When interest rates doubled in the second half of 2022, activity in the regional housing market slowed significantly. However, a drop in rates over the last several weeks has spurred a notable uptick in activity.
A few weeks ago, a three-bedroom home in Silver Spring came on the market. The house fit what the DC area would define as a starter home, and was priced to attract first-time buyers.
The weekend after the home was listed, 200 people came to the open house.
"It was a zoo," listing agent Daniel Brewer told UrbanTurf. His business partner Sebastian Courret spoke with several attendees who were largely buyers that had taken a break from looking to buy in 2022 and were now re-entering the market. The home ultimately received several offers and will close for above its $515,000 listing price.
When interest rates doubled in the second half of 2022, activity in the regional housing market slowed significantly. However, a drop in rates over the last several weeks has spurred a notable uptick in activity.
"As mortgage rates went above 7% in November, many buyers decided to hold off on their home search," Bright MLS chief economist Lisa Sturtevant told UrbanTurf. "But we’ve seen a bit of a turnaround, which suggests that the market may have bottomed out. Rates have fallen now for five weeks in a row and it looks like some buyers who were on the sidelines have returned."
Recent statistics show that buyers are indeed returning. Pending contracts on homes in the DC region were up 24% in January compared to December, and showings also increased. And it is not just buyers that are coming back. Last week, Bright MLS reported that there were 52,890 active listings across its coverage areas, up nearly 70% compared to a year ago.
"While only thirty days into the year, we’ve seen positive trends relating to overall leads, traffic and sales volume," Chris Masters of new home sales and marketing firm McWilliams|Ballard told UrbanTurf. "Our portfolio has seen the highest level of in-person traffic since April 2022."
Masters said that the uptick is a combination of buyers coming to terms with the new interest rate environment while also wanting to take advantage of the recent downward trend in rates.
"With a variety of loan programs now available such as rate buy-downs and attractive longer-term ARM products, buyers are realizing there are ways to make home-ownership affordable."
The continued resurgence of the market may have as much to do with jobs as rates. While the unemployment rate is low, that will need to remain the case for the continued success of the market.
A report out Friday bodes well for that possibility. The Labor Department said that employers added 517,000 jobs in January and that the unemployment rate fell to 3.4%.
Photo courtesy of HomeVisit.