We are proud to present you with this synopsis of the national, regional, and localized trends that matter most, found here in our Charlottesville 2023 Annual Report.
Recapping the 2023 real estate market is anything but straightforward. It was a year of conflict in the real estate world. Five years of unparalleled buyer demand led to the smallest inventory of homes, not just here in Charlottesville, but in virtually every market in the U.S. Prices escalated while interest rates rose at the fastest pace the U.S. market has ever experienced, as evident in historically low affordability rates. And while early in 2023 the inflation looked staggering, it leveled near where the Fed was targeting. And contrary to every prediction, unemployment remained consistently low.
So where did the year end? Many indicators such as prices (especially when looked at as a monthly expense as part of a mortgage) show that home costs are too high for many borrowers. But the reality is that while many would-be buyers have been priced out, because of the small inventory, there are still enough buyers to absorb all the new homes on the market. And the interest rates aren’t just stopping buyers from buying, they are stopping sellers from considering a move. 82% of homeowners have a mortgage rate below 5% while mortgage rates bounce between 7 and 8%. And yet, Zillow found in an ongoing survey that the current percentage of home owners who wish to sell their home within the next three years is the highest they have ever seen.
So what’s to come? While there is no obvious path the housing market is likely to take, there are signs that it won’t balance for quite a while. Charlottesville remains a desirable community, with unemployment levels significantly below the nation. Couple that with a small inventory of resale homes likely to hit the market, and our area seems destined for continued price stability.
MARKET OUTLOOK – NATIONAL LEVEL
Every year starts naturally with a focus on the near future, and 2024 brings with it a mixed bag of economic signals that may at times contradict one another and provide a somewhat murky view of our year ahead. At Nest we are committed to providing our clients with the best and most relevant information to help you make some of the most important financial decisions of your life. On a national level, we focus on three key economic indicators—interest rates, consumer confidence, and employment—to help us look forward to what we should expect. The fundamentals of our nation’s economy are solidly on the right path: inflation rates have stabilized, interest rates have retreated, low unemployment has continued as a bright spot, and real wages finally seem to be making headway in a positive direction. But while the data may look cheery, our nation faces some of the lowest consumer confidence in more than a decade, driven, we believe, from political frustrations at home and geo-political instability abroad. With real estate in mind, a quick conversation with your Nest advisor will help you understand some of the problems created by historically low inventory.
The year 2023 began much differently than it ended. During the first half of the year, we were seeing record-breaking inventory lows, coupled with low mortgage rates, and high buyer demand. In short, houses were selling quickly, often far over the asking price. By the end of 2023, we faced rising mortgage rates and a drastic cooling off, with more days-on-market. The fact that the market has cooled from the frantic highs of 2022 and early 2023 is not a surprise. But the speed of how quickly things shifted, is surprising. And while we’re not in the business of predictions, it is our hope that we’re heading toward a more balanced market where both buyers and sellers have the time to make well thought-out decisions. With that, let’s look through the 2023 data to gain a deeper understanding of where we’ve been and where we are now. In this report, we start off with an overall snapshot of the national market, then take a closer look at what’s happening in our local market. Understanding both the national and local trends can help us better interpret your home’s value and where the local market is potentially headed.