Buyers continue to be the winners as the 2008 real estate market kicks off.
The Federal Reserve has lowered its key interest rate by 75 basis points in a surprise move, while pricing of homes for sale continue to moderate. This
is the largest single interest rate cut by the Fed since 1982. Since September 2007 interest rates have been reduced by 1.75 percent, and there may be a further cut, when the Fed meets for its official Open Market Committee Meeting at the end of January. The number of homes in Northern Virginia priced at $299,000 or below has grown by two hundred thirteen percent over the previous year, according to a market analysis by McEnearney Associates. Together, these market dynamics spell a greater inventory of affordable housing, at a potentially lower mortgage rate.
Yet, many Alexandria sellers wonder where the buyers are. Attached homes listed for sale are up nearly forty-two percent, in December of 2007 over the previous year, according to data compiled by McEnearney Associates McLean Broker and statistician, David Howell. Average days on market have risen to one hundred fourteen, with an average sales price of $550,350 and an eight-month supply of inventory. The city has a housing inventory of over eight thousand homes for sale.
The bright spot in the forecast for the first half of 2008s housing market comes from new homebuilders. The National Association of Home Builders is forecasting systematic improvements in sales by the second quarter of 2008, with an uptick in housing starts by the third quarter. Since new construction sales offices usually offer a mortgage package, the Fed cut in rates will potentially improve the rates for financing they can offer and might improve their competitive advantage over existing homes for sale, if the loan package is competitively structured.
The rate cut and economic stimulus package proposed by the Government will only really stimulate sales, if the benefits are passed on to the consumer. Many in the banking community embrace the lowered rates and proposed federal assistance to shore up their reserves against record losses in the sub-prime market. If the combined assistance is enough to benefit the consumer, the housing market will benefit. If, however, the troughs of losses in the financial sector are indeed deeper than publicly known, all these efforts may have little to do with the actual cost a consumer will pay for a mortgage. In that case, sales prices will likely continue to moderate, to entice the wary buyers off the fence.
Jeni Upchurch is a former Assistant Secretary, U.S. Department of Housing & Urban Development. She is a full-service realtor at McEnearney Associates Old Town, Alexandria office, and can be reached directly at 571-216-6701.