Post-Spring Market Update

We are now past the mad spring rush that we see on a normal basis in real estate. Traditionally the market slows down some post Memorial Day Weekend, as buyers and sellers alike spend time on vacation and busy with summer activities. Generally speaking, around this time we still see a good amount of inventory and buyers out but the market is just a little less competitive overall.

This year, we saw a more pronounced slow down earlier than usual (right around the start of May). I’ll talk more about this below. A lot of what I will cover is related to this chart so take a good look before diving in.

Applicable to Fairfax County.

ACTIVE LISTINGS INCREASING
We have been seeing active listings go up pretty dramatically this year. You’ll notice in 2021 the increase in listings was less pronounced with more incremental increases. This year we have seen listings increase by about 50% month over month. Though data for May and June has yet to be determined, I feel confident in saying this trend will continue and possibly increase. What does this mean exactly? First, don’t panic if you are considering selling. As you can see, though inventory is jumping up, we are still at a much lower inventory level overall than we have been in the past, meaning there is still demand. It is worth noting that interest rates are finally likely having an impact on buyers. With rates doubling since early 2021, many buyers’ budgets have decreased and it is understandable they may be a little more picky. Take this as an incentive to make your house showing ready. You can’t just throw any house on the market at this point and expect to receive multiple offers in a weekend, so sellers need to be mindful of making their house welcoming and clean. Good news for buyers! We are finally starting to see contingencies included back in offers and houses selling for closer to list price. With increased active listings, buyers are gaining back some negotiating power.

All this said, I am finding that the housing market is not all consistent and pockets are hit-or-miss. There are still some scenarios where houses are having bidding wars. In particular, homes that are very turn-key and fall into the entry-level price point for both townhomes and single family homes still seem to be the segments that are hot.

INTEREST RATES
It’s somewhat difficult to see, but this graph shows mortgages rates from 1971 to now. At their height, rates were all the way up over 18%! I only show this graph to try and put current rates into perspective. We were spoiled with rates below 3% for a little while, but historically speaking, 5.5% is still low. Even still, the jump up in rates has given some buyers pause about their search, which has impacted the size of the buyer pool overall. Many buyers have been considering adjustable rate mortgages as of late, which can be a great option depending on how long they plan to own the home. My point here though is, I think after some time buyers will understand that rates likely will not drop back down to where they were so if they have been considering buying now is a great time.

WHY IS THIS MARKET DIFFERENT THAN 2008?
This market looks wildly different than it did in 2008 for many reasons. First, the volume of loans given to borrowers with credit scores under 620 was nearly 400 billion then. In the past 5 years, that number has been less than 100 billion. My point here is that many requirements were put in place after the housing bubble, and buyers in the last 10 years have been much better qualified. Second, and most importantly, the vast majority of houses are worth more than what they were bought for, meaning the owner can sell and pay off the mortgage if they get into a tight financial spot. This wan’t the case back in 2006, 2007, and 2008. Finally, home prices are still increasing. Even though the appreciation has slowed down, we still have very limited inventory, so the demand is still present.

CONCLUSION
All this said, a recession does not necessarily mean a housing crisis. I don’t foresee our housing market experiencing large price decreases. I more so anticipate that the market will be pretty balanced throughout the rest of 2022 – a great opportunity for buyers. Likely though, buyers will become accustomed to the higher rates and lack of inventory will cause spring 2023 to roar on similar to the spring markets we experienced for the past handful of years. It just may be more comparable to the pre-COVID market, which provided buyers just a little more negotiating power.

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