Prices Down Slightly in September; Arlington Down 25% Since July
September Prices Fell 1.7% from August: The median home price in Northern Virginia was down slightly (-1.7%) in September after hitting a new high of $660,000 in May. Since June, prices have declined four consecutive months: June (-3%), July (-3.3%), August (-3.9%), and September (-1.7%). All major sub-markets in Northern Virginia declined in price between 1 to 3% in September, except Arlington which declined by another staggering 13% like in August. It should be noted Arlington can be particularly price sensitive since it typically has the fewest homes sold among the area counties. Also, Arlington has a concentration of higher price points compared to other sub-markets.

For example, since July, Arlington home sales declined from 254 (Jul), to 237 (Aug), to 212 (Sep) units. The declines predominantly occurred in the luxury home space with prices between $1.5 to 2.5 million, significantly impacting the median and average prices. While the average price in Arlington declined a whopping 25% in just two months, it's because the number of luxury homes sold has markedly declined, not prices across the board. Softness in the luxury space is similar to other areas like Fairfax County, but Fairfax is not as price sensitive with 6 times more homes sold each month than Arlington.

Market is Regessing Back to the Mean & 2019
The Market Shift is Occurring Inside a Bias of Strength: It cannot be denied the market is shifting in 2022. The days of 2020-21 and 85% of homes selling in the first weekend and prices escalating 5 to 15% over seller ask have left the market. Almost every metric during 2020-21 whether it was the fast climb in prices, rapid fall in days on market producing an ultra-low 0.75 month inventory, widespread buyer escalation over seller ask, or buyers commonly waiving contingencies like home inspection and appraisal, were examples of outlier behavior not typical of normal purchase terms. The hallmark of 2022 is a regression back to the mean (average). In fact, many metrics are lining up with 2019 experience. It almost doesn't matter which selling statistic we look at, they are very much on par with 2019. Here are some examples:

• Inventory: September inventory in Northern Virginia was 1.35 months, very close to the 1.41 months seen in September 2019.
• Contract Ratio which measures the ratio of homes Active for sale to those Under Contract was 0.70 (41/59 split) in September compared to 0.83 (45/55) in 2019.
• Days on Market (DOM): While the average DOM is still measurably faster in 2022 (15 days) than 2019 (27 days), the percentage of homes selling in the fastest time frame (0-10 days) is nearly equal. Last month, 43% of homes sold in 0-10 days compared to 45% in September 2019.
• Sold-to-List Price Ratio: Due to the fewer days on market in 2022, homes are selling on average 102% of seller ask, while in 2019 was 99%. However, in the month of September, the ratio was nearly the same in 2022 and 2019 at 98%.
• Number of Homes Sold: This is the one statistic that has been most alarming to anyone connected to real estate during 2022. So far this year in Northern Virginia, there have been 21% (7,500+) fewer homes sold compared to last year. However, the 28,684 homes sold through September are within 5% of the 30,133 homes sold in 2019.

Is the Market Undercurrent Strong?
All Things Considered, the Answer Leans "Yes": The Northern Virginia housing market performing on par with 2019 could be argued as surprisingly strong given the list of market headwinds in 2022. Inflation is checking in at 40-year highs all year, interest rates at 20-year highs, the stock market is in a deep bear with the Nasdaq down 35% in 11 months, and consumer confidence is hitting 10-year lows. Even with this combination of headwinds, the average home price in Northern Virginia is up 8.6% YTD 2022 (up 5.6% in Q3). So long as home inventory remains persistently low, prices should remain materially stable. We have to remember, the market is regressing back to the mean from a position of strength, not weakness.