Glover Park row house prices rose again in 2022, climbing another 12% or $143,000 to a new record average of $1,325,000. Home prices have risen in 18 of the past 22 years (see the chart below). Sales, though, crashed from 69 houses sold in 2021 to only 36 in 2022 – a 48% drop in homes sold. On top of that, only 10 of those houses closed in the second half of the year! Annualized, this would be the slowest pace in Glover Park home sales in the 22 years tracked here.
What has caused these sustained high prices with so few houses sold? The word “stagflation” comes to mind – a term with a negative connotation in economic analysis to describe an environment of high inflation and stagnant demand, yet it does not describe the market forces at play here completely accurately. Comfort, Cost and Fear are the three key drivers of this changing real estate market.
COMFORT: During the time of increasing transactions roughly from 2017-2021 when, not coincidentally, mortgage rates dropped to all-time lows, lots of buyers and re-financers secured their 30-year rates as low as 2.5% last winter. Now these homeowners are comfortable and do not want to trade up in price or change neighborhoods considering rates have been in the 6-7% range since the beginning of the summer. And who would want to move out of Glover Park anyway….with 20 restaurants, Whole Foods, top-rated Stoddert Elementary….ok enough marketing.
COST: New buyers are facing affordability challenges with prices at all-time highs, and the monthly cost of a typical home purchase loan up 41% from the lows last year as a result of the surge in mortgage rates. Wages, even in the strong DC economy, have not kept up with home ownership costs. As a result, many have put their home buying plans on hold as there are few affordable choices. Potential sellers weigh the cost of what they have and what they can get elsewhere and are finding they are effectively glued to where they are now.
FEAR: If you watch the news, most likely you have seen all the negative commentary about the high cost of a house, the drop in demand, prices slipping in some markets around the country, and a general uncertainty about the economy and what will happen in the near future. Fear laced with uncertainty tends to cause the real estate market to take a pause and in some cases it can be a long pause until the economy stabilizes, the future looks a little brighter and the media stops the doomsday reporting.
Is the current scenario good or bad for you in Glover Park? It depends on who you are. If you are a seller, things are great – demand is strong and inventory still is rock bottom. If you are a buyer – it is good that the days of 10, 20, 50 offers on a house are gone, but it costs more to own now. Many at the margin are deciding to rent, both out of cost and fear and this has boosted the rental market. Current home seekers should plan to use a healthy amount of cash down to remain flexible so that they can refinance when rates come down again - which could be this year if the Federal Reserve backs off their (over)tightening by raising interest rates to extinguish inflation. Such real estate “stagflation” hurts those in the real estate industry the most – Realtors, mortgage lenders, title companies, home inspectors, builders, movers, house contractors, and more. This is a big concern nationwide because of the ripple effect that a slow-down in real estate sales has on the overall economy, which was a leading cause of the 2007 financial collapse. If we get clear signs that the Fed’s actions are causing a significant recession, banks will tighten their lending standards as well, creating a snowball effect on an economic downturn.
Glover Park row houses are not like a typical suburban subdivision in which most houses sell within a certain narrow range of value. The 36 houses sold in 2022 ranged from $700,000 to $1.915 million – coincidentally both the low and the high were on the same block and street. The degree of renovation plus the lack or existence of a third upper level of living space (like a corner row or a pop-up) make a big difference in valuation. Days on market did rise 77% from 9 days to 16 days, and even though it is notable, it was largely due to a few outlier house flips or former rental properties that sat on the market a while. The vast majority got a contract as soon as a date was set to review offers.
What about the condominium market in Glover Park? Far more condos are sold in the neighborhood and those property values tend to be more sensitive to interest rate increases. 48 one-bedroom condos sold (down a bit from 57 in 2021) with an average price of $319,000 which is slightly up from the $308,000 average of 2021. They did take on average two months to get a buyer which is even higher than the average 52 days on market in 2021 so condo sellers do need to be patient these days and plan ahead! Two bedroom condo prices averaged $507,000 - about on par with the 2021 level of $505,000 - and the number of units sold rose significantly from 18 in 2021 to 31 with the majority closing in the first half of 2022, reflecting the drop in overall activity since early summer.
* Data from Bright MLS Realtor-listed sales and does not include some sales sold off the market. All rights reserved. Data and graphics may not be re-posted or re-transmitted without permission.