Buying and selling real estate in Northern Virginia is a bit like playing chess, with the pieces on the game board being interest rates, inventory, prices, and demand. Whether those pieces will move forward, slide backward, or get checked is anyone’s guess.
We spoke with four of Northern Virginia’s top-producing agents about the region’s current real estate climate and what to expect in the coming months. All agree: There are more people wanting to buy than there are homes to sell, and there is a resurgence of multiple competing offers coming in for appropriately priced new listings.
Higher Rates: The New Normal
“Rising interest rates definitely had an impact on buyer activity in this area,” says John Mentis, a real estate agent with Long & Foster in Arlington. “Buyers now cannot afford the same price point that they could have under lower rates. That’s obvious. What’s not as obvious is the new fear, or uncertainty. Rising rates knocked the wind out of excited buyers, whom I now have to tell that not only is it going to cost them more to buy, but they better hurry because we don’t know where rates are going to end up.
“Some buyers held out, hoping the heavens would open and rays of sunshine and lower rates would fall upon the earth again, but that hasn’t happened,” adds Mentis. “We are only just now leaving the funeral for the pandemic market. Sellers are almost done mourning the fact that they can no longer charge whatever they want for their homes, and buyers are almost done mourning the fact that they missed the historically low interest rates on mortgages.” Mentis advises buyers to talk with at least three lenders when shopping for a mortgage.
Rob Ferguson, an associate broker with RE/MAX Allegiance in Arlington and McLean, says most of his clients are considering adjustable-rate mortgage products, in hopes that rates might someday drop again. “During the pandemic, it was like musical chairs, with people selling and moving to the next best thing because the market was so easy. Now, unless they really need to move, those who have homes with low rates aren’t selling, and those who are buying tend to be in the marketplace because of necessary life changes, like a job transfer or having a baby.”
Theresa Valencic, a real estate agent with Long & Foster in McLean, says buyers are starting to feel better about purchasing. “Buyers were so shocked by the jump in rates last fall that it sidelined everything for a while, but they’ve had time to accept that this is the new norm,” says Valencic. “We are now seeing buyers new to the market who weren’t shopping during the lower rates, so they are more accepting. Their attitude is that they simply need to find the right house, and rates are going to be what they are going to be.”
Jackie Lawlor, an associate broker with Jack Lawlor Realty Co. in Ashburn, says one way to deal with the reality of higher rates is for buyers to understand they can refinance later if rates drop. “VA loans are an option for those who are eligible, as are FHA loans and some conventional loans that require lower down payments,” she adds.
VA loans, which require no down payment, are a loan guarantee benefit through the U.S. Department of Veterans Affairs available to service members, veterans, and eligible surviving spouses. FHA loans are government-backed mortgages insured by the Federal Housing Administration that can help lower-income and first-time buyers by offering lower down payments and minimum credit scores.
“We don’t have enough homes in Northern Virginia to sell to those who want to buy,” says Mentis. “When supply is low and demand is high, prices go up.” Mentis adds that more people have decided to delay retirement or modify their homes so they can age in place, stay near their children, or remain connected to the area’s lifestyle amenities. He notes that inventory is especially tight for single-family homes.
Concerning whether the delays in the construction of Amazon’s HQ2 in Crystal City will impact the market, Mentis says it’s a bit too early to tell (as of press time). “My best guess is that, for the moment, the Amazon hiring and construction freeze, along with staffing layoffs, will pause any Amazon-related price acceleration or inventory contraction in the DMV real estate market until Amazon makes a final decision as to whether to continue the expansion as planned or somehow modify the plan,” says Mentis.
Ferguson says rates need to come back down for inventory to considerably increase. “A lot of owners won’t sell if their current rate is too good to leave. We don’t know what inventory will be like a few months down the road, though, so owners who are sure they need to sell this year should do it as soon as possible,” he says.
Valencic says lack of inventory is a challenge. “It’s hard to find our buyers the homes that they want, and when something does come on the market, we are seeing competing offers with sales exceeding the asking price. The number of showings properties are getting in a short period of time indicates how much demand is still pent up. Condition is important, though, so homes must show well for buyers to be interested.”
“The market is competitive for purchasers,” says Lawlor, who also reports that many listings have multiple offers. “Buyers are again waiving contingencies, including home inspections, appraisals, and even financing,” she says, adding that this applies to homes that are positioned properly and show well. “In this environment, buyers will likely have to include a price escalation clause,” she says.
Priced to Sell
After last year’s drops, Mentis thinks prices are leveling off. “But properties that are priced well for their condition and location are selling with multiple offers, so buyers who are waiting for bargain basement prices will be very sad because that’s not going to happen,” he says. “Buyers will pay top dollar if a house shows well, but not if it needs a lot of work. Staging helps, but unless something is really falling apart, just make sure the house presents clean, well-organized, and priced for what it is.”
Ferguson says that not so long ago, sellers could get away without staging. “There was so much velocity that some agents would just throw houses on the market and get them sold,” he says. “But there’s a difference between getting them sold and getting the best dollar figure for the client. Today, you really need to be perfect in a lot of ways, not just in price. To maximize value, take time to paint, do the floors, and freshen the house. That velocity can still be there if you stage or present well. Remove or repair any objection that will cause buyers to look elsewhere.”
“There continues to be great demand, with more people vying for a limited number of properties,” says Valencic. “But I don’t think we will see big price jumps. In that regard, we will probably stabilize.” Valencic says staging is always necessary. “It sells the home and shows it in its best light. The key is always fresh paint and updating bathrooms and fixtures, plus any kind of kitchen refresh will be worth the spend.”
Lawlor reports that she’s seeing prices go up, sometimes due to escalation clauses. “The lack of inventory is spurring the market,” she says. “People in this area have a Pottery Barn mentality and are willing to pay for upgrades. Create a demand for your property, getting it in great shape to appeal to the masses, and you will get more offers. Consult with a stager who can look at your entire house and prioritize updates that are most impactful. Paint, fixtures, and new carpet are good places to start. As far as outdoor spaces, homes with screened-in porches are selling faster and for more money than homes with just a deck.”
High rates, low inventory, and steep prices result in fewer choices for buyers. “Buyers have to be flexible,” says Mentis. “You can have a wish list, but know which things are nonnegotiable, whether it’s a garage, privacy, yard, or community amenities. If nothing on the market meets your essential criteria, it might make sense to rent, or decide that this is not your forever home and find something that works for you for the next three to five years and reevaluate then.”
“Everything starts with location and budget and goes from there,” says Ferguson. “Buyers might want a four-bedroom, three-bath house in Arlington for under $1 million, but that might not exist. So we have to look at what we do have in Arlington, and if that doesn’t work, decide where to go from there. As reality sinks in, goals might have to change, or you might have to stretch and be willing to pay more.”
Valencic says she can usually find buyers what they are looking for if they are willing to compromise. This can be hard for buyers relocating from less intense markets. “There’s real sticker shock for buyers coming in from other areas, and they want to make low offers that can’t compete,” says Valencic. She notes that buyers often lack vision when considering homes that need substantial work. “My husband is a builder, so I’ll point out to buyers changes they can make within reasonable budget, or I’ll get in front of that with sellers by suggesting adjustments that will make their homes more appealing to buyers.”
In upper-bracket luxury home searches, Valencic reports a popular request: “Almost the No. 1 question I get is whether the house has a pool, or if there is room to build one on the property. This is a holdover from the pandemic, where owners wanted to create a home oasis, and it’s still going strong.”
“Everything boils down to affordability,” says Lawlor. “Set your maximum purchase price and then go down from there, seeing what’s available. If someone can afford a $500,000 house, I show listings from $425,000 and up, because they will most likely have to set an escalation clause.” As far as desires, Lawlor says many buyers are asking for walkability to a downtown area. “That’s why places like One Loudoun and Leesburg are so popular,” she says. “I also get requests for views of bodies of water, like the small lakes in Ashburn.”
For first-time buyers, Lawlor says the goal is to start small and use gained equity to move up. “Move farther out if you can commute. Start with a condominium or townhouse, and flip the equity until you get that dream home. That’s what I did. It’s what most of us did. You’ll find ways to make it work.”
This story originally ran in our May issue. For more stories like this, subscribe to Northern Virginia Magazine.