A new administration, rising interest rates and a housing market that continues to be competitive will make 2017 an interesting year for real estate. Here’s what I’ve seen on the ground this year in Northern Virginia and Washington, D.C. and predict for the year ahead.
- Northern Virginia and D.C. will continue to be a seller’s market, with all-cash buyers and those with the fewest contingencies having the greatest advantage.
What I’ve experienced here in the metro D.C. market is that even if you have well-qualified buyers with realistic expectations, that doesn’t make them an automatic shoe-in for the home they put an offer on.
In the popular neighborhoods, we’re often competing against half a dozen other offers, and it’s likely that half of those are all-cash buyers, which means that if you’re coming to the table with a mortgage, you’re likely out of luck.
Sellers usually take an all-cash buyer over those with a mortgage because they can close very quickly and likely do not have any contingencies, which are opportunities for the buyers to walk away and get out of the contract if something comes back unexpected or they don’t like. Additionally, in these competitive areas, the list price is merely a starting point. And then it’s just a matter of how high can we go price-wise to get the home.
It’s honestly very surprising how many people in this area can come to the table with $400K or more in cash to buy a home. And that’s leaving the “average” buyer who is putting 20 percent down at a disadvantage.
- Living closer in to D.C. is better than commuting and paying tolls.
About 10 years ago, the market was seeing a ton of buyers who had had enough of paying a lot of money for little house move out to Ashburn. Buyers aren’t flooding there anymore. Yes, you still can get a greater bang for your buck, but that’s often coming at a longer commute, paying the Dulles Greenway toll ($6.35/way during rush hour), etc. Now, we’re seeing an emphasis on what we’ve always known to be the No. 1 factor in choosing a home: location, location, location. McLean, Vienna, Tysons, Falls Church — they’re all hot markets and show no sign on slowing down. People realize that time is money, and they’re willing to pay more, for less space in exchange for a shorter commute.
- Millennials will increasing become first-time homebuyers
“A huge wave of Generation Y-ers, who have delayed home buying, are emerging into their key buying years. They are predicted to keep home sales and condo sales strong well into 2020, according to economists.” — National Association of REALTORS Daily News blog, “Predictions Roll In: 2017 Housing Forecast”
NAR Chief Economist Lawrence Yun explained the potential rebound in a statement: “Young adults are settling down and deciding to buy a home after what was likely a turbulent beginning to their adult life and career following the Great Recession,” he said.
- Interest rates will continue to rise.
Mortgage interest rates spiked considerably in November, rising to 4.08% by the end of the month. That is an increase of more than a half percent from the Nov. 1 rate of 3.47%. There’s no doubt that’s a big one-month jump and it is highly likely that 3.5% rates are forever in the rear-view mirror. Nonetheless, expect rates to remain fairly stable during the next several months, reaching no higher than 4.5% by mid-2017 and 5.0% by the end of 2017. —“Market in a Minute: Northern Virginia,” McEnearney Associates, Chief Information Officer and Executive Vice President David Howell
Additionally, Fannie and Freddie raised conforming loan limits for the first time in 10 years — they’re increasing from $625,500 to $636,150, which will give buyers more room on their conventional loan to account for the rise in prices.
What do you think 2017 will bring for the real estate market?