FROM THE EDITOR: What's Going on With Fredericksburg-Area Real Estate Prices?
Recent data on local home prices are coming in line with national trends. Does this portend a coming drop in home prices?
By Martin Davis
EDITOR-IN-CHIEF
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There are two competing mantras in the housing market — both locally and nationally — that don’t seem to fit together.
There is a shortage of homes available for sale. A report from the Brookings Institute summarizes the consensus opinion on housing supply: “Policy experts and academics widely agree that … [there’s] a long-run housing supply shortage, which is a key driver of housing unaffordability.” Others sharing this opinion include BankRate, Zillow, NPR, Realtor.com, and Harvard to name but a few.
There’s a growing inventory of homes available for sale. Even as the country struggles to make up for the crash in home building that was ignited by the Great Recession, more homes are becoming available for sale across the country. See reporting by U.S. News & World Report, Forbes, and Realtor.com among others.
What’s happening? The monthly housing reported released late last week by the Fredericksburg Area Association of Realtors helps to make sense of it.
According to the report issued July 11, housing inventory is climbing in our region. At the end of June, there were 1,190 active listings compared with just 877 one year ago. New listings are also slightly up; 659 listings in June as opposed to 631 a year ago.
Despite that good news, the number of homes sales “remained basically flat in the FAAR footprint with 539 homes selling this June compared to 537 last year.”
The reason can be summed up in four words — interest rates, home prices.
Interest rates on home mortgages, while dropping some, remain relatively high. BankRate lists 6.72% as the national average. That number has been fairly consistent since July 2022, when interest rates on a 30-year mortgage averaged 5.71% before jumping three months later 7.07%. The average hasn’t dropped below 6.32% since.
High mortgage rates combined with high prices are keeping people from purchasing homes, though demand for homes is strong.
For now, the temptation to reduce prices hasn’t taken hold. In fact, locally, average home prices are, once again, up.
But nationwide, the same pressures at play here are starting to put downward pressure on home prices in many parts of the South.
A recent report in Forbes, for example, shows home prices falling rapidly in Florida, Texas, Alabama, and parts of North Carolina. Home prices in much of the rest of the country, as here, continue to climb.
The question becomes, are the trends in Florida and Texas foreshadowing lower prices across the country, including Virginia?
That question is difficult to answer because Florida and Texas are two of the states, along with North Carolina, where new-build housing is surging.
However, should sales in our region remain flat, and more homes continue to come on the market, downward pressure on houses is a possibility.
As with any economic issue, there are a range of issues at play. Federal job cuts, tariffs, and rising prices all tend to slow demand for housing. Population growth, new industries, and living in a region with a good quality-of-life tend to grow demand for housing.
As has been the case for more than a year now, our housing market is very much in a wait-and-see mode.
So too, apparently, are buyers.
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