The Real Estate Market in the Metro DC Region Remained Hot Through 2021

In our semi-annual Market Report, we take a comprehensive look at sales data for the second half of 2021, analyze the impact of tight inventory on Washington, DC and the Maryland and Northern Virginia suburbs, and look ahead to the first half of 2022 to help you make the most informed real estate decisions. This market report is a must-read!

Q&A with Maureen McEnearney Dunn, President McEnearney Associates REALTORS

It’s hard to believe that we’ve been dealing with COVID for almost two years. Are things getting back to normal?

We have been in a sustained seller’s market for several years, so I’m not entirely sure what “normal” is anymore. If “normal” means balanced, then we’re not back to normal. The scales are still tilted in favor of sellers in most of the metro DC area. The market certainly paused for about 6 weeks when COVID first hit in the spring of 2020, but it came roaring back. As we have discussed in previous Market Reports, there were lots of people who wanted to change their living arrangements to accommodate working – and schooling – from home which created much higher demand in the suburban markets, while close-in condos struggled a bit.

How did the market fare in 2021?

It started off very strong and stayed that way. 2020 was a record year, and 2021 was even busier. In 2020, COVID shifted the usually strong spring market into the summer and fall, but we saw a bit of seasonality return in 2021. The spring market was the best, and there was an expected and modest cooling as we went into the third quarter. About the only thing that kept 2021 from being even stronger was the one-two punch of the emergence of the Omicron variant and holiday travel. So many people stayed home over the Thanksgiving and Christmas holidays in 2020, but huge numbers of people traveled at the end of 2021. That, along with renewed concerns over COVID, really hurt contract and listing activity in December.

What do you think the market will look like in 2022?

Particularly because of the limited number of new listings in December, we have entered 2022 with a significant deficit in listing inventory – probably the most acute shortage of any period since the onset of COVID. Buyers have returned to the market a bit more rapidly than sellers, so we are seeing a real frenzy right now. But, we believe this will calm down as we head into the spring market for two significant economic reasons that we discuss in detail in the community commentaries in this report. The first is rising mortgage interest rates, and the other is inflation. Homes will become less affordable as rates rise, and inflation in consumer goods and energy prices will further reduce the buying power for most purchasers. The pace of price appreciation will moderate, and we expect overall appreciation to be in the range of 5% – 7 % for much of the region, with lower appreciation for urban condos.

Are you at all concerned about a “bubble”?

We’re fortunate to have been in a strong sellers’ market for a sustained period of time, and even more fortunate that it hasn’t been as overheated as some other areas of the country. We don’t even make the top 20 metro areas for price appreciation – and that’s a good thing. We’d be a bit more concerned if prices had been rising 20% – 25% annually because that simply isn’t sustainable. We have a solid regional economy, and the overwhelming majority of homeowners have equity in their homes. Even those people who have a change in personal circumstances that might force them to sell their homes will have a high probability of being able to sell without highly negative consequences. And in the event there are foreclosures, there is such a significant inventory deficit that the market should be able to absorb them. There’s nothing about this market that resembles the conditions that caused the real estate bubble to burst in the Great Recession.