Demand for Townhomes remains strong causing the median sale price to jump $54K

OVERVIEW

The surge in new contract activity last month translated into a rise in sales for November. Sales are higher than last year, but new contracts are down slightly compared to November 2011. This could be an early indication of tempered demand in the market. The inventory of homes for sale continues to shrink, and new listings remain at their lowest level in over a decade. The low supply is putting upward pressure on median sales prices around the region. Price gains have been most pronounced in the townhome segment, which has led in year-over-year growth for 3 consecutive months. Townhomes also lead all segments in sales growth, and active inventory declines, which indicates strong demand for these properties. As the year-end approaches, the market tends to slow down, which will likely equate to an even lower supply of homes for sale in the coming months. Buyer demand has been consistent, but seller participation in the market remains low. This is due to both economic uncertainty and potential equity losses in many areas. With the Federal Reserve’s September announcement of continued low interest rates through 2015, it is feasible that many buyers will wait it out until more options become available in the market. This could mean slower sales and stable prices in the near-term.

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Like most companies (and residents) of the DC Metro area, we're paying close attention to the fun-filled negotiations between the White House and the Republican majority in the house. Sequestration would obviously have a huge impact on the local economy, but our housing market is also extremely vulnerable to any mortgage interest deduction limits, even if relatively high caps are put on itemizers. For background, the always interesting (and concise) blog Econ70.com summarizes the new revenue options being considered (see their post):

"If all 1040-Schedule A deductions, including the mortgage interest deduction are capped at about $35,000, then homeowners with houses priced north of $500,000 would be the ones primarily affected, and their homes would fall in value. Interestingly, they might respond by reducing charitable giving. If, however, the deductible amount is limited to 80% of total deductions, then all itemizers would be hurt, and many more houses would decline in price."

How many of the homes sold (year-to-date) in key DC Metro areas would have been impacted by a $35,000 mortgage interest deduction cap?

Might be a good time for area homeowners to give their local congressman a ring!