I recently asked a first-time buyer client what she was most concerned about in terms of her home purchase process. She told me it was FOMO – Fear of Missing Out.
This had not even occurred to me. I was thinking that it might be concern over purchase price or payments or the condition of the property (missing something on home inspection) or selecting an area that would later turn out to not to be as good as she might have hoped. But, FOMO? Not even on my radar…
And, then I gave it some thought… We have such a tight, low-inventory market right now – throughout the region (maybe with the exception of many condos). It’s been that way since before businesses started opening up again.
In fact, according to Bright MLS, we came into 2020 with the lowest inventory (available homes) and strongest contract activity that we had experienced in a decade. And, that was coming off of a very strong 2019. So, my buyer’s fear was well-founded. When there are multiple offers on, seemingly, every decent property (and some not-so-decent ones), only one party can win a bidding war and this means a handful (a few? a dozen? a score? or more…) would-be buyers go away disheartened and prices continue to rise. Many parties will miss out.
Why is it so tough for buyers right now?
People are holding onto their homes – maybe it’s pandemic-related (home is safe – but that retirement community with less space between people may not feel that way). Households are changing, too. Adult “kids,” are back at home – parents aren’t downsizing as they once might have. Multi-generational households are on the rise – people are staying in and modifying their homes to accommodate other family members and new needs in terms of work and school (have you noticed how busy contractors are?).
And, then there are the low interest rates – almost free money. One day, we will look back on this time in awe and disbelief that rates were once “this low.”
While the DC Metro area enjoys a strong market, this is not just a regional phenomenon… If inventory remains low in 2021, prices may continue to climb. Across the country, the median asking price for properties in September 2020, according to Realtor.com, was $350,000 – an 11% increase compared to last year. And, inventory has declined 39% year-over-year. Increased demand and a dwindling supply are great for sellers, but not so for buyers.
In our region (which includes the jurisdictions of Fairfax, Arlington, Prince William and Loudoun counties and the cities of Alexandria, Fairfax, and Falls Church) for the week of Nov. 29-Dec. 5 new contract activity was down 3.7% from the previous week, but was a remarkable 48% higher than the same seven-day period last year for the six jurisdictions we track. Homes also sold almost three weeks faster than the same period last year.
All six areas posted solid increases in the number of newly ratified contracts since the same time last year. Northern Virginia (Fairfax, Arlington counties and cities of Falls Church, Fairfax & Alexandria) had the best week with an amazing 76.4% jump. Loudoun County was up 56.3%, and Prince William was up 34.8%.
But, even with all of this, contract activity – week over week – is declining, following patterns we’ve seen before, as the year draws to a close and the holiday season gets into full swing. According to David Howell, EVP and CIO at McEnearney, “Inventory is blossoming in almost every jurisdiction and the outer suburbs are outperforming the closer-in areas.”
— McEnearney Associates, “Today’s buyer concerns: Fear of missing out?”