Why DC's Housing Inventory Shortage Will Continue 'For Foreseeable Future'

• February 25th 2015

by Lark Turner

A recent uptick in the number of homes on the market hasn’t been enough to balance an inventory shortage in the DC metro, and low inventory will likely continue to be a theme through the year.

“The DC area still has an inventory shortage and likely will continue to have inadequate supply relative to demand for the foreseeable future,” said Corey Hart of date firm RealEstate Business Intelligence.

There were 0.8 pending contracts per active listing in February, which is down significantly from 2013 when it was at one time as high as 1.5 pending contracts per active listing. But don’t let that relative drop fool you, Hart said; “[a 0.8] ratio is very, very high.” The larger issue is that inventory dropped almost 75 percent from 2009 to 2012, and that huge decline hasn’t been offset by slight gains in the past few years.

That means it’s still firmly a seller’s market in the area. The market for townhomes is the most inflexible, with the highest demand relative to supply. There are fewer active townhome listings than townhomes under contract.

For the inventory to turn around, Hart said, the DC area would have to see sales drop dramatically combined with a rush of new listings hitting the market.

“It would take several months of double-digit percent declines in purchase activity coupled with double-digit spikes in new listings for inventory to tip into balance,” Hart said. “The trend over the past three months doesn’t portend that we’re near the end of the seller’s market.”

That trend, he said, looks more like this:

• November 2014: New listings down 5.1%; Contract activity up 1.2%
• December 2014: New listings up 12.9%; Contract activity up 10.8%
• January 2015: New listings up 4.4%; Contract activity up 6.2%.

Slight increases in the number of days homes are spending on the market do give buyers a bit more of an advantage, but Hart predicts that this spring most homes will still go under contract within about two weeks as competition remains high.

This article originally published at https://dc.urbanturf.com/articles/blog/dcs_inventory_shortage_likely_to_continue_for_the_foreseeable_future/9572.