With the new year only a couple of days away, I wanted to take a preliminary look at how the Loudoun County Real Estate market of 2009 compares to the market of 2008. There have been many developments over the past year that have influenced the real estate market. Here are a couple that I feel have made a huge difference to our market:
Tax Credit for First Time Home Buyers - This waste of taxpayer money has created a complete imbalance in the low end inventory levels. The problem with the market in Loudoun is not demand, it is inventory. Adding more buyers to the market segment that has had multiple offers for over a year is a total failure. When you see the inventory levels you will see what I mean.
Bank Indifference - There is currently a huge shadow inventory level in Loudoun County due to the fact that banks refuse to put foreclosed homes on the market in a timely fashion. This will keep price levels down as home buyers realize that there is still a bunch of vacant homes that need to be sold over the coming months. This strategy by banks will increase the length of the recovery by 2 or 3 years.
Interest Rates - Rates have remained at historically low levels as the Federal Reserve has continued to be a huge buyer of mortgage backed securities. This program is set to expire in March of 2010 and then normal market forces will take over and presumably move rates higher. In the meantime, the rates have kept demand levels higher as the cost to borrow money remains low.
Here is a good breakdown of the government intervention into the housing market.
Recession - Bad news for the country means good news for Washington. And Loudoun County is no exception as it has reaped the benefits of the democratic efforts to save the economy by increasing the size of government. Unemployment levels are half as much as other areas of the country and as the government continues to expand, the jobs will be here. And people will move here to find employment.
So these four factors continue to push inventories down. As of today the number of homes for sale in Loudoun County is only 770. On Jan 8th of 2009, inventory in Loudoun was at 1471. This is a decrease of almost 50% on top of the previous year decrease of 38%
But prices for the full year are almost unchanged. The average sales price of a home this year was $362,349 vs. $367,557. This is only a 1.4% change. And the number of homes sold has gone down 13% from 2008. This year 4283 homes have been sold with 3 days left in the year. Last year 4927 homes were sold. And even more striking is the drop off in home sales over the last 4 months of the year. Since September 1st, only 802 homes have gone to closing. Last year 1327 homes went to closing in the final four months. That is a drop off of 40%.
In my next post, I will take a closer look behind the numbers and try to explain why the market is acting like it is and give you and idea of what to expect the beginning of next year. Also, I will have charts and graphs of year end numbers once the year is over.