Welcome to Market Talk!
I’m Liz Moore, President of Liz Moore & Associates, and today we’re going to talk about what’s happening in our local real estate markets as we close out the 3rd quarter of 2024. We invited Ryan Price, the Chief Economist at Virginia REALTORS, to present at our company meeting last month. His insights into an improving economy and housing market in Virginia, as well as his forecasts for 2025, were met with much enthusiasm from the agents! I’ll share a few of his thoughts here.
Good News!
The best news is that interest rates have finally settled down and stabilized. And, while they’re not the 3% rates we enjoyed during the pandemic years, they are reasonable again – especially compared to the peak last year near 8%. The Fed lowered the federal funds rate for the first time in 4 years in September, with several more drops anticipated next year. Rates are hovering near 6% (with some government loans in the mid to high 5’s), but most importantly they seem to have stabilized, and buyers have acclimated to the new norm.
Buyers are beginning to surface again, finally feeling comfortable that the rate environment will hold steady, at least through
the remainder of this year.
More Good News!
Inventory is beginning to build. Our local marketplace has seen steady gains in active inventory available on the market for the majority of the year. Like the buyers, sellers who have put their moves on hold during the pandemic years (largely because they are addicted to their existing low interest rates) are realizing that life has moved on, and it’s time to move. We expect that interest rates trending downward will accelerate this trend.
During the past 2 years there have been almost 3 million marriages and 1.5 million divorces, 7 million babies born, and 7 million boomers turned 75, which translates to time to downsize. There were also 50 million job changes, and lots of flexibility because of new remote working opportunities.
Not only do life events trigger moving opportunities, but sellers are also recognizing that they have had tremendous equity gains over the past 4 years.
Sellers are recognizing that their homes may never be worth more than they are right now, and that 2024 may be the ideal time to tap into their equity. Because of extremely strong price appreciation during the pandemic years, most homeowners have record high market values, and accordingly significantly more equity than they did pre-pandemic. Nearly 70% of homes are completely paid for, with the owners having no mortgage at all, or have at least 50% equity.
This record high equity creates an opportunity for sellers to trade up and use their additional cash to either put down a larger down payment to offset interest rates, or to pay off other consumer debt that is carrying a higher interest rate. Either way, overall monthly expenses can actually drop even though mortgage rates will be higher on the new house.
Will this home price appreciation continue? That’s the million-dollar question! Price’s forecast for 2025 is a more “normal” appreciation rate of 3.4% - still positive, but down from the crazy pandemic years.
Prices are Trending Higher
Source: Virginia REALTORS®
It’s also interesting to note that homes in the luxury segment of the market have made larger gains than their more affordable counterparts, which is a statistic that has actually surprised me and a lot of other folks.
Is My Tax Assessment an Accurate Picture of Market Value?
We have fielded dozens of inquiries recently as clients have received notices of increases in their local tax assessments. In some cases, we’ve seen values increase 40% or more over the past 2 years.
While that may seem like a lot, in many cases it simply reflects the assessor’s office catching up with home price appreciation since the pandemic. And, while it’s not a happy result for your pocketbook when it comes to paying property taxes, it’s definitely a positive indication of the increase in your home’s value.
Is the assessment an accurate reflection of market value? That’s hard to say without doing a market analysis for you. Like Zillow zestimates, tax assessments are based on a variety of algorithms that don’t take into consideration a number of human factors that are necessary to accurately predict your home’s true value.
We would love to provide you with a complimentary market analysis, as well as bring you up to date on all that’s happening in the local market.
Should I Buy Now or Wait?
Everyone’s situation is different. Increasing inventory favors the buyer, as does the decreasing trend in interest rates. The real factor to consider is the cost of waiting. With appreciation compounding sales prices at a pretty alarming rate, delaying a purchase for a year could cost you an additional 5%, which would offset any drop in interest rates.
What Does the Recent NAR Settlement Mean for Local Consumers?
Many of you have called to ask what impact the recent National Association of REALTORS settlement in the class action commissions lawsuit will have on our local market. The settlement was approved by the courts and practice changes went into effect this summer, with buyer-side compensation being removed from our local MLSs recently in August and September. Real estate commissions have always been negotiable, and that will continue. As a consumer, you should hire your agent based on the value that they bring to the transaction on your behalf. Sellers need to decide the amount of compensation, if any, that they will offer to buyer agents. This is an important marketing consideration, and your agent can help you evaluate that based on your competition and data in the local market.
We Love to Talk Real Estate.
Questions? Whether it’s about your home’s value, whether or not it may be a good time for you to move or invest, or if you’re just curious about what’s happening locally or nationally, give us a call today or email info@lizmoore.com.