The promise of warmer days heats up the spring real estate market. While listings flood the market mid-March to early May, the spring market technically starts shortly after the new year and runs through mid-summer. Real estate’s second half of the year historically brings less inventory as sellers take off for summer vacations, prepare for school, and look ahead towards holiday festivities. Typically, new listings taper off from July into the fall with the market entering a mild hibernation November into the new year. While we expect already low inventory levels to fizzle in the second half of the year, buyers who shop later this year may find some of the market’s hottest deals. If you are thinking of listing or buying the second half of 2023, here are the top things you need to watch. #1 Watch Market Cycles: Year-over-Year home values are more nuanced than you think. Since 2020, median home values in our Central Virginia MLS have increased by a whopping 29%. The lion’s share of the increase came in 2020 and 2021 when interest rates were at earth-shattering lows. In 2022 - despite countless predictions that the housing market would crash due to rapid rate increases - our median home values still rose 3% YoY which is in keeping with historical averages for the last several decades. However, savvy consumers should know that spring market’s sales prices make up the bulk of a year’s rise in home values. In fact, the data indicates that the second half of the year can claw back some of a year’s initially strong, spring market gains. For example, median home values in our Central Virginia MLS peaked in June 2021 at $325,000 but then dropped to $315,000 by January 2022. Likewise, values peaked in June 2022 at $363,000 but leveled off in January 2023 to just $325,000. While both years’ YoY median home values saw impressive increases, the spring market’s inflated sales prices recoiled going into the second part of the year - taking back some of what the market gave early on. If you are buying the second half of 2023, know that while overall home values have already risen to $379,475 as of June 2023, if we see only a 3% YoY increase like we did for 2022, home values may drop to $334,750 by January 2024. #2 Watch Interest Rates: Interest rates play an important role in home values. Home values rebounded from the 2008 crash - and then some - due to literally years of below-average mortgage rates and declining inventory. In fact, the historically low rates we saw in 2020 and 2021 caused close to a 30% increase in home values in our region – giving back any losses felt from the crash. However, when rate hikes reached the 7’s last fall, home values stagnated somewhat, tipping the scales to more of a buyer’s market. If rates hover in the 7’s the second half of this year, current home values in our area could be hit like they were last year during a similar rate environment. However, if rates drop closer to 6%, home values may not be affected much. #3 Watch Inventory: The economics of supply and demand rings true in real estate. New construction – hard hit by Covid shutdowns and supply-chain slowdowns – hasn’t been able to keep up with the rising home inventory gap. Furthermore, homeowners who would like to upgrade or downgrade may find that between higher home prices and higher mortgage rates, the cost is simply prohibitive. With current rates, upsizing can come at a cost of 2-3 times a current mortgage payment while downsizing may find the smaller space costs the same - or more – than the current home. Many just can’t see any motivation to move. Instead, they keep their home off the market suppressing inventory levels even further. What’s worse, homeowners who secured historically low interest rates realize there could be more value gained by converting their current primary residence into a rental property rather than selling it when they purchase their next home. More two-homeowner families could create a greater inventory gap than anyone even expects. Add to this the influx of relocations from higher priced areas, property investors taking advantage of rising rental values, and a new generation of first-time home buyers, and it is easy to see how markets like ours could see home values rising this fall or at least holding steady from their summer peaks. What’s in store? As is always the case, timing the market is a tough task since no one knows how the variables will land. Despite a higher rate environment moving into the second half of the year, low inventory could cause supply issues keeping home values elevated. However, if inventory holds steady moving into the year’s final months, buyers just might find themselves on the winning end of a dream deal. Never want to miss a post? For more useful real estate tips & tricks, subscribe to our mailing list or contact us with any real estate questions.
Authored by: Kat Medaries, REALTOR® MT Realty Advisors of Long & Foster Real Estate Village of Midlothian Sales, 1100 Jefferson Green Circle, Midlothian, VA 23113 Licensed to sell in the Commonwealth of VA | Equal Housing Opportunity For informational purposes only. Not intended as legal, financial or credit counseling advice. Seek the assistance of a professional should you require.
0 Comments
Leave a Reply. |
MoreOwning real estate should be a journey of building & preserving wealth through the equity in your home or other properties. Our resources are designed to give current and would-be homeowners tips & trick to maintain, improve & shop for their greatest asset. Your search for value in real estate stops here. Archives
July 2024
Categories
All
|