By Liz Moore
2013 was a roller coaster ride in real estate, and as we enter 2014, there is a great deal of buzz in real estate circles about what the New Year will bring. The proverbial market bottom is definitely in our rear view mirror, so now the question remains how the local market will perform in the middle of an economy that continues to struggle, taking a step forward, and a few steps back.
Here in Williamsburg we enjoyed 10 straight months of year-over-year increases in sales last year, which took a huge chunk out of the inventory levels during the summer (we actually enjoyed fewer than 6 months of inventory in March through July). Although the final 2 months of the year saw a bit of a dip in sales (not unusual for the season), January has started off with a bang, and all predictions are for a strong sales year in 2014.
The market is still definitely favoring sellers who are positioned properly – those who are aggressively priced and in move in condition are still selling in less than 3 months on average. There is currently slightly over 7 months of inventory available in the greater Williamsburg market, which underscores the importance of being sensitive to the competition – both in terms of price and condition. The best news is that our market has enjoyed a 24%+ increase in closed sales over last year, and the sales momentum has finally resulted in a slight warming trend toward positive price appreciation in most market segments.
Here is what I see in the coming 12 months:
Interest rates will continue to increase as the market improves. As I predicted in last year’s crystal ball, interest rates are on the rise. Although this is good news for our stock portfolios, it will have an adverse effect on home sales. Although consumer confidence has rebounded somewhat with the recovering economy, fewer buyers will be able to afford what they want, with the combination of rising interest rates and tighter lending guidelines on the horizon. My message here remains the same as last year: If a home purchase is on your New Year resolution list, buy early in the year, as interest rates have a much greater impact than most realize. For instance, waiting for prices to drop 5% to save $12,500 on a $250,000 purchase may cost you an extra $225 per month in payments; if rates increase from 4% to 5.5%, then your payment increases from $1194 to $1419. For most buyers, the affordability index of monthly payments is a more critical consideration.
Consumer Confidence is still volatile as we experienced this Fall with the direct impact of the government shut down. As we have learned from market cycle history, the first buyers back in the market are investors, and that began to happen in 2012, and continued through 2013. The next wave of buyers came as consumers realized that interest rates and prices were beginning to rise, and moves need to be made ASAP to take advantage of a 5 year streak of historically low rates and home values. It’s important to note that the market can shift quickly, and the pendulum is likely to continue its swing toward lower inventory levels, creating a more competitive environment than we’ve seen in recent years.
Prices will finally begin to show improvement in many neighborhoods. Prices are neighborhood specific, and some areas are definitely improving faster than others; median sold prices were up just slightly this year (just over 2%). I expect the market to continue to trend toward more normal appreciation rates in the coming months.
*All stats based on Broker Metrics for WMLS, 23188, 23185, and 23186 residential home sales in 2013
If you’re a seller who has been wondering if it might finally be time to sell, email us at concierge@lizmoore.com, or click below, and we can prepare a complimentary analysis of market value for you – you just may be pleasantly surprised.
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