By TED SMITH
If you’re like most people who pay attention to real estate, you may be somewhat puzzled by the current market in D.C. On the one hand, you hear that it is a perfect time to buy; on the other, you hear that it is a seller’s market. How can both of these statements be true?
Here’s why it’s an ideal time to buy:
Interest rates are at an all-time low, ranging between 3.25-3.75 percent for fixed rate, 30-year financing, and going even lower for adjustable rate mortgages (ARM).
The low interest rates mean that your buying power has never been greater. In August 1982, when interest rates were 16.27 percent, a $2,600 monthly payment would get you a $190,000 mortgage (assuming a 20 percent down payment so you could avoid Private Mortgage Insurance). In 2012, that same $2,600 monthly payment could get you a $570,000 mortgage (again, assuming a 20 percent down payment)—three times the buying power.
Home prices are just now returning to their levels of 2005, so while you’ve missed the bargains, you’re catching the trend as it’s beginning to rise again.
Here’s why we are in a seller’s market:
The inventory of properties for sale is limited — the lowest in more than 5 years — partly because some homeowners are still under water on their mortgages, so they are waiting for the market to improve before listing. Limited supply with constant demand drives prices up.
The average selling price is up 13 percent over a year ago.
Homes are selling in less time — 64 days on average in September 2012 vs. 77 days a year ago.
Sellers are getting on average 96.5 percent of their asking price, and in some cases are getting more than their asking price due to a bidding war between buyers.
So we’re in a “perfect storm” for the real estate market in D.C., a market that’s favorable for both buyers and sellers. But because “storm” sounds negative (did you see the movie?), I prefer to call it a “harmonic convergence.” What does that mean for homebuyers? It means that this is a good time to buy. But be sure to get pre-approved from a mortgage lender so you know how much you have to work with.
For potential sellers, it means that you’re likely to sell your home in less time and for more money than in the past seven years. Plus, when you get ready to buy another home, you can take advantage of those same low interest rates that your buyer got when they purchased your home.
Ted Smith is a licensed Realtor with Long & Foster specializing in mid-city D.C. Reach him via tedsmithsellsdc.com.