property

My crystal ball broke…it’s all about the numbers

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Although my crystal ball is currently in the shop, we do know where things stand in regards to the local housing market in Northern Virginia.  Inventory levels of active resales are virtually the same – we currently have 7,640 homes for sale in Fairfax, Loudoun, Arlington, City of Alexandria, Prince William and Fauquier Counties.  This time last year we had 7,680 – pretty similar.  There is a slight difference between these two timeframes and that is in the number of distressed properties on the market.  This year there are only 293 foreclosures for sale along with 882 short sales – last year, there were 450 foreclosures and 1109 short sales.  This result is a difference of about 5% of the total inventory.  The perception is we are inundated with distressed properties when in reality, we have a lower percentage of overall inventory than the rest of the country in relation to foreclosures and short sales.  Our market is healthy. 

We have a 2.6 month supply of homes which is a seller’s market.  Houses are selling when the sellers have them priced right, in the right condition, and staged properly – often times with multiple offers.  We had several agents engaged in multiple contract situations this past weekend with a few of those properties being listed for several months.  We have buyers in our market because we have jobs.  One of our agents relayed a story of his nephew and their job search.  Over 140 people interviewed for a job at an oil change shop in Florida – that’s unbelievable.

Our rental market is strong, currently posting a 1 month supply of homes.  The reason is people relocating into our area are gun shy on purchasing.  This is as a result of a few different factors.  It may be their confidence in the housing market because of where they came from to relocate here, they can’t buy because of a potential short sale or foreclosure on their credit report or they are losing out to other contracts and have a short time to find a property and get forced into renting.  Either way, it is a great time to be an investor in Northern Virginia.

Prices are stable to increasing in the Washington Metropolitan area.  We are seeing price increases throughout our region in several price points.  Typically in house priced below $400,000 (pretty much everywhere) and those priced between $800,000 and $1,200,000 (closer into the beltway and DC).   In addition, builders found their bottom in pricing towards the end of last year and the first quarter of this year and have started to escalate their prices as they have seen an increase in sales of their homes.  Reports show that we are expected to have a 7.4% increase in housing prices in our region compared with -3.2% in the rest of the country – a difference of over 10%.  Again, we have a healthy market.

We also have low interest rates which are fueling our sales – housing is affordable because of rates.  If people are waiting to buy because they feel prices will come down – they are mistaken.  If they think rates will continue to decrease, they are mistaken as rates have actually increased over the last few weeks.  Now is the time to buy.

 

What’s up with our market?

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There are home buyers out in Northern Virginia but they are savvy, price sensitive and condition critical.  As we have seen in the papers, read online, and heard on the news, the rest of the country is experiencing a double dip in home prices, and waves of foreclosures are going to hit the market spiraling prices even further.  All of this has made buyers in our area become very cautious and has lowered consumer confidence nationwide. 

Why do you ask are they this way?  Well, most of them are from someplace else and they have seen streets riddled with real estate signs, are from areas that have a 41 month supply of houses versus our 3.1 month supply of houses or have friends and relatives who have been unable to sell their house in other parts of the country.  This has an impact on their buying decision here and yes, they hear our area is different and understand the underlying reasons why our market is strong but they are still looking for “a deal”.  They scrutinize each property looking for excuses not to buy them versus finding reasons to buy them.  When there is a home that offers the right price (often below market)  that has been staged (painted in neutral or trendy colors, new carpeting and de-cluttered), in perfect condition (no broken window seals, leaky faucets, etc.) and in a great location (backing to trees, end of cul-de-sac, etc.) they swarm on this property like vultures.  Many times we will encounter multiple offers on these types of properties and see them escalate above list price.

If you are a seller and your home hasn’t sold, what should you do?  Lower the price – it is the least common denominator and makes up for many areas where the home may be lacking such as in condition or location.  Get the home staged, by a professional.  You could also offer a higher commission to the buyer’s agent as an inducement to sell your house.  Many sellers or listing agents are offering a lower commission as many buyer agents have accepted lower commission rates in the past few years  as a result of short sales and foreclosures (banks) only paying a lower fee so paying more can set you apart from the competition.  Be ready to negotiate to get your house sold.

If you are a buyer, what do you do?  You should be ready to be in competition if you are looking for the perfect house at the perfect price and be prepared to include an escalation clause with your contract.  As was mentioned early, these properties are typically seeing multiple offers that go above list price.  Buy a new home – pick your own colors, location, and avoid the competition.  Many builders have adjusted to the market and are priced to sell.  Make an offer on an almost perfect house and see what happens.  Often times, as homes stay on the market and sellers have many visitors with no contracts, they tend to be more reasonable with what the market is telling them in regards to pricing.  The idea for buyers is to just buy.  The housing affordability index hasn’t been this high since 1979!  Interest rates are at their lowest level this year and prices are reasonable plus, we have jobs and stability in our market place.

If you need to sell, this is a great time to do so.  If you are a buyer, you shouldn’t delay – prices and rates are not going to get lower in our area making this an opportunity of a lifetime.  Contact your RE/MAX Gateway professional today and get packing!