Shortage Alert: Spring Market and Beyond

by Tony Hain on April 14, 2011

Spring has sprung and sprung big.

In our Fall Market Preview, we noted that the fundamentals were in place for price appreciation and a seller’s market.  Buyers remained cautious, but six months later we are seeing multiple offers across the city.   Now, we’re not back in the heady days of 2005, but the shortage of homes for sale in certain markets is strikingly similar.

Combine this shortage with low interest rates that are expected to rise and buyers who now believe the bottom has passed and want to get into the market and you have the recipe for price appreciation…and in DC, that could mean big appreciation in the coming 5-10 years.

Let’s put this in perspective, there are currently only 9 houses on the market priced between $549,000-$850,000 in the 20009 & 20010 zip codes. However, 15 homes in this same price range and zip codes went under contract in the past 30 days. That means we have less than a month of inventory when anything below six months is considered a seller’s market…that is remarkable. Let me say that again, we have less than a month of inventory. Now each neighborhod and price range are different, but this is the shortage we’ve been predicting as demand returns and new construction lags.

2011-2015 Home Price Appreciation

Believe it or not, while DC is leading the way, appreciation is expected across the country. In fact, an ongoing national survey of home price expectations from 111 of the country’s experts shows that they believe prices will decline 1.38% in 2011, before appreciating the following four years. This is a national survey and if you’ve been following our posts you know that DC has been significantly outperforming the national trends through the entire boom, bust and recovery period.

Something else has changed. The national media that spent the past several years predicting the end of housing as we know it have a new perspective. In January, The Wall Street Journal put out an article, “Why Your Best Investment is a House” and stated, “With home sales starting to improve and where price is now possibly forming a bottom, real estate could well be the asset class that represents the best low-risk buying opportunity out there today.” Fortune magazine published “Real Estate: It’s Time to Buy Again.” at the end of March and said…“Forget stocks and don’t buy gold. After four years of plunging home prices, the most attractive asset class in America is housing.”

What does this mean?  If you’re considering purchasing in the near future, you may not find a better time than now.  Interest rates are expected to rise and financing may face more hurdles in the coming months so that even if prices remain flat, it may be more expensive to buy down the road.  It’s already more expensive to buy this spring than it was last fall.

Cost is the Same, It Just Costs More

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