DC House Market Tightens Further - Lowest Inventory Since 2005

The market for houses in Washington continues to tighten according the most recent sales statistics for released by the Greater Capital Area Association of Realtors (Click here for the report). The available inventory of houses is the lowest it has been in seven years and the cheapest homes on the market lead the way.

Supply Side
For the month, inventory dropped 11.9% compared to a year ago (486 vs. 428), which is still strong, but not a strong as the spring season was. The number of available houses declined 35.1% this year compared to last (1,092 vs. 709) and is now at its lowest level since August of 2005, which was two months before the market started to slip.

Generally the inventory rises and falls at all price ranges at approximately the same rate, but that’s not the case this month – the low end of the market is much tighter than the high end. Last month the number of new listings for properties under $400,000 dropped 39.2% (214 vs. 130). Whereas number of new listings for properties that are $900,000+ increased 32.1% (78 vs. 103); the highest priced homes had a 53.8% increase in inventory this month (40 vs. 26)!

Demand Side
As supply is constricting, demand is waning. Total number of contracts accepted last month declined 9.7% from a year ago (408 vs. 452).

The reason for this is mostly due to the restricted supply, had there been more properties available, the number of contracts would have increased as well. The proof of that is that the demand for properties has the same disparity as the supply side. Low-end properties are showing weak demand, while the high-end side has shown strength.

Pricing is King
These market trends show an important difference between the current market and the peak of the market in 2005. Buyers are willing to wait for the right home at the right price. There is not the insane desire to buy “anything.” If a home is priced too high, buyers will simply wait for the seller to lower the price of the home.

Summary
If you have a house that is $900,000 or more, it’s critical to price correctly at the beginning. With large numbers of competitors coming on the market and finicky buyers it’s a tougher market on the high-end. If you have a home that languishes for 2-3 weeks without interest it would be prudent to cut the price sooner rather than later.