Driven up by high demand and low inventory, home prices kept climbing in most jurisdictions
Combine those factors with not enough houses for sale and the effect was a red-hot housing market with some properties commanding double-digit multiple offers and jaw-dropping escalations. In the spring of 2021, at least one house received more than 30 bids before selling for $1.3 million, more than $300,000 above its asking price. Another house sold for more than $1 million above its list price, starting at $3,495,000 and closing at $4,540,000. It was as if everyone decided 2021 was the year to buy a house.
“I’m an economist, not a psychologist,” said Lisa Sturtevant, a housing market analyst who consults with Bright MLS, the area’s multiple-listing service. “I will say in periods of uncertainty, whether it’s economic uncertainty or life uncertainty, this idea of real estate or home, I feel like is really compelling to people. And again, for those with means, that both financial as well as personal uncertainty was one of the reasons why real estate felt very attractive, coupled with a 2.65 [percent] 30-year [mortgage]. That didn’t hurt.”
Prices of single-family houses rose across jurisdictions last year with the Maryland suburbs seeing the biggest annual percentage increase, according to data from Black Knight, a mortgage and real estate technology and data provider. Black Knight’s data comes from deed records.
“What started in 2020 I think we saw a continuation of that into 2021,” said Gunnar Blix, a data analyst at Black Knight. “It was just not as an extreme change from the year before.”
The median sales price of a single-family house in the Maryland suburbs climbed to $475,000 in 2021, up from $427,000 in 2020, an 11 percent increase. It tied the biggest percentage increase for Maryland in the past 10 years. Maryland also saw an 11 percent increase in median sales price in 2020.
The District didn’t have as big a jump in median sales price as the previous year but its increase was also significant. The median sales price of a single-family house in the District was $820,000 in 2021, up from $750,000 in 2020, a 9 percent increase. It was the third-highest increase in the past 10 years. The District saw a 14 percent increase in median sales price in 2020.
The Virginia suburbs had their second-best increase in median sales price in the past 10 years. The median sales price of a single-family house in Virginia was $676,000 in 2021, up from $625,000 in 2020, an 8 percent increase. Virginia saw an 11 percent increase in the median sales price in 2020.
Comparing pre-pandemic prices from 2019 with last year, the median sales price of a single-family house has climbed 25 percent in the District, 23 percent in the Maryland suburbs and 20 percent in the Virginia suburbs in the past two years.
“People are still looking for the larger homes, more space, that’s what’s driving part of that median price jump,” Blix said. “And there’s very little inventory, especially in the low end of the market. And so, if you’re looking for a low-end, single-family residence, you’re simply not going to find it.”
Condo prices moderated in 2021 after big gains in 2020. The Virginia suburbs had the biggest annual percentage increase in 2021, but it was half as big as in 2020. The median sales price of a condo in Virginia was $420,000 in 2021, up from $405,000 in 2020, a 4 percent increase. Virginia saw an 8 percent increase in median sale price in 2020.
The Maryland suburbs’ condo prices also rose. The median sales price of a condo in Maryland was $330,000 in 2021, up from $320,000 in 2020, a 3 percent increase. Maryland saw a 9 percent increase in median sale price in 2020.
The District’s condo prices were flat last year. The median sales price of a condo in the District was $491,000 in 2021, up from $490,000 in 2020. The District saw a 7 percent increase in 2020.
Comparing pre-pandemic prices from 2019 with last year, the median sales price of a condo was up 7 percent in the District, 12 percent in the Maryland suburbs and 12 percent in the Virginia suburbs in the past two years.
McLean, Va., was the most expensive place to buy a home in the D.C. area in 2021. The median sales price for Zip code 22102 was $1.65 million. Chevy Chase, Md. (Zip code 20815) came in second at $1.47 million. The least expensive place to a buy home in the D.C. area in 2021 was Bushwood, Md. (Zip code 20618) in St. Mary’s County. The median sales price there was $225,000 in 2021.
Another St. Mary’s County town, Chaptico (Zip code 20621), was the second-least expensive at $240,000 and the Zip code with the biggest gain in median sales price. Median sales prices in Chaptico were $92,000 in 2020.
The number of homes in the D.C. region that sold for $1 million or more continues to increase with 8 percent of the homes in the region selling above that mark, according to data provided by Bright MLS. Its data is drawn from the real estate agent’s database and does not include for-sale-by-owner homes. Some newly built homes are also not included.
Twenty-one percent of the home sales in the District were for $1 million or more. Nine percent of the home sales in the Virginia suburbs were for $1 million or more. Five percent of the home sales in the Maryland suburbs were for $1 million or more.
“A million dollars isn’t what it used to be,” Sturtevant joked. “We live in a region where there really is this big dichotomy in incomes. We’re not like Manhattan or Silicon Valley but we do have a demographic and employment base where there’s folks that are making a lot of money. And we know that there has been a tremendous amount of housing equity that existing homeowners gained over the last couple years. So some of that bump-up in prices and the reason why people can afford a $1 million house is because they just sold a $600,000 house that they made $300,000 on.”
More than 42 percent of homes for sale in the D.C. region in 2021 sold above their list price, according to Bright MLS data. The Virginia suburbs had the most homes sell above list price at 44 percent. The Maryland suburbs had 43 percent of its homes sell above list price. The District had 31 percent of its homes sell above list price.
Sales strongest in Virginia
When the region shut down in 2020 because of the pandemic, home sales ground to a halt. But they quickly rebounded once it started opening up again. Sales of single-family houses were higher in the Maryland suburbs and the Virginia suburbs with Virginia showing the biggest annual percentage increase, according to Black Knight data. Sales in the District were flat. Virginia had 33,029 sales of single-family houses in 2021, up from 29,057 in 2020, a 14 percent increase. Maryland had 46,598 sales in 2021, up from 46,003 in 2020, a 1 percent increase. The District had 3,878 sales in 2021, up from 3,869 in 2020.
Condo sales were also higher across the region with the Virginia suburbs seeing the biggest annual percentage increase. Virginia had 27,304 condo sales in 2021, up from 23,988 sales in 2020, a 14 percent increase. The District had 4,414 condo sales in 2021, up from 4,030 in 2020, a 10 percent increase. The Maryland suburbs had 27,316 condo sales in 2021, up from 26,278 in 2020, a 4 percent increase.
“Prices just escalated so quickly during the pandemic, that if you were a first-time buyer or even a move-up buyer and you were looking for a more affordable option, you had to turn your eyes to condos,” Sturtevant said.
Buyers flocked to Jessup, Md. (Zip code 20794) in Anne Arundel County. Zip code 20794 had the biggest annual gain by percentage in sales. The number of homes sold jumped to 52 in 2021 from 28 in 2020. The part of Zip code 20912 in Prince George’s County also had a big jump in sales. The number of homes sold there rose to 48 in 2021 from 26 in 2020.
“I think what’s going to be interesting though, is to see what happens more in the midmarket and we’ve already started seeing this at the end of 2021,” Sturtevant said. “A place like Prince George’s County actually did quite well at the end of 2021 in terms of home sales activity because of the relative affordability of the homes that are there. … It will be interesting to see if that market continues to be a draw to folks as rates continue to take a bite into some buyers’ buying power.”
While it was great to be a home seller in 2021, it was frustrating to be a buyer. Sales in all three jurisdictions would likely have been greater had more homes been on the market. Inventory has been declining for several years now, according Bright MLS data.
As of December 2021, the number of homes listed for sale in the region was 5,650, down 22 percent compared with December 2020. It was the third year in a row of double-digit percentage decreases. In December 2020, there were 7,244 homes on the market, down 37 percent from December 2019. In 2019, there were 11,401 homes on the market, down 22 percent from December 2018.
The Virginia suburbs had the biggest decline in inventory of the three jurisdictions. The number of homes for sale was down 31 percent. The Maryland suburbs were down 21 percent. The District was down 10 percent.
“If you look at the data, we’ve been seeing year-over-year declines in inventory for at least five years,” Sturtevant said. “It accelerated during the pandemic because of the other demographic, the millennials, who are coming into the market, who are fueling a lot of the demand in our region.”
Sturtevant added: “Demographics will take us out of it, but not for a while.”
Sturtevant explained that as baby boomers age, they will be moving on to senior housing or moving in with their adult children. That should put more homes on the market.
“We do think after a decade or so we will see that population will exit some of the housing stock that the millennials will be able to move into as move-up buyers,” Sturtevant said.
But Blix is pessimistic about the near term.
“We still don’t see exactly where that inventory is going to come from, if it’s going to come back,” he said. “I think there’s possibilities, but we are simply not building enough. We’re simply not seeing enough of that inventory coming on the market just yet, not seeing people who want to sell their homes.”
A home is typically a person’s biggest investment in their lifetime. Yet some buyers were having to make quick decisions on such an expensive purchase. Nearly two-thirds of all homes on the market in the D.C. region last year went under contract within 10 days in 2021, according to Bright MLS data. Homes in the Maryland suburbs sold the quickest with 67 percent under contract within 10 days. The Virginia suburbs were next with 66 percent under contract within 10 days, and in the District, 49 percent of homes went under contract within 10 days.
After two years of a hot housing market, 2022 could be a turning point.
“I suspect that we’re going to [this] year be seeing a different story, maybe somewhat of a reversal,” Blix said. “I think we already kind of see at the tail end of last year that sales are slowing down. There’s not as much inventory and with rates rising, we’re going to be looking at a different scenario.”
But even if the housing market weakens this year, don’t expect it to crash.
“I think the region is going to react a little bit different than some other places,” Sturtevant said. “I don’t think mortgage rates are going to have as big an impact on our housing market as it will in other parts of the country simply because of the incomes we have here in the Washington area.”
She added: “That supply-demand imbalance, that’s going to be with us for a while because of that and because of the fact that the Washington-area economy is pretty good, and actually does pretty good during recessions, if we ever get one of those again, that there’s no big warning flags in terms of any type of downturn in the market in our region.”
