The only national statistic that has any impact on the local Loudoun County real estate market is interest rates. The national statistics that are quoted in articles are, for all intents and purposes, meaningless to our local marketplace. But interest rates and their movements have a direct impact on the Loudoun County real estate market and could be argued to be the single most influential statistic when it comes to homes sales and home prices.
The reason they are so important is because they directly impact the amount of money a buyer can borrow and thereby the amount they are willing to pay for a home. In a rising interest rate environment (like today), each increase in interest rates will eventually lead to lower overall sales prices. The question is how much of an impact will they have and when will it occur.
The sharper the rise the sooner it affects our market. A sharp increase in rates after a crisis occurred after Hurricane Katrina in September of 2005. That spike marked the beginning of the market correction that we have been in for the last 20 months. The impact was almost immediate with a 40% decrease in the volume of homes sold in October of that year.
The effect on prices of an increase in interest rates usually takes 2 to 4 months to work its way into our market. In March of 2006 interest rates began a move up and approached the 7% range in June 2006. In Ashburn, Sterling and Leesburg the median sales price in the month of June dropped to $439,000. This represented a drop of $60,000 from the previous months median price of $499,900.
The latest interest rate run-up will more than likely be felt by home sellers in Loudoun County beginning in August. If the rise continues the marketplace could see another wholesale price adjustment in the late summer/early fall. Buyers will see the impact of the rising rates almost immediately and this will result in slowing sales and lower offers in the next 60 to 90 days.
For the latest stats, data and information/resources on the Loudoun County, Virginia real estate market, check out Loudoun Stats.
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