It was only three weeks ago that I wrote about my newfound affinity for higher interest rates. Our buyers were getting deals done, keeping their contingencies and negotiating concessions we hadn’t seen in years. What a difference three weeks can make.
In my last post, I explained why that burst of activity probably wouldn’t last. Buyers already in the market had reasons to hurry up and get something done, whether they feared rates going even higher or suddenly had the leverage to negotiate a deal worth taking. The problem was that we weren’t seeing new buyers come in behind them.
I would love to have a more encouraging update, but the slowdowns we’ve become accustomed to over the last four years seem to be getting harder to shake. We’re back in a market that feels frozen, with less reason to believe a stronger market is on the horizon, at least not in the short term.
Across Northern Virginia and the DC metro, showings have been at five year seasonal lows for eight consecutive weeks. Locally, showings were down 20.7% from this time last year, and new contracts fell 18%. Inventory was up 22%, even as fewer new listings came to market. Homes are piling up because there simply aren’t enough buyers to absorb what’s already for sale.
September wasn’t much better, and you might have seen some of the dramatic headlines about pending home sales reaching record lows. Nationally, pending sales declined 7.3% from the previous month and 11.3% from a year ago. Our market tends to outperform the national averages, but not this time. The DC metro saw a 17% decrease in pending sales year over year.
September Housing Market Report:
And yet, prices haven’t fallen nearly as much as you might expect. Technically, prices are actually up from last year. Not by much, but the regional median increased 1.6%, although more expensive single family homes accounted for a larger share of sales. The upper end markets of Northern Virginia have been a silver lining, with those homes generally outperforming the rest of the market.
Much of this comes down to homeowners with low mortgage rates who can often afford to wait rather than accept a price they don’t like. Buyers look at the monthly payment and decide they can wait too. Homes sit, some sellers pull their listings, and everyone watches rates.
Prices matter, obviously. But in my conversations with buyers, the payment is usually what stops the purchase. The Fed’s announcement on October 28 didn’t give me much confidence that relief is around the corner. Rates were held steady, inflation remained a concern, and two members actually wanted an increase. That doesn’t mean mortgage rates have to rise, but I wouldn’t build a plan around an imminent decline.
What happens next is anyone’s guess. We’ve seen quiet markets turn competitive surprisingly quickly when rates ease. In fact, I can’t remember a time over the last five years when the market felt
For sellers, I’d focus on the buyers showing up today rather than count on a better market in the spring. For buyers who can comfortably afford the payment, there is room to negotiate. Just make sure the purchase works at today’s rate, without counting on a refinance to make it affordable later.
As always, for a more nuanced read on your situation or market, feel free to reach out for no obligation conversation.