Are Home Prices Falling in Fairfax?

June Prices Fall 3% from May: The median home price in Northern Virginia fell for the first time in 2022. After hitting a new high last month of $660,000, the median price in June fell $20,000 (3%) to $640,000. Prices in all major Northern Virginia sub-markets declined together, except for Prince William which increased 1.6% ($9,000) to another new price high. Many buyers have pivoted to Prince William in the last year where prices are viewed as more affordable.

Interest Rates have fallen somewhat since reaching a June high of 6-1/8%. Current rates are in the area of 5.75%. Rates have been relatively volatile for the last several months reacting to the rapid rise in inflation and fluid policy shifts by the Federal Reserve.

Low Inventory Persists | Listings Down | Showings Down
Buyer Behavior Shifts; Sellers Adjusting: The housing market in Northern Virginia is in the process of rebalancing, but still inside a low inventory environment. Year to date, there have been 15 to 20% fewer homes offered for sale by sellers compared to last year. Buyer showings are down nearly 40% compared to 2021. Even with fewer buyers now in the market, persistent low inventory has helped hold prices relatively firm. June inventory was only 1.03 months compared to 0.85 in June 2021 and 0.96 in 2020. In Northern Virginia, 2 to 3 months of inventory is generally considered equilibrium, so we're still operating in a relatively seller-advantaged market.

The Key Takeaways
Buyers & Sellers Rebalance Inside a Strong Market: What we are seeing is the receding of the buyer surge that occurred in 2020-21 which produced an extraordinarily high number of multiple offers, significant price escalations, and elevated buyer risk by waiving many contract contingencies. The market is trending back to 2019, pre-pandemic numbers, and more normal buying and selling terms and conditions. This includes sellers experiencing a more typical number of home showings, offer prices closer to seller ask, offers now with buyer contingencies, more normal time to a contract, and even the instance of seller price reductions and concessions returning. Of course, this is not true in all cases. In Fairfax County, of the 1,611 homes sold in June, 54% were sold above seller ask where multiple offers may have been received with varying buyer contingencies waived. 

If you remember the "bell curve" from school, market behavior is regressing back toward the mean (average). June inventory of just 1.03 months is still below average, but the market has shifted and is trending back toward the large area of the bell where 70% of normal behavior is transacted. This is why buyers have been able to significantly better navigate the current market finding their home of choice under more reasonable seller terms. So far, home prices in Northern Virginia have held up during the rapid rise in interest rates since January. Surprisingly to many consumers, the average price of a detached home in Fairfax County has only declined $32,000 (2.7%) from $1,167,000 to 1,135,000 since January, while interest rates and buyer purchasing power has been substantially impacted by the 60% rise in rates.