Hi everyone! Happy holidays and welcome to our latest Market update video where we explain what’s happening in the DC Metro area real estate market so you can make the best real estate decisions.
Thanks Tim, well… to be honest, the market is pretty tough out there right now. We are currently seeing the lowest number of active listings in 10 years. The good news is that we are hear from some economists that the inventory should be rising over the next six months.
However, we are currently at a one month’s supply of housing and we really need to get back up to 3 months for prices to stabilize. As you can see, we have been under three months for a long time which has fueled the rising home prices over the past decade.
In order to stabilize we need more new listings coming on the market, which we could see as spring approaches and more homeowners consider selling.
This year, we did see more homes coming on the market than the past two years but not nearly enough to meet the demand so we are going to need a lot more new listings to stabilize the market.
Something interesting though… Can you get what local county has the most expensive average sales price of single family homes?
As of this month Washington DC jumped back up to the top spot over Arlington County with an average sales price of $1,500,000 for a single family home. Fairfax County had a record setting October when it moved above the million–dollar mark for the first time in history but then fell back down in November.
There has been a lot of talk about mortgage rates and inflation. A lot of people are worried that rising interest rates could cause prices to go down… Here’s what we know. The current interest rates are rising
They are currently around 3% after they were as low as about 2.7%. So, they are still VERY low compared to previous years.
Around year 2000 we hovered between 7-8%. Only 4 years ago in 2018 we were close to 5%. The average rate over the past 50 years is around 7%. So they are exceptionally low, but the question about how changing interest rates impact prices is important.
Mark Fleming, chief economist of First American says that price appreciation is resistant to rising mortgage rates primarily because most home sellers would rather withdraw from the market than sell at low prices. So, what Mark is saying here is that if sellers have the ability, they will hold off on selling rather than take a loss.
When you look at the historical changes in interest rates. The red line indicates rising interest rates and the yellow line indicates falling. You will see that only during the great recessions did rising interest rates lead to lower prices, but those falling home prices were really fueled by the mortgage meltdown, not the rising interest rates.
So in summary, there is no guarantee that rising interest rates will cause falling prices. It will likely cause a lot of home sellers to stay in their home rather than selling, which actually would further decrease the inventory.
That said, we do believe that the pandemic has caused a lot of people who wanted to move to delay the sale until life stabilized, and we are optimistic that we will see a rise in inventory over the next 6 months.
So what does it all mean? well, we expect some interesting things to happen in the next year. For buyers, the natural inclination may be to wait since inventory is low and prices are high. but I would recommend you be aggressive while looking to take advantage of those low interest rates will they are still here. Just be prepared to live in a home that you buy today for a while. Now is not the time to buy for the short term. If you are a first time buyer, you need to be cautious, however it has never been a better time to buy a condo since prices have fallen in that market.
If you are a seller, you are still in a very good position with low supply. If you are looking to sell and buy another home, it can be tricky. The best thing to do would be to set up a personal consultation with our team where we can assess your needs and create a strategy based on your goals of where you want to be, how long you want to be there, and what you want to spend. Also, we are working with a lot of retirees right now that want to be near their children and grandchildren in the DC area. We have helped a lot of them find great spaces that are low maintenance, so please connect us with your loved ones if that is that case.
All that said, we are here for you whatever your real estate needs are. We conduct a lot of zoom consultations with clients who are trying to figure out what to do next. If that’s you, reach out to us and let’s set up a time to talk. It can be quick and should help identify the clearest path to help you get to where you want to go.
That’s it for this month and this year. God bless you and your family a We hope you have a wonderful holiday and a Happy New Year!