Here is a list of the forces that will keep home prices in Loudoun County suppressed during the coming year. These factors will prevent any appreciation in home values for the next twelve months. And without some offsetting factors that could be looked at as positive, these factors might even continue to push prices lower.
1. Foreclosures/bank-owned properties - The total number of foreclosures/REO and the percentage of the market they represent continues to climb month after month. And the forecast is for these distressed properties to continue to come onto the market. Keep an eye on the foreclosure listings and statistics to see if and when we hit the peak of this trend.
2. Rental Rates Stay Low - Even with rental properties being converted into condominiums during the boom market and less and less people qualifying to get home loans, the supply and demand factors have not caused rental rates to increase. And without rates moving higher, a lot of investors and smart money will wait on the sidelines to make purchases. Watch for rental rates on townhouses and condominiums to start to move up before home prices move with them.
3. Supply Stays High - In the heyday, there was never more than a couple (2) months worth of supply even in the slow months. We haven't come near that supply amount since Hurricane Katrina hit in August of 2005. With 2500 homes on the market and 250 sales per month we are at a 10 months supply. Demand would have to start cutting into this supply before prices have a chance at appreciating.
4. Sellers Moving Out and Down not Up and In - Baby Boomers are downsizing and/or heading South. Companies are moving out of the area (e.g. AOL) and the job growth in the area has slowed. Much of the equity people used to make a move to a larger home is now non-existent so they are staying put or looking to move to other parts of the country with a lower cost of living and lower home prices.
5. Election Year - In an election year when we have no idea who will be the candidates for President much less what party will control the White House, people will hold off on major investment decisions until they feel less uncertain about the future. And for most families, the biggest investment is their home. So until we know who will control Congress and the White House, don't expect potential buyers to be too excited about buying.
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