Dr. Terry Clower and Dr. Keith Waters
George Mason University Center for Regional Analysis

The Center for Regional Analysis (CRA) at George Mason University partners with the Northern Virginia Association of Realtors® (NVAR) on a regional consensus forecast for housing in the NVAR region. The annual consensus forecasts are supplemented by a mid-year update. This year, the mid-year update is particularly relevant as the effects of the pandemic subside with vaccine rollouts. While there is still uncertainty regarding the future of the pandemic, the housing market seems to be stabilizing after several months of atypical behavior—strong sales in mid-winter, price increases not seen since the boom of the early 2000s, and unusual weakness for prime location condos. This article discusses the highlights of our forecast update for the remainder of 2021. Overall, prices will continue to rise but at a slower pace. The days of multiple offers on the first day of listing and 5% over asking price may have ended – for now. Except for some condo sub-markets, inventory levels will continue to be like doing the limbo, how low can they go?

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Median Price Forecast

Overall, the median price of sold homes is expected to continue its upward trend but at a notably slower rate of change for nearly all sub-regions and all housing types (Table 1). Single-family homes, which have been in increasingly limited supply over the past several years, are forecast to record the largest price increases. The largest increase in the median prices of single-family homes will be in Arlington due to low inventories and supported by cheap mortgages. Through the second half of 2021, the median price of sold single-family homes in Arlington is forecast to increase an average of 16.4% year-over-year. The median price of Fairfax County single-family homes is forecast to increase year-over-year by 8.6%, on average, and by 7.4% in Alexandria at year’s end. This is not a signal of comparative market weakness in Alexandria, but more likely reflects unique market dynamics and some data artifacts due to Alexandria being a small market. A small shift in which specific homes are selling can change the median sales price in Alexandria substantially. 

From July to December 2021, the median price of sold townhomes is forecast to increase year-over-year an average of 6.8% in Fairfax and 3.5% in Alexandria while decreasing 2.4% in Arlington. Do not read too much into a year-over-year decline in pricing of Arlington townhomes. Overall, Arlington townhomes will continue to be sold at elevated prices compared to long-term trends and will be coming off the unusually strong market at the end of 2020. Investing in a Northern Virginia townhome is likely as close to a sure thing as you can get in real estate.

Despite the large fluctuations in the condo market with increased inventory and pandemic influenced lower demand, the median price of sold condos across Northern Virginia will show increases this year but at more moderate levels compared to other housing types. Trend line forecasts suggest price increases ranging from 1.6% to 3.3%. However, given the wild swings in inventory, condo prices in our region could be impacted by motivated sellers – a descriptor we have not used much in recent years.

Table 1. Average Y-o-Y Change in Median Sales Price (Jul '21 - Dec '21)

Total Sales Forecast

While the number of closed sales has recently boomed in the NVAR region, the pace of sales will abate somewhat and will decline on year-over-year comparisons for some housing types (see Table 2). The number of closed single-family homes is anticipated to decline from the recent burst in activity. The consensus forecast is that there will be an average of 4.1 percent fewer closed single-family home sales in Fairfax County per month through the second half of 2021. For the third and fourth quarters of 2021, the number of closed townhome sales is forecast to decline steadily year-over-year in Alexandria (-8.4%), remain stable in Fairfax County (0.3%), and increase substantially (36.5%) in Arlington, with our usual notation that the townhome market in Arlington is quite small so a few extra sales have an outsized impact on percentage change. For the second half of 2021, condo sales are forecast to be lower on average than the same months in 2020 in Arlington but remain elevated in Fairfax County and Alexandria. The decline in Arlington is primarily a return to a previous trend after a strong second half of 2020; the forecast number of sales is in line with the number of sales in the second half of 2019. 

Table 2. Average Y-o-Y Change in Closed Sales (Jul '21 - Dec '21)

Inventory Forecast

Inventory, as measured by months-end active listings, varies most notably among the indicators measured here (Figure 1). Condo inventory has been piling up in Fairfax County, Arlington, and Alexandria following the onset of the pandemic and is forecast to remain at elevated levels at least through the end of 2021. Active listings of condos will range from 561 to 640 in Fairfax, 360 to 429 in Arlington, and 180 to 216 in Alexandria. These ranges are notably higher than the pandemic lows for each jurisdiction and reflect a phase-change in the monthly inventory from pre-pandemic trends. Overall, townhome inventory is forecast to remain steady at levels lower than 2020. While townhome inventory in Fairfax County has climbed recently, it is forecast to decline throughout the remainder of the year. Townhome inventory will remain low in Arlington and Alexandria. Despite fluctuations in other market segments, we expect no meaningful change in the multi-year trend of declining active listings for single-family homes across Northern Virginia. The pandemic barely affected the relentless decline in the number of single-family homes in the NVAR region, and this trend will continue throughout the second half of the year. Fairfax County, the largest jurisdiction in the NVAR region, is forecast to have only about 400 active listings of single-family homes in December, down from 2,674 in June 2015. Arlington and Alexandria are forecast to have just 71 and 17 active listings of single-family homes in December, respectively. Frustrations among those seeking to buy a single-family home will continue.

Figure 1. Inventory by Housing Type by Sub-Region

Conclusion

Overall, the NVAR market forecast team anticipates that the median price of sold homes in all jurisdictions and among all home types will continue to increase but at a more modest pace for the remainder of 2021. The number of closed sales will also continue to climb, meaning continued positive economic impact flowing from our region’s housing market. We will continue to see divergence in trend lines for active listings across housing types with condos inventories stabilizing but at higher levels than seen in recent years. Inventory trends for townhomes is mixed among geographies but is generally anticipated to contract through the end of the year. Finally, the forecast group anticipates that the number of active listings of single-family homes in the NVAR region will continue to decline through the end of the year. With sales levels expected to be stable, this suggests that competition among single-family buyers will persist and prices will continue to rise. Pricing for condos is less certain, but we see little to suggest any enduring market weakness in multi-family properties.

Through the remainder of the year, the CRA/NVAR forecast team notes several effects that are likely to impact the housing market in various ways. Above all is the course of the pandemic and its impacts on work-from-home and public schools. More subtly, the pent-up demand for travel after a year of staying at home has likely slowed the pace of buying and selling during summer vacation season. There may be an unexpected increase in activity if would-be buyers and sellers return from vacation ready to jump into the housing market. Another market factor we will monitor is that households who refinanced or remodeled during the pandemic are likely to hold onto their properties longer, which could depress listings. While there remains much uncertainty about the post-COVID economy in Northern Virginia, the housing market overall remains very strong and will continue to be a major contribution to regional economic resilience.

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