July 2020 Market Update

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As We Begin to Reopen…

As we transition into Phase III with some areas beginning to open up while others remain on restricted status, I encourage you to stay safe, make wise decisions when you go out in public, so you and your family continue to remain healthy.

The result of the pandemic has limited the number of houses coming on to the market here in Northern Virginia. Potential sellers are still concerned about people coming into their homes, which is understandable during this time. The crazy thing is – the pandemic and various Phases we have been in have not slowed down home sales! The inventory level of houses for sale is down 43% from this same week last year, yet sales are up 16.5%. It is critical that we find people looking to sell their home and are comfortable doing so because we are continuing to see multiple contracts on houses throughout Northern Virginia (in most price points). It is not uncommon to receive 15-25 contracts on a house in less than 48 hours when it is priced right, in the right condition and location. Most recently, I heard about a condominium in Falls Church that received 44 contracts – one of our fellow agents lost out on that one just last week.

The onslaught of offers has prices escalating, and as a result, we are experiencing some appraisal issues. I make sure to set the proper expectations for both sellers and buyers if I feel the house will not appraise.  In addition to this, I meet the appraiser at the property to keep them informed on the situation – the number of contracts, prices, the quantity of showings, etc. to try to avoid low appraisals. However, they still are happening in some cases, as some prices just cannot be supported by the appraisers. We have had several people waive the appraisal contingency to secure a home, which has been great for my sellers. We have also had many appraisal waivers from lenders when the borrower has excellent credit, is putting down 20% or more, and the neighborhood can support the pricing. To learn more about this, please call me.

Buyers – get in the game!  We can help, and rates are still amazing. Today’s rates are below 3% on 30-year fixed loans. Additionally, if you aren’t planning to move and you haven’t refinanced, now is a great time. Call me to learn more about this and our strategies to win in multiple contract situations or for a connection to one of my preferred lending partners. I am always here to help!

I hope you had a great 4th of July!!

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Here we grow again…

This tag line is very appropriate for many different reasons.  First, let’s start with the Northrop Grumman’s move to Northern Virginia from California.  Northrop Grumman had been looking to relocate their company to this region because they have over 20,000 employees in Virginia, Maryland and DC and was looking for a different presence here in the area.  There will be approximately 300 high level executives moving to the area and there is no doubt, additional subcontractors and service providers of Northrop Grumman will move here as well.  Kudos to the leadership of Virginia in capturing such a valuable resource!

Additionally, in an economic report by George Mason’s Center for Regional Analysis, the Washington area’s economy will double over the next 20 years bringing in more than 1,000,000 new jobs and perhaps  upwards as many as 1.6 million to our region.  The jobs that will be created will be government – especially defense, domestic security, and financial regulatory agencies.  Along with these new jobs, a total number of new people in excess of 1.7 million will be moving to the area.  This is a good news, bad news scenario – good that the area will continue to grow and it should have a positive outlook on the housing market but a bad news scenario for roads, infrastructure and how to accommodate this growth.  The area planners have some work to do!

Next, let’s review New Home Sales.  Month over month sales of new homes jumped 26.9% in March – the largest increase in nearly 50 years!  New Home Sales had been in a four month slump coupled with a record low of housing starts in February; this segment of our market got a strong shot in the arm with this excellent news!  Let’s see how these numbers are affected by the home buyer tax credit ending this week and see if sustainable growth will occur.

Now on to existing sales…existing home sales rose as well.  The number increased by 6.8% in March – this is the ninth straight month of increase in sales over previous year ago levels each month.  This is a result of favorable market conditions – great rates, lower prices, and the homebuyer tax credit amongst other things.  Let’s keep this pace headed in a positive direction!

We must also speak about inventory levels.  They too have been increasing every week since the last week of December.  It is important to keep an eye on this number and how it affects pricing on a number of fronts.  In the Northern Virginia region – the inventory of existing homes for sale in week ending April 23 was 7,252…stay tuned.

And the last piece of good news – and it isn’t about an increase – it is about relative stabilization in mortgage interest rates.  Many expected rates to shoot up at the end of the government’s purchasing of mortgage backed securities but it hasn’t really happened.  Interest rates were just below 5% in March and have stayed in the 5.125 – 5.25% range over the last 3 to 4 weeks.  Let’s hope private investors continue to buy mortgage backed securities and the government keeps the funds rate low as well.

It is important for professional Realtors to keep up-to-date with the market and market conditions to keep their buyers and sellers completely informed on what is happening so they can make the right decisions when buying and selling homes – get in the game of learning more!  Get it?  Got it?  Good!

It’s all so confusing…

There is so much confusion in what is being reported about the real estate market it is understandable why so many people are unsure of what to do in regards to housing.  Information recently reported from Standard and Poor’s is just one reporting outlet where mixed signals are being sent out to consumers.  In one report, they claim that housing prices have increased for 8 consecutive months – this is through Standard and Poor’s and then through the Standard &Poor’s/Case-Shiller pricing index they say prices have dropped for the 4th consecutive month – absolutely insane.  How can one agency say prices are going up and down at the same time and not believe they are sending a mixed message to consumers and in turn hurting the housing recovery? 

For the record, The Washington Examiner reported that the Washington area was the strongest in the Nation as we have the right fundamentals in place.  Low unemployment, and scarcity of land are factors they sight in their article – couple this with low inventory, low housing starts, great rates, the home buyer tax credit and relatively affordable prices and we have a better than average housing market.

We too have been hearing, reading and expecting rates to increase when the Fed eases out of and stops buying mortgage backed securities (which has been happening by the way) yet rates have stayed low – conflicting news, but good news none the less.

We watch the market very closely everyday here locally and it is important to understand from a professional what is happening in our market and why.  We want to reiterate that our housing market in Northern Virginia is robust, resilient and is rebounding nicely today.  Our absorption rate remains high, prices are increasing in some areas and we have buyers out looking to capitalize on the remaining days of the home buyer tax credit.  To learn more about what is happening with your home or to learn how you or someone you know can take advantage of the tax credit, call us today!

We’ve caught the 500 pound elephant…

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The economy isn’t as bad as we think it is or as the media portrays it to be…especially in our Washington Metro Area.  Dr. Stephen Fuller from GMU’s Center for Regional Analysis spoke to our office today regarding the current economy in our area including unemployment and the state of the housing market…and of course his forecasts for the future.

The future is uncertain. It always has been and as it should be. We can only predict so much. So Dr. Fuller believes that in 2010 and 2011 the housing market in the Washington Metro area is going to be out of control good or in his words it’ll go “gangbutsters”!  That’s pretty optimistic considering the last batch of Alt-A loans (5/1 and 7/1 ARMS) are due to adjust in 2011, but he did say to that end that the majority of those loans have already gone into foreclosure.

Unemployment in our area is down. It’s up around the rest of the nation and according to Dr. Fuller will go up to 10.2 nationally by April of next year before we see it start to come down again.  As of this last month, there is a 3.5 point gap between the national unemployment figure and the figure in our region. He noted that as a country we are losing 200,000 jobs per month and in order to keep employment where it is currently, we would have to accrue 100,000 jobs per month – again, we are losing 200,000 per month.  Employment won’t return to pre-recession numbers until 2014. That’s a heck of a lot of jobs! And half of those job losses are in the retail sector.  Thanks to amazon.com and all of the other internet retailers that offer goods for discounted prices. Store front retailers can’t keep up, end up in bankruptcy and leave buildings and strip malls vacant along with any customer service that might have been associated with it.  Big box retail shopping centers may get rezoned to accommodate housing short fall – stay tuned.

Dr. Fuller did comment on inflation and whether or not it will happen in the near future due to all of the spending our government has been doing lately. Will we have to endure a hard inflation period to “pay it all back”? His answer is not likely.  Unemployment is a major factor affecting our economy, but it’s not enough to put pressure on the economy to spark inflation. He noted that manufacturers are not struggling as hard as they would be during an inflationary period. This is in large part because of all the products you can purchase online. They costs of  not having a physical store, employees, etc. allows for the lower cost product and thus more profit in the long run. Therefore, if they continue to produce the goods, they continue to sell, then inflation shouldn’t occur…but that doesn’t mean another recession won’t occur. Dr. Fuller said another recession is inevitable, but when is the question.

A recession is defined as a period of an economic contraction, sometimes limited in scope or duration or as Wikipedia says it’s when the GDP falls or when we have negative growth. We have experienced this negative growth for the past 18 months and things are finally looking upward.  As is the housing market!

The real estate market in the Washington Metro area is hot and soon to get hotter! At Gateway our sales are up 4% over last year, but our volume is down by 5%, thus showing that prices have come down quite a bit from last year. Dr. Fuller predicted that builders will start building more spec homes about springtime of next year. He commented that we need to have 25,000 new homes (not resales) to accommodate just the new residents in the Northern Virginia area, compared to 1 million nationally. Currently in our Northern Virginia market, inventory is slowing decreasing. This week we see 5,984 active listings on the market…that’s down 56% from this time last year. Just goes to show it’s a great time to sell and with the $8,000 first time home buyer tax credit and low interest rates, it’s also a great time to buy.