One of our local real estate associations, the Dulles Area Association of Realtors (DAAR) hosted its semi-annual economic summit last week, and I was glad to be able to attend. We heard from many esteemed speakers, including Lawrence Yun, Chief Economist of the National Association of Realtors®.
Not surprisingly, I’m always asked about the current real estate climate by friends and neighbors, and I love to educate people about this important subject. While Mr. Yun’s comments mostly focused on national trends and statistics, he did touch on some local intel. Here are some quick bullet point takeaways you may find interesting.
- While folks flocked to the suburbs and more rural areas during the pandemic, there has been a recent trend toward the city centers again.
- In the DC Metro area, people are still not all going back to work in person. Numbers are under 50% of pre-Covid levels.
- 6.5%-7.0% may be the “new normal” for interest rates.
- Mr. Yun sees -5% to +5% median price fluctuation in the near future. We are very unlikely to see the larger swings downward like some other pockets of the country, due to continued low inventory and strong demand in the DC Metro area. I have personally seen this when working with clients in northern Virginia. There just haven’t been wild price fluctuations toward the downside. (FYI: the “trend line” of historic annual price appreciation is 4%.)
- 51% of homes in the country are being sold at or above list price, with 49% selling below list. Again, my experience is that homes in good condition that are priced, presented, and promoted well are selling fast and for list price or higher. Contingencies have started to come back, but it depends on the particular home and whether there are multiple offers.
- Virginia has .4% more jobs now versus in March 2020 before Covid hit.
- Overall, consumer sentiment is low. The majority of people feel it is not a good time to buy a home. With that said, this puts buyers who are still looking (and who can afford a mortgage at these higher rates) in a better position versus just 9-12 months ago, as there is less competition for the reduced inventory of homes.
I think it’s important for both Buyers and Sellers not to panic with the shifting market. Northern Virginia tends to be very resilient due to the strong economy and base of government jobs and government contractors. I had two listings go on the market in mid-late September…one at the very high end of the market (a single family home in Clarendon priced at $1,850,000) and the other on the more affordable side of the market (a condo in Sterling priced at $335,000). Both sold for quite a bit over list price with few to no contingencies and in 2 and 4 days, respectively.
Even though the heyday of a dozen offers within the first few days of listing may be over, Sellers are still in a great position, since there are so few homes on the market (and we are entering a slower season for the next couple months). But come January, things will likely pick up. The challenge is that Sellers are “locked in” with low interest rates. (According to Redfin, 85% of homeowners have mortgage rates of 5% or lower.) Therefore, it’s a tough pill to swallow to trade out of a mortgage with these low rates and into one today hovering around 7%. Many experts do believe rates will come down next year, so there is hope…and the prospect of refinancing when that happens.
Plus, lenders have many creative financing options at their disposal for Buyers, from having borrowers pay points to lower the interest rate to doing a “buydown” (which the Seller pays for). Adjustable rate mortgages (ARMs) have made a comeback, and some lenders, like the one I like to recommend, are even offering a Rate Drop Pledge. This allows borrowers to do a fast and easy refinance with no lender fees when rates come down.
Please let me know if you’re considering buying or selling. I’ll help you evaluate the pros and cons so you can make a decision based on facts, not fear!