By Dr. Terry Clower, director of the Center for Regional Analysis at George Mason University
Home buyers and sellers view the housing market from different perspectives, but with one common question: where is the market in this region headed? To help answer that question, the Northern Virginia Association of Realtors® (NVAR), in conjunction with the Center for Regional Analysis at George Mason University (GMU-CRA), issues a consensus forecast for the NVAR region’s housing market. The association convenes a panel of key experts from differing sectors of the real estate industry to review preliminary forecasts developed by GMU-CRA economists and offer their insights into current and near-future market conditions.
The GMU-CRA team’s forecasting methodology employs several data analysis techniques based largely on patterns and trends for specified market metrics. This data-driven approach is then augmented by the judgment of CRA team members, NVAR staff, and a group of volunteer NVAR members representing different market participants such as Realtors®/brokers, financing specialists, settlement agents, title attorneys and others. This year’s forecast was especially challenging since the pandemic and its related disruptions presented highly unusual patterns of market activity. More than ever, the GMU-NVAR Market Forecast is the product of a highly collaborative, iterative process where the forecasting team strived to anticipate the potential impacts of factors such as: federal monetary policy and stimulus programs; the continuation of work-from-home scenarios; vaccination rate; the impact of lending practices and mortgage rates; and the permanence of market changes observed in 2020, such as the surge in condo listings in some submarkets last fall.
In this year’s forecast we have made two notable changes in how we present the forecast. Changes in units sold in each jurisdiction is summarized as annual totals. The normal seasonal pattern of sales was essentially absent in 2020, and the disruption in market cycles may continue well into 2021. Also, in a given year, it may not matter in which particular month sales occur, as long as the sales do happen. For the same reason, we summarize inventory as the arithmetic sum of the month-end inventory levels. This is not a full count of all units that have been on the market, since Days on Market (DOM) continues to be very short for most properties. Still, this is a way to examine how inventories trend over the year instead of our previous month-to-month focus. For both of these data points our forecast charts still provide estimates of monthly trends.
Forecast by Jurisdiction
Fairfax County (view charts)
Continuing high demand is expected to push prices upward through competitive bidding, with the median sales price at the end of December predicted to be $593,979. Prices are predicted to peak in June, at $644,991. Year-over-year price growth at the end of December is forecast at +4.2%. Demand-driven price increases could be even higher, but overall affordability levels and the chance of rising mortgage rates should hold price increases within the forecasted range.
The spring and summer markets will rebound, assuming available inventory, leading to a positive year for sales growth, with total annual sales crossing the 18,000 threshold to 18,192, an 11.1% increase over 2020, which turned out to be a good year for residential sales. We still expect summer to be the peak of activity. This positive outlook will depend entirely on sellers. If there is hesitancy among sellers to enter the market because of limited move up or downsizing options, then sales will underperform our expectations.
Inventories continue to tighten in Fairfax as the focus of demand remains on less-dense suburbs and choices for current Fairfax homeowners are restricted. We think that the normal market segment of those current homeowners wanting to downsize to inner suburb townhomes or condos will continue to be affected by pandemic concerns for much of 2021, even with aggressive vaccination programs. Overall, we expect inventories will contract about 9.5% over the year.
Arlington County (view charts)
Steady year-over-year price increases are expected in Arlington, with a median sales price in December being $683,761. Peak sales price is forecast in July at $719,577. Year-over-year growth of +9.4% is expected, which reflects strong demand for single-family properties.
Reflecting, in part, continuing demand shifts related to work-from-home conditions, substantial year-over-year unit sales increases are predicted. Total annual sales will rise 14.1% to 3,126 units by year end. Sales are predicted to peak in July, at 291.
Comparatively high inventories are expected to remain through most of this year as market preferences shift in a year still marked by pandemic conditions. The sum of the month-end inventory levels will be 33.6% higher in 2021 compared to 2020. Of course, this is still below long-run trends. In part, we think that pandemic related issues, either continuing concern about social proximity in dense neighborhoods or the opportunities for increased remote work, are outweighing Amazon HQ2 effects that caused inventories to plummet. The good news is that those who want to sell will continue to see strong interest from buyers looking past the pandemic to a strong local job market.
Alexandria City (view charts)
Median sales prices in Alexandria will continue to rise, though our forecast shows price volatility. Because of notable jumps in condo inventory last fall, we see just a bit of market rebalancing that is offsetting very strong price gains in recent years. The Alexandria market should come out ahead by the end of the year with price appreciation in December 2021 reflecting a 2.9% rise.
Total annual units sold will reach 2,824 in 2021 versus 2,691 in 2020, a respectable 4.9% increase. Late spring through mid-summer will be steady, if not booming.
The shift in demand dynamics for multi-family properties will drive inventories 24% higher using our sum of month-end inventories. While this may result in some increases in DOM for Alexandria properties, sellers will still likely see multiple offers for their homes. While 24% is a big jump, inventories will remain substantially below long-run trends.
As noted previously, the impacts of the pandemic, the shape of our post-pandemic economic recovery, and long-term effects of work-from-home conditions will shape residential real estate markets for the next couple of years. Still, in the collective judgment of the NVAR/GMU team, this should be a strong year for Realtors® and their clients.
Because this will remain an atypical year, the Center for Regional Analysis will be providing updates based on incoming data, a rolling survey of the NVAR forecast group, as well as a survey of members of the NVAR Top Producers Club.
Learn more at cra.gmu.edu and NVAR.com/stats.