Surging mortgage rates are leading to a more cautious approach to real estate in Arlington, but overall, they don’t currently seem to be scaring off many prospective buyers.
Months of rising interest rates, which surpassed 7% for 30-year fixed-rate mortgages last week, have led homebuyers to tread more carefully, even as local home sales have been holding relatively steady, a cross section of real estate professionals told ARLnow.
“From what I’m seeing in my own business, the 7% rates are definitely affecting the market, but I wouldn’t say they’ve stopped buyers from buying. They’ve made buyers much more cautious and thoughtful about the numbers,” said Vicky Mashaw, a Realtor with Top of Mind Team of Samson Realtors.
Mashaw, who provides services from D.C.’s inner suburbs out to the Winchester area, said recent increases in mortgage rates are causing buyers to double down on due diligence:
“I’m seeing buyers really focus on the monthly payment and what they’re actually getting for that payment. They’re taking their time, looking at more homes, negotiating harder and paying much closer attention to price. A house has to make sense to them financially, not just check all the boxes.”
“At the same time, I’m seeing buyers who have the attitude of, ‘If rates come down at some point, we’ll refinance.’ They don’t want to put their lives on hold waiting for the perfect interest rate. If the house, location and payment work for them today, they’re willing to move forward and revisit the financing later if the opportunity presents itself.”
According to Freddie Mac, which tracks mortgage rates on a weekly basis, the 30-year fixed-rate mortgage averaged 7.03% as of Sept. 24. It was up from 6.95% a week before and above the rate of 6.3% recorded a year earlier.
Last week marked the first time since January 2025 that the average national 30-year rate topped 7%.
Lisa Sturtevant, chief economist for the region’s multiple-listing service Bright MLS, told ARLnow that higher rates affect the health of the market in two ways:
“A mortgage-rate increase from 6.5% to 7.0% adds more than $125 to the typical monthly payment on the median-priced home in the U.S. Higher financing costs will force some buyers to compromise on their location or consider a smaller home. But other buyers are going to simply sit out the market this fall. ”
“Beyond the immediate financial constraints, the 7% threshold is a foreboding psychological barrier. Crossing this mark could create a chilling effect on the market, leading home sales transactions to slow considerably this fall.”
At the national level, the market is beginning to show signs of strain from higher interest rates, said Lawrence Yun, chief economist for the National Association of Realtors.
“Buyers steadily entered into contracts in August even though mortgage rates increased,” he said. “However, the housing market is still sluggish, with contract signings below last year. This is due to higher mortgage rates offsetting the increased buying power created by job gains and income growth outpacing home-price growth.”
In Arlington, home sales for the first eight months of the year have been relatively flat, rising 0.1% year-over-year to 1,601, according to MarketStats by ShowingTime.
Across the broader local area, however, August sales were down, according to the Northern Virginia Association of Realtors (NVAR).
That was largely due to a major drop-off in Loudoun County offsetting flat or modestly upward growth rates in the inner suburbs.
The trifecta of affordability, financing rates and personal circumstances “continues to influence purchasing decisions and the pace at which buyers are able to move forward,” NVAR CEO Ryan McLaughlin said.
The higher cost of financing purchases has yet to translate into a drop in the prices that most sellers can expect for their properties.
The median sales price of $765,000 in August across Northern Virginia was up 2% from a year before, and the average price per square foot was up from a year ago in Arlington, Fairfax and Loudoun counties and the city of Alexandria, while holding steady in Prince William County.
But if interest rates continue rising, experts warn that impacts could be more significant.
According to Bankrate, in only two years in the last quarter-century have the yearly 30-year fixed mortgage rates averaged 7% or above, and just barely: 7% on the nose in 2023 and 7.01% in 2001.
But average rates above 7% are hardly unique, or even unusual, from a historical perspective.
During the 1990s, viewed today as having a healthy economy, rates varied from just under 7% to just under 10%, depending on the year. From 1979 to 1989, average annual rates were never lower than 10%, peaking at 16.64% in 1981.
Among those who lived through that economic environment was Carol McEwen, who is now retired but spent decades as a realtor in Arlington.
People were still willing to buy when interest rates were that high, but once they began to drop, “people were refinancing like mad,” she told ARLnow.
“As the rates continued to drop, some people refinanced more than once,” McEwen said. “Ironically, as the rates got so crazy low, many people were waiting for even lower ones before locking in. I called it ‘the limbo of real estate,’ as in ‘how low will they go?’ Consequently, some of the greediest buyers/refinancers missed the true bottom of the rates.”
McEwen and her husband purchased their first Arlington home on Lorcom Lane in 1976, “and we were thrilled to get a 9.25% interest rate” given the existing market conditions, she said.
Based on her years in real estate, McEwen said that the home-buying public sometimes deals with economic factors in a counterintuitive way.
“When I first got in the business, I thought people bought when rates were dropping, but that’s not what I found,” she said. “Again, it was the ‘limbo of real estate’ in action. But the minute those rates would tick up, then people would buy because, ‘Holy smokes! The train is leaving the station without me!'”
Given the higher rates, current homeowners may be tempted to stay put if they have mortgages from the low-interest rate environment of the early pandemic era.
In 2021, with the economy struggling, the average 30-year rate was under 3.2%, the lowest since the 1960s.
But those on the ground in the industry are finding some flexibility among the public.
“Life still happens — people are getting married, having babies, changing jobs, getting transferred, downsizing, retiring,” Mashaw said. “I’m seeing buyers and sellers who are willing to make a move because they don’t want an interest rate to dictate their lives.”
