DC Home Buyers, finally some good news on the housing market
When Amy Thomas and her husband, Navendu Shekhar, landlords in the Barnaby Woods neighborhood of Chevy Chase DC, began their house hunt in earnest in January, they fell in love with a home priced at $1.4 million that received 16 bids and sold for $2.2 million.
“The bidding wars created a sense of panic,” says Thomas, who works in human resources at Amazon Web Services. “So mortgage rates have started to riseand now [in July] we have a greater sense of urgency to buy before rates rise.
Like other potential buyers, Thomas and Shekhar, a market researcher for AARP, face a good/bad news situation. While higher rates have lowered their price range from $1.8 million to $1.4 million, they face less competition and aren’t as likely to see exponential price increases.
Washington-area home sales have slowed in recent months as rising mortgage rates and economic uncertainty pushed some buyers out of the market. While there isn’t a glut of homes for sale, the limited inventory that created a hot seller’s market appears to have bottomed out. Prices continue to rise, but at a more moderate pace.
“While some pockets of the region will still be warm, we will see a more normal market this fall,” says Suzanne DesMarais, real estate agent at Compass in DC. “It won’t be a buyer’s market, but we’ll start to see normal things happen, like offers contingent on a home inspection.”
Rapid market change
The gap in inventory has given sellers almost total control over the housing market for years, says Bic DeCaro, an agent for eXp Real Estate in Great Falls: “Almost overnight it stopped when mortgage rates went up. It went from several offers to a few offers and often only one.
“Now buyers can go back if a property hasn’t sold in a few weeks because they know it won’t sell above the asking price. This market provides an opportunity for buyers.
DeCaro stresses that’s healthy, though sellers may have to readjust to home inspections and other contingencies. “This sudden change in a really crazy market isn’t so scary for people who have been in real estate for a long time,” she says, “but it is for people who only know the way the market has been in recent years.”
Homes always sell quickly, often within days, she explains, if the price is up to them.
“As soon as the market changed, buyers started to be very picky about the condition of a home,” says Melinda Estridge, agent at Long & Favor at Bethesda. “Now that rates are higher, many buyers have had to reduce their price range a bit, which makes them more concerned with getting the best value possible.”
Homes in the $600,000 to $1.2 million range continue to get at least a few offers if they’re in pristine condition, Estridge says: “Now buyers can go back if a property hasn’t sold in a few weeks because they know it won’t sell above the asking price. This market provides an opportunity for buyers once they adjust to a 5% or 6% mortgage rate.
The slight easing in the market means those with older homes may have a harder time selling them, especially if they’re not updated, says DesMarais: is improving, but now these are so hard to sell. But in some neighborhoods like Chevy Chase, we will still see escalation clauses for super high quality homes that are in excellent condition.
Thomas, who works with Caroline Aslan from Melinda Estridge Groupwhich is part of Long & Foster Real Estate in Bethesda, says she and her husband want to stay at Chevy Chase and are relieved to see homes now getting a few offers instead of more than a dozen.
Buyers who are also sellers benefit
For Paul Sathrum and Franco Russo, the slightly slower spring housing market made it easier for them to transition from a condo in Columbia Heights to a single-family home in North Brentwood, between Hyattsville and Mount Rainier.
“Even though we bought after the rate hike, we probably got a better price on the house than we would have because there was only one other offer,” says Sathrum, a teacher.
Russo, a senior program officer at the World Bank, says they received a quick and comprehensive offer for their apartment. The couple worked with DesMarais and his team for both transactions and bought between $750,000 and $800,000.
Strength in the DMV
While the market may differ from neighborhood to neighborhood, DeCaro points out that our area continues to have employment opportunities and a limited supply of homes, which will keep values stable.
“The DC market is active and well-located with government and business,” says Estridge. “It’s unlikely to take a hit unless mortgage rates hit 7 or 8%, but that’s not likely to happen.”
Estridge predicts that the spring 2023 market will be a good time to sell, as buyers will have adjusted to higher mortgage rates and prices should be stable.
DeCaro says, “It’s not like 2008 and 2009, when lending was irresponsible and people were buying property without a down payment or any loan paperwork. Now people have equity in their property and lenders are more cautious, so we probably won’t see big price drops. »
While first-time buyers are usually the hardest hit by higher mortgage rates, DesMarais says the higher rates are also making residential investors hesitant. This could free up more inventory for other buyers.
“It’s not a buyer’s market, it’s just a normal balanced market,” DeCaro explains. “The big change now is just that buyers no longer have the wrong side of the stick.”
This article originally appeared in the October 2022 issue of The Washingtonian.