This week’s Q&A column is written by Rebecca McCullough of McEnearney Associates Realtors®, the leading real estate firm in Alexandria. To learn more about this article and relevant Alexandria market news, contact Rebecca at 571-384-0941 or email [email protected]. You may also submit your questions to McEnearney Associates via email for response in future columns.
Question: What’s the 20/20 on 2020?
Answer: A year ago, all indications were that 2020 was going to be a good year for the real estate market in Northern Virginia. We started off strong, then COVID-19 hit, massive shutdowns followed and the market fizzled. For a few weeks in late March and early April, no one knew what to expect. Then, rather quickly, the market began to rebound, and by the beginning of June 2020 amidst so much strife and uncertainty, Northern Virginia experienced a full-fledged “spring market effect.” That active market continued to the end of the year.
Why so strong, and for so long? There are several reasons.
- A strong economy: Even in the face of the pandemic, the U.S. economy was strong. The stock market reached record highs, and savings account balances actually increased as many individual expenses declined — such as daycare, transportation costs and entertainment expenses.
- Changes to the way we live: In the past several decades, many people who chose to live within walking distance to work, restaurants, fitness places and entertainment found that during the pandemic those benefits were no longer available. Instead, they started searching for more space in which to live, cook and exercise — all at home, of course. To this effect, we saw a 211% increase in condo listings from December 2019 compared to December 2020!
- Low interest rates: The drop in the average interest rate for a 30-year fixed-rate mortgage from December 2019 to December 2020 was over 1% (from 3.72% to 2.67%), translating to an increase of 14% in buying power. This allowed more buyers to enter the market, and their dollars went further.
In light of these factors, our market became a seller’s market quickly, as inventory was limited. It became the norm to see an “offer deadline” when listings were launched. The “new normal” scenario looked a bit like this: A listing goes active on Thursday, showings are scheduled and open houses are held throughout the weekend. A pre-offer inspection or two might occur in the same first weekend, and there was often a Monday 6 p.m. offer deadline. It was busy and interesting if you were the listing agent and sometimes torture for the potential five to eight buyer agents hoping their clients had the successful bid. Price escalations, contingency waivers and pre-offer home inspections became standard. This was true even through the last days of 2020 and has thus far continued into 2021.
As we compare December 2019 to December 2020, we see a 44.9% increase in the number of contracts in Northern Virginia. Fully available listings have increased by 22.2% over last year, largely due to the significant increase in condos under $500,000 coming on the market. The inventory for detached and attached homes is well below what it was at the end of last year, which will drive an increase in competition for these properties.
You can see by the graph below that at the end of December 2020 the months’ supply was significantly below the end of 2019. Months’ Supply is calculated by dividing the available inventory by the number of contracts for that month. A monthly supply number for normal markets is around 5 or 6, so with the current number being between 0.5 and 2.0, inventory is scarce!
What can we expect in 2021?
If 2020 taught us anything, it’s not to make predictions. However, we can make a few observations. The market is still strong, and while interest rates crept up a bit toward the end of the year, many believe that they will remain around the 3% mark for many months to come. Finally, with the pandemic still very much impacting the global outlook and our way of life, there are still many people hoping to make the jump to homes with additional space and home offices. We don’t anticipate the market cooling off in this area any time soon.
In conclusion, if you’ve been thinking about selling, please reach out. I can help you determine what the market value of your home could be and if selling in 2021 is right for you.
Rebecca McCullough has built a successful real estate business in Alexandria and Northern Virginia by providing excellent service to her clients. If you would like more information on selling or buying in today’s complex market, contact Rebecca today at 571-384-0941 or visit her website RebeccaMcCullough.com.
If you would like a question answered in our weekly column or to set up an appointment with one of our Associates, please email: [email protected] or call 703-549-9292.
McEnearney Associates Realtors®, 109 S. Pitt Street, Alexandria, VA 22314. www.McEnearney.com Equal Housing Opportunity. #WeAreAlexandria