These days there are many conflicting headlines when it comes to describing today’s Northern Virginia real estate market. Some make the comparisons to the market we experienced 10 years ago while others are plain wrong reporting the difficulties of qualify for a mortgage. This can be very confusing to the home buyers and home sellers when deciding to jump into the market. Let’s look at the top 3 myths about Northern VA’s Real Estate Market.
Myth #1: Another Housing Bubble is On Its Way
Real Estate prices have appreciated year-over-year for the last 76 straight months. Many areas of Northern VA are at, near, or above their peak prices achieved before the last housing down turn. This has some worried that another housing bubble is on it’s way to Northern Virginia.
The Reality: The challenge facing today’s real estate market is a lack of homes for sale! Real estate demand is still strong, as renters have started to come off the fence and purchase homes, condo’s, and townhouses.
Historically, a normal market requires a 6-month supply of inventory in order for prices to rise with the rate of inflation. The National Association of Realtors (NAR) reports there is currently a 4.3-month supply of inventory across the nation. Currently in Northern VA, there is only a 3.2 month supply of inventory, you can find those market statistics here: Market Statistics: Northern Virginia
The Northern VA market hasn’t had 6-months inventory since May 2012! It is supply and demand that is driving home prices up! With Amazon’s new HQ2 staffing up for the next few years, the demand will continue.
Myth #2: A Future Recession Will Lead to a Housing Market Crash
Wall street and economists know that the country has experienced economic growth for almost a decade. When this happens, they also know that a recession can’t be too far off.
The Reality: Recession DOES NOT equal housing crisis. Many people associate these two terms since the last time we had a recession it was caused by a housing price collapse. There have been six recessions over the last 40 years, as reported by the Federal Reserve. Each of the previous five recessions, home values appreciated.
Myth #3: An Affordability Crisis is Looming
The continued rise of home prices have many concerned that the average family will no longer be able to afford the average priced home.
There are numerous affordability indexes that all measure different data and backed by different institutions; Therefor, there is confusion about what “affordable” actually means.
The monthly expense of a home is determined by the home’s price and the interest rate on the mortgage. Interest rates have risen from 3.95% in January to 4.81% as found on Freddie Mac’s web site.
The Reality: Again, home prices have appreciated year-over-year for the last 76 months, largely driven by high demand and low supply.
A Zillow study found the percentage of median income necessary to buy a home in today’s market (17.1%) is below the mark in 1985 – 2000 at 21%, as well as in 2006 at 25.4! Interest rates would have rise above 6% before buying a home would be less affordable than historical norms.
The starter-home sector has appreciated at higher levels than any other market. This is driven by many first-time buyers who have flocked to the starter-home market are being met with competition. For those hopeful buyers, it may take more than a good offer to stand out from the crowd!
As you can see by these myths about Northern VA’s real estate market there is a lot of confusion about the facts. There are good ways to track the health of the real estate market and here are two factors buyers and sellers should watch. If your future plans include buying or selling a home, townhouse or condo, make sure you have a trusted advisor and market expert by your side.
Todays New Listings in Northern VA
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Call Joey, an exceptional real estate agent and REALTOR with RE/MAX Preferred Properties, for selling or buying a home 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. Your Home My Passion.
This article first posted on the Call Joey Keeping Current Matters Blog, Top 3 Myths About Northern VA’s Real Estate Market.