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Northern Virginia Housing Market Facing an Uncertain Future

TENDING TO A LOCKBOX is Irene Xenos from RE/MAX West End in the City of Falls Church. Lockbox usage dropped by nearly 17 percent for the second half of March; a sign that confidence in the housing market has dropped in the long-term. (Photo: Courtesy Louise Molton/RE/MAX West End).

Like most of the country, the usually strong housing market in the Northern Virginia area practically hit a full stop in mid-March and is now seeing the effect of that slow down bear out in monthly reports on its activity.

The yin and yang of March’s numbers give a clearer picture of how severe the situation is regarding the novel coronavirus.

An enthusiastic start to March had sales up 14 percent year-over-year with a total of 1,815 homes sold, according to Showingtime data on the Northern Virginia region, and typically sold above their asking price and spent almost a week less on the market. The $1.17 billion in total dollar volume was a 24 percent increase over last March as well.

But after Virginia Gov. Ralph Northam declared a state of emergency on March 12 and President Donald Trump declared a national emergency over the coronavirus four days later, lockbox usage for home viewings during the ensuing work week saw a steady decline in traffic, according to a release from the Northern Virginia Association of Realtors.

As a result, pending sales, which represent long-term confidence in the market as they translate to actual sales down the line, were down almost 17 percent by the end of the month compared to March 2019.

“I haven’t even come up with a word yet that makes sense of this craziness. There has been a huge change,” Reggie Copeland, treasurer for NVAR, said. “It’s interesting because in January, February and the beginning of March, the talk was having a struggle of inventory…As soon as Covid[-19] got into the mix, I started seeing changes right away.”

The City of Falls Church — a small, but hyper-competitive housing market — saw some pronounced consequences from the pandemic as well.

Per Showingtime data, home sales dropped from 14 to nine year over year while pending sales slid from 27 last year to 20 this year. Median sales prices took a dive as well, sinking from $816,200 in 2019 to $633,115 in 2020. Overall dollar volume was nearly halved, plummeting from $12.24 million last year to $6.78 million this year.

All the uncertainty hasn’t necessarily cured the inventory woes that the Washington, D.C. metro area’s normally piping hot housing market experiences.

Copeland said that he saw buyers walk away from transactions while many sellers either temporarily took their homes off the market or completely did in order to ride out the length of the pandemic.

Only one type of seller seemed motivated to move their property right now, according to Copeland — investors of rental properties where the tenant lost their job and had to move out. Copeland said in his experience and when speaking with other agents, that template fit a good chunk of their clients.

Attempting to draw a comparison to previous housing market downturns proved difficult given the added layer of an infectious disease driving this current freeze.

“There’s two big differences,” Chris Finnegan, a spokesman for Bright MLS, said. “The 2008 slow down was more gradual, while this happened more quickly. Another big difference in terms of this one being so immediate: ’08 was solely a financial crisis. This is a public health crisis that has a residual as a financial crisis. It’s a broader thing that probably contributes to the immediacy of the effect.”

The circumstances surrounding this crisis make it so much harder to gauge when any sense of normalcy will return, said Copeland. The bubble bursting over a decade ago had its own sense of uncertainty, but as Finnegan said, it was a problem of the economy and easier to track how it progressed out of its rut.

Both believe that once the response to Covid-19 is determined and implemented, the economy will follow close behind. In Copeland’s case, he thinks that Northam giving the thumbs up to resume life as normal will make way for a strong end of June to middle of July.

But it demands asking: is buying a home the top priority for people following a global pandemic, especially given the possibility of a second surge taking place? To Finnegan, this time of social distancing and staying home-bound will only increase the urge for prospective buyers.

“Being quarantined and everyone being at home, it’s caused us to be much more conscious of our homes,” Finnegan said. “We’re in them basically 24/7. We’re thinking about our homes more, spending more time in them and we’re becoming very aware of what we like and what’d we like more of. Homes, in general, are absolutely at the top of the mind for folks in quarantine right now.”

Before it gets better though, plan on it getting worse. Or as Copeland said, “Expect the April numbers to blow us away.”