April 2020
In Metro DC, we entered the COVID-19 era with a solid housing market that had constrained supply, strong demand, and prices that were about to get a bit “frothy”. We probably had a good year in front of us to enjoy the peak of the housing cycle. Instead, we entered this likely recession with strong housing fundamentals that will help us endure a V-shaped recession with few long-term effects. Unfortunately, it appears that we should expect a Nike-swoosh-shaped recession as the employment declines are expected to continue.
Consider our fundamental affordability, supply, and demand conditions:
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- Homes are relatively affordable based on household incomes and current low 3.19% mortgage rates.
- Our low supply of new homes and existing homes will help support home and land values. If fact, we could stand to ease the supply which will give more buyers more choices.
- We have reasonably strong demand conditions with prospects for quick recovery. While we lost a lot of jobs in March, housing demand will continue due to the large number of office-using and federally funded jobs.
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April data begins to show us the pandemic’s impact on local employment. Preliminary BLS numbers showed Metro DC lost 21K jobs in March, a -0.6% drop from February. This change pales in comparison to Baltimore’s -1.45% decline.
Existing Home Sales and Prices
Strong: Projected resales closings increased a staggering 7.8% to 103K for the last 12 months ending March and are at the highest level since the 2006/2007 peak. Median sales prices have also increased from $392K average in 2019 to $398K average for the past 12 months. While low mortgage interest rates helped increase sales for higher priced homes, we anticipate the median sales price will decline as home shoppers tend to want more affordable than luxury homes during a recession.
Affordability
Strong: Data from February 2020, one month before the pandemic, shows that Metro DC home values were starting to increase. Together with rising sales, increasing home prices suggest the DC housing market was beginning to peak. On an annualized basis, home values across the country were beginning to rise. Metro DC’s home value appreciation was at 3.7% compared to 4.2% for the U.S. and 3.4% for the Top-20 MSAs.
