Where is the Housing Market Headed?

Everyone is talking about the market, but what is the market actually telling us?

A steady stream of spring market data is signaling a shift toward balance in the DC metro housing market, with homes staying on the market longer and buyers increasingly approaching a home purchase with negotiation in mind.

Despite record-high home prices in the DC metro area, May 2025 showed a modest rebound in contract activity across several jurisdictions. However, the broader year-to-date trend remains slightly down. We’re seeing modest week-over-week growth in the number of newly ratified – but that growth is very unevenly distributed.

Northern Virginia led the way with a 9.9% year-over-year increase in May contracts, followed by Montgomery County (up 5.2%) and the District (up 4.0%).
Loudoun County (up 0.8%) and the Virginia Countryside (down 0.4%) saw smaller changes, while Prince George’s County posted a slight 0.2% dip.
However, most areas are still trailing slightly behind 2024 levels for the first five months of the year, with contract activity down between 0.4% and 10.2%.

Homes are also taking longer to sell: average days on market rose across the region, ranging from 23 days in Northern Virginia and Loudoun County to 55 days in the District. Together, these indicators reflect a market adjusting toward balance, where motivated sellers must work to stand out, and buyers may find emerging opportunities.

Whether you’re on the market to buy or sell, or thinking about jumping in, here’s what to keep in mind.

If Your Home Is Listed

Compared to last May, the number of homes on the market has risen significantly in every jurisdiction, and this is absolutely a market where “price matters and time kills.” Even though contract activity was very stable compared to last May, that rising inventory pushed down absorption rates – the rate at which available properties go under contract within that month – pretty much across the board.

Home prices are still strong, more than half of homes are selling at or above list, and in most local jurisdictions, the absorption rates are above the 30% threshold for a “Sellers Market.” But absorption rates are tracking lower by the month, not just year over year. Some tips if you currently have a “For Sale” sign on your home right now:

Be Competitive When Pricing: Be realistic given current conditions and get familiar with the factors that are influencing your neighborhood, and watch for signs in other comparable areas that things are selling more quickly or slowly than your home. Smart sellers know this is not the time to “test the market” and push the envelope on peak pricing.
Consider Strategic Staging & Renovations: The first showing is your home’s audition, and you may not get the chance at a callback. Make sure your home is perfectly presented from the minute a buyer pulls up and that a tour reinforces that the home is show-ready. Offers with home inspection contingencies are more common now, especially if buyers are paying top-dollar (they want to know what they’re getting!) Making sure your listing is sound in structure and appointed with the modern conveniences that buyers flock to will ensure it stands out from an increasingly crowded field of options. Allowing pre-offer inspections will also keep serious buyers engaged and moving toward a clean offer.
Flexible Financial Incentives: With prices and mortgage rates still in the upper ranges, entice buyers with concessions like rate buydowns (which 37% of new construction builders are using) and other sweeteners like paying their agent’s compensation or offering money towards closing costs.
Targeted marketing: Work with your agent to emphasize neighborhood strengths and include a list of great features and resources that can be found in the area. Don’t assume buyers have time to do the local research that you’ve accumulated over the years. Brag about what makes your home in that neighborhood such a great place to live!

If You’re In the Market To Buy

Opportunity window: Prices stabilizing (or not increasing as rapidly), and more inventory is giving buyers the best shot in a long time for negotiating leverage. With more choices and fewer bidding wars, buyers can negotiate better, and smart sellers on a tight timeframe may be willing to negotiate on everything from buyer concessions to price reductions.
Mortgage rate plateau: Mortgage rates have steadied at just under 7%, with recent retreat into the mid‑6% range (around 6.84–6.85%). While still elevated, this plateau signals some relief and suggests rates may remain fairly stable or ease modestly as inflation cools.
Be prepared: Readiness is critical – having your pre‑approval in hand, being flexible on timelines when possible, and taking swift action when you find a home can mean the difference between winning a deal or watching it slip away.
Get Creative with Financing Fixer-Uppers: Sometimes that “Dream Home” is actually a work in progress. If you have the vision to take a home that needs some TLC to make it your own, remodeling and investment loans – like a VA Renovation Loan, FHA 203(k) or Fannie Mae’s HomeStyle – can help you finance both the purchase and the renovation in one package.

Looking Ahead

Timing the market when buying or selling a home is difficult because real estate is influenced by many unpredictable factors – interest rates, inventory levels, economic shifts, and even seasonal trends. By the time a trend is clear, it’s often already reflected in prices or competition. Trying to “wait for the perfect moment” can mean missing real opportunities that align with your needs, rather than the market’s.

Sellers, make sure to adjust your pricing in response to the market – three weeks without an offer is probably an indication that you’re off the market and need to reevaluate either your pricing, your home’s condition, your marketing efforts… or all three. Buyers, this is a great opportunity to come off the sidelines and engage intentionally and smartly with motivated sellers to secure your spot on the path to homeownership.

Incoming insight suggests a turning tide: Sellers who price smart and stage carefully will still succeed, while buyers who come armed with preparation can capitalize on enhanced bargaining power.

Read more housing analysis in our Market in a Minute and Weekly Meter, and connect with one of our agents to find the best strategy to sell or buy your home!