Regional Spotlight–The post-pandemic housing market has taken hold in the Mid-Atlantic region, with home prices and sales retreating to levels last seen when Americans were chasing Pokémon and “Stranger Things” debuted on our screens. Home sales were down 38.4% across the region, as buyers and sellers sat on the sidelines during the holidays, according to a recent report from Bright MLS.
Bright MLS’s December Housing Report found that the median sales price was up just 0.5% compared to December of 2021, with home prices declining in the Washington, D.C., metro area, as well as in the Eastern Shore and southern Maryland markets.
“Price growth has been slowing for months,” said Dr. Lisa Sturtevant, Bright MLS chief economist. “However, the price decline in the Washington metro area is a first and something that we will be closely monitoring as homebuyers and sellers continue to settle into the new normal of the housing market, with mortgage rates hovering between 6 and 6.5%. As we said previously, it’s important to note that home prices ran up quickly during the pandemic, and so in most markets, prices will remain higher than they were three years ago.”
Philadelphia metro area: Median home price down from peak but still more than 30% higher than pre-pandemic level
Housing market activity slowed to its lowest level in eight years in the Philadelphia metro area. However, despite the slowdown in sales activity, prices continue to rise year-over-year, reflecting the region’s relative affordability. Home prices in the region peaked in June, but the median sales price in December is still up 4.9% compared to a year ago, and prices are still more than 30% higher than they were three years ago.
Inventory increased YoY; however, supply in the region is still less than half of what it was three years ago. New listing activity continues to be low. In December, a total of 3,922 new listings came onto the market in the Philadelphia metro area, the lowest number of monthly new listings in more than two decades.
There is pent-up demand in the market, as many prospective buyers have been sitting on the sidelines. Mortgage rates have likely hit their peak for the cycle and will start to come down slowly. Both buyers and sellers will begin to accept the “new normal” of the 2023 housing market, which will include rates around 6% and greater balance between buyers and sellers in the transaction.
Baltimore metro area: Home prices have fallen from peak; still higher than last December
Buyer activity was very slow in the Baltimore metro area, with the lowest December new pending sales total since 2013. The market slowdown has been driven by rising mortgage rates, and many buyers paused their home search during the winter holidays.
Home prices peaked in the region in June, and prices have retreated from those levels over the past several months. However, the median sales price in December was still up 3.4% compared to last year at this time, and the median price in the Baltimore metro area is still 21.9% higher than three years ago.
Home prices have been more resilient in the Baltimore metro area than in many other markets due to the area’s relative affordability. Home prices likely will continue to fall from their peak levels, but current forecasts are for relatively stable prices throughout 2023.
Washington metro area: Median price falls YoY for the first time since 2016, down 15% from peak
The Washington metro area’s median sales price was $513,315, down 1.3% compared to a year ago. This represents the first time since September 2016 that home prices have declined YoY in the region. Home prices peaked at $605,000 in May 2022, and the median price is now 15% below peak level. December pending sales were down 35.8%, tracking at the lowest level since 2008.
There have also been pullbacks on the supply side. While the number of month-end active listings was up compared to last year, that increase is being driven by slower sales activity, not as a result of new listings coming onto the market. In December, the D.C. region registered 2,787 new listings, the lowest level in more than two decades.
Home prices may slide further in the first quarter of 2023, but current forecasts are for the median home price to rise by 1.1% in 2023. Mortgage rates will stabilize and will start to come down slowly. At the same time, both buyers and sellers will begin to accept the “new normal” of 6% rates, offers under list price, and greater buyer leverage.
Full Mid-Atlantic and Metro area reports are available at https://brightmls.com/article/market-insights-december-2022.