There are many factors contributing to the change in real estate market in the US and more specifically, Virginia. How are these factors changing the buyer’s market? Read on to find out some of these factors and to see if it’s a seller’s market or a buyer’s market.
The Covid pandemic brought with it a seismic shift in the US housing market. Many middle-class homeowners and renters were shifted from a commuter status to indefinitely working from home. This shift in employment brought with it a shift in perspective. After all, if someone is no longer commuting to and from the office, is there any need to remain in an expensive city environment? To many workers, the answer to that question was no. As a result, the overall housing inventory nationwide has been utterly crushed.
Currently it is a “seller’s market”, that is, there are more people looking to sell their home. This has led to bidding wars, home price inflation, and a collapse of housing inventory. Prior to the pandemic, there was simply more housing supply than there was demand, which led to a slight drop in housing prices. Now, however, there is more demand than there is supply. The sellers simply have more leverage than potential buyers when it comes to negotiating the price of a home.
However, the pandemic isn’t the only factor affecting the meteoric rise in home prices currently being witnessed across more traditionally inexpensive areas in the United States. Due to rising inflation, the federal reserve has begun to dramatically increase interest rates which until recently had been at historic lows. When the federal reserve raises interest rates, all other banks throughout the industry are compelled to do the same. This makes mortgages more expensive, and subsequently makes buyers less willing to pay for a house whose price may have been inflated by other market conditions.
March of 2020 saw some of the lowest interest rates in the past decade, at between 0-0.25%. Starting in 2022, interest rates have since rise to between 2.25 and 2.50%. If a buyer is only eligible for a variable rate mortgage, this will dramatically reduce the “amount of house” that they will be able to afford. For this reason, the rising interest rates could potentially change and cause the market to switch from a seller’s market to a buyer’s market.
Some sales data for early 2022 is already reflecting this shift. In 2021, the average rate of growth in US housing prices was 14%. Data collected so far in 2022 reflects that the rise in home prices is continuing, but at a lower rate. Home prices have only risen by 7% so far in 2022, with signs that rising interest rates will slow this growth down even further.
As you can see, there are many factors affecting the real estate market which dramatically affects the buyer’s market. However, PJ Belle can help you to find the home of your dreams regardless of what kind of market it is. You need a passionate, knowledgeable, local advisor that can help you navigate the home, land, commercial or 1031 Exchange, buying and selling process.