The last few years have been WILD in DMV real estate! Between COVID and the housing market, we’ve been on a roller coaster ride – and often unsure of when the next turn is coming. The recent months have shown that, although the ride is slowing down, we likely won’t be getting off anytime soon.
For many buyers in the DMV (the District, Maryland suburbs, and Northern Virginia), the rise in mortgage rates has created fear, and in some cases, forced them out of the market. This is especially true for first-time home buyers who were already pushing their budgets to the max to get into a starter home. Higher mortgage rates mean they can no longer afford homes that were once in their budget.
Many buyers are stuck waiting for more inventory in their price range to become available. Or they’re being forced to move to a more affordable area. Some are hoping prices will drop—but based on expert predictions, that seems unlikely.
Tabitha Mazzara, director of operations at Mortgage Bank of California says “If you’re waiting for prices to suddenly plummet to what they were in the past, you’re making a mistake…The Fed has promised another interest rate boost. If you’re ready to buy, don’t wait because prices aren’t headed dramatically downwards to what our parents paid. Things might dip a bit, but there’s no cliff dive that’s going to happen.”
Despite the rise in interest rates-high housing demand and low supply are continuing to increase home prices. The longer buyers wait, the more costly purchasing a home will likely become.
What does low inventory mean for buyers?
Low inventory means you must be ready to move quickly when you begin your home search journey. The best homes will likely be gone fast.
This means not starting to look at homes until you are pre-approved! The last thing you want is to fall in love with a place and not be truly ready to pull the trigger. Having a pre-approval letter ready is extremely important. When submitting an offer, your Realtor will need to include your pre-approval letter in the offer package. Sellers are unwilling to accept offers without feeling confident that the buyer has the funds and ability to get to the closing table.
If you struggle to find a home you love, reevaluate your “must have” list. And, if at all possible, expand your search criteria. I like to start my clients off broad with their search to show them as many options as possible. The requirements can be easily adjusted as they get a better idea of what they are genuinely looking for.
The DMV Real Estate Market is Starting to Shift
So what can we expect in the coming months? Inventory is likely to increase. The last few years have pushed many homeowners to re-evaluate their personal needs, especially as more companies continue to adopt work-from-home and hybrid models.
Those with access to a significant amount of equity will be looking to make moves. Given the housing market in recent years, the pool of homeowners with “the right amount of equity to sell” is fairly large.
As inventory increases, this means less competition for buyers. We are already starting to see the days of extreme bidding wars dissipate, and contingencies such as home inspection, appraisal, and sometimes, home sale contingencies come into play.
“Should I buy a home now or wait?”
That’s the big question many buyers are asking themselves right now.
Regardless of market conditions, buying a house is a personal decision. It is likely the largest purchase most people will ever make. It’s important that any potential buyer take a deep dive into their finances and speak with their trusted Realtor and local lender before taking the leap.
Focus on your budget and your needs. Decide what you may or may not be willing to sacrifice in order to get into a new home. Although rates have increased, they are still historically low, and there will be opportunities to refinance in the future. With home prices continuing to increase, waiting even 6 months “to see what happens” can end up costing you thousands of dollars.
When speaking with a trusted local lender, ask them to run a projection for you. I recently had a client on the fence about purchasing, and after my preferred lender Tom Light [ Home Savings and Trust Mortgage] ran the numbers, he determined it would likely cost my client $80K+ to wait until next year. There are no guarantees either way. But if I’m evaluating my financial risk, purchasing now certainly seems like the better option. At the end of the day, there is no magic 8 ball to tell you what to do.
Run your numbers and decide what makes the most sense for you and your specific circumstances. It’s always better to make educated decisions and know your options rather than to assume one way or another. If you need help working through the details, start with contacting a Realtor and get the conversation started!
