The residential real estate business has an imprecise way of forecasting the strength of the housing market called “month’s supply.” It gauges both the pace of sales going forward and how difficult current market conditions make it for potential buyers to find what they want and can afford.
In Northern Virginia, the month’s supply shows an extremely tight market, with less than one month’s supply of inventory.
“It refers to the number of months it would take the current inventory of homes on the market to sell given the current sales pace,” said Ryan McLaughlin, CEO at the Northern Virginia Association of Realtors. “So, generally speaking, a lower month’s supply indicates it is more of a sellers’ market, and a higher months supply indicates it is more of a buyers’ market.”
It is a snapshot in time, usually reported with monthly sales and price trends. It does not take into account any sudden slowdown in buyer activity or an increase of homeowners deciding to list their property (the lack of which is one of the biggest challenges for buyers in Northern Virginia and elsewhere, these days).
Typically, a four- to six-months’ supply of homes for sale is considered a balanced market, though that is not necessarily the case in the Northern Virginia housing market.
“That industry standard has never really been the case here in Northern Virginia in our marketplace. Our supply is almost always under four months. In fact, our supply in May was just under one month at 0.98 months compared to the national average of three months,” McLaughlin said.
Inventory in Northern Virginia did rise in May, although just barely, from a supply of 0.89 months in April.
The Northern Virginia Association of Realtors reports home sales in the region spiked 27.3% from April to May, which it said shows more strength during the busiest time of the year than the nation overall, though sales were still down 20.4% from a year earlier.
McLaughlin said the region still has significantly fewer sellers than other parts of the country, and in part, because of that sellers have the upper hand.
Selling prices in Northern Virginia are holding up, with a median price in May of $715,000, a 0.2% increase from April.
With buyers competing for fewer listings, homes in Northern Virginia also continue to sell quickly, with homes sold in May having been on the market an average of 13 days, meaning half of homes that sold, sold in less than two weeks.
The Northern Virginia Association of Realtors and the Center for Regional Analysis at George Mason University recently released a mid-year update on the Northern Virginia market, with a forecast of continued lack of inventory, pent-up buyer demand, and positive economic conditions that could be challenged by mounting risks that could be in store.
The Northern Virginia Association of Realtors represents agents in Fairfax and Arlington counties, the cities of Alexandria, Fairfax and Falls Church, and the towns of Vienna, Herndon and Clifton.
