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As we look at the 2009 real estate market recovery in Northern Virginia, there are various indicators to pull out to demonstrate how hot the market has turned here. The first item to watch is the pending sales. (I know many people want to look at pricing, but the problem with watching pricing is you never know where the bottom is until it bounces back up!)

Pending sales let you know buyers believe prices have hit bottom and are starting to jump off the fence. As pending sales (contracts written) pick up speed, the number of closed sales follow suit. Once sales surpass year-over-year percentages, the media starts jumping on board, officially announcing the market has turned.  Well – we saw the turn last fall (nearly a year ago) and all the numbers have been in a positive run since.

Next – I reported that inventory was hitting lows that would result in higher prices. And that’s exactly what happened. In my last issue of Around Town, I shared with you how the average prices have been moving up now for 7 consecutive months– well, that’s now 8 months straight for the whole region. And that brings us to the final indicator of a turning market, and that would be the Days on Market.

As of July 2009, the average days on market (DOM) for houses sold in Northern Virginia has hit the 60-day mark. The significance of 60 days is that it is half the time it took (120 days) to sell a house at the height of the buyers market, which was in January 2008 (see the chart on the flipside of this newsletter).

So what? What does this mean to you? Well – it doesn’t take much to figure out what’s happening here. Prices hit the bottom for buyers, buyers jumped off the fence, inventory dropped, prices are moving upward and now more buyers are jumping in droves, dipping the time on market.

We are selling more and more regular sales these days – non-foreclosure – and that means regular sellers are moving up to the larger, more updated home since they have plenty of first-timers and move-up buyers in line to buy their home for a profit. The market is tightening up!

Make your move now while there is still plenty of higher-priced inventory available.

I was looking over the supply of houses on the market this week in Fairfax County, Virginia and it’s really getting dangerously low. Compared to May of 2008, we have 55% fewer homes on the market – and 20% more contracts written on them.

That leaves home buyers with only a 7-week supply of houses and it’s getting smaller. Officially – we’re in a sellers’ market. For pocket markets (townships, subdivisions, etc.) it’s as hot a market as it was in the peek of 2005-2006 – it’s just that the prices are much lower. Ergo – the opportunity. If you’ve ever heard about buy low, sell high – now is the time to buy low.

The same is true across the country. Pending sales are up all over Florida, in Seattle, Phoenix, Los Angeles, Las Vegas, you name it, and buyers are coming off the fence like they were stung by a bumble bee!

For a macro look at how this can benefit you – consider the suburban Washington DC market of Fairfax Countty. If you are sitting in a house purchased in 2000 or earlier, you’re most likely sitting on a lot of equity that could enable you to move up to a larger home with the upgrades you’ve wanted but couldn’t afford.

I know – this sounds like a sales pitch – but frankly – it’s just the simple truth. Sellers and buyers have a unique opportunity to purchase a house at prices that have been backed up several years and at interest rates not seen for decades (currently in the mid-5% range).

In fact – we haven’t seen these kind of rates since they’ve been tracking them at Freddie Mac (http://www.freddiemac.com/pmms/pmms30.htm).

The average price of a 4BR, 2BA house in Springfield, VA, for instance, sold for $235,665 10 years ago. Today, that same house sells at $371,549. While this price is down from the last five recent years, the pricing has leveled and starting to rise in pocket markets throughout Northern Virginia.

And if you’re wondering if the market has turned around consider this – the average days on market for that house in Springfield is down to 18 days. That is not a misprint – NOT 180 Days, but 18 Days – a little over 2 weeks. Many other towns in the area are in the same situation.

So what?

  • Inventory is beginning its dip downward because buyers are coming off the fence, the foreclosure rate in the Northern Virginia area has been cut nearly in half (see www.CRA-GMU.org) and
  • Regular owners have not yet decided to place their homes on the market yet.
  • We are experiencing multiple offers (7 – 10 is not unusual, we’ve seen upwards to 35)
  • Escalation offers are back – one of my team members lost a bid after escalating $75,000!

Just remember DON’T MAKE A LOCAL DECISION BASED ON NATIONAL INFORMATION!

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