As in all forecasts, we can only rely on what we see to be a general trend. The Washington metro area real estate market in 2014 has slowed in comparison to 2013 with less activity. A trend that was thought to be related to the long, cold winter can now be seen to be caused by a number of other factors.
Those factors include changes in the types of jobs and incomes in the metro area, particularly the reduction in federal jobs. Although the area saw an increase of jobs of 28,000 from June, 2013 to June, 2014, they were not high-wage jobs. That significantly reduces the pool of buyers who can afford to buy a home.
The government shutdown was seen as a wake up call for much of the federal labor force who are being cautious in their moving decisions. Buyers today do not have the benefit of the first-time homebuyers tax credit. There are also fewer affordable homes. Lending requirements are more stringent and salaries are not keeping up with housing prices.
According to the Real Estate Business Intelligence Service (RBI), buyer activity was down from last year in every month. However, the median sales price has remain pretty stable. Inventory continues to grow, although according to RBI, overall inventory remains low, just 43.2 percent of its peak level.
If you are planning to make a move or purchase a home by the end of the year, here’s what to consider.
First time buyers — you’ve heard it before: interest rates are incredibly low and if you plan to stick around town for more than three or four years, buying should be something to consider. First do the rent v. buy analysis. If you are paying $2,000 in rent per month and plan to be in the area for four years you will have paid almost $100,000 to your landlord. You also have to keep in mind the current tax benefits to owning a property, which means you can often afford more per month when you own than when you rent without the tax benefit. Rates will have to go up sometime so take advantage of a terrific situation. Remember to buy something that is manageable and rentable if for some reason you do need to relocate. We are happy to help you with the rent v. buy analysis.
Move-up buyers — This is the hardest dance to maneuver. This is the year to really make an effort to move up to that bigger home if you’re squeezed for space. It requires preparing your current home and becoming knowledgable about the market where you want to buy. That is the hard part, however if you are willing to consider a variety of neighborhoods and housing styles you will succeed. It is much harder to move up in a market when interest rates are higher.
Downsizers — We are seeing many sellers heading out of town at retirement, and other sellers downsizing when their kids hit college. Those staying in town are seeking more urban locations and we expect this trend to continue.
Sellers need to understand that buyers have left their emotions behind and are carefully weighing the costs/benefits of each property. They don’t have much extra cash to put into updates so don’t be surprised if they pass a “dated” home for one that is slightly higher priced but updated in the last couple of years. This is a trend that is not going away. Sellers in price points above $750,000 will find fewer buyers and pickier buyers. And don’t expect this to change anytime soon. Many sellers believe that next year the market will improve and prices will be higher, but that is not always the case. The good news for sellers is that nationwide the real estate market is improving which means more buyers who are transferred here will be interested in buying over renting.
Overall, the market here will be more like a “normal” market — a steady stream of price-sensitive buyers. We are seeing multiple contracts only when the price is below market and the condition is above expectations.