2021 was a phenomenal year for the Reston residential real estate market! The number of sales in 2021 was up 11.6% over 2020 transaction levels and was driven by historically low interest rates, a strong labor market, changing housing preferences, demographic trends, and a continued bull stock market. The most pronounced growth took place in the upper bracket sales, with a staggering 31.5% jump in the number of sales from 2020 to 2021. The lower bracket segment grew at a much slower rate of 7.6%, reflecting the overall increase in prices for the year.
Covid jumpstarted the market in Spring 2020 and continued to impact housing preferences throughout 2021. Telework has become a permanent reality for many, providing the flexibility to live anywhere, and many buyers have prioritized more living space, both inside and out. Additionally, because of continued supply chain woes, most buyers want move-in ready properties and will pay a premium for new or fully renovated homes. This is evidenced by the $1Million+ price segment which saw a significant 100% increase in year-over-year sales.
These numbers are in stark contrast to the more subdued growth in the lower bracket segment. More than half of the lower bracket sales in Reston were condos in 2021. As Covid fears surged, the condo market waned in 2020 and has leveled out in 2021.
Demographic trends also drove housing demand in 2021 and will continue to do so in 2022. Millennials, the largest segment of the US population, accounted for over half of new home purchase mortgage loan applications in 2021. Gen Xers are combining into multi-generational households and are finding they need more space, while many baby boomers are choosing to age in place or purchase a second home. Also noteworthy, Washington DC lost 2.9% of its population in 2021, which could mean that suburbs like Reston absorbed some of these households. Couple these trends with the lack of housing inventory and the result is record setting prices in this market area. The good news is that while these demographic trends will continue, experts predict that home prices will appreciate at a slower pace in 2022.
The question on everyone’s mind is what will happen to mortgage interest rates in 2022. The 30-year fixed conventional rate has hovered around 3%. In response to inflation, the Fed has indicated tightening monetary policy which can include multiple rate hikes in 2022. In turn, most experts predict a rise in mortgage rates to 3.5% – 4.0% by the end of 2022. While a rise in rates may impact the rate of price appreciation in 2022, the good news is that even at 4% rates are still historically low. 10 years ago the average 30-year fixed rate was 4.45%. Also, unlike the 2008 financial crisis, today’s lending guidelines are more rigorous and borrowers who qualify for financing have sound credit scores and financial profiles. This phenomenon provides stability and certainty in the lending market
The Reston real estate market has done a complete 180 in the last 10 years. Sales were up 67% in 2021 vs. 2011. In 2011 the upper bracket market (homes sold for $750,000 and higher) accounted for 6% of the market. Today it is nearly 20% of the market. People wonder whether these market dynamics are sustainable. Case-Shiller recently reported that the longest extended period of price appreciation in the US real estate market occurred from March 1997 to November 2006 which is 9 years and 8 months. The current expansion started in July 2012 and has not stopped since. This means we are still shy of the longest expansion and there is still room to grow.
The outlook for the Reston real estate market is positive! While experts anticipate mortgage rates will rise this year, they will remain historically low. If you are thinking of selling, now is the best time to prepare your home for the market to take advantage of low inventory and continued high demand. Homes priced correctly for the market and in good condition have the best chance of commanding top dollar. If you are considering buying, consult with an experienced agent on how to navigate the 2022 market. There will be many great opportunities! Ultimately, time is of the essence.
Jenny McClintock and Sue Bender are with HBC Group at Keller Williams and are active and experienced Realtors® in the Northern Virginia marketplace. They work with sellers, buyers, investors, and builders in all price ranges and are available to assist with your real estate needs! www.HBCGroupKW.com, 703-731-2412 firstname.lastname@example.org, email@example.com