Northern Virginia Real Estate Market 2023: First Half Analysis & Second Half Predictions

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Northern Virginia Real Estate Market 2023: First Half Analysis & Second Half Predictions

The market in Northern Virginia has been very unique this year. Despite higher interest rates, home values have remained strong and we have not seen the drastic drop in prices that buyers were hoping for. Though the rate of home value increases has slowed, house values have been trending upward this year with the average sales price in the second quarter of 2023 up by 1.3% from the same time last year.

The number of homes that have sold this year is down pretty significantly, with Q2 sales down by 25.9% from last year. Often when people hear that sales are down, they think that means the market is bad. Decreased sales would be indicative of a depressed market IF there were a lot of homes available for sale that were not selling, but that is not the case. The number of new listings on the market in Q2 was down 37.3% from last year, so the reason that the number of sales has decreased is because the number of homes available to purchase has decreased.

One of the biggest factors in the decrease in the number of homes available for sale is interest rates. 82% of homeowners currently have an interest rate under 5%. So it's a tough pill for homeowners to swallow to sell their current home and give up their low interest rate and purchase a new home at over 6%. This is called the lock-in effect and those owners are not selling unless they really need to move. The bright side for those homeowners who do need to sell is that demand from buyers has remained very strong. In Q2 homes were selling on average for 101.5% of the asking price in 14 days. We don't have a crystal ball and it's impossible to predict what will happen in the market, but if interest rates stay the same it's likely that the rest of 2023 will look very similar to the first half of the year with limited inventory and steady demand. If interest rates drop, that will likely lead to a big surge in buyer demand and we will see even more competition and higher price escalations for hot properties.

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