The Washington area housing market is changing. Federal job cuts, mortgage rate shifts, and more homes for sale mean different conditions than we have seen in recent years. Here is what the numbers tell us and what it means for your real estate decisions.
Government Jobs and Our Local Economy
About 20,000 federal workers have left their jobs since December. Professional services companies that work with the government have also cut positions. This sounds alarming, but the bigger picture shows our economy adapting. Construction jobs are booming in Northern Virginia, and total employment continues growing despite the federal cuts.
We have been through this before. In the 1990s, the federal workforce dropped by 379,000 people during the Clinton years. The region survived and eventually thrived. By 1999, home sales jumped 12 percent and new construction hit levels not seen since 1986. Our market knows how to adjust.
Mortgage Rates: Do Not Expect Miracles
The Federal Reserve cut rates by a quarter point, but your mortgage payment will not drop dramatically. Mortgage rates usually fall only about 0.10 to 0.20 percent after Fed cuts. On a $500,000 loan, that saves maybe $45 to $55 per month.
Thirty-year fixed rates will likely stay in the mid-6 percent range through the end of the year. These rates feel high compared to the crazy-low rates during COVID, but they represent normal historical levels. If you have an adjustable-rate mortgage or home equity line, those will drop more quickly with Fed cuts.
The Big Picture: A Calmer Market
The Northern Virginia Association of Realtors forecast shows a market returning to earth after years of wild swings:
Home Prices: Rising 2 to 2.5 percent per year, about the same as general inflation. No more double-digit jumps.
Home Sales: Steady to slightly up, especially for single-family houses in good neighborhoods.
Available Homes: Way more inventory: 50 to 80 percent increases from last year. This sounds dramatic, but we are just getting back to normal levels after years of almost nothing for sale.
August numbers show the trend: 4,264 home sales (down 2 percent from last year) with a median price of $625,000 (up 2.1 percent). Homes now take 19 days to sell instead of 10 days last August. Buyers have time to think.
Each Area Tells Its Own Story
Washington DC and Maryland Counties
The District and Maryland suburbs show more pronounced market cooling. Median prices hit $625,000 in August, up 2.1% from last year. Homes are taking an average of 19 days to sell—about 11 days longer.
Contract activity increased by 2.9% from 2024. Montgomery and Prince Georges counties face stronger headwinds than their Virginia counterparts.
Fairfax County
The steadiest performer. Prices up 2.2 to 2.5 percent, sales holding firm. Inventory increasing but nothing crazy. If you want predictable, Fairfax delivers.
Arlington County
There are two different markets here. Single-family houses are hot: sales up 16 percent, prices rising 2.2 percent. But condos are struggling with prices falling 4.9 percent and fewer sales.
Alexandria
Solid but not spectacular. Prices are up 2 to 3 percent. There are decent sales for houses and townhomes, but condos are having trouble. There is more inventory coming, which helps buyers.
Prince William County
This is the toughest spot right now. Sales are falling for all home types, from 2 percent down for townhomes to almost 7 percent for condos. Prices are rising, but barely. If you are buying here, you have negotiating power.
Loudoun County
Balanced growth. Prices are up 2.5 percent, single-family sales jumped 13.5 percent. Even condos are holding steady. Inventory is building but demand is keeping pace.
What This Means for You
Buying a Home: Best conditions since before COVID for people not worried about government job cuts. More houses to choose from, less bidding wars, time to inspect and negotiate. Sellers cannot demand perfection anymore.
Selling Your Home: Price it right from day one. The days of throwing any number on the market and getting five offers are over. Good houses in good neighborhoods still sell quickly, but overpriced homes sit.
Investing: Look for value in areas showing relative strength. Single-family houses are outperforming condos across most areas. Prince William offers potential bargains for patient investors.
History Suggests Optimism
The 1990s federal job cuts show how this story can end. After initial adjustment, the DC area came back stronger. The economy is different now—less tech boom, more diverse job base—but the pattern holds. People want to live here, and that underlying demand supports home values.
The Bottom Line
We are moving from an extreme seller’s market to a more balanced market. Buyers have choices again. Sellers must have realistic expectations. The extremes no longer work.
For the first time in years, both buyers and sellers can succeed if they understand current conditions. The key is working with someone who knows these neighborhood differences and can spot the opportunities that others miss.
The Washington area remains one of the strongest housing markets in the country. We just have to adjust our expectations to match reality instead of the pandemic craziness we have been living through.
Do you need specific guidance for your situation? Properties on the Potomac helps buyers and sellers navigate changing markets with our depth of expertise and honest advice. Contact us at 703-624-8333 today!
Properties on the Potomac, Inc. 