WHERE’S THE BEEF (or Where are the Sellers)??

Robin Tingley (5/16/23)

Usually the spring market in Northern Virginia (NOVA) is extremely busy. But the Pandemic which started
in March 2020 turned Real Estate on its head and the NOVA market in Spring 2023 is anything but
normal.

Our market has really been not a “normal” market even before the pandemic. This is an area that has lots
of home sales/purchases movement because of the Federal Government and its ancillary industries and
has typically been a “Sellers Market” because of limited land space and low inventory.

This was especially true between 2010 (right after the Great Recession) and Spring of 2022 when interest
rates were low.**

**Though as you can see from the chart of years 2016 to 2023 - that is not always the case in our
neighborhood (173 homes - built between 1972 and 1974 Source: Tyson’s Woods Civic Association
(TWCA) web site). TWCA had 0 homes sold between January and mid-May in 2017 same as today. This
did not follow the 22182 zip code which seems to have had a normal pattern. My guess is that even
though we had the same environment (low interest rates, low inventory) - we did have an “eventful”
Presidential Election the prior November and I think Federal Government workers (which I guess but don’t
know for sure make up a number of homeowners in TWCA) were putting major decisions on hold to see
what would happen with a new President in place for the rest of 2017. We had one home that sold in
2017).

However, in the Spring of 2022 - the Government raised its federal funds rate to try and fight rising
inflation and indicated that it would continue to do so throughout 2022 which caused a seismic shift in
both buying and selling.

For example the average 30 year fixed mortgage rate was 3.37% in December 2021, 4.14% in February
2022, 5.23% in May 2022 and currently is at 7.45%.

So Where are the Sellers? Especially in TWCA which between 1/1/2023 and 5/14/2023 had 0 sales!!!

I believe the following factors are what is keeping this market (and our neighborhood) uncertain or as
BrightMLS calls this “the missing seasonality for Washington D.C Metro Market”.

1. Continued Low inventory

2. Higher Median Sales Price
3. High Interest Rates
4. Economic Factors including inflation, fear of future recession and anxiety around Government
policy.

In my opinion, the higher interest rates may actually be the main factor in keeping sellers on hold.

For example I assume that many of my neighbors in TWCA that have owned their homes here for a few
years and currently have low interest rates especially after refinancing a few times.
It doesn’t make a lot of financial sense to sell your home in the neighborhood (which has many positive
features as well including good family sized homes that are neither too small or big, nice back and front
yard space, close proximity to Metro/Tysons Corner/Town of Vienna and good school systems) and then
spending more time/effort to find another home ( if you are looking in NOVA) and then paying twice the
mortgage rate!

Of course there are many reasons why someone would put their home on the market and sometimes they
have no choice. But my guess is that NOVA will continue to see much uncertainty around the real estate
market until interest rates come down and inflation and recessionary fears abate.

The Presidential election in 2024 (and Virginia State elections in November 2023) may also contribute to
more anxiety so 2024 (to possibly early 2025) may not be much different either.

Here are some predictions for the rest of 2023 from my company (Redfin):

Prediction #1: Home sales will fall to their lowest level since 2011, with a slow recovery in the second half
of the year - Redfin expects about 16% fewer existing home sales in 2023 than 2022, landing at 4.3
million, with would-be buyers pressing pause due mostly to affordability challenges including high
mortgage rates, still-high home prices, persistent inflation and a potential recession. People will only
move if they need to.

Prediction #2: Mortgage rates will decline, ending the year below 6%
Redfin expects 30-year fixed mortgage rates to gradually decline to around 5.8% by the end of the year,
with the average 2023 homebuyer’s rate sitting at about 6.1%.

Prediction #3: Home prices will post their first year-over-year decline in a decade, but the U.S. will avoid a
wave of foreclosures - Redfin predicts the median U.S. home-sale price to drop by roughly 4%—the first
annual drop since 2012—to $368,000 in 2023. That’s due to elevated rates and final sale prices starting
to reflect homes that went under contract in late 2022. Prices would fall more if not for a lack of homes for
sale: Redfin expects new listings to continue declining through most of next year, keeping total inventory
near historic lows and preventing prices from plummeting. Very few homeowners are likely to see their
mortgages fall underwater even with next year’s anticipated price declines. That’s because the
homeowners who’ve had their home for at least a few years have fixed low mortgage payments and
plentiful home equity after values skyrocketed during the pandemic.

Full Article -
https://investors.redfin.com/news-events/press-releases/detail/845/redfins-2023-housing-outlook-a-post-p
andemic-sales