The real estate market in D.C. has been growing only slowly in 2016, and that pace is expected to continue. Thus far this year, the average home price in the District is just about 1.4% over 2015. While this is on par with the national average pace of growth, it’s nothing compared to the total growth witnessed in 2015, when the average sales price grew by 3.6 percent, or the two previous years of 5.6% in 2014 and 6.7% in 2013.
From an historical standpoint, the real estate market nationwide seems to tend to operate on an 18-year cycle, which incorporates the four phases of recovery, expansion, hyper supply and recession.
During the recovery phase, slow growth overflows from the previous cycle. The expansion phase is represented by rapid increase in average home prices and signs of market stabilization. The third phase, hyper supply, sees the market flooded as homeowners race to sell in order to take advantage of the higher-priced home sales. This leads to a downturn in home prices as homeowners price cut in competition with neighbors. The ending cycle of recession is the lowest point of the cycle and of the market, after which the cycle repeats. Almost without fail, this predictable cycle has repeated itself about every 18 years in the national market.
Since just about 2009, the market in D.C. has gone through both a recovery phase and a boom phase. While the rest of the nation went through the effects of the housing bubble, D.C. recovery was speedy and proved promising for D.C. homeowners. Consequently, the District has risen to become one of the strongest real estate markets in the entire U.S. on several fronts.
More recent data indicates that the cycle may be reaching its high in D.C., however. The average pace of home sales is slowing down. The dog days of sales over listing price will soon be over for good, and the market is expected to experience a downturn.
Factors regarding local real estate conditions heavily affect the cycle and add to its complexities. One of the biggest factors has to do with the inherently limited supply of housing within the D.C. area. Compared to the rest of the nation, D.C. lacks the supply of residential property on the market at any one time. This fact may have contributed to the fast recovery in D.C. post-2009. The District real estate market stayed a seller’s market simply because of the inherent lack of inventory.
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With this said, homeowners in D.C. who are looking to sell their property should price conservatively to avoid overpricing. Recent year’s house sale prices don’t necessarily predict what a homeowner will be able to get for similar residential property in 2016. This doesn’t mean a recession is on the horizon, but it does mean to exercise caution and pay attention to the natural trends in the local market. Buyers should beware that they likely won’t be able to get huge deals on homes in D.C.
To sum up, the cycle of the real estate market is still to be considered theoretical in nature. D.C. has always been a strong market, and there’s no reason to predict that will change. With continued slow growth during the remainder of 2016, the real estate market in the District will hold its own.