NoVa housing forecast: sellers’ market to continue
NVAR, GMU center predict low inventory, pent-up demand
Northern Virginia’s housing market will likely remain a sellers’ market for the rest of 2023, according to a Northern Virginia Association of Realtors market forecast released June 6.
NVAR and George Mason University’s Center for Regional Analysis predict a continuing housing inventory shortage and pent-up demand from buyers amid positive economic conditions but mounting risks.
“Higher interest rates are impacting both buyers and sellers, causing housing inventories to be even tighter than during the pandemic, but with slightly softer demand pressures,” NVAR CEO Ryan McLaughlin said in a statement.
Mortgage rates have receded from recent highs but remain higher than pre-pandemic rates. For the week ending June 8, the average 30-year fixed-rate mortgage rate was 6.71%, the first decline after a three-week climb, according to Freddie Mac data. While pricing remains strong, low housing inventory has decreased the number of units sold by about 20% from pre-pandemic norms.
GMU’s Center for Regional Analysis and industry experts predict that demand in Northern Virginia will remain soft compared with the last two years because some households are priced out of the market by higher mortgage rates. However, there is pent-up housing demand, and buyers seem to be accepting higher mortgage rates, especially since monthly rent rates are also increasing.
The forecast expects existing housing inventory shortages to increase, as current homeowners are less likely to move if they locked in lower mortgage rates. On average, the report predicts unit sales will decline from about 10% to 15%, compared with 2022.
“It will be hard to justify leaving a home with a refinanced loan below 3% for another home with a higher price and a loan rate that could be doubled,” said Terry Clower, director of GMU-CRA and the Northern Virginia chair of GMU’s Schar School of Policy and Government, in a statement.
Prices remain relatively stable, and NVAR and GMU-CRA expect prices to increase about 1% to 2% because of factors with conflicting effects: affordability and lessening demand versus low inventory and a resilient labor market.
The report includes expectations for three submarkets: Fairfax and Arlington counties and the City of Alexandria.
In Fairfax County, the largest locality in NVAR’s region, single-family home prices are predicted to have an average 0.7% price gain, while total unit sales will drop 10% for the year and inventories will drop 13%.
Fairfax County townhouses will lose 22% of inventory, and total unit sales will drop 15% annually. Median prices are expected to increase by 0.4%. The condo market will likely see a 23% decrease in sales and an average 4.3% rise in prices.
The average prices for single-family homes in Arlington are expected to increase 9.2%, with sales decreasing by 4% and inventories continuing to drop — the average number of units for sale will decrease by 7%.
Arlington townhome prices will remain flat because of dropping inventory, and the condo market will also have low inventory as condo owners stay put due to mortgage rates and a lack of available alternative housing options.
In Alexandria, home prices will increase about 1.6% as prices become less volatile, according to the report. Alexandria is expected to have a better sales trend than other markets in the region, with an increase in 5.4%, or 19 homes. Single-family housing supply in Alexandria will continue to decline but remain above late 2021 levels.
The Alexandria townhome market will likely see flat inventory levels, and unit sales will drop about 15% to about 619 units. Prices will rise about 3%, according to the forecast. Condo sales are expected to decline by about 17%. The annual average condo price will increase about 8%.
NVAR reports home sales activity for Fairfax and Arlington counties, the cities of Alexandria, Fairfax and Falls Church, and the towns of Vienna, Herndon and Clifton.