Thursday, January 15, 2009

Market is Up - Inventory WAY Down - Prices Holding Steady - Rates Down

2008 was the Year of Recovery in Northern Virginia and it will continue in 2009, but this time, with a vengeance! Northern Virginia continues to outperform the region, the state and the nation. Buyers face low inventory, competing with multiple buyers and even paying at or higher than asking price. If the market is divided by price ranges, there’s the Hot Market and the Not Market, thus, property condition is as much a factor as price.

Properties priced under $400,000 are snapped up by first time buyers, move-up sellers, and investors. Between $400,000 and $600,000, the houses are still selling that are priced right and in good condition – usually to first time buyers with plenty of cash and some move-up sellers. Above that range and it’s a tougher market. Many homes are priced right, but there are just no takers. The question of “how low can you go?” keeps being asked of sellers.

Inventory in Northern Virginia (from the border of Washington, DC, to western Fairfax County) is down 26% over the same period last year. Combine that with Pending Sales up 27% and you have buyers battling each other for the well-priced houses in good shape. Enter the all-powerful Interest Rate to home prices that have dropped over the last three months and you have a perfect storm for the advent of a Sellers Market.

Power of Interest Rates
Many times, consumers miss the importance of the interest rate. As of this writing – you can buy a home (or refinance) for 4.875%. These are rates that our grandparents haven’t even seen! What this means is thousands of dollars of savings per year on the mortgage today, compared to just a few months ago. When rates were around 7% mid-year in 2008, a mortgage of $350,000 would have run $2328. Now, it would be $1,852. This gives a buyer two choices – buy the same house for a smaller payment or move up the price range by almost $100,000. Fixed rates are tracking even LOWER than adjustable rate mortgages.

So what? Inventory is slipping – we need more houses on the market to meet today’s demand. Buyers are competing again for houses that look good and priced right. Consider two choices – 1) make the move up (or down) now, while prices are stable and interest rates are low; 2) invest at a time when the rent will cover the monthly payment.
While the local papers and television stations report on a dropping market nationwide, it’s not the case for the real estate market surrounding the White House. The market continues to respond to the job growth adjacent to the nation’s capital (+28,000 new jobs in the DC area in 2008 over 2007).

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