“The party’s over,” according to Lisa Sturtevant, chief economist at Bright MLS.
Housing market heads back to 2019
While home sellers may feel sad about the end of bidding wars, buyers in the D.C. region are more likely to feel relief. Sturtevant predicts that the number of sales and the pace of price appreciation will slow for the rest of this year and into early 2023. She says the housing market will look more like 2019, before the pandemic-induced frenzied housing market.
Overall, Sturtevant anticipates that home prices won’t drop even in the cooling market conditions. However, some localities have a greater risk of price declines. Generally, these are neighborhoods where prices grew faster than average over the past two years, where inventory is rising fast and where household incomes are lower than the average for the region.
In addition, the communities most at risk include those where second home buyers drove up prices during the pandemic and where remote workers relocated and heated up demand — in other words, rural and exurban areas, and vacation home markets.
Sellers beginning to reduce prices
Sellers began to recognize the slower market conditions and perhaps realized that they had overestimated buyer demand earlier this spring, especially as higher mortgage rates cut into buyers’ housing budgets.
Approximately 24 percent of homes for sale in D.C. had a price drop in June, according to data provided by Bright MLS. By neighborhood, price drops ranged from a low of eight percent of listings in Park View to a high of 46 percent in Fort Dupont Park.
Other D.C. neighborhoods with the highest percentage of reduced sales prices include Marshall Heights (43 percent), Southwest Waterfront (42 percent), Carver Langston (39 percent) and Lily Ponds (39 percent).
Neighborhoods where sellers lowered their prices in June include Adams Morgan (30 percent), Deanwood (29 percent), Dupont Circle (26 percent), Georgetown (23 percent), Petworth (20 percent), Mount Pleasant (20 percent) and Capitol Hill (19 percent).