If you climb mountains or simply hike mountainous areas you know the feeling of cresting a ridge only to see another peak in the distance, bringing the realization that you have not quite summited yet. For the first time in four years, the average Glover Park row house price has dropped slightly. Have we summited this property value mountain or is there another peak beyond? This is a question economists, real estate agents, investors, Sherpas and Shamans seek to answer.
The average row house price in 2023 dropped 1.6% to $1,304,392* from the peak of $1,325,383 in 2022. Yet, the number of home sales crashed even further, to 29 houses, a low point only seen in 2011 and 2017. Glover Park home values had a great run from 2018-2022, rising over 33%. The number of homes sold has dropped to half of what the neighborhood experienced only a couple of years ago. The average days on the market was 12, with the median at only 7 – meaning most houses sold virtually immediately as soon as a decision date was set by the seller. The majority had multiple offers, though the number of offers has dropped significantly from the 2021 low interest rate frenzy.
Why did prices level off and the number of homes drop so low? The indicators are pretty clear. The 30-year mortgage rate started 2022 around 3%, rising to 6% by year end, only to see it peak in late 2023 around 8%, before dropping back to around 7% by the end of 2023, where it hovers today. Housing affordability finally became a factor in the neighborhood. Think of it this way: the monthly payment for a 20% down payment, $1.3 million house at 7% is about $8000 (mortgage, taxes insurance), compared to $5400 at a 3% rate. That’s a 48% higher monthly housing cost, and this does not even factor in the inflation in homeowners insurance (distressing) and DC catching up on property assessments and raising property taxes! There is another reason for the leveling off of property values in Glover Park that is a bit harder to quantify on a small sample: borrowing costs and inflation in housing related goods and services did caused a drop in complete renovations and pop-ups (adding a 3rd floor since the raising of the height limit in 2016). Sales of these houses skew the average price up a bit. This year only 3 houses sold above $1.5 million, compared to 8 last year. There was a wide range in values, from $953K for a 2BR house up to $1.615 million for an average sized, fully renovated house with a small pop-up.
Wouldn’t such a precipitous rise in cost lead you to believe prices would drop more? This question brings up the other side of the economics equation – the supply side. The number of sales are about half of what they were a couple of years ago. Economics 101 – if supply and demand roughly stay in balance, prices remain stable. Why aren’t people selling like it’s 1999 (or 2021)? That question too has a rational answer: those who normally would seek to move up, or down, or sideways are looking at their mortgage calculator and weighing their 3-4% existing mortgage against a 7% rate to move (you can’t take your mortgage with you), and many decided to stay put, or simply cannot afford to move. How does this supply issue get resolved? There are two ways: 1) a nationwide recession causes interest rates to drop again in response to a slowing economy (a short term possibility), or 2) over time the low interest rate mortgages get paid off (through sale or savings) thus narrowing the gap between existing and new rates, causing homeowners to be less “clingy”. This is a near certainty but would take many years.
The condominium market in Glover Park experienced a similar “stagflation” in prices and sales. One-bedroom condo prices dropped very slightly to $318,000 in 2023 from $319,000 in 2022. Though, the number of sales crashed from 48 to only 29 in 2023, which is about half of the 2021 level. 1BR’s sold significantly faster than last year, largely due to low supply, taking only an average of 5 weeks compared to 8 weeks in 2022, while the median time on market was only 12 days - unusual for condos. Two bedroom condo prices rose to $526K in 2023 from $507K in 2022, and the number of 2BR sales crashed as well, down 10 units to only 21 in 2023, though 2BR’s did take longer to sell, at 8 weeks on average. Condo sales tend to be more interest rate sensitive and these owners are staying put with their low rates! This supply problem has offset the affordability effect, girding condo prices.
So what do the Shamans and Sherpas and economists and real estate agents and Chris Jones’s say about the 2024 Glover Park real estate market? The profile of those buying property in Glover Park tends to include a high average income and access to cash which provides flexibility. If we see a trend towards a nationwide recession and the Federal Reserve reverses course and lowers the Fed Funds rate, we could see prices rise again, or at least see the return of the frenzy of many offers on almost every property for sale. This city, due to the Federal government-driven economy, is somewhat insulated against temporary economic downturns, which means incomes are more likely to hold up here. Yet, a significant drop in interest rates would reduce the gap between existing and new mortgages, possibly causing a surge in supply as well when owners feel more comfortable about letting go of their mortgages and moving up, down or out. For the short term, interest rates have moved sideways, the stock market is strong, consumer sentiment does not reflect great pressure of a recession here, so we’ll see more of the same – a great market for sellers, limited choices for buyers, affordability concern but more chance to secure a home these days, as the frenzy of 2021 has not returned.
Do you know someone who would like to get into a Glover Park house for 25% below the average cost? Here’s their chance! 2107 37th Street is on the market at $975,000 – see virtual tour and cool 3D walk through here. Yes, it’s smaller than the average Glover Park house, but this price gets you in for an affordable cost and it’s fully renovated and move-in ready! Open Houses: Saturday 1/27 1:00-3:00, Sunday 1/28 2:00-4:00.
Chris Jones
* Data from BrightMLS, and does not include a small number of sales off market that were not posted in the MLS. Prices are net of any monetary credits from seller to buyer.