The regional real estate market remained challenging for many prospective home buyers in 2024 with higher home prices and interest rates that did not drop as much as buyers had hoped.
On the other hand, investors seemed unfazed by those factors and more houses were sold in Warren, Shenandoah, and Frederick counties last year than the previous year.
“When interest rates first started to climb, buyers got scared. And sellers got scared because they need to move somewhere too,” said Front Royal Realtor Jennifer Freer Avery, reflecting on the state of the industry over the last couple of years.
Christi Heflin, branch manager at Alcova Mortgage in Front Royal, said the combination of high prices and high interest rates most impacted first-time home buyers.
“As far as 2024 goes, boy, it was definitely a rough year for the mortgage industry,” said Heflin who has worked in the industry for 22 years. “Many predicted that by the spring market we were going to see rates come down — it just never happened.”
Mortgage rates hovered in the 6% range in 2024, dramatically impacting the buying power of prospective homeowners.
“Coming into the end of the year, when the Fed started talking about lower interest rates, everybody thought ‘oh yeah, we’re going to have cheap mortgages again.’ We saw a tiny little dip. I locked in a rate below 6% for the first time in a few years,” she said, adding that the drop was short lived. “They lowered rates on a Wednesday. By Friday, a jobs report came out that said unemployment was at an all-time low and that just sent everything back into a tailspin. We really saw only two or three days of lower rates. We did see some people refinance, but it didn’t last very long.”
Heflin said that she heard from many first-time buyers who spent months and months looking for a home, unable to find anything of interest due to low inventory. Now many of those same buyers are waiting for rates or prices to drop, she said, noting that there are some programs available to help with down payment assistance and financing for first-time buyers.
Despite the challenges, many people who sat out of the market in 2023 — in hopes of lower interest rates or more inventory — made moves in 2024.
According to Bright MLS market statistics, Frederick County real estate agents sold property valued at $710.67 million in 2024, up 25.28% from last year. Warren County Realtors saw a similar increase, up 23.46% with $268.99 million in sales volume. In Shenandoah County, sold volume was up 13.94% to $215.2 million in 2024.
Regardless of the market challenges, Avery pointed out that “people still have life events. People are still getting married and divorced. Families still need to move close to relatives to care for them. They’re not letting interest rates stop them. The market must move on.”
Warren County saw the biggest jump in housing prices, with an increase of 11.77% from $376,812 in 2023 to $421,146 in 2024. Properties spent an average of 33 days on the market.
In Shenandoah County, the average sales price went up 9.13% in 2024 to $348,881 from $319,721 last year. And homes were selling quickly, with an average of 34 days on the market. Frederick County saw the smallest year over year price increase, rising by 4.58% to $456,809 in 2024.
Heflin said that 2024 was the slowest year in her career in mortgage origination, a fact she attributed at least partially to higher prices in Warren County due to its proximity to Northern Virginia and the Washington, D.C., metro area.
“Alcova is a big company. We have branches all over the place. Our Cumberland [Maryland] branch is just killing it. It’s different there. Our average home price is probably $350,000 to $380,000. Theirs is $80,000 to $150,000,” Heflin said.
She pointed out that local prices put homeownership out of reach for many single professionals like teachers who are unable to overcome both the high prices and high interest rates.
An associate broker at Crum Realty Inc. in Winchester, Avery said that last year many of her clients were in a position of needing to buy or sell, as opposed to wanting to move for a bigger or smaller house or different location.
“Conditions are not ideal. Prices are high. Interest rates are high. And one of the challenges is so many people want to move out this way. That desire creates a whole other level of competition when it comes to affordability,” she said, noting that it is particularly difficult to find a family home in the $300,000 range or below. “You used to get a whole lot more for $300K. You could easily get a 3 bedroom, 2 bath. That’s not available these days and if it is, it’s often a fixer upper. Young families don’t necessarily have the ability to fix things up.”
That is the position that Christopher Peter and his family found themselves in last year before they finally purchased a home in Strasburg.
“It almost felt like people were asking too much for what they had, leaving me feeling like we were getting burned before we even made a deal,” said Peter, noting that all of the homes he and his wife, Kate DeBord-Peter, found in their $300,000 price range required extensive repairs, remodeling or simply didn’t meet the family’s needs. One house, he recalled, had only an outdoor dining area. Others didn’t have the three bedrooms they sought or were in undesirable neighborhoods.
“I was exasperated by that,” said Peter. “When we would find something that was suitable, we’d find out other people were also looking. And they were foregoing all inspections. And offering over the asking price.”
He said that in one bidding war, another prospective buyer offered to purchase the house at $20,000 over asking with no inspections.
“That put us completely out of the ballgame,” he said.
Peter said that after months of searching with Avery as their Realtor, the family was fortunate to find the house they ultimately bought. He credited Avery with tapping into her network of local Realtors to find the house as it was coming on the market.
“If I look back on it, I know I got lucky because I picked the Realtor I picked. I know other people who didn’t get lucky. They settled on homes in the $225,000-$250,000 range and they’re trying to build them up or they got out of town and are commuting,” he said. “I feel like we got lucky with Jen. She is a hard worker and she was able to pull that together. I don’t think I’d be in a home if not for her.”
Avery noted that because the market currently favors sellers so heavily, most sellers prefer to sell their homes as is, without painting or making any repairs, whereas buyers typically want move-in ready homes.
Buyers are also in competition with investors who are scooping up homes in the $300,000 and lower price range, Avery said, noting that Warren, Shenandoah and Frederick counties all remain attractive markets for sellers looking to relocate from the Washington, D.C metro area.
While most buyers used conventional financing to purchase homes last year, a significant percentage — 23% in Shenandoah County, 19% in Warren, and 17% in Frederick — paid in cash, according to MLS data.
Heflin said that she and her husband and business partner, Raymond Heflin, bought Service Title Inc. in March, adding that performing closings and settlements through that company has given her a different perspective. She noted the large percentage of cash buyers last year, many of whom were Northern Virginia transplants.
“We’re really seeing these folks selling houses in Northern Virginia and coming out here and paying cash, even $600,000-$800,000 in cash. Those little brick ranch homes that would be $250,000 here are nearly a million dollars in the city,” she said.
Avery concurred with that assessment.
“I believe that the majority of those cash deals are investors. In my tiny world of real estate, I have had more discussion about Airbnbs and homes that could be potential rentals than ever before,” Avery said, noting that many of those clients are new to the area, having sold more expensive property elsewhere. “They have the cash to be able to buy to a more affordable, for them, house out here. It’s hard for local families to compete.”
Avery said that in many cases investors can afford to purchase properties that need work and bring in a contractor to make improvements — an option that is not available to many young families.
“They end up buying the affordable home, doing the improvements and selling it at unaffordable prices for those sweet families looking for a home,” Avery said. “It’s not a bad thing. It’s improving our homes, but the negative thing is that it does take away that affordability for a family that’s just trying to get started.”
Looking forward to 2025, Avery said that she does not anticipate a huge influx of new inventory of housing and noted industry-wide uncertainty about interest rates.
The Virginia Association of Realtors predicts that home sales activity will improve in 2025, driven by strong demand and additional inventory. The association predicts an increase of 2.6% in new housing starts in 2025 along with an increase of 3.4% in median home prices.
The organization also predicts that housing markets near job centers will experience reinvigorated demand as return-to-office mandates are enforced in 2025.
In terms of mortgage rates, the VAR predicts a modest drop by the end of 2025, but notes “they will remain volatile along the way.”
Avery said that in working with first-time buyers last year, she noticed families were willing to make sacrifices to purchase a home despite the financial challenges.
“Interest rates are kind of high, but they’re steady. There’s some benefit to predictability. You know what you’re working with and can work through what you can and can’t afford,” said Avery. “I heard Mom and Dad negotiate with the kids, saying we’re going to have to give up this or that because we want to buy a home. I do believe that the majority of families recognize the value of homeownership.”
Heflin noted that it will take time for market conditions to change.
“I think it’s going to be a slow process. The housing industry itself is strong and is going to remain strong. Real estate is not going to go down. We’re not going to see that crash where suddenly people are upside down in their mortgages. The reason that’s not going to happen is economics 101 — supply and demand. There’s not enough inventory out there,” said Heflin. “Someone said last year at a conference, we could build great guns for the next 20 years and still not catch up with the inventory and housing shortage in the country. For that reason, the prices aren’t going to fall. What we have to hope for is for rates to come down so it’s more affordable housing for people. I just don’t see the prices of homes going down.”