Rising interest rates are expected to cool the housing market, but some markets may not be affected. Primarily Washington DC, where decision makers are raising interest rates.
The housing market in the country’s capital has shaken off the previous economic downturn, and it remains hot despite rising interest rates and record prices cooling demand in many parts of the country.
According to the Greater Capital Area Association of Realtors, sales in the Montgomery County District of Maryland and Montgomery County surged 11.3% from March to April. Home sales in Northern Virginia increased 5.8% month-on-month, according to the Northern Virginia Real Estate Agents Association.
According to data released Thursday by the National Realter Association, these numbers are contrary to the national trend of rising US home sales of 2.4% from March to April due to rising prices and mortgage rates. increase.
According to realtors, the high income and education level of the DC Metro area, coupled with low housing supply, makes the area resilient to the sharp rise in mortgage rates that push prices even further. ..
However, much of the recent activity is centered around more expensive homes, and high-income buyers are above list prices to fix mortgage rates for fear of further rises. The price increase will prevent first-time buyers from taking ownership of the home.
Harrison Beecher, Chairman of the Greater Capital Area Association, said: Of a real estate agent.
According to the association, the median selling price of DC reached $ 699,000 last month, up 5.9% from both March 2022 and April 2021.
District prices did not rise as high as the national average. It surged an unprecedented 14.8 percent monthly. According to experts, prices are already rising in the region.
Median home sales in the DC Metro area have risen annually for the past nine years, rising 50% since April 2013, the largest increase during a pandemic, according to data from real estate firm BrightMLS.
One of the main factors driving highs is the small number of homes for sale. According to Bright MLS, housing inventories in the DC Metro area have been cut in half since the start of the pandemic, dropping from 1.78 months in April 2020 to 0.86 months last month. According to the same analysis, housing supply improved from March to April, surged 26%.
The other is the influx of high-paying jobs coming to the region, backed by prominent companies and federal contractors trying to get closer to Washington’s policy makers.
Boeing, an aerospace giant that relies heavily on federal contracts, announced earlier this month that it will relocate its headquarters to Arlington, Virginia. This was after Amazon announced plans to build a large headquarters in Arlington and hire 1,900 new employees in the area. Some supporters have warned that it will only worsen the affordability of homes.
These factors, coupled with the fact that the DC Metro area has recovered rapidly from the previous recession, including the 2008 housing crisis, will allow housing prices to fall quickly, even if prices begin to fall elsewhere. Raises the question. Country.
“If there are country adjustments and adjustments that aren’t drastic, jobs and income will stay strong and help protect prices,” Beacher said. “Nationwide, if prices fall by 20% or 25% in some markets, DC has never actually shrunk by more than 8.5%.”
Soaring mortgage rates are increasing the cost of buying a home. According to Freddie Mac, the average fixed mortgage rate for 30 years reached 5.3% last week, up from 3.2% at the beginning of the year.
Mortgage rates soared shortly after the Federal Reserve raised interest rates in mid-March to combat the country’s surge in inflation. Federal Reserve Chair Jerome Powell said central banks could raise interest rates again if inflation continues. This is a move to raise mortgage rates even further.
These charges force some future buyers, especially low- and middle-income households, to cut their budgets or leave the market altogether. According to Zillow, buyers with a monthly budget of $ 1,500 can afford to buy a $ 340,000 home at last year’s rates. Well, that monthly payment only gives them a $ 275,000 home.
Zillow economist Nicole Basho said in a statement, “We expect the market to begin rebalancing this spring as inventories have enough bystanders to keep up with demand due to rising costs.” Said. ..
Realtors in the DC region say mortgage rates have hit record lows, with sales declining from last year’s peak when cashflush buyers quickly bought home inventories in the region. Closed sales in the national capital fell 11.9% from April 2021, while sales in northern Virginia fell 13%.
Delixwack, managing broker of the TTR Sotheby’s International Realty and Northern Virginia Association, said: A statement from a member of the board of directors of a real estate company said.