The real estate market in Northern Virginia continues to be in a remarkable time. First, rates continue to be extremely volatile – the jobs report exceeded expectations, and rates took their
January 2024 | Market Update
Dated: January 3 2024
Wow, in the blink of an eye, 2023 is over. A lot happened during the blink, so it was eventful, but time sure does fly. You may be asking what happened in real estate this year. Let's start with interest rates because they have the biggest impact on our business. If you recall, they started the year at just over 6% and then steadily increased until October. This is when they hit their 20+ year high, topping out at about 8.25%. Since then, we have had eight straight weeks of declining rates, resulting in a much lower rate of 6.67% today. This is well below our 50-year average of 7.75%, which is fantastic - purchasers are taking advantage of these lower rates.
But, along with the steady rise in rates, we had a lot of volatility during this time, which, of course, impacted sales. At the beginning of the year, we predicted the total number of sales in the US would decline from just over 5 million to 4.6 million. This is down from 6.1 million sales in 2021…huge drops, right? Well, the increasing rate environment coupled with volatility in the interest rate environment - plus the Fed raising their rates because they were trying to control inflation - will result in sales at just 4.1 million in 2023.
That said, we would have had more sales if we had more inventory. In Northern Virginia, we started the year with 1,611 homes for sale; we reached a high of 2,044 in October and will finish with just 1,065 houses for sale. The reason for low inventory? Interest rates - plain and simple. People are married to their rate and payment. Eighty-two percent of people with a mortgage have a rate of less than 5%, so they don't want to give up their low rate for a higher rate – at least right now.
Additionally, prices continue to go up. At the beginning of 2023, I said prices would continue to increase at the rate of 3-5%. Well, they increased by 3.5%, so this has also prevented some from putting their home on the market. Higher rates and higher prices equal less affordability, and people are staying put.
Nationally, people predicted prices would fall, and inventory would increase…they were wrong on both fronts. In the US, prices have increased by over 5%, and inventory, as I mentioned, is very low.
So, my predictions for 2024 are:
- Interest rates will continue to decline as inflation is in check - and it is an election year. I believe they will be in the low 6's to high 5's for most of the year.
- House prices will increase by 1-3% due to strong buyer demand and lower rates, which will put upward pressure on prices.
- We will see more houses sell. People will trade a 4-5% interest rate for a 5-6% rate, so more inventory with more demand equals more house sales.
- As wage growth and employment remain strong, I don't believe we will go into a recession – but if we do, it won't be good for the economy but great for real estate.
Have questions? Give me a call, and I'll be happy to help! Happy New Year!
Scott MacDonald, an experienced entrepreneur in the real estate industry with over three decades of expertise, leads a dedicated team at RE/MAX Gateway. Scott has successfully closed thousands of tran....