Contract activity in July 2023 was down 10.4% from July 2022 and was down for four price categories. Through the first seven months of the year, contract activity is down 23.2%. The average number of days on the market for homes receiving contracts was 21 days in July 2022, down slightly from 22 days last July.
The Urgency Index, simply the percentage of homes going under contract that were on the market 30 days or less, was up in July compared to last July. During the past 19 years, the Index has been as high as 94.4% (April 2004) and as low as 22.9% (November 2006). In July 2023, the Urgency Index was 83.7%, up from 76.3% in July 2022.
The number of homes on the market at the end of July (1,340) was down 46.1% compared to the end of July 2022 and was down for five out of six price categories. The number of new listings coming on the market decreased 26.7% compared to July 2022. The decrease in contract activity was offset by a bigger decrease in inventory, lowering overall supply to 0.9 months from 1.5 months the end of July 2022. To provide some context, during the “Great Recession” in July 2008, supply was 4.2 months, the average days on market was 85, and there were 8,600 homes on the market.
30-year fixed mortgage interest rates at the end of July stood at 6.90%. Rates have remained frustratingly high this summer, but the Mortgage Bankers Association is forecasting rates to dip below 6% by the end of the year, and below 5% by the end of 2024. We hope they’re right.
The payment on a no-money-down, 30-year fixed mortgage for a median-priced home is 85% higher than it was a decade ago in July 2013, and the median price is up 41%. The payment is also 26% higher than last July because of higher interest rates and higher prices. The mortgage payment for a median priced home ($4,544) was much higher in July than the median rented price ($2,950).
DIRECTION OF THE MARKET
In July 2021 there were 2,300 new contracts and 30-year mortgage interest rates were 2.8%; last July there were roughly 1,700 contracts and rates were 5.3%. Just last month there were only 1,500 contracts and mortgage rates were almost 7%. The Northern Virginia real estate market has seen a steady decline in contract activity over the last two years as interest rates have risen, yet it is a tighter sellers’ market now than during those heady days with sub-3% mortgage rates. And it’s simply because the number of homes on the market has contracted even more than buyer activity. There were almost 3,000 homes for sale at the end of July 2021, and that has dropped to a little over 1,300 now. With overall supply at less than a month, and the supply of homes priced less than $750,000 at just over two weeks, buyers just don’t have a lot of choices. That is keeping modest upward pressure on home prices and presents an incredible opportunity for homeowners who are in a position to sell. As we have noted before, we expect this deficit of listings to continue until mortgage rates drop below 5.5% – or perhaps even lower.