January 2022 Market Update

January's market statistics are kind of deceiving.

We’re looking at a decrease in total sold volume, number of units sold, and average sale price to list price ratio, making the market look like it’ll trend cooler than 2021. This may be the case for January, but with interest rates hitting 4% last week, we are expecting February’s numbers to be more realistic reflections of what buyers and sellers are actually experiencing.  

We knew interest rate increases were coming, but why did rates hit 4% more quickly than we anticipated?  Inflation.

Rates are driven by the Consumer Price Index, or how much prices for goods change over time. The CPI is the most widely used economic indicator to measure inflation.  Current inflation rates are running around 7.5% or higher.

Side Note: If you’re currently shopping for homes, be sure to touch base with your lender and make sure you’re still qualified at your current price point. With the volatility in the market, having a lender with a float down policy is something to consider. Reach out to me to learn more about this..

So how does January read?

Prices: We’re seeing an increase in the average sale price across the board at 4.83%.  Home values have increased since last year. Check out the change in Average Sold Price year-over-year by type of home below:

2 BR Detached = -2.00%

2 BR Attached/TH = 7.27%

3 BR Detached = 5.50%

3 BR Attached/TH = 5.08%

4 BR Detached = 5.65%

4 BR Attached/TH = 19.62%

Condo/Coop = 1.39%

Notice that 4 bedroom attached / townhome-style homes are up 19%, while most other properties hovered between 5-7%. (Own one of these and want to sell? Let’s get you a market analysis!)

But why the substantial difference?

In January 2021, there was a substantial difference in the average cost of a 4 bedroom townhome ($697,511) compared to a 4 bedroom detached home ($818,802). At the time, new buyers to the market often did not have the resources to compete with the escalating sale prices of detached homes and instead opted for a larger attached home, which offered square footage at a much lower cost. The shift had a downstream effect as more buyers sought out townhomes closing the gap between those numbers ($865,091 detached vs $834,376 attached) as we start 2022.

Financing: Majority of buyer financing is conventional (2,543 of 3,859 units sold), with cash coming in second at 572 units. This reinforces that sellers tend to give preference to offers with conventional or cash financing because there’s less risk of the contract falling through due to lender-required repairs or appraisal issues.

Time on Market: 41% of homes are only on the market for between 1-10 days. The average came in a little higher at 29, as 35% were on market between 11-60 days. In January, the Months Supply for the DC Metro region hit an all time low (over the last 3+ years) of 0.54 months.

Home Demand: Bright MLS’s Home Demand Index signals that demand is trending lower than the previous year since July of 2021. In January 2022, the Index was more than 23 percent lower than January 2021, signaling a somewhat lower level of demand at the start of this year’s spring market.This trend is likely due to factors including limited inventory, which held down sales, and decreasing affordability as home prices continued to rise..

And… what’s actually going on in the market in February?

Buyers agents are writing offers, often at $100K over asking with no contingencies, only for sellers to say it’s still not enough. Sometimes, these highly escalated offers don’t even land within the top 3 in a multiple-offer scenario.

The weekend of February 11 brought an influx of listings to the market. The region within 50 miles of Washington DC had 2722 properties with listing terms beginning between 2/7/22 and 2/14/22 as opposed to 1658 with listing terms beginning between 1/7/22 & 1/14/22.

Existing owners are wanting to upgrade to their “forever” home while the rates are still relatively low (Remember, just a few short years ago rates hovered in the 5-6% range!).

Many buyers have moved up their late spring - early summer timelines, reacting to the prediction of more rate increases to come.

We’ll look at similar numbers in next month’s report to see how this shift played out in February’s statistics.