The average northern VA home buyer and seller are savvy these days which is attributable to access of information. With this said, all my clients over the last 16 years of selling homes realize the many details involved once they are in the thick of a sale and/or purchase. However, don’t worry, because these are the details a great real estate agent will help with. Northern VA buyers and sellers Should watch these 2 market factors first when considering a move.
Mortgage interest rates are on the rise and are now over three-quarters of a percentage point higher than they were at the beginning of the year. According to Freddie Mac’s latest Primary Mortgage Market Survey, rates climbed to 4.72% for a 30-year fixed rate mortgage last week.
The interest rate you secure when buying a home not only greatly impacts your monthly housing costs, but also impacts your purchasing power. This can become very important when considering the average price in Northern VA
Purchasing power, is the amount of home you can afford to buy for the budget you have to spend. As rates increase, the price of the house you can afford to buy will decrease .
The chart below shows the impact that rising interest rates would have if you planned to purchase a $400,000 home while keeping your principal and interest payments between $2,020-$2,050 a month.
With each quarter of a percent increase in interest rate, the value of the home you can afford decreases by 2.5% (in this example, $10,000). Experts predict that mortgage rates will be over 5% by this time next year.
A ‘normal’ real estate market in Northern VA requires a 6-month supply of homes for sale in order for prices to increase with inflation only. According to the National Association of Realtors (NAR), listing inventory is currently at a 4.3-month supply (still well below the 6-months needed), which has put upward pressure on home prices. Home prices have increased year-over-year for the last 78 straight months.
The inventory of homes for sale in Northern VA had been on a steady decline and experienced year-over-year drops for 36 straight months (from July 2015 to May 2018), but we are starting to see a shift in inventory over the last three months.
The chart below shows the change in housing supply over the last 12 months compared to the previous 12 months. As you can see, in June, July, and August, inventory levels have started to increase as compared to the same time last year.
Keep an eye on this trend as we move further into the fall and winter months. If we continue to see an increase in homes for sale, we could start moving further away from a seller’s market and closer to a normal market.
If you are planning to buy or sell in Northern VA, let’s get together to discuss the changes in mortgage interest rates and inventory and what they could mean for you. Everyones situation is unique and there is no set rules on the best or worse time to sell or buy a home in Northern VA. Northern VA Buyers and Sellers Should Watch These 2 Market Factors
Specializing in happy home sellers and home buyers, selling starter homes, trade up homes, premium homes, and luxury real estate in Alexandria, Arlington, Ashburn, Burke, Centreville, Chantilly, Dunn Loring, City of Fairfax, Falls Church, Great Falls, Herndon, McLean, Oakton, Reston, Sterling, Tysons Corner, Vienna, or anywhere in Northern VA.
This article was first posted on my Keeping Current Matters Joey Remondino Northern VA Real Estate Blog, here.