June 2010 Market Update

June was a tough month for everyone watching our local real estate market, especially those that wanted to identify clear trends. Average and median sales prices were up, reflecting the ongoing improvement in property values. In Fairfax County, median sales price was up almost 12% year-over-year, and Arlington County saw a nearly identical 11% gain. For the bad news, pending sales in June were down year-over-year for both counties: a drop of more than 18.1% for Fairfax County and over 15.5% for Arlington County. Since 2009′s comparisons were relatively weak, the declines for 2010 aren’t good news. Pending sales are often a good leading indicator of market strength, and June results typically show a drop from May’s pending sales. However, this year June pending sales were up over the previous month in both Fairfax and Arlington Counties. Anyone looking for consistency in the June housing statistics would be disappointed.

Pending sales are a measure of contracts signed. I also track actual sales, or closings. Like pending sales, actual closings reflect the same mixed results. As the nearby graph shows, Fairfax County’s 3 month streak of rising year-over-year unit sales came to an end in June. For Fairfax County, unit sales were down year-over-year about 4.86%, but they were up over 9.8% in Arlington County. What a difference a little distance makes. Of course, Arlington County’s unit sales volume is only about 1/5 as big as unit sales for Fairfax County, and it’s always easier for a smaller number to make bigger moves.

Here are some key facts and statistics:

Properties that sell continue to do so in a short period of time, but this is changing – the percentage of Fairfax County properties that sold that became sales in under 30 days peaked at about 72% in May and has started to drop, while the share selling in 31 to 60 days is rising;
Average days on the market has started to creep up in both Fairfax and Arlington counties, reaching 41 days in Fairfax and 46 in Arlington; even with the slight up-tick, that’s a drop of nearly 45% (from 74 days) in Fairfax County and 27% (from 63 days) in Arlington County;
There’s still a lot of variation between towns, but the gaps are narrowing as market conditions improve: listed properties in Herndon have been on the market for about 28 days, about 31% less than the county average, but for Great Falls, that measure is 111 days, or 170% of the county average – a gap that seems big until one considers that the gap was twice as big just 2 months ago;
Different price ranges perform differently, and not as one might expect: Fairfax County sales in the $200,000 and $300,000 price ranges actually dropped, but in the $1 – $2.5 million price range, unit sales shot up by 100%;
Selling price as a percent of listing price remains strong but slipped slightly in June to just over 96% in Fairfax County and 95% in Arlington County;
Conventional financing has become more popular, gaining nearly 6 points of market share in just the past 2 months, but still finances only about 1 out of every 2 buyers; FHA & VA loans are used by more than 3 out of 10 Fairfax County buyers, a slight drop from the level of June 2009 – that suggests there are still liquidity issues in the mortgage market.

Throughout all of these statistics, there’s plenty of evidence of a strong uptick in prices. Average and median selling prices are up. The nearby graph of selling prices to tax appraisals is just another example. Since January 2010, there have been 5 straight months of rising price relative to a property’s tax appraisal. In that time, this measure has jumped by 9.40% in Fairfax County and 8.84% in Arlington. Those are dramatic increases in a short period of time.

It’s easy to get distracted by the big picture of real estate market statistics and miss what’s happening on a local level. That’s why I always try to look for the stand-out performers. I’ve discussed how unit sales volumes were down 4.86% in Fairfax County in June. When the county overall was down, the cities of Falls Church and Fairfax were up nearly 64% and 17% respectively. That’s stand-out performance by any measure. Days on the market dropped about 45% year-over-year in Fairfax County, but the city of Manassas dropped a whopping 78% and registered the biggest percentage decline of any area tracked by our regional listing service. Interestingly, the city of Manassas delivered the third-best jump in average sold price, registering a gain of over 35%.

You might find the video below worth watching. It’s current through May 2010 but offers great visual evidence of the quick snap-back we’re witnessing in real estate prices across our region. The announcer correctly points out that months supply of inventory puts us in a seller’s market. In Fairfax County as of June, there’s only 5771 active listings and 1567 sales, or about 3.7 months of supply at the current sales rate. He also mentions a fact that may surprise you: we have an “acute housing shortage” in our area. Other sources have suggested our nation as a whole might face a housing shortage. Housing shortages have a way of driving up housing prices.

May 2010 Northern Virginia MarketWatch