Bright MLS Mid-Atlantic Forecast Predicts Fewer Sales, Stable Prices

Notably, Housing Markets in the Mid-Atlantic Are in a Better Position to Fend Off a Major Market Correction

• 2022 annual home sales across the region expected to total approximately 259,400, a 19.1% decline compared to 2021
• Mortgage rates will stabilize and then come down through 2023, ending the year at 6%
• Home prices in the region will be relatively stable in 2023, with the median home price rising 0.5%
• Localized market conditions will vary depending on the strength of the local economy and the speed with which the housing market accelerated during the pandemic
• Seasonal cooldown continued in November

ROCKVILLE, Md., Dec. 12, 2022 /PRNewswire/ -- As in many areas of the country, the Mid-Atlantic real estate market experienced a red-hot rush over the past 2½ years, with double-digit gains in many parts of the region served by Bright MLS. Now, the region is poised to continue its transition throughout 2023, according to the Bright MLS 2023 Mid-Atlantic Housing Market Forecast. Expect overall home sales across the Mid-Atlantic to fall by 5% in 2023 compared to 2022, dropping to the lowest level since 2015. Home prices in region will be relatively stable in 2023, with the median home price rising 0.5%.

The Mid-Atlantic housing market cooled considerably during the second half of 2022, setting up very unusual market conditions. Total sales in November were at their lowest level since 2015, falling 35.7% compared to last year. New pending sales were down 36.6% compared to last year. New listings were also down relative to last year, but the pullback in buyer activity resulted in an increase in inventory.

"Importantly, unlike during the 2008 housing market meltdown when prices plummeted and foreclosures surged, today's market is in a much better position to withstand a market correction," said Dr. Lisa Sturtevant, Bright MLS Chief Economist. "However, there are some local markets that could face more significant price declines than others in the coming year. These markets include places where home prices rose much faster than average, in coastal and second home markets, and exurbs and 'zoom towns' that experienced strong demand during the pandemic. As people return to offices, these local markets will see less buyer activity and therefore are at risk for prices to fall."

Our national forecasts predict a 5% drop in U.S. home sales in 2023 compared to 2022. Sales are also expected to fall by 5% in the Mid-Atlantic region next year. Overall, there will be about 247,400 home sales across the Bright MLS footprint, the lowest annual sales total since 2015. Home sales are expected to dip across the region's three major metro areas, with sales in 2023 down 1.9% in the Philadelphia metro area, 6.4% in the Baltimore metro area, and 4.1% in the Washington metro area.

Because home prices did not run up as quickly in the Mid-Atlantic, these markets are at less risk of seeing major price declines. It is expected that home prices will be relatively flat in 2023 in the Mid-Atlantic, with the median price rising just 0.5% year-over-year.

The Mid-Atlantic's major metro areas will see slightly stronger price appreciation than the outlying areas. Compared to 2022, the median home price in 2023 is expected to increase by 1.0% in the Philadelphia metro area, 0.7% in the Baltimore metro area, and 1.1% in the Washington metro area.

In 2023, there will be a lot of variation across local markets in the Mid-Atlantic. In some places, there is a greater risk of more significant price declines in the coming year (e.g., 10%+ price drops). Several factors could prompt a bigger correction in some local markets:

• Places where home prices rose much faster than average. A steeper run-up in home prices during the pandemic puts a local market at greater risk of a steeper price drop in 2023.
• Coastal or second home markets. In 2020 and 2021, there was significant demand for second and vacation homes, which drove strong buyer activity in coastal and second home markets in the region. As that demand eases, prices could fall in these markets.
• Exurbs and "Zoom towns." Communities father out from the urban core experienced strong demand during the pandemic. As people return to the office, these local markets will see less buyer activity and are at greater risk of falling home prices.
• Places where household incomes are lower. In lower-income communities, there will be more downward pressure on home prices as prices in the market need to adjust to reflect local economic conditions.
• Inventory increasing. When inventory increases rapidly, there is a greater chance of prices falling.
• Days on market increasing. Homes remaining on the market longer reflects the fact that buyers can take their time, asking for concessions and negotiating on price.
• List prices falling. Sellers have begun adjusting their asking prices to reflect current market conditions. Drops in list prices in local markets indicate that closed prices are more likely to fall in the year ahead.

Top 5 Riskiest Markets in the Mid-Atlantic

Across the region's three major metro areas, the risk of price decline is moderate. The markets most at risk of price decline are along the coast and in north central Virginia—areas where prices are expected to fall by 10% or more in 2023. Here are the top 5:

1. Dorchester County, Maryland
   Over the past three years, home prices here increased by more than 70%. After 2+ years of a frenzied housing market, inventory is up 28% year-over-year, the median days on market has more than tripled, and the median list price is about 7% lower than it was a year ago. The median household income in the county is just 61% of the statewide median household income.
2. Sussex County, Delaware
   Drawing beach-home buyers as well as those looking to move farther out during the pandemic, Sussex County has seen a 60% year-over-year increase in the number of active listings. Home prices increased by 54% between 2019 and 2022. While the median list price is still higher than it was a year ago, homes are taking much longer to sell, with the median days on market nearly doubling compared to a year earlier.
3. Warren County, Virginia
   The 45% median price increase in this county over the past three years reflects strong demand during the pandemic. Over the past year, inventory has increased by 16%, and the median list price is down by 2%.
4. Fauquier County, Virginia
   Over the past year, inventory has begun to increase in Fauquier County as demand has cooled. The number of active listings is 43% higher than a year ago, and the median days on market has increased by 44% year-over-year. The county's median list price is 1% lower than it was a year ago.
5. Garrett County, Maryland
   This county's median home price increased by 37% over the past three years. Inventory is up by 41%, and the median days on market has increased by 73% compared to a year ago. The median household income here is just 63% of the statewide median income.

To view Bright's full Mid-Atlantic housing forecast, please visit 2023 Mid-Atlantic Housing Market Outlook.

The Philadelphia area housing market is more resilient than many other markets across the nation. While housing market activity will continue to be slow in the coming months, the housing market correction will be less severe in Philadelphia than it will be in many other regional markets. According to Bright MLS forecasts, the number of home sales is projected to fall by 1.9% in 2023 compared to 2022, putting transactions at the lowest level since 2015.

There were 5,201 sales in November across the Philadelphia metro area, which is down 32.8% compared to last year. This is the lowest November sales total since 2015. Sales also fell 8.7% from October. Sellers are also on the sidelines, with new listings 23.4% lower than a year ago. However, new pending contracts have fallen faster and the median days on market increased, which means that inventory continues to expand.

Despite the slowdown on both the demand and supply sides, home price growth was fairly strong in the Philadelphia region, with the median price up 6.5% in November.

After surpassing 7%, mortgage rates fell by a half percentage point by the end of November. However, that drop in rates was not sufficient to induce Baltimore-area buyers back into the market. Home sales activity continued to stall, exhibiting a typical winter slowing pattern. Fourth quarter sales in the Baltimore region are on pace to be at the lowest level since 2015.

Home prices continue to rise year-over-year. The November median sales price was up 2.7% compared to last year. But prices in the Baltimore metro area have fallen 8.0% from their summer peak. Prices grew rapidly over the past three years, but housing is still relatively affordable in the region. It is expected that home prices will be relatively flat in 2023, with the biggest risk of price declines in Baltimore City.

Baltimore-area housing market activity will continue to be slow in the coming months. Home sales transactions will be much lower than a year ago. However, the housing market correction in the region will be less dramatic than it will be in other metro area markets. According to Bright MLS forecasts, the number of home sales in the Baltimore metro area is projected to fall by 6.4% in 2023 compared to 2022, putting transactions at the lowest level since 2014.

The Washington area housing market has slowed down dramatically this winter. Moving forward, home sales will continue to be slow, as relatively high home prices and rates above 6% will continue to keep some prospective buyers out of the market. According to Bright MLS forecasts, the number of home sales in the Washington metro area is projected to fall by 4.1% in 2023 compared to 2022.

Prices are still rising, but at 1.4%, November's price change was the lowest year-over-year growth since 2018. Home prices peaked in the region during the summer of 2022. There are possibilities of price corrections in some outlying areas of the region, but overall home prices will remain stable across the Washington area. It is expected that the regional median home price will rise by 1.1% in 2023.

After surpassing 7%, mortgage rates fell by a half percentage point by the end of November. However, that drop in rates was not sufficient to induce Washington-area buyers back into the market. A bigger factor is a lack of inventory, which remains significantly below normal levels, and affordability challenges that continue to price some buyers out of the market.

Full Mid-Atlantic and Metro area reports are available at BrightMLS.com/MarketInsights.

Bright MLS was founded in 2016 as a collaboration between 43 visionary associations and two of the nation's most prominent MLSs to transform what an MLS is and what it does, so real estate pros and the people they serve can thrive today and into our data-driven future through an open, clear and competitive housing market for all. Bright is proud to be the source of truth for comprehensive real estate data in the Mid-Atlantic, with market intelligence currently covering six states (Delaware, Maryland, New Jersey, Pennsylvania, Virginia, West Virginia) and the District of Columbia. Bright MLS's innovative tool library—both created and curated—provides services and award-winning support to well over 100k real estate professionals, enabling their delivery on the promise of home to over half a million home buyers and sellers monthly. In 2021, Bright subscribers facilitated $141B in real estate transactions through the company's platform. Learn more at Bright MLS.com.

SOURCE Bright MLS