But What Does the Increase in Mortgage Rates in Northern Virginia Mean for the Housing Market?
Mortgage rates in Northern Virginia are going up. Back in May, the national average was right around 3.5% for a 30 year fixed mortgage. By the end of June, that number had increased to about 4.25%. What does that mean for the housing market here in Northern Virginia? Well, the short answer is ‘not much’.
The rule of thumb for mortages is that for every one percentage-point increase in rates, homebuyers pay 10% more. But we are still in the midst of a really strong sellers market. Newly listed properties in May sold within 32 days, and for almost 99% of original asking price on average. Prices also continued to rise in May, and the total inventory of homes for sale is still far below last years inventory.
So the increased mortgage rates may lead to a slight increase in prices throughout Northern Virginia, but it won’t be a big enough price increase to make much of an impact on home sale. There’s just not enough inventory out there. Reasonably priced homes will continue to be snatched up quickly by eager buyers.
One other thing to keep in mind: In May, new listings went up significantly in some areas. In Arlington for example, there was a 25% increase in new listings compared to May 2012. This was largely due to sellers looking to cash in on the buying frenzy that is taking place. The increase in mortgage rates could discourage prospective sellers from putting their homes on the market in the coming months. Right now, the factor driving the market is the lack of inventory. Until the number of homes for sale grows to more normal levels, Northern Virginia will continue to be a strong sellers market.