The housing market follows the basic principles of supply in demand. When the supply of an item is plentiful, then the price is low. When an item is rare, hard to find, or in high demand, the price increases because people are willing to pay more in order to get it.
The housing market was hot before the pandemic. The housing supply was already decreasing. However, in the past two years, the availability of homes has been down to a third of what it used to be.
In Northern Virginia, during comparing the period of Jan 2021-Aug 2021 to the same time frame in 2022, inventory of homes dropped significantly from 30,180 homes in 2021 to 24,883 homes in 2022. That’s a big drop.
See the graph below showing steady decline in inventory nationally and see the peak in 2021-2022 when interest rates were still low.
We helped many of our clients sell their homes over the past and take advantage of the peak market for sellers. The low inventory created a frenzy for buyers and sellers alike with bidding wars, removal of all contingencies and high prices. That activity started slowing down in spring 2022 and has really halted the sales market as rates have continued to go up.
What Does This Mean For Northern Virginia Landlords?
Rising rates makes buying a home less affordable coupled with a limited supply of homes, it becomes extremely difficult for buyers to purchase. And the limited supply of homes also places added stress on the rental economy. When buyers can’t find housing, they have to rent. This means it’s harder to find rental properties and landlords can charge tenants more each year.
We are already seeing the increase in rental rates in Northern Virginia. Comparing January to August 2021 to 2022, rental rates have jumped significantly from a median rental price of $2400 and average days on market of 31 days in 2021 to $2695 and average days on market of 19 days in 2022.
Why do rental costs keep rising?
Renters are also experiencing price increases along with home buyers. Because so few people can afford to buy houses, they continue to rent. The more people rent, the less supply there is for rental properties. This means landlords can raise monthly rent requirements because they know they will find tenants who are willing to pay them. And.. the more rents increase, the harder it is for renters to save for a downpayment and so on thus maybe increasing the time people rent.
That’s good news for landlords.
So it’s important to keep your home as updated as possible and as attractive as possible in order to attract many tenants and take advantage of the higher rent prices.
We can definitely help you with updates and quotes you might be thinking about so just let us know how we can help!
