Sometimes You Connect the Dots
By: Scott Pearson, Pearson Realty
April 2016, ENDEAVOR News Magazine
Like all people who derive their living from the real estate market, we focus on the local landscape to determine which way the market is going and what actions we and our clients should take to take advantage of trends. This intelligence gathering of local data can, if you aren’t careful, lead to missing the forest for the trees.
Despite continued low interest rates and an increase in saleable home inventory, the house prices in Annandale crept-up just a few percentage points during 2015, and is expected to continue a slow rise during 2016. Although we concur that the Federal Reserve will likely initiate a gradual increase in interest rates this year (no more than 1/4 point per quarter), we do not anticipate a heated market. Yes, it may spur some buyers fearful of higher rates, but it should not increase home prices by more than 3%.
The larger factors affecting the housing market are aging-in-place trends, consumer confidence, the maturity of the market, commercial development, and local budget pictures. Taking on the first, older Americans are healthier than in decades past and are living longer in their homes. Services to assist elderly people to remain in their homes have sprung up as the boomers age in place, thus defying old predictions of when homes will be offered for sale.
Consumer confidence rose over the past year, but that confidence is mainly being seen in sales of durable goods. It has not yet translated significantly into home sales. That is particularly true in this region where sequestration has continued to eliminate over $2 billion in local federal spending.
Annandale and its environs is a mature market. There is not much new and shiny stuff coming onto the market in our neighborhoods, nor much in-building taking place which is typical for the entire Northern Virginia region. Building permits for single-family structures went down by 14% last year. Mature markets tend to remain healthy and ours is, but they also tend to show relatively modest activity over time. For those homeowners who want certainty, that is a good thing. For people waiting for the value of their house to rise before entering the market again, patience from our Annandale neighbors will be required.
Although the country has shown great recovery from the recession, and signs of healthy economic development appear in the national media; Fairfax County is lagging behind the nation in economic development. There is too much empty office space, and too few exciting building projects, and none of the development is occurring in Annandale.
And anyone that has peeked at the Fairfax County advertised budget for 2017 will see shortfalls and gaps and hard choices that need to be made, including the proposed increase in the real estate tax rate, after already increasing the actual assessments, providing a huge double whammy to the tax payers.
Although Fairfax County raises over $4 billion in revenue, over half of that goes to the Fairfax County Public Schools whose Superintendent chronically bemoans the shortfalls in that budget to serve 180,000 students. Such negative reports dampen enthusiasm associated with buying a house.
However, Annandale residents should not let any of the foregoing factors cause them to be discouraged about the Annandale market. Home values continue to rise, activity continues to be healthy, and the local market as a whole is quite solid. But when planning ahead to buy or sell, it is important to be realistic, and to take time to connect the dots.
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