D.C. Market Update: Spring 2017

What's going on in the D.C. market as we transition from winter to spring? I've got an update for you today.
 

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I wanted to bring you an update on the Washington D.C. market as we transition from the winter market to the spring market.

We've got a lot of pent-up demand from people looking to buy a home who held off on their purchase since the election. Whether it was for economic or political reasons, people wanted to know what would happen. We're seeing this segment of buyers hitting the market, which already had low inventory.

From 2016 to 2017, the average sale price in D.C. has increased 11.1%.

This has had an impact on the market in that the average days on market here in D.C. is down nearly 5%. In Montgomery County, the average number of days on market is down 15% and in Arlington County, it's down 19.7%. This has an immediate impact on the price of these properties because they're ending up in multiple offer situations.

From 2016 to 2017, the average sale price in D.C. has increased 11.1% year over year. That number is up 6.8% in Montgomery County and up 3.4% in Arlington County. This means that if you're looking to buy a home, you need to work with a competent real estate agent and be prepared to write a competitive offer. If you're looking to sell your home, now is a terrific time to maximize your return by working with a professional who will stage your property the right way, market it efficiently, and negotiate on your behalf. Make sure your agent knows your area well.

If you have any questions about the D.C. market or you're looking to buy or sell a home at this time, give me a call or send me an email. I'd be happy to help!

What’s Happening in the D.C. Real Estate Market?

Because rates are so low and we have a historically low level of inventory, most of the greater D.C. area is in a seller’s market.
 

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We’re right in the middle of the fall market season now, which has thus far been very busy. It’s typical for the market to slow down once kids go back to school in August but then pick back up after Labor Day weekend, and we saw that again this year.

There was a lot of new inventory that hit the market, but we also saw a lot of buyers come back into the marketplace. A lot of that new inventory, then, was absorbed. What we’re left with now is a historically low level of inventory. We’re currently sitting at a three-month supply, and since a six-month supply is considered balanced, most of the greater D.C. area is in a seller’s market.

As you go a little bit further out, you’ll a see a little softening in areas like Potomac, Great Falls, Vienna, and even as far as Reston. This is indicative of the price points that are prevalent in those areas. Anything under $750,000 or even $800,000 is still extremely popular given that interest rates are still so low. That kind of borrowing power is forceful, and you’re seeing a lot of people step up their bases a little bit to get that property. We’ve also seen some softening in the more expensive markets between the $1.3 million and $1.4 million price points. Because interest rates are so low, many lenders have offered some really great jumbo loan packages, and these are starting to help the even more expensive markets between the $1.6 million and $1.8 million price points.

We’re seeing a historically low level of inventory.

If you’re a buyer, it’s a great time to be out there looking, particularly to lock in on something while the rates are so low. The next Fed meeting is happening in December, and they are expected to raise interest rates, so it might be a good idea to protect yourself from what could be a one-quarter to a half percentage point rate increase.

If you’re a seller and you’re looking to downsize, now is a great time to do that as well. There are a lot of buyers out there, and because of the interest rates, you’ll likely be able to find that higher price point you’re looking for.

If you have any further questions about the D.C. real estate market, feel free to give me a call or send me an email. I would be happy to assist you in any way I can.

The Impact of Brexit on the D.C. Real Estate Market

How has Brexit impacted the D.C. housing market? So far, there is a lot of uncertainty in financial markets and long-term implications there.

In our local real estate market, however, a lot of people are putting money into really safe securities, like treasuries and bonds. When that happens, the value of the U.S. dollar goes up and interest rates go down. As far as the 10-year treasury, Brexit may also lower the yield.

Locally, we haven’t seen any changes in home prices, so don’t worry about home values going down. In any case, they continue to go up. Home value is more closely tied to supply and demand than what happens in the global financial market.

If anything, Brexit has created a great buying opportunity for people in the real estate market. In fact, there is a lot more international money coming back into the United States real estate market. People see the U.S. as the best, safest place to park their money. Investors are using cash to invest in our real estate market.

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Interest rates have dipped even lower since Brexit.

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The bottom line is you should not be concerned about Brexit’s impact on home value. Again, home value is affected more by local economics and policies than anything in the global market.

So, take advantage of these historically low interest rates. You can get a 30-year mortgage for 3.5% or 3.625%, which is unbelievable. It’s also a great time to be in a 15-year amortization - that is under 3%.

If you have any questions, give me a call or send me an email. I would be happy to help you!

Taxes Are About to Go Up for Washington D.C. Home Buyers

 

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Today I’m here with a public service announcement about the upcoming tax increases for Montgomery County, specifically for the county transfer tax. Anything settled after September 1st is subject to these fees whether you are the primary resident or an investor.

To clarify, these tax increases don’t apply to homes under contract; this is for actual settlements. If you are looking to buy something and you want to get in before these deadlines, you need to act very quickly and be under contract in the next week or two.

What are these increases and how will they impact your bottom line? Let’s say you bought a $575,000 home. Under the old county tax fees, $50,000 would be exempted from the first $500,000 of value if the property is your principal residence. The next $450,000 would be taxed at $6.90/$1,000, which would add up to $3,105. The additional $75,000 would be taxed at $10.00/$1,000, which would give you another $750. All told, you would pay $3,855 in taxes.

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The county transfer tax increase takes effect on September 1st.

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Under the new rules for that same $575,000 property, you will get a $100,000 exemption off the first $500,000 of the home value. The next $400,000 is then taxed at $8.90/$1,000, bringing you to $3,560. The remaining $75,000 is taxed at $13.50/$1,000 for an additional $1,012.50. Your tax under the new increases would be $4,572.50 total.

As you can see, that is an increase of $717.50 (or 19%) under the new tax increases. That’s if the property is your principal residence. If you are buying an investment property, there will be no exemption and taxes are due in the full amount.

I think I speak for everyone who lives in the area when I say we expect better roads, less crowding in schools, and a variety of other things from the city council after these increases are in place.

I hope you have a better understanding of what your settlement costs will be after September 1st. If you have any further questions, please don’t hesitate to reach out to me. I would be happy to help you!

How an Increase in Interest Rates Will Impact Your Mortgage

 

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On June 15th, Janet Yellen and the Federal Reserve will decide whether or not to increase interest rates. While a potential 0.5% increase in rates might not seem like much, it can actually significantly impact your mortgage payment.

For example, let’s say you’re buying a $600,000 house and you put 10% down. That means your mortgage is $540,000. If you have a 4% interest rate, your mortgage payment on that loan is going to be $2,578 a month. If rates go up to 4.5%, your mortgage will be $2,736. That’s a difference of $158 a month.

While that might not seem like much, you have to consider how the loan is amortized over that period of time in order to understand the true cost of the loan. Let’s look at that same example again. If you have the 4% interest rate, $1,800 of that mortgage payment goes to the interest and $778 goes to the principal.

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A small rate increase can significantly impact your mortgage.

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If the rates go up 50 basis points, your total interest payment is $2,025 and your principle is only $711. That’s $225 more going to your interest rather than your principal. That’s $2,700 a year in additional interest paid because of that rate increase. The loan is amortized differently because it’s a higher interest rate.

On June 15th, we’ll know whether rates will increase or not. If you have any questions, give me a call or send me an email. I would be happy to help you!

What's Happening in the DC Real Estate Market?

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The real estate market in Washington DC is in a transitional period due to the holidays. The Fed interest rate increase is also playing a factor right now.

So, what can we expect moving forward to 2016? I don't think that the Fed interest rate increase will have any long-term effects on your buying power. Interest rates are still hovering around 4-4.5%.

The metro DC market has many smaller markets within it, and these all play roles in forming different market conditions. I would argue that we're still in a seller's market. Just the other day I sold a home with multiple contracts, escalation clauses, and contingencies.

Inventory appears to be rising in Great Falls, Reston, Rockville, and Potomac. Prices are also starting to decrease and the number of days on market is decreasing. Price reductions are also becoming more common, and a buyer's market appears to be forming here.

Because we have such a dynamic real estate market with so many micro-markets, it's recommended that you work with a professional who knows what's going on.

Overall, it is a very opportunistic time to be a home buyer. Interest rates are very low, and we're seeing a buyer's market form in certain areas.

As for sellers, I recommend that you have your agent run a competitive market analysis on your property in order to gauge whether a home sale would benefit you.

Please don't hesitate to come to us with questions. We look forward to hearing from you!