Shrinking Overall Supply and Declines in Foreclosures Continue Recent Trends
Rockville, MD –(May 10, 2012) – The following analysis of the Washington, D.C. Metro Area housing market has been prepared by RealEstate Business Intelligence (RBI), and is based on the April 2012 RBI Pending Home Sales Index™ released today.
Pricing in the DC Metro Area continued recent positive trends with a year-over-year Median Sale Price gain of 11.2 percent, the highest annual gain in over six years. Active inventory remains low compared to demand, with only 3.2 months of supply. This not only put upward pressure on pricing, but resulted in significant declines in Days on Market prior to sale and the percent of Original List Price discounted at settlement. Traditional listings, or those not involving a short sale or foreclosure, represented the highest proportion of closed sales since the foreclosure wave was at its peak. While new contract activity was up 9.5 percent over April 2011 levels, the percent change vs. last month was well below normal seasonal patterns.
All the talk of a looming shadow inventory of distressed properties apparently did not offset the effect of a limited supply of available inventory and historically low interest rates, as the median sale price for the DC Metro Area rose 11.2 percent over the April 2011 level to $371,500. This represented the largest year-over-year gain in median sale price since January 2006 and marked the third consecutive month of annual gains in this indicator. The year-to-date median sale price is $337,000, 6.7 percent higher than the $316,000 YTD level through April 2011. Every jurisdiction in the region has seen an increase in YTD median sale price, led by Falls Church (+23.3 percent), Arlington (+12.4 percent) and Fairfax City (+11.7 percent).
The biggest gain in median sale price was in the condo/co-op segment, the $275,000 April level represented a 14.6 percent year-over-year gain, the second consecutive month where this segment saw a 14 percent annual gain. The townhouse segment had a median sale price of $350,000, up 9.4 percentyear-over-year. Detached homes were up 8.4% over April 2011 to $450,000, the largest annual gain for this segment since October 2010.
While the percentage of sales that are under foreclosure continues to fall, the median sale price of $185,150 for this segment is up significantly, 27.7 percent, over the April 2011 level. The median sale price for short sales is down 14.2 percent year-over-year to $193,000, the lowest level on record, possibly the result of lenders’ propensity of late to take distressed properties through the short sale path rather than foreclosure. The median sale price of distressed properties collectively (short sales + foreclosures) was $190,000, up 10.5 percent over April 2011, though down 5.0 percent from last month. The median sale price for traditional listings (those not involving a short sale or foreclosure) was $425,000, 6.8 percent higher than March and 3.0 percent higher than April 2011.
Along with continued low inventory compared to demand, the composition of the sold inventory was a factor in the pricing increases in April 2011. Year-over-year gains in detached property sales outpaced annual gains in attached property (townhome + condo/co-op) sales. The 1,910 detached property sales were up 10 percent over April 2011 while the 1,858 attached property sales represented a modest 3.9 percent year-over-year increase. The number of closed sales in April represents a 7 percent increase over the April 2011 level and 12.7 percent increase over March (outpacing the ten-year average March to April increase of 8.4 percent). The year-to-date total of 12,323 closed sales is down slightly – 1 percent – compared to the 12,448 sales through April 2011.
Foreclosure sales were down 54.3 percent vs. April 2011 to 278, the lowest level since MRIS began tracking distressed listings in April 2009. Foreclosures represented only 7.4 percent of all sales, down from 17.2 percent in April 2011. Short sales increased 18.1 percent year-over-year to 482, likely reflecting changes in the way lenders are dealing with distressed properties recently. Short sales accounted for 12.8 percent of all sales, up slightly from the 11.6 percent share in April 2011. The 3,011 traditional sales, or those not involving short sale or foreclosure, represented a 20 percent year-over-year increase, and accounted for 4 out of 5 transactions (79.9 percent), the highest proportion of “healthy sales” since the foreclosure crisis hit.
The 5,663 new contract agreements signed in April represent a 9.5 percent increase over April 2011 and were 11.0 percent higher than the five-year April average. This level of contract activity was essentially flat with the number of new contracts in March (5,671), going against the normal pattern for this time of year: The ten-year average March to April change is +7.4 percent.
The 6,280 new listings in April represented a 14 percent decline vs. those entered in April 2011, marking the 11th year-over-year decline in new listings in the last 12 months. Notably, the level of new listing activity in April represents a 9.1 percent decrease compared to the 6,909 new listings in March. This is only the 2nd time in ten years that there were fewer new listings in April than March, the ten-year average trend is a 7.6 percent increase in new listings. The last time there was a March-to-April decline in new listing activity was 2006, when new listings dropped 2.9 percent month-over-month.
The 348 newly listed foreclosures represented a 40.3 percent decrease compared to April 2011 and accounted for 5.5 percent of new listings, down from 8.0 percent in April 2011. This does represent a slight increase in the share of new listings in foreclosure compared to March (4.8 percent), worth keeping an eye on in the months ahead. 12.4 percent of new listings were short sales, down slightly from the 13.4 percent share in April 2011 and well below the two-year high of 23.6 percent in December 2011. The 5,157 new traditional listings, which made up 82.1 percent of new listings in April, were down over 10 percent compared to both last month and April 2011 levels.
So how does the supply level look heading into May? The 10,652 active listings at the end of April were 31.5 percent lower than the same point last year. Supply is tight relative to demand across the board, but especially so in the more moderately priced attached home segments. Months of inventory, or the number of months it would take for the current inventory to be sold given the last twelve months’ average sales rate, is 3.2 months. The amount of active townhomes relative to demand is the lowest, with only 2.2 months of supply; the detached market has 3.8 months of supply. Though townhomes accounted for 25.2 percent of sales in April, they make up only 17.5 percent of the active market heading into May. Detached homes, on the other hand, accounted for 50.7 percent of April sales, but represent a larger share of total active inventory, 58.8 percent.
Actively listed foreclosures are down 66.6% from the 1,039 active foreclosures in April 2011 and represent only 3.3% of the active market, the lowest share since MRIS began tracking in April 2009. 82.6 percent of active listings do not involve a short sale or foreclosure, significantly higher than the 2-year low of 65.7 percent in January 2011. The 1,510 active short sales are half the April 2011 level and represent 14.2 percent of all active listings, down from 19.3 percent at this time last year.
Impact on Seller Success
Low inventory relative to demand is advantageous to practical home sellers, and declines in Days on Market and seller concessions to buyers are a predictable result. The Average (Mean) Days on Market (DOM) of 70 days was eight days lower than April 2011. The Median DOM, or the number of days that half the solds in April were listed prior to contract, was only 25 Days. This is 7 days faster than April 2011 and 14 days less than the average April over the past five years. The Median DOM for townhome properties, where supply is lowest relative to demand, was down to 16 days – 12 days less than the April 2011 level. Short sales had the highest Median DOM with 63 while half of the foreclosed sales in April were on the market for 32 days or less. The Median DOM for traditional listings was lowest at only 20 days – reflecting the fact that sellers willing (and more importantly considering equity issues, able) to price homes at a practical level are receiving offers within a few weeks of entering the market. The amount of original list price received at sale (SP to OLP ratio) was 95.6 percent in April, the second highest level since August 2007, further evidence that the DC Metro Area is a seller’s market.
The RBI Pending Home Sales Index™ (first chart) is a two-year moving window on the housing market using new pending sales (signed contracts) and median sales price (closed sales). It provides unique insight into the state of the current housing market by measuring the number of new pending sales for each month through the most recent month.The results include new pending sales through and including April 2012. The market area includes: Washington, D.C., Montgomery County and Prince George’s County in Maryland, and Alexandria City, Arlington County, Fairfax County, Fairfax City, and Falls Church City in Virginia.