December Northern VA Market Update
In the blink of an eye, this year is coming to a close. It has been a true whirlwind, to say the least, regarding the real estate market. We had a fury of activity and sales at the beginning of the year with artificially low interest rates, escalating prices, and extremely high demand. Now we will finish the year with interest rates that doubled over the last year (though they are coming back down), stabilizing prices, and less demand. We are in a more balanced market, and it's nothing like it was earlier in the year.
This slow down has the media going crazy and they continue to put out sensationalized headlines to grab your attention. One topic we’ve all been reading about is the crash of housing prices. While there are some areas that will see price declines, most will see a decline in price appreciation. Areas where prices sky rocketed (and are now spiking in inventory levels) will indeed see prices decline, and decline rapidly. These areas saw the most benefit from the pandemic and remote working environments, and that was not sustainable.
Overall, prices are up year-over-year, but we have been seeing prices decline month-over-month (see Chart 1). Historically, price appreciation is 3.8% and the numbers far exceed those historical averages, even today. These declines are slowing down (see Chart 2). As a result of the year-over-year price increases, the Federal Housing Finance Agency (FHFA) recently announced the conforming loan limit values for mortgages to be acquired by Fannie Mae and Freddie Mac in 2023 will be increased to $726,200. This is an increase of $79,000 over 2022. In Northern Virginia, where our area boasts prices that have higher median home values, we have a new loan limit for properties, that number is $1,089,300. These are crazy numbers indeed, but the numbers show that prices may have hit the bottom. Price declines month-over-month have slowed, showing more realistic prices today than earlier this year, as noted in Chart 2. The question is, would the FHFA increase the loan limit if they thought prices would decline substantially? I don't think so.
Misinformation dominates the news and in my opinion, the media is not telling the whole story about the real estate market. To get a much more accurate story about housing, please rely on me, your trusted real estate advisor. Real estate is extremely local, so call me to learn more about how this affects you if you are selling or buying a home today. Next month, we will debunk another media fallacy–so stay tuned! In the meantime, have a great holiday season with family and friends.