DC Metro Housing Market Proves National Headlines Wrong in 2022
Prices Appreciate - Homes Selling Fast - No Glut of Inventory: As usual, the consensus forecasts by many renowned economists and so-called "housing experts" have been proven wrong, again. It was almost one year ago when Fed policymakers indicated they would be aggressively raising interest rates to combat inflation. Subsequently, it became commonly reported in the national news from almost every angle that rising interest rates would crush housing prices. We were reminded of this at each rate increase. Headlines read "housing collapse", "housing recession", "days on market will dramatically increase", and "a glut in inventory will ensue". Some experts even used words like a "looming foreclosure tsunami". The most conservative forecasts projected housing prices would fall 5% in 2022.

What has actually occurred in 2022? In Northern Virginia, home prices have not fallen 5%, but rather increased by 8% in 2022. This, despite a more than a doubling of mortgage rates. The 8% increase is a full three points higher (60%) than the average annual appreciation of 5% typically seen in our area (since 1975). That's a huge 13-point miss by the most conservative economists and so-called experts. Embarrassingly worse, are the number of forecasters who called for a housing price collapse in 2022. Similarly, homes have not seen a doubling of days on market, but instead, slowed by an average of just 1 day, from 15 to 16 days on market in 2022. What about inventory? Yes, inventory is up moderately from the ultra-low levels experienced in 2020-21, but still operating at a very low level of just 1 month in November 2022 with no hint of a glut, or foreclosure tsunami.

Where Has the Real Estate Market Suffered Most in 2022?
Number of Homes Sold is Down Significantly (-24%): Certainly, the cost of borrowing has increased with elevating interest rates negatively impacting buyers. However, many people point to how rates have been artificially held down by the Fed for several years much below the normal range of typical market experience. Many believe rates have simply returned to a more normalized cost of money consistent with historical levels.

The most impacted segment in 2022 possibly has been any business that assists in the home buying and selling process. Through November, in Northern Virginia alone, there have been 10,400 fewer homes sold (-24%) compared to 2021. That's over 20,000 transactions since there is both seller-side and buyer-side representation. This is over 1 million homes across the U.S., and 2 million transactions putting significant downward pressure on U.S. GDP. The "real estate services" component (real estate, finance, insurance, rental, and leasing) is the single largest component contributing to U.S. GDP (17%).

Contrary to national headlines, the real estate market between "buyers and sellers" remains quite strong, while the real estate market in total continues to normalize, receding from the 2020-21 outlier behavior. Even with the significant decline in homes sold in 2022, Northern Virginia is only 8% behind the pace of 2019.