December Highlights:

• DESPITE HIGH RATES, PRICES FINISH STRONG YEAR
  
  
• Northern Virginia Home Prices UP 4% in 2023
  Northern Virginia finished strong with the average price appreciating $27,000 to close at $733,600. While prices were up, 2023 marked another year with declining home units sold (27,300). This is down 22% from the 35,100 homes sold in 2022, and down 42% from the 47,100 peak in 2021. Most sub-markets in Northern Virginia ranged from 3 to 9% appreciation with Manassas City leading ($30,000 appreciation on a $469,000 average price). Fairfax and Loudoun counties continued to lead Northern Virginia in terms of number of homes sold and average price. Fairfax closed the year with the top average selling price - $1,132,000 (detached homes). This compares to more affordable Prince William County finishing at $710,000 (37% less).
  
  
• High Interest Rates Dampened Buyer Showings in 2023
  Buyer Showings (demand) were down 25% compared to 2022. More and more buyers moved from actively showing to the sidelines as interest rates ranged between 6.5 to 8% for most of the year. Many buyers even left the market altogether delaying their purchase. Buyers were very opportunistic with rate moves. Like now, there has been a recent surge in showings as interest rates have fallen from the late October high of 8% to the current 6.5%.
  
  
• Listings DOWN 26% from November to December
  This compares to typically DOWN 34% last 5 years.
  
  
• December Listings DOWN 36% vs. 5-year Average
  Number of homes sold Jan to Dec DOWN 22% (7,900 homes).
  
  
• Rate Locked "Discretionary Sellers" Stayed in Place
  However, analysts are expecting these sellers to begin loosening up in 2024 bringing more inventory to market.
  
  
• Contract Ratio STEADY at near 1.00 (seller-advantaged)
  
  
• Persistent Low Inventory FALLS to 1.12 months
  Inventory remains below last year's levels (1.24 mos in December 2022).
  
  
• Sellers See Fewer Offers, Less Escalation in 2023
  Average Sold Price-to-List Price finished the year at 100.2% (down from 100.8% in 2022). However, days on market (DOM) remained in the fast lane with 63% of homes selling between 0 to 10 DOM. This high velocity is unchanged from 2022. DOM in Northern Virginia increased only two days from 17 in 2022 to 19 in 2023.
  
  
• Buyers Confronted Less Competition in 2023
  During the year, the movement of Buyer Showings (demand) consistently ran below the movement of Seller Listings (supply). For much of the year, we experienced a buyer-advantaged 20+ points spread between showing highs and listing highs. This relationship can be indicative of "conviction" like stocks that trade between buyers in sellers. Overall, it's still a seller-advantaged market to be sure, but this lack of conviction is what dampened buyer escalation and waived contingencies commonly offered in 2021. Additionally, contract cancellations by buyers averaged about 15% (1-in-6) compared to about half that in 2021.
  
  
• Fed Meets Jan 31: EXPECTED TO REMAIN at 5.25%
  The futures market is pricing a 95% chance the Fed will hold rates unchanged at the January meeting. The futures market flips to a 68% chance the Fed will reduce rates 0.25% in March. This would be a relatively serious departure from the Fed's firm stance the last two years that they will not reduce rates until the 2% target inflation rate is reached for a sustained number of months.
  
  
• Headline Inflation RISES to 3.4%, UP 0.3% Nov to Dec
  As reported last week, inflation unexpectedly increased from 3.1 to 3.4% year-over-year. Month-to-month was up 0.3%. Inflation remains well above the Fed's 2% target they want to see sustained for several months before reducing the Fed Funds rate.
  
  
• Mortgage Rates STEADY in the Mid 6's
  Rates have seemingly reached some balance in the current 6.5% range not seen since July 2023. This is markedly down from the 8% high just a few months ago. The current tug-of-war appears to be more about how long will the Fed hold existing rates before reducing them. The bond market (which dictates rates) will need to see the same things it has been wanting to see: sustained lower inflation, softer economic data, and for the Fed to be seeing the same thing.