Contract activity in February 2022 was up just 0.6% from February 2021 and was up in three out of six price categories. Through the first two months of the year, contract activity is down 7.9%. The average number of days on the market for homes receiving contracts was 22 days in February 2022, down from 26 days last February.
The Urgency Index, simply the percentage of homes going under contract that were on the market 30 days or less, was up in February compared to last February. During the past 18 years, the Index has been as high as 94.4% (April 2004) and as low as 22.9% (November 2006). In February 2022, the Urgency Index was 85.7%, up from 81.1% in February 2021, and that is Northern Virginia’s highest February Urgency Index in the past 12 years.
The number of homes on the market at the end of February was down 41.7% compared to the end of February 2021. The number of new listings coming on the market decreased just 1.0% compared to February of 2021. The slight increase in contract activity combined with the decrease in inventory lowering overall supply to 0.5 months from 0.9 months at the end of February 2021.
30-year fixed mortgage interest rates at the end of February stood at 3.76%. That is a little more than three quarters of a point higher than this time last year and almost a quarter point higher than just a month ago. Rates briefly rose over the 4% mark in mid-February and are likely to fluctuate on either side of that line as inflation and international turmoil impact the economy.
The payment on a no-money-down, 30-year fixed mortgage for a median-priced home is 56.6% higher than it was a decade ago in February 2012, and the median price is up 59.3%. The payment is also 17.2% higher than last February because of higher prices and higher interest rates. The mortgage payment for a median priced home ($2,807) was higher in February than the median rented price ($2,500).
DIRECTION OF THE MARKET
The lack of inventory is both consistent and persistent, and it is the reality that dominates that market. As we have noted, there were 41.7% fewer homes on the market at the end of February compared to last February, and the deficit is across all price ranges. The paltry inventory is driving buyers (and their agents!) nuts. The urgency index is the highest it has been in any February since we started tracking this metric, days-on-market are falling, and homes are selling, on average, well above their list price. There is no near-term salvation for this supply shortage either – fewer homes came on the market in February than a year ago. And while it’s true that we will likely see more homes enter the fray as we head into the spring market, we continue to expect that new inventory will be lower than the corresponding month last year. It’s a great time to be a seller, and there are plenty of homeowners who would like to sell but are hesitant to confront the reality they would face as buyers in this hyper-competitive market. That hesitancy is heightened by the thought of giving up their current mortgage rate to finance their new purchase at a higher rate.