We are proud to present you with this synopsis of the national, regional, and localized trends that matter most, found here in our Fredericksburg 2023 Annual Report.
In the words of one Nest Realty Fredericksburg client, “The 2023 real estate market was bananas!” No truer words have been spoken. The prediction of higher interest rates came true, with rates topping 7.5% after starting 2023 at 6.48%. However, demand for housing stayed strong in the Fredericksburg and Culpeper markets. Yearover- year home prices continued to climb in the region while rent prices stabilized. Buyers took more time to decide which home to make an offer on, but most homes still accepted a contract within a month of listing. Lending choices were the key to success in purchasing a home. 2023 saw many smaller mortgage lending companies shut their doors. Erroneous pre-approval letters wreaked havoc on the local real estate industry. Using trusted, local lenders won out over “bargain” internet options. As borrowing became more expensive, buyers and lenders had to get creative in helping the loan become as affordable as possible. Assumable loans, especially VA loans, became a desirable financing alternative for the first time in decades. As we neared the end of 2023, we saw the return of seller subsidy (the seller paying at least a portion of the buyer’s closing costs), home inspection contingencies, and home-sale contingencies.
As we enter 2024, the real estate industry will continue to look toward interest rates as the largest obstacle to obtaining housing. We are expecting a drop in interest rates to start the year and then a gradual increase as we approach the summer and fall. Keep in mind that interest rates are traditionally lower, and there’s a decrease in competition during winter months. We will also be navigating changes to the real estate industry as a result of national lawsuits addressing how commissions are paid. (Your favorite Nest Agent is already equipped to talk to our clients about this). The Fredericksburg and Culpeper markets should remain strong as our area continues to grow and remain attractive as a place to settle. Our area continues to benefit from its proximity to Washington, D.C., and the abundance of jobs available to different levels of the area workforce.
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.
