FOCUS on the Market - Nothern Virginia
These past 6 months have kept our team extremely busy staying up on the latest changes in our rapidly moving real estate market. The increasing number of foreclosures and the 'credit crisis' within the tightening loan industry have both led to decreased home values. We saw this trend play out a couple of months ago when the average sales price in Northern Virginia in September dropped by 23%. That’s compared to sales prices in September 2007. This downward pressure on prices was especially evident in the suburban counties. While this is not great news, there has been a positive change as well. While the average sales price in No Va decreased by 23% in September, the total number of residential sales has increased by 53% compared to the same time last year. This indicates that lower prices have led to increased buyer activity and more contracts. Although this increased buyer activity was slowed down for the 'first time buyer market' in September 2008 when FHA eliminated the Down Payment assistance programs, activity still remains strong compared to Fall of 2007. Something else to note is the average days on the market, which have also increased from 85 to 93 days. That means it is taking listings longer to sell.
It’s a lot to consider as we look to the future, but I do think we will continue to see increased buyer activity through the rest of 2008 and early 2009. This is mainly because prices will remain low and buyer affordability will continue to increase. At the same time, prices will begin to stabilize due to less foreclosures on the market. According to recent news outlets, we are expected to see a decrease in the number of foreclosed homes as banks will now be more inclined to negotiate short sales and loan modifications with home owners. We're seeing this trend already, with major banks like Washington Mutual and Chase deciding to temporarily halt foreclosures through January 2009. Others are likely follow. In addition, President Elect Barack Obama has promised a moratorium on all foreclosures for 90 days once he is in office. This will likely result in new legislation for banks, the foreclosure process, and alternatives such as short sales and loan modifications.
While we cannot predict what is likely to happen to real estate prices in the short term, especially in the midst of this unprecedented time in history, real estate remains a solid long-term investment if you have a modest amount of cash to put down (3.5% minimum), or the ability to obtain a VA loan. It is also a great time to buy investment properties, as decreased prices and a strong rental market now make it possible to find cash flow positive rental properties. This is even true if you have only a minimal down payment to invest.
Now, if you’re a homeowner who bought in the height of the market with an Adjustable Rate Mortgage and your payment has now adjusted, there can be good news out there for you as well. You’d be surprised what can be done to help ease the burden of needing to sell when your loan is “upside down”. Because we work closely with banks, we are in a unique position to assist clients with short sales and loan modifications. If you or someone you know wants to learn more about a short sale, loan modification, or buying or selling in the current real estate market, please call or email us at JenYoung@kw.com. We'd be happy to serve you!