Back in September, I said it was clearly a buyers market. The numbers were there to back it up: more contract fallouts, higher days on market, growing inventory, and fewer pending sales. Prices were moving in the wrong direction and continue to do so today. The only hope for a rebound, in addition to a strong economy, was lower rates as result of the Fed cuts, and, as it turns out, an open government.
The government shutdown has pretty much wiped out any hope for sellers trying to get back in the driver’s seat or relive the days of multiple offers and clean contracts. The “Big Beautiful Bill” was supposed to keep funding flowing to the contractors who drive so much of our local economy, it didn’t. Rates were suppose to drop and get buyers off the sidelines, it didn't. We were already in rough shape going into October, and things haven’t improved. You could say we’ve gone from bad to worse.
It’s still too early to know how the shutdown will affect prices since that data won’t show up for another couple of weeks, but what we’re seeing so far is already telling. Showings are steady, pending contracts are down, and inventory is climbing.
Buyers are still out there. Showing activity and open house traffic have actually ticked up a bit over the last two weeks. Maybe people simply have more free time to tour homes, or maybe the surge in new listings has created enough variety to get them back out looking. However, fewer of them are looking seriously. It's a problem when we report back to sellers that showings are up but offers are down, and that's whats happening right now.
Normally, September and October are busy months, that almost mimics the peak of the Spring, before the market slows for the holidays. Inventory tends to decrease, not expand, right now. This year, it’s different. I usually stay busy until Thanksgiving, but this year my golf game is improving rapidly :)
The market is uneven right now. For years, Fairfax and Arlington moved in near lockstep. Prices, inventory, and buyer behavior rose and fell together. That’s not the case anymore. Arlington has been hit especially hard as result of this shut down. New listings there are up about 30 percent compared to last year, and total active listings are up nearly 50 percent. Fairfax County by contrast looks better, albeit still not great. New listings are up around 5 percent, and total active listings are up roughly 26 percent year over year. On a weekly basis, the numbers for Arlington are pretty alarming, while we see decent pending activity in Fairfax County, Arlington is a frozen market.
Arlington’s market has softened faster, and part of that may be tied to the number of residents and buyers directly affected by federal furloughs.
Even where the numbers haven’t moved dramatically, the mindset has. Buyers have no sense of urgency. They’re seeing more options every week, rates have dropped to a three-year low, and nobody really believes they’ll jump back up anytime soon.
Yes, mortgage rates are at a three-year low, you read that right. No one seems to care and that hasn’t turned the market around. Context matters but fixed rates for most folks with good credit is typically around 6.25% today vs 6.85% this same time last year. Cheaper money only matters when people feel secure about the economy, and right now, that confidence isn’t there.
Looking back, calling it a “buyers market” might not have been the best term. At least not from an optics perspective. Most people hear that and assume it means there are bargains everywhere or it's a good time to be a buyer. That’s not necessarily true. Affordability is still at an all time low. Value means paying less than a home is actually worth, not just less than the asking price.
I’m routinely seeing homes sell 10 to 20 percent below their original list price, but those homes were often overpriced from the start. The reality is that while it looks like buyers are getting deals, most sellers are still walking away in decent shape and we will only know once the dust settles.
The market feels off balance. Buyers have more choices and less motivation. Sellers are adjusting to a slower pace and more price pressure. If the government shutdown drags on, this pattern will likely get worse through the end of the year.