McEnearney Associates, Inc.
The living room of a condo for sale in Alexandria.
McEnearney Associates Realtors recently released their 2020 Second Half Market Report. Three main themes stood out for the real estate market in the DMV:
- Interest rates are at historic lows.
- Inventory of available real estate is critically low, especially for detached and attached homes.
- Condo inventory is higher than previous years.
We spoke with McEnearney EVP & CIO David Howell about his take on these trends and what he thinks the future holds.
Howell brings a unique perspective, with more than three decades of experience in local real estate.
“This is a very unusual market circumstance. We’ve had hot markets before but this is the hottest one I’ve ever seen in terms of the one-two punch of extremely low inventory and very high buyer demand,” Howell explained.
He says the reasons for this are twofold: The first factor is interest rates which have reached historic lows of around 3 percent. Howell can remember a time when interest rates were 18 percent. The second factor is the COVID-19 pandemic, as many people have been forced to spend a lot of time at home. “It has caused many people to take a hard look – are my current living circumstances ones that are going to suit me or my family for the long run?” said Howell.
In Alexandria, condos typically make up 40 percent of homes on the markets but by the end of 2020 they made up 80 percent of market inventory, an increase of 254 percent. Most condos listed were studios and 1-bedrooms or high-rise apartments that share a common entry and elevator and have very little or no private outdoor living space, according to the report.
The combination of buyer demand and low inventory has led to multiple offers on most houses. Many homes are selling well over asking price and some buyers have waived home inspection contingencies or offered cash in order to make themselves more competitive.
Howell advises buyers, sellers and realtors to avoid “pocket listings” or selling and buying houses off-market. He admits it can be tempting for buyers to do this to avoid losing out on a house. Sellers may be drawn to it in order to sell quickly.
“I hate to see it from a couple of perspectives. ... There are so few listings on the market, it doesn’t help the market when listings are intentionally withheld from the market. It exacerbates the problem for buyers a whole. We think it’s bad for sellers, we think it’s bad for buyers,” said Howell. “Everybody should have access to every listing and every seller is benefited from the broadest exposure to the marketplace,” Howell continued.
Howell predicts that the low inventory and the excess of condos will continue through the rest of the year but he expects that everything will begin to even out at some point. “I am a firm believer that markets seek balance over time, they always have,” he said. “There is ultimately going to be a point where a growing number of buyers can’t afford to buy,” Howell observed, which will lead to a decrease in demand.
Howell offered the following advice for homebuyers. “Understand the market. Be patient. Understand that there will be more listings that come on the market.” He went on to explain another important point for buyers to keep in mind. “It’s really easy to get caught up in the feeding frenzy where the objective becomes to win. The objective should always be to make a sound financial decision based on the current circumstances.”
His advice to sellers was simple. “The broadest exposure to the marketplace is almost always in their best interest,” said Howell. Despite the fact there are more buyers than there are listers, he said it is still possible to get it wrong in this market as a seller.
“Roughly one in every nine listing that comes on the market in the multiple listings service (MLS), expires or is withdrawn before it is sold,” explained Howell. This typically happens if a property is overpriced or it is not in market-ready condition.
Read a full copy of the McEnearney 2020 Second Half Market Report here.
