Washington DC Real Estate

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The Isaacs Team | DC Real Estate

Fall Market | DC Real Estate

Highly qualified buyers unfazed by mortgage interest rates and those with cash have been taking advantage of market uncertainty. With rates shifting between 6.7% and 7.7% and extremely tight inventory conditions hampering many buyers, the volume and pace of the DC market has slowed, but prices continue to inch up due to demand vs low inventory.

Rates are still historically low, but as financing buyers adjust, additional rate hikes are levied. Utilize ARM mortgages, and plan for moderate rate drops in 2024. Buyers are hesitant to put money into improvements after closing, so turnkey homes will sell well, and buyers will exercise more caution with home inspections and careful evaluation of price. Also a consideration, school boundary changes are being decided this year. See our blog post on that topic.


What To Expect In 2023 Q4

One additional rate increase is possible this year, likely this month. DC home buyers who must rely on financing will face a daunting market in the final quarter of 2023 due to credit tightening, inventory decreases and affordability issues. We expect DC real estate market activity to slow considerably by November as a result.

Loan underwriters Freddie Mac and Fannie Mae have tightened the gap between high credit score borrowers and those with lower scores by about half, but this is unlikely to compensate much for restrictive market conditions.

What To Expect In 2024

Stubborn inflation means the Fed may greenlight an additional rate hike in 2023, and markets aren't pricing in big downward moves. The Nov. 14th CPI Report shows the pace of inflation slowed to 3.24% in October on a year-over-year basis, down from 3.7% in September, inching toward the Fed's 2% target. The two-year Treasury yield is about 5% vs federal-funds rate range of 5.25% - 5.50%. Still, there's optimism: the CME FedWatch Tool shows traders are pricing in the first rate cut around the mid-2024. Investment bank strategists forecasting downward rate movement. UBS predicts the fed-funds rate will drop below 3% by Dec. 2024, while Goldman Sachs sees rates dipping below 4%. Source: Bloomberg

DC Real Estate Market Summary

With Susan Isaacs

October 2023 in the District of Columbia:

  • Oct. 2023 Sold Dollar Volume was $402,129,235, a decline of -13.09% from Oct. 2022’s $462,697,001;
  • Oct. 2023 Median Sold Price was $678,500, up 4.38% from October 2022;
  • Avg Days on Market (DOM) in October was 30 Days, up 1 day from Oct. 2022;
  • Avg SP to Orig. List Price Ratio in October was 98.1%, up 0.65% from Oct. 2022;
  • Ratio of Avg SP to Avg Orig. LP in October was 97.4%, down -0.29% from Oct. 2022.

Visit the following links for details on individual home types, detailed DC market data and DC real estate values:

Off-Market Inventory & Sales

Keep in mind that a significant percentage of homes bought and sold in the District of Columbia are transacted off-market. This ‘shadow’ inventory is not available to third party sites and is unlikely to be included, or reported with accuracy, by any market data tool. For this reason, Washington DC market data should be viewed as informational, rather than absolute. Assessments of inventory may be quite skewed based on the now commonplace use of ‘Private Exclusive’ listings held by individual brokerages.

How The Economy Impacts Housing

Main factors that affect the housing market are economic growth, housing demand, unemployment. interest rates. consumer confidence, mortgage availability and supply.

DC housing market data

Housing Starts

Tracking housing starts by new residential construction permits is a key in determining the health of a local real estate market. When the economy is strong, more new homes are built and sold. In weak economies, fewer permit applications are made and fewer new homes are sold. Housing starts are essential indicators of economic health, and affect related markets such as mortgages, land sales, raw materials and employment.

Home Sales And the Economy

There is a direct correlation between home sales and economic health. As economies slow, money supply becomes harder to borrow, and as a result, fewer home buyers enter the housing market. This leads to diminished home inventory and homes on the market take longer to sell. A greater supply of homes in a market with lower demand generally forces prices downward.

Money Supply Impacts Housing Sales

Money supply is critical to housing market health. When borrowing is too difficult, housing starts and home sales slow significantly. When borrowing is too easy, too many buyers enter the housing market and drive up prices until a market correction or crash occurs.

Foreclosures Reflect a Market Downturn

Foreclosures are an indicator and a result of a housing market decline or crash. If interest rates rise dramatically, borrowers with adjustable rate mortgages may not be able to refinance or stay current on the debt. This results in increased foreclosure activity. Mortgage type isn’t the only reason for heightened foreclosure volume.The leading causes of foreclosure are rising unemployment, debt (medical debt in particular), divorce, death of a spouse or partner who contributed income, and  unexpected large expenses.

Economic Slowdowns

When the economy slows, it will affect the housing market, which in turn negatively impacts the economy as housing-related activities decline. This economic cycle breaks once economic improvement begins and housing prices reflect consumers’ confidence in their ability to take on mortgage debt.

DC Is An Unusual Market

The District is a unique and sought-after housing market– among the strongest in the country. Bouyed by the constant ebb and flow of government officials and contractors, Amazon’s HQ2, the tech sector, scarcity of land and the District’s small size (68.3 SqM), and its connectivity to adjoining states, Washington DC has weathered many declining markets well, and recovered quickly.

Regional Real Estate Market

The DC Metro Area includes Washington DC and parts of Maryland, Virginia, and West Virginia. It’s important to clarify the areas of the region being used by data reports before relying upon their numbers. Real estate is local first, so while we look at data for various regions surrounding the District of Columbia, our primary focus is on the District itself, parts of northern Virginia, and particular Maryland counties. We find this to be the most accurate representation of the market we live and work in.

Here are the four primary measures of the DCMA regional housing market for all home types:

National Real Estate Market

Forbes Advisor Highlights

The Fed voted to keep the federal funds rate unchanged at its penultimate two-day meeting for the year.

The November decision was the second straight rate pause after policymakers skipped a rate hike in July. After 11 interest rate hikes in this tightening cycle, the current rate range remains between 5.25% and 5.5%, the highest in 22 years.

Fed projections suggest the terminal federal funds rate will reach 5.6% by the end of 2023, implying one more 25 basis-point rate increase is on the table for this year.

Yet, housing market experts are less concerned about one more interest rate hike this year than what the Fed has in store for rates in the coming years.

“Right now, it’s more about what the Fed intends to do rather than what it does,” says Keith Gumbinger, vice president at mortgage website HSH.com. “[W]hile not meaningless, another quarter-point hike at this point won’t change the big picture much, as a lot of the ‘damage’ from higher interest rates is either done or is already in process.”

Gumbinger says what matters most is how long policymakers plan to keep rates elevated and when they’ll begin implementing rate cuts.

Though most experts believe that two rate-hike pauses in a row are a sign that the Fed is finally done with increases, Fed policymakers reiterated at the November post-meeting presser that achieving the goal of a sustainable 2% inflation rate still has “a long way to go.”

Given that outlook, Fed chair Jerome Powell unsurprisingly put the kibosh on the possibility of rate cuts happening soon, suggesting the current high rate range will remain in place for the time being.

Consequently, many housing market watchers forecast mortgage rates remaining elevated for the remainder of this year—and possibly into 2024.

When Should Homebuyers Act?

  • 30-year mortgage rates are currently expected to fall to somewhere between 5.4% and 6.8% in 2024
  • Instead of waiting for rates to drop, homebuyers should consider buying now and refinancing later to avoid increased competition next year.

–Business Insider



Month CPI Core CPI PCE Core PCE Updated
November 2023 0.22 0.34 0.23 0.30 11/03
October 2023 0.07 0.34 0.14 0.30 11/03
Note: If the cell is blank, it implies that the actual data corresponding to the month for that inflation measure have already been released.
Month CPI Core CPI PCE Core PCE Updated
November 2023 3.31 4.20 3.13 3.64 11/03
October 2023 3.28 4.16 3.12 3.63 11/03
Note: If the cell is blank, it implies that the actual data corresponding to the month for that inflation measure have already been released.
Quarter CPI Core CPI PCE Core PCE Updated
2023:Q4 3.56 4.01 3.25 3.40 11/03
Note: If the cell is blank, it implies that the actual data corresponding to the quarter for that inflation measure have already been released.
Federal Reserve Bank of Cleveland
  • Background: “Nowcasts” are estimates or forecasts of the present.
  • Description: We provide daily nowcasts of inflation for two popular price indexes, the price index for personal consumption expenditures (PCE) and the Consumer Price Index (CPI).



Housing Inventory Outlook for 2023

Forbes Advisor

With many homeowners “locked in” at low interest rates or unwilling to sell due to high home prices, demand continues to outpace housing supply—and likely will for a while.

Despite a slight uptick in resale homes, housing stock remains at near historic lows—especially entry-level supply—consequently propping up demand and sustaining ultra-high home prices.

In the meantime, the monthly supply of new homes, which has been helping to pick up some of the slack, continues on a slow but steady decline that began last fall.

“Inventory is approximately 46% below the historical average dating back to 1999,” says Jack Macdowell, chief investment officer and co-founder at Palisades Group. “We think that it is highly unlikely that the inventory problem will be resolved in 2023.”



Mortgage Rates Drop After Surprise Jobs Report

Yahoo Finance

In our upside-down economy, where good news for ordinary people means bad news for financial markets, worries about an overheated labor market pushed 10-year Treasury yields to their highest level in 16 years in October. That put pressure on stocks, and lifted the average rate on America’s most popular mortgage into yet-more-inaccessible territory, pushing it above 8% for the first time in 23 years.

But everything may have just changed Friday, when the Labor Department issued its monthly jobs report with a shockingly low number — just 150,000 jobs were created last month, 20,000 fewer than forecasted and barely half of the 297,000 gain seen in September.

The news helped push the average 30-year fixed mortgage rate below 7.4% on Friday, its lowest level in two months, relieving some of the pressure on the housing market. Mortgage rates tend to track the 10-year Treasury yield, and that plummeted on Friday, illustrating that investors could be anticipating interest rate cuts from the Federal Reserve.

And while a cooling labor market might not be great for the average American, it’s definitely good news for the Fed officials who have been hoping to slow job growth amid their nearly two-year-long battle with inflation.




UPDATE OCT 18 2023

Overall Economic Activity
Most Districts indicated little to no change in economic activity since the September report. Consumer spending was mixed, especially among general retailers and auto dealers, due to differences in prices and product offerings. Tourism activity continued to improve, although some Districts reported slight slowing in consumer travel, and a few Districts noted an uptick in business travel. Banking contacts reported slight to modest declines in loan demand. Consumer credit quality was generally described as stable or healthy, with delinquency rates still historically low but slightly increasing. Real estate conditions were little changed and the inventory of homes for sale remained low. Manufacturing activity was mixed, although contacts across multiple Districts noted an improving outlook for the sector. The near-term outlook for the economy was generally described as stable or having slightly weaker growth. Expectations of firms for which the holiday shopping season is an important driver of sales were mixed.

Labor Markets
Labor market tightness continued to ease across the nation. Most Districts reported slight to moderate increases in overall employment, and firms were hiring less urgently. Several Districts reported improvements in hiring and retention as candidate pools have expanded and those receiving offers have been less inclined to negotiate terms of employment. However, most Districts still reported ongoing challenges in recruiting and hiring skilled tradespeople. A few highlighted that older workers are remaining in the labor force, either staying in their existing position or returning in a part-time capacity. Wage growth remained modest to moderate in most Districts. Contacts across many Districts reported less pushback from candidates on wage offers. There were multiple reports of firms modifying their compensation packages to mitigate higher labor costs, including allowing remote work in lieu of higher wages, reducing sign-on bonuses or other wage enhancements, shifting compensation to more performance-based models, and passing on a greater share of healthcare and other benefits costs to employees.

Prices continued to increase at a modest pace overall. Districts noted that input cost increases have slowed or stabilized for manufacturers but continue to rise for services sector firms. Increases in fuel costs, wages, and insurance contributed to growth in prices across Districts. Sales prices increased at a slower rate than input prices, as businesses struggled to pass along cost pressures because consumers had grown more sensitive to prices. As a result, firms struggled to maintain desired profit margins. Overall, firms expect prices to increase the next few quarters, but at a slower rate than the previous few quarters. Several Districts reported decreases in the number of firms expecting significant price increases moving forward.


Benchmark Interest Rate Watch

Fed Benchmark Rate

The current Federal Reserve interest rate was raised a quarter-point in July 2023 from 5.25% to 5.50%, which is at its highest level in 22 years.

The Federal Reserve interest rate (federal funds rate, benchmark rate, or FOMC rate), is the interest rate banks and other depository institutions each other for overnight loans of funds. It is the benchmark for nearly all interest rates, determined by the Federal Reserve.

The current federal funds rate is 5.25% to 5.5%.

The Federal Reserve kept its benchmark overnight interest rate unchanged (5.25%-5.50%) at its November 1 2023 FOMC policy meeting, marking the second consecutive meeting in which the rates remained unchanged.

Economists anticipated this second pause on interest rate hikes because of cooling inflation.


News | Forecasts | Reports

The Conference Board

Economy Watch: US View

While the prospects for a ‘soft landing’ have risen, The Conference Board believes it is more probable that the US economy will slip into a short and shallow recession in early 2024. While consumer spending has held up in recent months, income gains have not kept pace. Rising debt levels and declining savings have underpinned consumption. This is not sustainable in our view. US labor markets remain tight given a strong September jobs report and large upward revisions for July and August. As the economy cools in early 2024 so too will the labor market. On inflation, progress is being made, but the outbreak of war in the Middle East amplifies energy price risks. We expect one final 25 bps hike by yearend, but no cuts until mid-2024

October 20, 2023 | Brief
Erik Lundh
Principal Economist
The Conference Board


The Conference Board

Global Forecast

Global real GDP is forecasted to grow by 2.7 percent in 2023, down from 3.3 percent in 2022. We expect further slowing to 2.4 percent in 2024. Economic growth is moderating under the weight of still high inflation and monetary policy tightening. Rather than a global recession, we expect a relatively subdued economic outlook. Growth is generally strongest in emerging Asian economies, and weakest in Europe and the US.

Rapid monetary policy tightening over the last year or so led to weakening in global housing, bank lending, and the industrial sector. However, this weakness has been more than offset by strength in other sectors, most notably service-sector activities, which is visible in labor markets. Strong consumer spending and the fading impact of shocks of recent years have been difficult to assess, leading to ongoing forecast revisions. Nonetheless, recent data  point to moderation of these positive trends, leading to slower global growth in the second half of 2023 and early 2024.

Two key risks stand out regarding the global economic outlook. The first relates to inflation. While headline inflation has peaked in most economies, core inflation (excluding volatile items such as food and energy) has proven stickier and has not decisively peaked in many economies. Price pressures in the (global) goods and industrial sectors have receded, and if history is any guide, services prices should likewise moderate over the next quarters. However, the speed of this disinflationary process is hard to assess and will depend on a number of factors including weakening demand and pricing power of firms, labor market dynamics, and passthrough from past input price increases. The second risk relates to financial market stability. Central banks tightened monetary policy rapidly and this exposed weaknesses in the banking sector, and financial markets in general. While most indicators point to relative stability in global financial markets, long and variable lags in the passthrough of monetary policy mean more financial turmoil could be on the horizon.

Apart from country-specific deviations, such as a possible rebound in US GDP in 2025, business would do well to prepare for a slowing global economic growth environment over the next decade. Relatively slow growth of about 2.5 percent for 2023-2024 for the global economy reflects the ongoing pivot to a more modest global GDP growth environment for the next decade, which is estimated at around 2.6 percent, down from an average annual pace of 3.3 percent in the decade leading up to the pandemic.

The 10-year economic outlook signals a prolonged period of disruptions and uncertainties for businesses, but there are also opportunities. Global growth will return to its slowing trajectory with mature markets making smaller contributions to global GDP over the next decade. Nonetheless, there are still opportunities for firms to invest in both mature markets—given their wealth and need for innovation to compensate for shrinking labor forces—and emerging markets—given their need for both physical and digital infrastructure to support their sizable and young labor forces. Keys to ensuring growth over the longer term include developing new lines of business; strengthening corporate culture; embracing digital transformation and automation; recruiting for talent with new skills not currently represented in the company; and maximizing the hybrid work model where it makes sense.


The Conference Board

Forecast For The U.S. Economy

The Conference Board forecasts that US economic growth will buckle under mounting headwinds early next year, leading to a very short and shallow recession. This outlook is associated with numerous factors, including, elevated inflation, high interest rates, dissipating pandemic savings, rising consumer debt, lower government spending, and the resumption of mandatory student loan repayments. We forecast that real GDP will grow by 2.2 percent in 2023, and then fall to 0.8 percent in 2024.

US consumer spending has held up remarkably well this year despite elevated inflation and higher interest rates. However, this trend cannot hold, in our view. Real disposable personal income growth is flat, pandemic savings are dwindling, and household debt is rising. Additionally, new student loan repayment requirements will begin to impact many consumers starting in October. Thus, we forecast that overall consumer spending growth will slow towards yearend and then contract in Q1 2024 and Q2 2024. As inflation and interest rates abate later in 2024, we expect consumption to begin to expand once more.

Meanwhile, following weak growth in Q1 2023, business investment bounced back in Q2 2023 despite interest rate increases. This was largely due to a surge in business spending on equipment (especially computing and transportation equipment) and elevated investment in structures (especially in manufacturing). However, we expect this trend to gradually reverse as US consumption begins to soften and interest rates continue to rise (we believe the Fed will raise rates by 25 basis points once more this year, likely in November). Residential investment, which has already contracted significantly, should start to bottom out later this year and then rise on lower interest rates and strong demand in 2024.

Government spending represented one of the few positive growth drivers for 2023 as federal non-defense spending benefited from outlays associated with infrastructure investment legislation passed in 2021 and 2022. However, reductions in discretionary outlays ($1.5 Trillion over 10 years) detailed in the Fiscal Responsibility Act, which averted the debt ceiling crisis, will limit overall government spending and act as a drag on growth later this year and early next.

On inflation, we expect to see progress over the coming quarters, but the path will probably be bumpy. Energy prices have been rising in recent weeks and will likely rise further on the back on conflict in the Middle East. However, progress in rental prices, which were previously a significant contributor to inflation, are beginning to cool inflation data. We expect year-over-year inflation readings to remain at about 3 percent at 2023 yearend and that the Fed’s 2 percent target will not be achieved until the end of 2024.

Labor market tightness has been remarkably persistent but we expect it to moderate somewhat over the coming quarters. However, relative to previous economic downturns we expect the labor market to hold up well due to persistent shortages in some industries and labor hoarding in others. This should prevent overall economic growth from slipping too deeply into contractionary territory and facilitate a rebound next year.

Looking into late 2024, we expect the volatility that dominated the US economy over the pandemic period to diminish. In the second half of 2024, we forecast that overall growth will return to more stable pre-pandemic rates, inflation will drift closer to 2 percent, and the Fed will lower rates to near 4 percent. However, due to an aging labor force we expect tightness in the labor market to remain an ongoing challenge for the foreseeable future.


The Conference Board

Consumers Remain Pessimistic About the Future—Even as They Continued to Spend

Press Release
Tuesday, October 31, 2023

The Conference Board Consumer Confidence Index® declined moderately in October to 102.6 (1985=100), down from an upwardly revised 104.3 in September. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—declined to 143.1 (1985=100) from 146.2. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—fell slightly to 75.6 (1985=100) in October, after declining to 76.4 in September. The Expectations index is still below 80—the level that historically signals a recession within the next year. Consumer fears of an impending recession remain elevated, consistent with the short and shallow economic contraction we anticipate for the first half of 2024.

“Consumer confidence fell again in October 2023, marking three consecutive months of decline,” saidDana Peterson, Chief Economist at The Conference Board. “October’s retreat reflected pullbacks in both the Present Situation and Expectations Index. Write-in responses showed that consumers continued to be preoccupied with rising prices in general, and for grocery and gasoline prices in particular. Consumers also expressed concerns about the political situation and higher interest rates. Worries around war/conflicts also rose, amid the recent turmoil in the Middle East. The decline in consumer confidence was evident across householders aged 35 and up, and not limited to any one income group.”