Throughout the country and certainly in the Charlottesville/Central Virginia area, the housing market continues to trend upward. Over the last several years, the number of homes sold and the average sales price has increased moderately. This trend will continue in 2018 and in fact, I predict that home values will appreciate even more given the lack of existing home inventory particularly in the lower price ranges.
For the first time since 2012, the question is being asked are home prices once again reaching their peak? How much higher can Prices go? The price increases are not happening everywhere. There are geographic areas and price ranges that are somewhat static right now. This is especially true for existing homes competing in areas where there are new homes being built. Because of these factors, purchasers really need to do their homework to make sure they pay the right price for a home.
This leads me back to the topic of this article. In 2010, there was 10 months of listing inventory. This is defined as how many months it would take to sell every home if another one did not come on the market). Currently, there is only 3 ½ months of supply. This will continue to create demand which will naturally result in higher home values. Add the fact that 30 year mortgages are at a 7 year high and you find a recipe for the purchasers buying power becoming significantly diminished. A very loose estimate shows us that a buyer may lose up to $70,000 of buying power if they wait a year. Why? If a $300000 home increases to $330,000 and the interest rate goes up by 1% (meaning $10,000 less loan per ¼ % increase) it could mean a $30,000 price increase and a $40,000 difference in loan amount equaling the before mentioned $70,000 loss in buying power effectively causing some to not be able to purchase a home. Mortgage Banker Association CEO, Dave Stevens projects the interest rates to be as high as 5.5% in 2019. He remains optimistic about the real estate market given the number of millennials that will be entering the housing market over these next few years. You can hear his full conversation by clicking on this link.
There is still a lot of energy in the housing recovery however, there are some (see below links) that are predicting 2020 is the year to watch not as much because of what might happen with the economy but more because of what rising interest rates could mean to potential buyers.