Summer is here and many Americans are looking to get back to traveling in record numbers, despite rising gas costs, 40-year record high inflation, and growing concerns over an economy headed towards a possible recession.
After two-plus years of a hot real estate market across the nation, we are now entering a new phase. The shift in buyer sentiment happened quickly, as if by a flip of a switch. In a matter of 2 to 3 weeks, the market cooled off and common scenes of buyer frenzy, multiple offers with high escalations (in some cases insanely high), are now a bit more sporadic. Demand still outweighs supply in some pockets of certain neighborhoods and price-points, but for the most part, the market is a lot more “normal” and balanced.
Buyers, as many as 40% according to UrbanTurf DC, felt frustrated and fatigued and decided to take a step back and renew leases. Additionally, the rapid rise in interest rates has contributed to the slowdown, as the Federal Reserve announced an historic rate hike of 75 basis points in order to fight inflation.
There’s no question that even in above-average, affluent markets such as Bethesda, Chevy Chase, Potomac, and NW DC, this dramatic change will cause a disruption in buyers’ calculus and attitudes. These effects are already here and are widely felt.
Still, we shouldn’t confuse what’s happening now with the financial meltdown and subsequent Great Recession of 2008. The underlying economic woes of 2022 are fundamentally different than those of 2008, and I believe the US economy will recover faster.
While the local real estate market is cooling off, and we’re reaching a plateau in terms of price increases, as predicted a while back, I don’t think we’re headed towards a dramatic reversal and a decline in property values. Sellers in our market should adjust their expectations as buyers’ behavior and sense of urgency have changed, but in terms of historical outlook, it is still a good time to sell.
A quick look at Q2-2021 versus Q2-2022 (for the sake of this report, April 1 – June 15), for detached homes in Bethesda-Chevy Chase, shows what we all know to be true, the inventory overall shrunk further by 7% and that median home prices have increased by 5% comparatively.
The change in buyer behavior and attitude will be revealed in the quantity and quality of the contracts written during the last couple of weeks of June and into July as I write these lines… the average Days on Market rises steadily as Sold Price to List Price Ratio slides back down towards 100% (and perhaps dips below), and as the median sold price stabilizes and halts its climb. While I cannot yet provide you information on sales in the last 30 days, as these transactions haven’t settled yet, I can share with you anecdotally that between April 16 and May 15, 2022 there were 144 new contracts signed for detached homes in Bethesda-Chevy Chase, compared with only 91 in the period between May 16 and June 15, 2022, representing 37% less contracts!
To our valued clients in Potomac, Washington DC, and those who own condos, while the information above refers to detached homes in Bethesda and Chevy Chase MD, please know we regularly track and analyze trends in all surrounding markets and for all types of properties. The trends mentioned above are a reflection of the greater trends in real estate throughout the region. We also welcome your questions and comments and are happy to provide specific analysis of your home, tailored to your needs.
Wishing you and your family a very happy and safe summer season!
Be well.
