Home Values and Interest Rates Drop in Q1
In times of political uncertainty—both federally and here in Virginia during a gubernatorial election cycle—the last thing homeowners want to hear is that home values are dipping alongside interest rates. But if you’re a renter, maybe this is the window you’ve been waiting for to jump into homeownership and start building equity.
The news may be sounding alarms—some of fear, some of excitement—but it’s important to step back, ignore the noise, and examine the facts. We’ve included the relevant graphs at the end of this newsletter so you can review the trends for yourself. Let’s dig in.
The Big Picture: Local Home Values
Despite the headlines, Lynchburg and Central Virginia have seen phenomenal appreciation over the past five years. Home prices rose:
9% in 2024
8% in 2023
11% in 2022
12% in 2021
11% in 2020
Since 2019, the median home value has increased by $113,500, representing a 57% gain. For context, we haven’t seen this kind of consistent growth since the 1975 and 1990. But we have seen it before. And even during the 2008 housing crash, our local market didn’t experience a significant drop in value.
So what about the recent dip? We’re talking about a 0.3% decrease, or roughly $1,000 off the median price—hardly a cause for concern. Seasonal dips are common just before the summer surge, and it’s happened the last few years like clockwork. Remember all the “bubble” talk in early 2023 and 2024? It didn’t pan out then, and it’s likely not what we’re seeing now.
Home Prices vs. Income: Unaffordable
A common concern is whether home prices are out of sync with incomes. That’s where the Front-End Ratio comes in—how much of your income goes toward housing payments. Here’s the historical perspective:
1985: Front-End Ratio was 35%
1990: 27%
2008: 17%
2024: 20%
Lowest Ever: 13% in 2012
Experts agree being “house poor” starts around 30%. So today’s buyers are still operating within a healthy and historically sound range. The idea that homes are wildly unaffordable just doesn’t hold up under the numbers. But we feel the pain – so what’s the source? Inflation with groceries and cost of goods.
So... What’s Going On in 2025?
If we’re not in a housing bubble, and prices are still aligned with income, then what’s all the noise about? Two things are at play:
Seasonal Normalcy
Home values usually plateau in winter and dip slightly before summer. It’s not because the market is crashing—it’s because families don’t want to move mid-school year.Natural Hesitation
People tend to invest when they feel secure. Right now, uncertainty is in the air—politically, economically, and globally. Some are nervous about the US President, others the governor’s race, others about international conflicts or stock market volatility. Fear makes people freeze—and in real estate, that can mean buyers holding off.
Unless something dramatic shifts, I expect values to rebound in Q2 and continue rising through the rest of the year. If international trade tensions calm down and confidence returns, we could easily see 4–9% appreciation by year’s end – largely depending on who claims victory in the tariff scrap.
If you’re a buyer, now is the time to act—before emotional stability brings another spike of buyers into the market.
And if you’re thinking about selling—don’t stress. You’re not losing value. I can more than make up for a 0.3% dip through smart pricing, strategic marketing, and savvy negotiations. Stay focused. Don’t get distracted. Let’s solve for peace.
Nathan isn’t your average realtor. He brings a unique blend of experience, values, and genuine care to your real estate journey, making it more than just a transaction. He guides clients with integrity, compassion, and a deep understanding of the Lynchburg community. As a realtor, financial coach, and family man, he sees you as more than a client and helps you achieve your long-term goals. Reach out today for a free consultation. Download his free app today by clicking here.