May 2017 Newsletter

If you’ve been paying any attention, it’s probably not news to you how hot the real estate market has been across major U.S. cities thus far in 2017. In the DC metropolitan area, medium price homes have seen a 5.8% increase in just 4 months. Buyers remain concerned about tight inventory and expected rate hikes from the Fed that may translate into higher mortgage rates. While these concerns are legitimate, it is worth noting that 2013—the last time the spring market here was so hot—was followed by a mellow 2014. Moreover, some believe that impending government cuts and slow job and wage growth will act as a brake on the market. 

My own view is that demand for medium price homes will continue to stay strong due to its relative affordability, although I am less confident about homes at the higher price range. Buyers will continue to see value in completely renovated homes, as opposed to new builds with all the bells and whistles. However, many baby boomers may not be ready to downsize and sell yet. 

On the ground, I have started to see more flexible home loan programs as well as some non-traditional home mortgages aimed especially at young professionals and students. One example of the former is investors who are willing to lend money to home buyers through crowdfunding and other fintech platforms under structures that allow them to share in any capital gains realized by the buyers in a later sale. As for non-traditional mortgages, I have seen a couple of companies willing to lend to buyers who are only putting 1% down on their purchases. 

Given evolving lending arrangements it is especially important for buyers to understand lending options fully before determining which to choose. However, a 2016 end-of-year national realtors survey showed that one of the three top things that realtors believe buyers should do but are not doing is to talk to a lender before looking for a property. Buyers concerned about a lowered credit score should know that pulling a credit score once will not harm the score. But it will give the lender a much better picture of your financial status. It can also help buyers realize how late payments or overdue medical bills of which they were unaware may have hurt their score. Experienced lenders can also advise you how to increase your credit score in a short period!  

The credit score as well as past W-2 and tax return records allow the lender to provide an accurate pre-approval letter, which you want to have in hand when you make an offer. This is an issue of style as well as speed. The listing agent will rely on the pre-approval letter when advising his or her seller whether your offer is a strong one. It’s not just about who is offering the highest price for the property.

On this note, I’d like to point out that veterans utilizing the lower down payment and interest rate provisions offered by VA loans are taking advantage of a well-deserved benefit for service to the country, not necessarily indicating any financial issues. Your listing agent should speak with their lenders and find out any more information needed for more clarity into their offers. Please give an opportunity to those who finally can settle and may be looking for a home to grow their families. 

2017 Housing Market Survey of MLS (Mid-Atlantic Region) Real Estate Professionals

Market Activity

62% believe homes will go under contract more quickly than last year
80%+ say homes will sell in 60 days or less
57% say buyers will move faster to purchase a home this year
75% think rising rent prices will encourage millennials to purchase a home

First-time Buyers

54% say there will be more first-time buyers this year
70% say student loans are a barrier to first-time buyers

Most important home features to first-time buyers:

72% Affordability
62% Updated kitchen
62% Move-in ready status
37% Open floor plan
33% Walkable communities

Home Design

57% say open plan kitchen is most requested feature

Outdated Home Trends

74% Divided floor plan
71% Laminate countertops
69% Popcorn ceiling
53% Carpeting