Fewer Listings Should Push Prices Higher

Only 4,000 homes were listed in the DC area in January. That is the best news sellers could ask for. As a result, we should see more competition among buyers this year. That is welcome, because buyer competition is the thing that pushes prices upward.

DC area listings fell 4 percent compared to January 2012—which doesn’t sound like a big deal. But compared to January 2008, listings were down 62 percent. The huge number of listings we saw several years ago is what caused the market to slow and pushed prices down. Every year since, we have been encouraged by the steady decrease in home listings and increasing sales activity.

Bottom line: Home prices are more likely to rise this year because the smaller inventory will force DC-area buyers to compete for the homes that are available.

Baltimore’s listings have also fallen since 2008. Last month’s listings were 36 percent lower than January 2008—not as sharp a drop as we saw in DC. Baltimore-area listings actually increased in January, rising 6 percent compared to January 2012.

Consider, also, that Baltimore-area contracts grew just 3 percent in January. That imbalance—with listings rising faster than sales—will not help Baltimore if it continues. It would only put a damper on buyer competition.

By contrast, the DC area enjoyed a 5 percent increase in contract activity in January. If contracts continue to rise while listings fall, DC-area buyers will face the stiffest spring competition since 2006.

Chris Sicks has reported on the Washington-Baltimore real estate market for 20 years. Contact him at csicks@gmail.com