Right now the housing market seems so strong that home prices are not only insulated from summer slowdowns but also large jumps in inventory.
Despite five months of growing inventory compared to last year, home prices in Northern Virginia continue to soar, going up 23 percent in July since last year, according to figures from the Metropolitan Regional Information Systems, Inc. (MRIS).
The average home sales price last month reached $559,790, while last year at the same time the average was $454,341, according to MRIS.
“The best way to explain it is basically there are so many buyers out there that prices are going to continue to go up until demand is met,” said Amy Ritsko-Warren, director of communications for Northern Virginia Association of Realtors (NVAR). “Even though we’ve gotten an increase in inventory, it’s not nearly enough to meet demand.”
WHILE INVENTORY HAS crept up the past several months , last month’s inventory jumped up by 26 percent more than last year.
“[An increase in inventory is] really a good thing for the market because it makes it a little bit easier for buyers to get into homes,” said Ritsko-Warren. “But with these inventory numbers, we’re still in a sellers market because there’s such job growth and the inventory is not at a point where inventory exceeds or even meets demand.”
Summertime is an odd time for such an increase in inventory because the housing market slows down a bit and isn’t the hottest time of year to sell homes, like the spring and fall.
“It might be that people are putting their homes on the market even though it’s a slowdown,” said Ritsko-Warren, adding that people may think the market is so hot that summertime lulls won’t have any effect.
Thus far, it hasn’t had any effect on prices, but increases in inventory and slower sales may mark a larger slowdown.
Sales have decreased from last year for the past two months, despite the consecutive months of increased inventory. The number of sales in July dropped 12 percent from last year. In June it fell 10 percent, and in May it dropped 5 percent.
Taken together, the two trends seem to be contradictory, with the increase in inventory demonstrating more supply and the decrease in sales demonstrating less demand.
“It could be [a sign of a market slowdown], but until we see it for a couple of months, it could just be an aberration,” said Ritsko-Warren.
OTHER REALTORS HAVE suggested that the local residential market is softening a bit. “The trend of the market [now] is you have the highest demand and the lowest supply from Jan. 1 through June,” said Realtor Debbie Dogrul, who has been in real estate for 17 years. “July is benefiting from those months and that really means that July is not going down, it’s sustaining that rise.” She added that the area is still in a sellers market.
According to Dogrul, it won't be until next year to be able to confirm if the summer slowdown is anything more than a seasonal trend.
Yet despite the region’s strong job growth, some economists are saying that the increase in inventory combined with lower sales is a sign of things to come.
“Those are early indicators that the market is moving away from the frenzied pace that we’ve been seeing,” said Lawrence Yun, senior economist at the National Association of Realtors.
Yun has predicted that price appreciation in the area will slow to a rate of 7 to 10 percent over the next year.
“Well, certainly a 20-percent-plus appreciation is not sustainable,” said Yun. “The mortgage rates are going to be rising over the next 12 months, and with rising rates and also the combination of the affordability condition deteriorating significantly, the buying demand will steadily retreat.”
Yun predicts that the imbalance caused by too many buyers will even out some over the next year.
Yun also said that appreciation rates will exceed the “historical norm” of 4 to 5 percent appreciation. “But if we go back to a 10 percent rate of appreciation, I think most homeowners will still be happy.”