Wow, it has been a crazy 8 weeks for interest rates. As we have discussed in the past, if someone was considering buying or refinancing, they should do it then. Well, I hope you took that advice because interest rates have gone up three quarters of a point in just the past 2 months. This week, we saw the largest increase in rates since April of 1987 – that’s 26 years! The reason behind the increase is Ben Bernanke of the Federal Reserve made remarks that they may be tapering its bond purchases later this year if the economy continues to improve. Although the stock market was up the second quarter with all three indexes recording gains of between 2% and 5%, it too took a hit on these comments. We will have to keep a close eye on the economy and see where rates will go moving forward with this type of news on the forefront. If you recall, at the beginning of the year, we predicted rates to rise to around 4.5% which I believe will still be the case, I thought it would be more gradual and not so drastic.
All of this being said, interest rates from a historical perspective, are still very low. Today 30 year fixed rates are 4.25% with .75 points on conforming loans above $417,000. While the increase in interest rates will certainly dampen some housing activity, the effect will be softened by the high level of buyer affordability, and home sales should still remain strong.
What else do we see in our real estate market? We continue to see housing prices increase throughout the area as demand remains strong despite the increase in rates which is good news for our sellers. We are also seeing more houses coming onto the market in Northern Virginia which is good news for our buyers. The inventory of resale homes is above 5,000 for the first time since the third week of October 2012. Since the beginning of the year, inventory levels are up nearly 37% but we are still in a seller’s market with just a 1.4 month’s supply of homes. The market still remains competitive with many properties receiving multiple contracts. We had one house with 3 contracts on it this week in Virginia Run. Distressed property inventory remains very low as well – just 6.9% of the market which is good news for everyone. We should continue to see these trends continue throughout the summer.
Lastly, we are excited to announce we have signed a lease on our 5th office. It is in the Clarendon section of Arlington and is located at 3000 10th Street – look for our grand opening announcement soon. Please let us know how we can serve you.
RE/MAX Gateway, LLC