The continued favorable mortgage picture, buoyed by the Fed’s recent interest rate decreases, presents an excellent opportunity for qualified buyers to enter the market.

In a move designed to assuage lenders’ fears, the Federal Reserve voted for the second time in six weeks to cut the federal funds rate, used for overnight loans between banks, by one-quarter percentage point to 4.50 percent. The lending rate to banks received a similar quarter percentage reduction, according to the National Association of REALTORS®.

By making it cheaper for banks to borrow money, this savings will be passed on to the qualified buying public. Lower borrowing costs overall may induce people and businesses to boost spending, thereby energizing economic activity. What effect this will have in the near term on the overall housing picture remains to be seen, NAR noted.

 

Healthy Fundamentals in the Local Market Still a Reality

Local fundamentals are still strong, according to the Center for Regional Analysis. CRA cites that job growth in Northern Virginia has increased by 155,400 since 2002, a trend that continues, leading employment gains in D.C. and Maryland.

On the national scene, NAR Chief Economist Lawrence Yun pointed to an increase in jobs and the projected growth of the gross domestic product at 3.3 percent as evidence of positive economic fundamentals. “Interest rates remain at historically low levels,” said Yun. He explained that, in the early 1980s, interest rates hovered at 15 percent, and later stalled at 10 percent in the early 1990s. Today, interest rates are at 6.4 percent and are projected to remain near this level throughout 2008.

“Mortgage problems were peaking back in August when many of the September closings were being negotiated,” said Yun, “and that slowed sales notably in higher priced areas that rely more on jumbo loans,” he said. “The good news is that mortgage availability has markedly improved in recent weeks with interest rates on jumbo loans falling, and more people are applying for safer and conforming FHA mortgage products. Some of the cancelled transactions will move forward as buyers apply for other loans.”

Third-Quarter Average Sales Price Comparisons

Comparing third quarter average sale prices in Northern Virginia shows a 3.34 percent increase. The 2007 third-quarter average sale price is $546,709 compared to the 2006 third-quarter average sale price of $529,026.

A total of 1,123 homes sold in October 2007, about 25 percent less than in October 2006, when 1,498 homes sold.

 

Active listings remained steady, signaling continued market stabilization, with a decrease of only 0.16 percent from last year, standing at 10,363 active listings in October, compared to 10,380 homes available in October 2006. Similarly, homes are taking about the same amount of time to sell, with the average Northern Virginia home in October 2007 staying on the market for 89 days, compared with 83 days on the market (DOM) in October 2006.

 

The average sales price in October 2007 in Northern Virginia was $520,829, reflecting a dip of just 0.65 percent (less than one percent) from the average sales price of $524,236 just last October.

 

The median price of a home sold in Northern Virginia in October was $435,000, which is a decline of 5.20 percent compared to October 2006’s median price of $458,850. The median price reflects the price at which an equal number of homes in the region are sold at higher and lower prices.

Sales activity in Greater Northern Virginia (NVAR jurisdictions plus Prince William, Loudoun and the Greater Piedmont counties) for October 2007 reflects a dip.

Greater Northern Virginia sales data reflects a continuation of the higher inventory and lower demand in further-out suburbs. The average sales price of $472,764 in October 2007 was just 3.36 percent below the October 2006 average sales price of $489,185.

 

The number of Greater Northern Virginia region units sold in October was 1,910, about a 23.57 percent decline from October 2006’s total of 2,499 sold houses.

 

Across Greater Northern Virginia, 22,846 listings are active on the market, which is 4.88 percent greater than this time last year, when 21,782 homes were available. The average DOM for a home sold in October 2007 was 104 compared to the 91 DOM of one year ago. Therefore, homes now take a little more than three months to sell compared to last year when average home sales took about three months.

 

The Year-To-Date Average Sales Price for the Greater Northern Virginia region in October 2007 is $500,956, which is only a .78 percent decline from October 2006’s YTD average sales price of $504,876.