Two Key Economic Trends Affecting Home Values

Northern Virginia Real Estate Market Recovery
Both at the national level and here locally, the housing market remains in a modest recovery. For Northern Virginia in July 2015, the number of closed sales is up 19 percent compared to a year ago and the median sales price has increased 2.3 percent. Lawrence Yun, the chief economist for the National Association of Realtors®, cites three factors driving this increased market activity:

  1. Steady rent increases
  2. Slowly rising mortgage rates
  3. Stronger local job markets

However, Yun also said, “With home prices and rents continuing to rise in wages showing only modest growth, declining affordability remains a hurdle or renters considering homeownership — especially in higher-priced markets.”

Economic Trend #1 — Rising Rents

As Yun indicates, higher rents are somewhat of a double edged sword…

On the one hand, higher rents combined with anticipated higher mortgage rates are causing some renters to become buyers. Rent versus buy comparisons show renters just how much they are losing by staying put. For those with the ability, the time to buy is now.

On the other hand, rising rents can also have the effect of trapping the renter as rent hikes siphon off cash that otherwise could be saved for down payments and closing costs. As home prices and interest rates increase, the transition from renter to homeowner becomes more of a challenge.

The National Association of Realtors® has also conducted research into the more than 9 million homeowners negatively affected by the housing market downturn. They looked at people that completed a short sale, underwent a foreclosure, or received a deed-in-lieu of foreclosure between 2006 and 2014 to evaluate the number of credit worthy borrowers expected to reenter the housing market in upcoming years.

Economic Trend #2 — Return Buyers

This study found that these “return buyers” represent a new source of demand that is adding a boost to the real estate market. The key findings include:

  • More than 950,000 have likely already bought again.
  • An additional 1.5 million return buyers are likely purchase over the next five years.
  • Damaged credit and other factors will severely limit the number of these former owners that return to the housing market.

The housing market continuous to heal from the wave of distress sales and foreclosures. Fortunately, here in Northern Virginia, we are helped by our region’s 4 percent unemployment rate and a stable local economy. Other factors in the lending market such as loosening criteria for jumbo loans, also help as these are often used given our high home values.

The Bottom Line for You

Whether you are a traditional first-time home buyer, a “return buyer”, or looking to trade up, right now is an excellent time to evaluate your options. We can help.

Also, if you have a home you are thinking about selling, or have tried unsuccessfully to sell, our local market expertise can reveal the maximum home value, as well as the rental income it could produce.

Give us a call at (703) 485-4663 to discuss your particular situation.

About Ashley Leigh

Ashley Leigh is one of North America’s most productive residential Realtors of all time selling over 4,500 homes and over $2 Billion in sales in his 20 year career. Ashley’s highest level sales performance has earned him mentions in The Wall Street Journal, Fortune Magazine, and The Washington Post. Ashley continues to work full-time along with his local sales team.

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