2019 Real Estate Forecast - More of the Same?
The Washington, D.C. metro area’s real estate market was strong, but not spectacular, in 2018. In every major jurisdiction, the number of sales was down a bit compared to 2017 and the average sales price was up slightly. And we expect the same for 2019.
As would be expected, this year started with a dip in contract activity because of the partial government shutdown, but we expect to see buyers returning to the marketplace in greater numbers as we move towards spring. We believe that the buying and selling decisions that were put on hold during January and early February were deferred, not shelved. Nonetheless, it will take until the end of the first quarter to see the full impact on our market.
Here’s our look ahead on some key measures for the year ahead:
Mortgage Interest Rates – Until late 2018, most economists were projecting rates to be 5.5% by mid-2019, but now the prevailing wisdom is that rates will hover under 5% through the year. Former Federal Reserve Chair Janet Yellen recently opined that the Fed might even lower rates at some point and while that doesn’t directly impact mortgage rates, it is another strong sign that we should see a stable rate environment. That’s good news for buyers and sellers alike.
Supply – So far this year, every jurisdiction in the region has an overall supply of homes at or less than two months, continuing a trend we saw through much of 2018. Yet there are differences – the number of homes on the market in the Virginia cities and counties continues to decline, while inventory is rising a bit in D.C. and suburban Maryland. We’d be surprised to see supply in any metro area jurisdiction exceed three months at any point in 2019.
Sales and Contract Activity – Only Prince George’s County had an increase in contract activity in 2018 compared to 2017, but despite that increase it still had 4.5% fewer settlements because of its heavy reliance on first time homebuyers. Every other area saw modest decreases in sales and contracts compared to 2017, and we see nothing on the horizon that will significantly boost buying activity. We do believe that there will be more unit sales in 2019, but it is unlikely we’ll see the levels attained in 2017.
Prices – As mentioned above, every area had an increase in the average sales price in 2018, ranging from a high of 3.8% in Prince George’s County to a low of 1.7% in Northern Virginia. With stable mortgage interest rates, those are very sustainable numbers. Although there will always be pockets that outperform the overall market, we expect that price appreciation throughout the region will be 3 to 5%.
Amazon HQ2 – Amazon will start to ramp up their hiring by midyear, and that will provide a boost to the markets in Arlington County and the City of Alexandria more than any other areas. But it won’t create an enormous increase in prices – while we are projecting 3 to 5% in the region, prices in the areas closest to “National Landing” may jump as much as 8% in 2019.
After two decades of wild swings in the market, we’ll take a repeat of 2018 anytime. It’s finally starting to look like a “normal” market!
MARKETWATCH ARCHIVE - NORTHERN VIRGINIA