“Wait and see” has become a tiresome strategy for many looking to buy or sell a home in Northern Virginia’s tight real estate market.
Some people have been sitting on the fence, hoping mortgage interest rates will drop, and others are waiting for an increase in housing inventory, all while prices have continued to rise.
Looming in the background has been a major unknown: whether the results of the 2024 presidential election will prompt a shakeup in a real estate market where so many are employed by or work with the federal government.
As of press time, the new administration has already made aggressive moves that will affect federal workers. But even in the face of efforts to reduce the federal workforce, relocate some jobs to other parts of the country, and call remote employees back to the office full time, NoVA’s real estate market seems to be growing both stronger and tougher, with moderate increases in both market activity and home prices.
We asked some of the region’s top real estate brokers and industry experts about current market conditions and whether plans to reshape the federal workforce could significantly impact the area. The consensus: Pent-up housing demands are so great that the market should be able to withstand these changes.
NoVA Market Forecast
Late last year, the Northern Virginia Association of Realtors (NVAR), in conjunction with George Mason University’s Center for Regional Analysis (GMU CRA), released a 2025 regional housing forecast outlining recent market changes.
“Buyers and sellers who were hesitant to move in the last two years are starting to reenter the market,” says NVAR President Casey Menish. “Many sellers who had been sticking with their homes in order to keep their 3 percent interest rate from three years ago are experiencing life changes that necessitate a move, such as a growing family, changing jobs, or downsizing, which is creating modest gains in inventory.”
Menish notes that buyers who paused their searches in hopes of lower interest rates are coming to terms with the reality of today’s market. “We expect that rates will likely stay in the 6 to 7 percent range this year and will not return to those historically low interest rates any time soon.” Current U.S. rates for 30-year, fixed-rate mortgages are actually hovering below the historic average of about 7.7 percent (based on rates from 1971 to 2025). The record low for 30-year, fixed-rate mortgages in the U.S. was 2.65 percent in January 2021, and the record high was 18.63 percent in October 1981.
“There is still steady buyer demand, but there is limited inventory to choose from, which means that we remain a sellers’ market for the time being,” says Menish. “Some homes are certainly receiving multiple offers and price escalations, but nowhere near the frenzy of the early years of the pandemic.”
GMU CRA Director Terry Clower predicts that home price increases in NoVA will, to some extent, be constrained by affordability. “Prices can’t keep going up if potential buyers are priced out of the market. That does not mean that we will not see some price escalation in 2025, but it just may not be as much as some parts of the country. Even with home prices rising, homeownership remains one of the best pathways to build intergenerational wealth.”
Federal Job Uncertainty
“Reductions in the federal workforce could impact the real estate market,” says NVAR’s CEO Ryan McLaughlin. “Retiring federal workers may choose to downsize or relocate to other areas with lower costs of living or to be closer to family. This could increase inventory in the local housing market, resulting in more housing options for buyers. On the other hand, retirees may choose to stay in the area due to its amenities, proximity to excellent health care, and strong community ties. The full impact of these changes will depend on how policies evolve in the coming months,” he says.
“If anything, we sense a surge of optimism developing as people sift through and absorb the election results,” says CENTURY 21 New Millennium CEO and Founder Todd Hetherington. “It certainly could have an impact, but history has shown that nothing happens quickly. Having said that, with the current administration’s pace out of the gate and their executive orders directly affecting a huge portion of the federal workforce, depending upon how many federal employees take advantage of the buyout offering, things could actually happen pretty darn quickly. Thankfully, our market could easily absorb a 20 percent increase in inventory. Our region has always been last in and first out of recessionary periods. If the federal workforce is downsized, the private sector will ramp up to fill any gaps. The market is strong enough to absorb change over time,” he says.
“We have underbuilt for so long, and there is so much pent-up demand, it would take a large shift in federal jobs to cause a notable shakeup in this housing market,” says Clower. “Yes, the federal workforce is important, but by itself, a reduction in federal jobs is not likely to cause a major housing market calamity. Northern Virginia has the resources and ingenuity to adapt to changes in the economy.”
Holly Worthington, regional vice president and principal broker for Compass DMV, has a similar opinion. “Even large numbers of government employee layoffs, which could occur, would not significantly impact the real estate market. There is a meaningful housing shortage here, and home values in most areas have continued to inch up because of it. When government-related jobs are lost in our region, most of those employees stay here and find other work. They may have children in school or a spouse with a job here,” says Worthington.
“I’m not seeing a response in the market to proposals to reduce the federal workforce or relocate agencies,” says Sherry Rahnama, broker/owner with RE/MAX Executives. “Getting past the elections helped the market, because it lifted uncertainty for those who were waiting to buy. We have a strong and vibrant economy. Yes, we have the federal government, but we have many other things going for us. Do I see prices dropping? Not in the foreseeable future, but things could slow down and level out for a period of time.”
However, Clower notes there is still reason for concern: “This region has been losing ground for several years to our economic competitors. We must change our approach and attitudes about economic development if we are to be successful in building an economy less reliant on the federal sector — this is not a new message.”
Remote Work Changes
With the rise in remote work options during the pandemic, many buyers flocked to more affordable communities in the region’s outer suburbs and beyond. The question is whether a shift back to the office will affect sales and home values in more remote areas.
Rahnama says the NoVA market tends to be stronger than other markets during times of uncertainty. “I think a lot of buyers will look in areas closer to their offices and DC, but prices are higher there, and they may not be able to afford it. Proximity to public transportation will be their next best option.”
Hetherington says moving back to the city is not the only alternative for those asked to return to the office. “The affordability and enjoyability of remote suburbs will compel some to make a career change versus changing their lifestyle.” Worthington says she does not think a federal employment shift would have a big impact on the market. “Many of those workers have already been reporting to the office a few times a week. If government workers are called back into the office, it will be a plus for local restaurants and other services that support those workers.”
Menish says homebuyers make decisions based on multiple factors. “Buyers are choosing between price, type of home, and location. Price, they have to prioritize, just finding something that works within their budget. Then they must decide if they want to live closer to the city with a shorter commute but probably a smaller property, or if they are willing to drive a bit further for that single-family home, knowing they will be stuck on I-95 or I-66 paying those tolls. That’s the toss-up.”
Clower says much depends on what the new normal becomes in terms of hybrid work. “I remain skeptical that organizations will stick with hardline five-days-in-the-office policies. Labor markets remain tight, especially for experienced tech talent. Inflexible employers may find themselves on the losing side of competition for the best workers.”
Clower adds that while he sees no risk of collapse in the housing market based on different employment scenarios, he does think a complete overhaul of the current land use management process is necessary if the region wants development that will support growth into the mid-21st century.
“If we do that correctly, we will not see a significant drop in housing values, but a slowing of price escalation compared to competitor regions,” says Clower. “We don’t have to become as cheap as Charlotte or Houston, we just need the gap in housing costs to come down to the point where our high level of amenities makes the higher prices worthwhile and allows working families to have a real shot at homeownership.” Retaining the region’s workforce and curbing outmigration is vital, says Clower. “It involves the availability and affordability of housing. Young families are having to go elsewhere to find these opportunities. We need to address the challenges directly involving the availability of workforce housing in our market.”
NoVA Market Challenges
In the December 2024 virtual panel briefing on the 2025 housing market forecast, NVAR Immediate Past President Thai Hung Nguyen described why single-family homes in Northern Virginia are out of reach for most first-time buyers. “It depends on interest rates, inventory, and income. Interest rates continue to stay near 6 to 7 percent, and that is where buyers got challenged with affordability. Inventory is low, and first-time buyers don’t have a lot of choices. They just have to put together the resources to make a purchase. It’s tough. Income has not grown as fast as inflation and home prices, so qualifying to purchase has become a challenge.”
For a single-family home, some buyers are pulling family resources together and entering multigenerational purchases, says Nguyen. He notes that the alternative of buying a condominium, although a good choice for many, comes with its own challenges. “High condo fees can make it more difficult for the homebuyer to qualify for the purchase. So, townhomes have become the sweet spot.” Nguyen recommends that first-time buyers consider two Virginia Housing programs: the Down Payment Assistance Grant program and the Closing Cost Assistance Grant program.
Rahnama recalls working with a firefighter who put a contract on a “fixer-upper” that was getting a lot of interest because of the price point. “He could barely put together the 3 percent down payment, but I found him a good lender,” says Rahnama. “We searched for loan and grant programs specific to firefighters, and the seller agreed to help with closing costs and my compensation. Still, I thought there was zero chance he was getting this house, so I braced him for disappointment. The day I told him his offer was accepted, he actually cried.”
“It will never be cheap to live in the national capital region,” admits Clower. “Jurisdictions must continue to develop their nonresidential tax base to include high-value-added technology sectors of the future.”
Clower points specifically to data centers, which are a hot-button issue for many. “In Northern Virginia, the communities that have embraced data center development, Loudoun and Prince William counties, are reducing tax burdens on residents that make total housing costs in their communities more affordable.” The change in real property tax rates in 2012 to 2024 in Alexandria was 13.7 percent, compared to -28 percent in Loudoun County and -18.7 percent in Prince William County.
“Data centers enable infrastructure of those high-value-added industries — artificial intelligence, quantum — that will drive growth,” Clower adds. “Communities that embrace data centers have a leg up on attracting all of that other investment. Those that don’t have data centers, or they leave and go elsewhere, will have a harder time growing. We may need to change some regulations, rethink the land-use process a little differently, but it can be done. We should look to the future, not be scared of it.”
Feature image, courtesy Yeonas and Shafran Real Estate
This story originally ran in our March Issue. For more stories like this, subscribe to Northern Virginia Magazine.
