The local real-estate market is beginning to feel the impact of federal-government downsizing, new data suggests.
By autumn, the impacts may be even more pronounced, according to Bright MLS, the region’s multiple-listing service.
“Although home prices in the DC area remain higher than national averages, agents are reporting growing price sensitivity and early signs of decline, with 38% indicating that workforce cuts are contributing,” Bright MLS chief economist Lisa Sturtevant said on June 24.
More than half (54%) of DC-area agents report that federal-workforce reductions are affecting market activity, with 43% saying they’ve seen an uptick in sellers, according to the new data.
Put together, the evolving data marks “a turning point” in the local homes market, Sturtevant said.
To date, impacts on the price of housing have been relatively minimal in the local region. In Arlington, the cost-per-square-foot of homes that have sold in recent months has remained relatively stable. In May, the average per-square-foot price of $511 was up 1.2% from a year before.
But things potentially could change, both across Arlington and the region.
“Federal agencies have recently begun rehiring a limited number of laid-off workers, and no new cuts have been announced,” Sturtevant said. “However, with buyout payments ending later this summer, more selling activity may still be on the horizon.”
“By fall, the increase in inventory in the region could lead to flat or falling home prices in some markets in the region,” she said.
In a recent presentation to County Board members, County Manager Mark Schwartz said that while all of Northern Virginia is at economic risk, the inner suburbs — Arlington, Alexandria, Falls Church and Fairfax — could be most impacted.
To prepare, Schwartz and his finance staff have proposed a number of steps, including delaying a planned bond sale and deferring some capital projects.
The Trump administration’s February buyout offer provided up to eight months of salary and benefits to encourage federal workers to voluntarily resign. According to the Office of Personnel Management, approximately 75,000 employees accepted the offer.
According to the Bright MLS data, some of those planning to sell homes and depart the region are those who already had been looking toward retirement.
The impact could be far-reaching.
“Federal buyouts provided older, often higher-income homeowners a chance to cash out and relocate, but the ripple effects are just beginning,” she said. “As more impacted families list homes post-school year, we could see further price pressure across the region this summer and fall.”
In some areas, however, tight inventory continues to result in higher prices. About 2% of real-estate agents surveyed by Bright MLS noted that trend.
More information on the current state of the market will come around July 10, when Bright MLS releases sales and price data for June.
It is not simply federal-government downsizing and its ripple effects that are impacting the real-estate market.
Affordability challenges and mixed market signals continue keeping some would-be buyers on the sidelines, said Ryan Price, chief economist for Virginia Realtors.
“Economic uncertainty and fluctuations in the labor market are making some buyers hesitant to enter the housing market,” he said. “With mortgage rates still hovering near 7%, many Virginians are waiting for more stability before making a move.”
There were 10,649 closed sales across the commonwealth in May, down 0.6% from a year before, according to Virginia Realtors’ data.
Despite lower sales levels and the skittishness of some prospective buyers, home prices continued to rise in most local markets. Virginia’s median sales price was $440,000 in May, up $15,000 (3.5%) over the past year.
Nearly 80 percent of Virginia localities saw year-over-year increases in the median sales price in May, according to the Virginia Realtors data.
