And just like that we are through the beginning of 2023 and the spring market begins. You heard that right – we are already seeing bidding wars start in many pockets of the tri-state area. To begin, I want to cover a little bit about the below graphic. The national media frenzy made it sound like with the rise of interest rates at the end of 2022 housing supply would be through the roof and values would drop significantly. THIS IS NOT THE CASE. The below graph shows months of supply in Fairfax County. As you can see, the number of homes currently on the market is pretty similar to early 2021 – the truth is we are still very much in a sellers’ market with only .65 months of supply (a balanced market is usually considered around 5 months of supply).
Moving on, the market during this year thus far has been a little unpredictable but a few trends I am seeing consistently occur:
- Listings that are turnkey and present well to buyers (meaning updated, clean, decluttered, staged, etc) are going under contract quickly and in many cases receiving multiple offers. That said, sellers, you cannot just put your home on the market in poor condition and expect it to sell. Reach out for tips and tricks to get your home market-ready! A few small tweaks can really make a big difference.
- Unlike the past couple of years, the contract TERMS seem to be the most important bargaining piece. I am referring to the deposit, contingencies, closing time, etc. As usual during this busy time, I am seeing buyers’ competing offers waive many or all contingencies, but the key difference is that prices are not escalating as far above list as they were the past couple of years.
- Buyers continue to be more picky given that interest rates remain above 6%, so sellers have to make their house appealing in order to get good foot traffic and top dollar in an offer. Just like the last few years in the spring, if you are looking to buy you want to make sure you are working with a great agent who can get you in to see the home early and advise you on the best strategy to have your offer accepted. Time is of the essence!
- Inventory levels are still VERY low, driving demand. The area’s continued lack of inventory will likely not change any time soon, let alone this year. Reason being is most homeowners are staying put unless they need to move. With the higher rates, we are seeing a lock-in effect because sellers aren’t willing to give up their sub-4% mortgage.
- New construction, in particular condo units, are a good opportunity for buyers. As rates climbed at the end of 2022, builders experienced many buyers walking away and are now stuck with multiple units for sale. If you do see new construction on the market that you like, don’t hesitate to reach out! We’ve had more negotiating power recently with this type of sale.
- And finally, I am seeing the condo market re-gain much of the momentum it had lost during the pandemic. Units that are updated and closer in within the beltway, especially those at a low price point, are in high demand and garnering a large amount of interest. Likely, many people are headed back into the office, which is contributing to this change.
Let’s address the biggest topic of concern amongst buyers in the last year – interest rates. Experts seem to be all over the place on whether or not we can expect these to decrease in 2023. Based on all of my research, I anticipate we see at least a slight dip by year end, as interest rates are heavily tied to trends in inflation. There’s no way to know for sure though, and no way to predict timing. Recently they’ve been quite volatile. My best advice to buyers is do not wait to try and time the market. Start your home search now, and if rates do go down then you will always have the opportunity to refinance.
In addition, many lenders (including those I recommend) have gotten extra creative in offering programs that help ease the financial burden of the high rates by providing contributions to closing costs and downpayment. Let me know if a lender recommendation would be helpful to you!
In summary, sellers need to make their homes market-ready in order to garner extra buyer interest and accept an offer at top dollar. These are no longer the days of anything on the market sells well. On the flip side, buyers should be prepared to compete in the current market climate, especially if the house they like is turnkey and well presented. Having a good agent and lender to guide you will make all of the difference!