The U.S. Commerce Department recently produced a report that indicates the strength of the housing market. In January 2020, new home sales jumped up by nearly 8% — over double the expected change of 3.5%.

With this huge jump in sales, January saw a seasonally-adjusted annual rate of 764,000 new home sales. Seasonally-adjusted annual rate is a metric that takes a single month’s data and applies it to a full 12 month period, in order to more accurately compare housing statistics from different months. This means that, if the rate of new home sales in January 2020 were to be stretched across an entire year, then there would be 764,000 new homes sold in that year. 

In December 2019, the seasonally-adjusted annual rate was only 708,000 new home sales. 1 year ago — in January 2019 — the rate was even lower, at 621,000 units. 

In fact, January 2020’s seasonally-adjusted annual rate is the highest of any month in almost 13 years!  The last time the new home sale rate was this high was in July 2007, which is an indication of how powerful the housing market has been — despite social and business factors that might usually harm the world of real estate. 

For instance: many people might think that the Coronavirus (COVID-19) scare would hurt the real estate market. When people are scared, they are usually less likely to make big decisions like building or buying a home. Despite this tendency, new home sales are soaring.

Here’s why this is important for you: In general, new home sales are a good metric for judging the overall strength of the housing market. So when you see that the seasonally-adjusted annual new home sale rate is the highest it’s been in over a decade, that’s a sign that the housing market is maintaining — and gaining — strength. 

Why are new home sales up in 2020?

New home sales tend to increase as the real estate market picks up momentum. When more people are looking for homes, many of them will choose to build a new home to suit their preferences. 

Additionally, many hot real estate markets have been dealing with a lack of inventory in recent months and years. Fewer people were selling their homes than wanted to buy — so housing prices soared and home searches had trouble finding the right home. 

The spike in new home sales is, potentially, a reaction to this inventory shortage. This conclusion is supported by an increase in homes under construction and permits to build new homes. According to recent reports, the amount of permits for future homes — and the number of houses currently being built — is the highest since 2007

In response to the lack of inventory, people are building new homes and selling them to highly-motivated home buyers — and those sales build the strength of the housing market. 

Why are home buyers so motivated?

The Federal Reserve (which regulates loan interest rates in the United States) cut rates 3 times in 2019. This means that fixed-rate loans will maintain low interest rates through the loan’s duration, so more people can reasonably attain a home loan without worrying about crazy-high mortgage interest. It’s important to note that although the Federal Reserve’s rates don’t directly impact most mortgage rates, they almost always trend in the same direction. 

Basically, more people know what mortgage they can afford on their dream home, and they don’t want to miss out on getting locked in with low interest rates. In response to this demand, more new construction homes are being built!

Why does this matter?

If you are interested in buying or selling a home, it’s important to know what’s going on in the market. 

Interest rates on personal loans and mortgages are low — and some economists predict that they will be cut again in March. However, there is still a relatively low number of available homes in hot markets like Arlington and DC, so home sellers still have higher values on their property. 

This means that now could be the right time to look into moving up to a new home! 

A lot of move-up home buyers can get scared to make rookie move-up buyer mistakes when buying and selling a home at the same time. This stress usually comes down to being worried about financial insecurity — so lower mortgage rates paired with high home values could be a winning combination to help make sure you don’t lose out when moving up to a more valuable property. 

One of the common fears of move-up buyers is that they won’t be able to sell their home before buying a new one. Good real estate agents and lenders can help you around that fear by walking you through your refinancing options. 

Two popular short-term refinancing policies for move-up buyers include bridge loans and Home Equity Lines of Credit (HELOC) — both of which benefit from the lower interest rates!

How to learn more

If you are interested in how this strong housing market could work to your benefit, then you need to make sure you get in contact with real estate experts who can help you through the entire process. Each home seller (and move-up buyer) has different needs and means, so it’s vital that you speak with an expert who will show you what to do next. 

One good place to start is to use the Keri Shull Team’s cutting edge Home Valuation Tool. This analytical tool uses an algorithm to determine your home’s value in the current market, so you can get an idea of what your home is worth!

As always, the best way to know your home’s value and the best option for you is to speak with an expert — like one of the Keri Shull Team’s home value experts! We will walk you through your choices and help you select the one that is best for you

Then, we will work with our lending and construction partners in the area to build a program that suits your needs — so you can stop worrying and start getting ready to move into your dream home!

We have the knowledge that you need to find the right home,  whether you are living in Arlington VA or anywhere else in the DMV, we have your back!

We have experts standing by to help you with all your real estate needs — so to book an appointment click here. Make sure to ask about our Move-Up Buyer Guarantee and learn how we will sell your home for FREE!