2024 DAAR Annual Economic Summit for Realtors®

A highlight for area Realtors® each year is the Dulles Area Association of Realtors® Annual Economic Summit. This year’s distinguished speakers included Dr. Lawrence Yun, Chief Economist for the National Association of Realtors®; Dr. Lisa Sturtevant, Chief Economist for Bright MLS of the mid-Atlantic region; and Buddy Rizer, Executive Director of the Department of Economic Development for Loudoun County, VA. This year the event was held at the beautiful new Lodge at Hanson Park in Aldie.

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So what exactly is the state of our housing market?

Whether from clients, friends, or neighbors, we Realtors® are often asked about the state of the local housing market…and most importantly, interest rates. While mortgage rates aren’t set by the Fed, they do typically move in tandem with the Fed’s direction on short-term rates.

Many homebuyers — maybe yourself included — have been sitting on the sidelines waiting for mortgage rates to come back down. Most economists (and the Fed itself) have hinted for some time now that lower rates are coming. The timing appears to be a bit further off than many had initially hoped, due to the fact that some inflationary indicators remain a bit stubborn. But it’s no wonder, as Dr. Yun pointed out, because our government is still spending like we did during Covid. And it’s likely that when mortgage rates do go down, we’re looking at the “new normal” being around 6%, not the 2-3% we got accustomed to during the height of Covid.

Regardless, it’s always encouraging to hear how strong our DC Metro area housing market is compared to other parts of the country that typically see more volatility.

Let’s look at the strength of the northern Virginia housing market in particular…

  • Loudoun County has consistently been at the top of the rankings for growth. Even today, many homeowners are moving from neighboring counties like Montgomery County, Maryland — right across the river. The reason? Faster job growth. NoVa is the place to be!
  • Our northern Virginia suburbs benefit from the flexibility of the area’s tech workers to work from home, making suburban living more desirable than it may have been for some workers pre-pandemic. The DC Metro area has the third largest share of work-from-home employees. And in general, U.S. workers are returning to offices at a shower pace than their counterparts in Europe and the Asian Pacific.
  • There is significant pent-up demand from buyers who have stayed put over the last couple years due to low inventory (where would they move to?) and higher mortgage rates.
  • We are in a period of historic low inventory. Inventory has been on the decline for the past 10-15 years, even before the pandemic.
  • In the past 3 years, we’ve had 42% price appreciation in Virginia! Most of you have seen that on your own homes.
  • There have been fewer building permits issued in Loudoun over the last few years…the wrong direction to be moving to alleviate the housing shortage. So the low supply isn’t just with resale homes…it’s with new construction as well.
  • People move where their grandchildren are! With our area being a hugely popular area for young families, it goes without saying that many grandparents will follow. (As such, there are a fair number of senior communities that have cropped up in northern Virginia. A full 7% of home sales in Loudoun were in age-restricted communities in 2023.)

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The takeaway?

Low Supply + High Demand = High Prices…and lingering bidding wars even now for homes in good condition.

Is there any hope for some relief?

A couple ideas have been floated for boosting inventory, although neither have been codified. One is to give a tax break to investors that own five or more properties if they sell one or more of their properties…with an extra incentive to sell to a first-time homebuyer.

Another idea is to index to inflation the threshold for capital gains on the sale of a primary residence that was set years ago at $250,000 for an individual or $500,000 for a married couple. That way, homeowners wouldn’t be averse to selling out of fear of a big tax hit.

Of course the biggest factor is being patient for mortgage rates to come down so that more existing homeowners potentially decide to sell and move to their next home. Unfortunately, right now those homeowners feel “locked in” to the low rates they refinanced at in the last few years. Trading an existing mortgage at 3% in for one at 7% is a tough sell. However, with that said, if you’re a buyer, I don’t advise being passive and waiting for things that are beyond your control.

What you can do…

As I like to remind people, current mortgage rates in the ballpark of 7% are actually the historical average for the past 40-50 years, so take heart. If you buy now and rates do indeed dip a bit, you can always refinance, which will typically make financial sense if you plan to be in your home for more than 2-3 years. (Check with your mortgage lender to crunch the numbers on the breakeven point based on your individual situation.) And if you’re a first-time homebuyer, by not “waiting” you’ll also start building equity in your new home…and enjoy the average 4-5% annual appreciation of owning a home (and those figures are conservative in this area of especially strong price growth). In other words, there is a very real cost to waiting.

So let me help you look at homes now, while others sit on the sidelines. You’ll have a bit less competition than you will if rates tick down, and you may even get requested contingencies accepted, rather than having to waive everything the way winning bidders needed to do not so long ago.

I’d love to help you strategize and begin your search. And if you’re thinking about selling, I’m sure you can agree, there’s no better time! Either way, call me at 703-585-3386 to start the conversation!

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