Interest, Inflation Shifting Buying Habits

Throughout the D.C. region, low inventory is helping sustain demand for sellers, but buyers may be tapping the breaks a bit as we head into the summer months. With interest rates at about 5.5 percent nationally in the first few weeks of June, new mortgage loan applications dropped to their lowest point in 22 years.

“The purchase market has suffered from persistently low housing inventory and the jump in mortgage rates over the past months,” said Joel Kan, Mortgage Bankers Association (MBA) Associate Vice President of Economic and Industry Forecasting, in a statement from the organization June 8. “These worsening affordability challenges have been particularly hard on prospective first-time buyers.”

In a release the following day, Kan continued.

“Mortgage credit supply declined for the third month in a row to the lowest level since July 2021,” he said. “The index remains more than 30 percent below pre-pandemic levels, as recent months’ credit tightening has occurred in refinance loan programs.”

Another factor in the overall financial picture is that inflation continued on the rise at 8.6 percent in May—the highest annual inflation increase in about 41 years. And we’re all experiencing that at the gas pump and grocery stores with prices on the rise. Over time, this could keep sale prices up, but still have a downward push on the value of the dollar.

Still, serious impact on the market is yet to be seen, as data typically lags over months or more, but the anecdotal evidence appears that there’s a cooling of the market going on, with some buyers dropping out or waiting to see what might happen. With inventory drastically low throughout the region, a bit of a slowdown could be a welcome sign for some buyers, particularly those who have had to compete with sometimes dozens of other home buyers for a single property in recent months. But as the market ebbs and flows, the low inventory remains a huge factor in the competition among homebuyers.

In Fairfax County, the number of active listings was nearly 16 percent lower in May than in May 2021, and the number of new listings that hit the market was down nearly 17 percent over the same period. With that, the upward trend in price continued in May, with average sale prices in the county about 10 percent higher than a year ago. Also, average days on market was just eight, compared to 10 days in April and 11 days in May 2021.

Though Alexandria City active listings were down more than 18 percent in May compared to a year ago, the number of new listings that reached the market in May was within one percentage point of what it was in May 2021. Average sale prices were up in Alexandria, but only 2.3 percent over what they were a year ago. Days on market was lower than a year ago, with the average sale happening in 11 days, compared to 15 in May 2021.

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Christopher Prawdzik and his wife Angela Logomasini are licensed Realtors® with Samson Properties in Alexandria and are members of the Northern Virginia Association of Realtors® Top Producer's Club. Operating as D.C. Region Real Estate, they offer comprehensive real estate services, including 4½% full-service listings throughout the entire Washington, D.C. real estate market. Angela is licensed in Virginia, Washington, D.C., and Maryland. Christopher is licensed in Virginia and Washington, D.C. In addition, Christopher holds a broker license in North Carolina and is affiliated with McGary & Associates.

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