The housing inventory in Northern Virginia was up almost 50 percent in June from the same time last year, according to numbers from the Northern Virginia Association of Realtors. And Molly Craig, a Realtor with Century 21 New Millennium, says she’s been having some hard conversations with home sellers in the area.
For so many sellers, Craig says, the COVID-19 pandemic formed a baseline real estate market expectation with its “perfect storm of really low interest rates and no inventory.” She would sometimes search a ZIP code and find literally “zero properties available.”
So when something came on the market, Craig says, “People were parachuting in to write offers. We were getting 15, 20, 25 offers [per property] with no contingencies. … It was just a really terrible time to be a buyer.”
She has to regularly talk sellers down who think it’s still going to be that way, but the NoVA real estate market has changed.
“In my day-to-day, in certain neighborhoods, houses that would have three or four years ago sold for, you know, $1 million, $1.2 million, are now not. … There’s less competition, less escalation.”
Interest Rate Changes
One big thing that’s changed in recent years is the rise in interest rates, generally holding around 6 percent to 7 percent, from a low of around 2.25 percent.
She says that situation has even locked her in personally. “My interest rate is so low that, if I downsize, my mortgage payment would be higher. And that’s most of Northern Virginia right now. So it’s created this logjam where people would have downsized and aren’t. They’re just waiting, and now they don’t want to sell because they’re not going to get that escalated price they would have a couple years ago.”
When loans aren’t as cheap, buyers have to be more careful, and more picky.
The trend has accelerated this year, Craig says, in large part due to economic uncertainty caused by the on-and-off tariffs and massive federal layoffs that have been two of the hallmarks of President Donald Trump’s second term.
Job Uncertainty
“There’s just a lot going on in the country right now,” Craig says. “Anytime people are uncertain, it causes some pause.”
“The biggest killer for us is job uncertainty,” Craig says. “Even government jobs, which were the gold standard, are no longer rock solid. We’re being told as a brokerage to never waive financing contingency, because we don’t know whether someone’s going to lose their job over the course of a 30-day loan approval process.”
People are more reluctant to plunk down for a house, Craig says, and they’re pickier about what they do get.
For herself, Craig says she hasn’t seen people selling because they’ve lost their job, although she stresses that she’s only speaking from her own experience.
She adds that at low interest rates, buyers had the money to do repairs and upgrades. Now, though, people are reluctant to buy “unless it’s the perfect house. They have to have liquidity to do a fixer-upper. When they were borrowing at 2.25 [percent], they had liquidity; it was cheap money. But now, if they’re paying 7 [percent], they’re going to want a house with not much to do to it.”
Houses that require work are seeing price drops this year for the first time in a long time, Craig says. And that’s not all. “Houses [are] being withdrawn from the market because they’re not selling. A lot of contracts [are] falling out over home inspection.”
Advice for Sellers
Craig acknowledges that sometimes people have to sell homes because of an estate sale, divorce, relocation, or other factors. But she advises, “Unless you have to sell now, don’t.”
For would-be sellers, Craig tries to guide them through the process based on how things have changed. “I have to show [sellers] what is happening in the market. … Some still think it’s COVID [times], and they’re going to get 15 offers on their house, even though they’ve done nothing to it in 15 years. … I would just show them exactly what’s going on, the data for the price per square foot that has stayed flat, at least in June, and what has gone on in their neighborhood. And usually I can show them that there’s inventory that’s sitting or inventory that’s been withdrawn.”
Those conditions affect prices: “It’s hard to explain to them that you don’t want to list the house for your dream price. Buyers are too savvy for that. So you have to be strategic. If a house has been sitting for 30 days, [is a buyer] going to go in at list price? Probably not. We really don’t want a house priced poorly because it doesn’t serve our clients well.”
Advice for Buyers
“I’m telling my buyers it’s a good time to come out,” Craig says. “They’ll get choices and they can refinance in a couple of years. … I believe it’s a really good time to be a buyer.”
That said, buyers can afford to be careful. They’re rarely under pressure, Craig points out, so they can wait if they need to. “It’s very rare that you have a buyer that has lit a fuse that can’t be unlit, and they have to get a house in 60 days.” (And if you do, Craig advises finding some kind of temporary housing before you make the kind of commitment that buying requires.)
She also advises that buyers keep financing contingencies in place. “That way it’s a voidable opportunity, meaning they can get out of the contract if, for some reason, they lose their job, and still get their earnest money back.”
She also highly recommends home inspections before even making an offer, “and that way we’re not wasting anybody’s time.”
Craig says it hasn’t happened to her, but a look at the market shows it’s happening. “You see a lot more ‘Back on Market.’ You’re never fully sure why it fell out, [but] you can kind of assume that if it fell out within seven days, that it was home inspection. But there’s no way to know.”
So Now What?
No one knows how things are going to shake out, Craig says: “I mean, anybody who thinks they know what next year is going to look like, it’s just guessing. … It’s not a balanced market yet, but we certainly are seeing the buyers get a little bit more power in the market.”
That’s fine with her: “I kind of like this more balanced approach. Call me crazy, but I think a buyer should be able to have an inspection and calmly search for a house and have choices. The frenzy was not pleasant for anybody, buyer or seller. It didn’t feel like a healthy market.”
Feature image courtesy stock.adobe.com
