06/10/2008 Northern VA Market Update

In Northern Virginia, May data points showed improvement compared to April. The months supply is now at a six-month absorption rate, compared to last month´s absorption rate of nearly nine months. That shows that homes are selling.

The number of homes sold in May this year is only 5 percent below that of May 2007 sales activity. The average sales price, however, did show a slightly greater disparity in May, year over year, than April´s average sale price, year over year. That means that buyers are getting a great value.

In Greater Northern Virginia the number of homes sold in May this year increased by 11 percent, exceeding home sales in May last year. The absorption rate for May 2008 is actually lower than last year´s with a seven-month rate compared to the May 2007 rate of an eight-month supply.

A modest gain in the level of home sales is possible over the next couple months, and an improvement is forecast for the second half of this year as more buyers are able to access affordable mortgages, according to the latest forecast by the National Association of Realtors®. Since the Northern Virginia region tracks in tandem – although slightly above – national trends, the incremental gains show an uptick in consumer confidence. Other evidence of such improvements is reflected in the 2,116 contracts that are either pending or marked contingent in the NVAR region for May.

Lawrence Yun, NAR chief economist, said pending sales contracts have picked up notably in areas undergoing significant price drops. "Bargain hunters have entered the market en masse, especially in areas that have experienced double-digit price declines, but it´s unclear if they are investors or owner-occupants," he said. "Sharp price reductions are leading to a quicker discovery of price equilibrium points."

The market may be breaking its holding pattern, noted NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif. "It appears that more buyers are realizing they can take advantage of a favorable combination of mortgage interest rates, home prices and family income," Gaylord said. "Overall affordability conditions are the best we´ve seen since the middle of the housing boom in 2004, but with far more choices and much less pressure than buyers experienced four years ago to make an investment in their future. Recent declines in mortgage rates on conforming jumbo loans and a return to sound but not overly stringent underwriting standards will permit more people to qualify for a loan."

 Mortgage Options

FHA-insured mortgages, which require down payments, have become more popular amid the shrinking of the subprime-mortgage market. The new, higher loan limits announced in March – which range from $271,000 to $729,000 – opened up the market for FHA loans in high priced areas and have already helped about 100,000 homeowners nationwide. These new loan limits assist Northern Virginia buyers.

Rates on FHA loans can vary from lender to lender and there are dollar limits. For the maximum FHA loan amount in your geographic area, go to www.hud.gov and look for "FHA Mortgage Limits" in the right-hand column.

Bernankes Remarks Suggest Possible Future Rate Increases

Amid widespread inflation concerns, the Washington Post reported on June 10 that, "Federal Reserve Chairman Ben Bernanke is raising expectations on Wall Street and elsewhere that the central bank could boost interest rates sooner than anticipated if high oil and food costs threaten to spur a broader bout of spiraling prices."

This message comes after a series of aggressive cuts to the federal funds rate that began in September of 2007. That rate currently rests at a four-year low of 2 percent. There is no expectation that the rate will change at the Fed´s next meeting, slated for June 24-25.

Some economists think the Federal Reserve will begin raising interest rates later this year to fight the growing threat of inflation.

May 2008 Housing Data
Northern Virginia: May 2008

The Northern Virginia Association of REALTORS® reports on May 2008 home sales activity for Fairfax and Arlington counties, the cities of Alexandria, Fairfax and Falls Church and the towns of Vienna, Herndon and Clifton.

A total of 1,724 homes sold in May 2008, just 5 percent less than May 2007 home sales of 1,816, and up from April home sales of 1,455. As noted above, at the end of May, there were 2,166 sales contracts pending in Northern Virginia, continuing an upward trend for the year.

Active listings increased by just 5 percent from last year, with 10,757 active listings in May, compared with 10,240 homes available in May 2007. Homes continue to take longer to sell in 2008, with the average home in May staying on the market for 88 days, compared with 73 days on the market (DOM) in May 2007. However, DOM has decreased significantly since January of this year when homes took an average of 123 days to sell.

Sales prices continue to remain lower than those realized last year. The average sales price in May fell by 12.84 percent from May 2007, to $478,672, compared with last May´s average of $549,197.

The median price of a home sold in Northern Virginia in May was $405,000, which is a decline of 13.83 percent compared with May 2007´s median price of $470,000.

Greater Northern Virginia: May 2008

Sales activity in Greater Northern Virginia (NVAR jurisdictions plus Prince William, Loudoun and the Greater Piedmont counties) for May 2008 shows an increase from 2007.

The number of Greater Northern Virginia region homes sold in May was 3,210, a 10.65 percent increase from May 2007´s total of 2,901 sales. This marks the second consecutive month of increased year-over-year sales totals for Greater Northern Virginia.

The average sales price of $406,899 in May 2008 continues to lag behind the 2007 average by about 20 percent. The May 2007 average sales price was $510,383.

Across Greater Northern Virginia, listings remain higher than 2007 numbers, but by a smaller percentage than April. In May, there were 23,134 listings active, which is just 2.43 percent greater than this time last year, when 22,585 homes were available. The average DOM for a home sold in May 2008 was 107 compared with last year´s 98 DOM, an increase of about 20 percent.

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