Ask McEnearney: How was the real estate market this fall?

This week’s Q&A column is written by David Howell, Executive Vice President and Chief Information Officer, of McEnearney Associates Realtors®, the leading real estate firm in Alexandria. To learn more about this article and relevant market news, contact David at 703-855-5089 or email [email protected]. You may also submit your questions to McEnearney Associates via email for response in future columns

Question: How was the real estate market this fall?

Answer: After the new year, we will take a comprehensive look at market data for all of Alexandria including the City and Fairfax County neighborhoods. In the meantime, the following Market-in-a-Minute summary is for market conditions in Northern Virginia* for November 2022.

Contracts

Contract activity in November 2022 was down 44.9% from November 2021 and was down in all price categories. Through the first eleven months of the year, contract activity is down 24.8%. The average number of days on the market for homes receiving contracts was 46 days in November 2022, up from 38 days last November.

Inventory

The number of homes on the market at the end of November was up 15.0% compared to the end of November 2021. The number of new listings coming on the market decreased 23.3% compared to November of 2021.

The increase in inventory combined with the decrease in contract activity raising overall supply to 1.8 months from 0.8 months at the end of November 2021. (By the way, during the “Great Recession” in November 2007, supply was 8.0 months, and the average days on market was 106!)

Direction Of The Market

How one views the market is really a matter of context. Compared to this time last year, the real estate market in Northern Virginia is undoubtedly softer in just about every respect. There are fewer buyers, fewer new listings, absorption rates are lower, days on market are longer, and the overall supply of homes on the market is roughly double what it was last November.

However, the average price of a home selling in November 2022 was 3.2% higher than it was last November. But a comparison to last year’s market when interest rates were hovering near 3% doesn’t provide a good comparison to a “normal” market. Throughout the post-COVID boom, we were in an interest-rate driven market as buyers rushed to take advantage of historically low rates, soaking up demand for homes. Much of what would have been 2022 home purchases were accelerated into 2020 and 2021. A drop in buyer activity was inevitable even without the rapid rise in mortgage rates earlier this year, but those higher rates had a big impact on affordability. Lots of would-be buyers were forced to the sidelines.

The more relevant market comparison to this year’s market is 2018 or 2019. We have roughly the same level of buyer activity as those years, fewer listings, and shorter time on the market. And 2018 and 2019 were considered to be sellers’ markets. We are now in a value-driven market.

If a buyer doesn’t see value in a listing, they will happily move on to one that’s worth their money. Overpricing is the kiss of death for sellers, but the market still rewards sellers who price it right. 31% of all homes settling in November in Northern Virginia sold at or above their original list price.

*Note: Data derived from BrightMLS and is deemed reliable, but not guaranteed. “Northern Virginia” is defined as Arlington and Fairfax counties and the cities of Alexandria, Falls Church and Fairfax.

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