“We are looking at a national problem when it comes to the housing market”, says ONE Street President Samer Kuraishi. Home prices have skyrocketed across the nation, and due to unprecedented inflation levels, interest rates have spiked as high as 7% in 2023. But what does all of this mean for the Washington D.C. housing market? In this article you will find an in depth look at the current housing market, how we got here, and what to expect in 2024 as many believe there are good times ahead.
2020 and 2021–The Anomaly Years That Got Us Here
Tons of money was pumped into the economy in 2020 and 2021 in an effort to keep the national economy going, with so many people unable to work. This increased money supply led to surges in home sales around the country, with a highest ever since 2006 of 6.1 million home sales occurring in 2021.
At the same time, interest rates for mortgages were very low, even under 3% at times. This was another factor which allowed many first time home buyers into the market. People who no longer had to be at the office also expanded out into markets further away from cities that would have made for unreasonable commutes in previous years. In addition, people began to value their homes more since, afterall, they were spending more time there than ever before!
All of this led to an extremely competitive market where it wasn’t uncommon for buyers to close on properties without even having an in person viewing. It was definitely a buyers market, with record home sales being recorded, and many first time buyers scoring very low interest rates.
The Current Scene Late 2023
Around Q2/Q3 of 2023 prices began to shoot up across the board, notably gas and food prices and including home prices. Interest rates were seeing all time highs before regressing in late 2023, often as high as 7% even for those with good credit scores. Most of the people who bought homes in 2020 and 2021, or anyone with a low interest mortgage rate, are not considering selling because they are facing a new mortgage at six percent or more.
This means there is an extremely low supply of houses on the market compared to usual time periods. In the D.C. area, the current housing supply is six weeks, which is actually higher than most markets, which means if no new inventory came on the market, and sales continued at current rates, the current listings would only last six weeks. An average supply in a healthy market tends to be around six months. With these conditions, coupled with the inflated money supply and subsequent price rises, housing prices have taken a sharp upturn.
But things aren’t as crazy as they were a year ago with offers being bid up well over the listing price, and buyers jumping on homes without even taking a tour (for fear of losing the property). Things have cooled off a bit in this regard, but prices do remain much higher than previous years.
The rental market is still growing nationally and in D.C., with many buyers being unable to afford the high interest rates. Over the last year in fact, rental rates have increased twice as much as home prices in Washington D.C. Housing is trending back into cities with more and more people returning to regular office hours as well. This means markets that saw new growth in previous years, could see a price drop in the future.
2024 Forecast–Washington D.C. Area and Nationally
Interest rates are expected to lower in mid-2024 and not go any higher. This means expect to see more and more people moving out of the rental market, with a continued increase in home prices for the D.C. area and nationally.
Around the country, in areas which are seeing a big spike in new residents such as Florida, Texas and North Carolina, expect higher home prices as demand increases, and supply likely remains at current levels. Nationally, home prices have increased on average by 33.9% over the past two years, whereas in Washington D.C. the increase has only been 9.4%. This trend of increased appreciation can be expected in 2024, with D.C. increasing at a slower rate than the rest of the country.
The advantage of Washington D.C. is that the economy remains strong (and probably always will) with the presence of government, military and corporate influences. Foreclosure rates will likely decrease nationally and in the D.C. area with government assistance programs expiring, but D.C. should be insulated from being hit too hard on this front because of high employment rates compared to national averages. However, with foreclosures there will be opportunities for investors to acquire properties at advantageous prices, especially if they are able to pay cash and avoid high interest rates.
The current high interest rates are an effort to squash inflation will begin to lower, expect them to level out and decrease by at least Q3/Q4 of next year. Overall the D.C. market will remain strong.
Summary
“It’s survival of the fittest”, says ONE Street President Samer Kuraishi. While things may have looked grim in terms of continued high rates and increasing home and rental prices, this looks to be turning around and there are always opportunities for those who seek it. The housing market has definitely done things that probably no one expected over the last few years, and the future may be equally difficult to predict. But generally, with the right attitude, and not buying into all of the doom and gloom around this topic, one can always make the most of even the worst housing markets.
In uncertain markets, it’s more important than ever to have expertise on your side. Schedule a free consultation with ONE Street to have a team on your side that cares!
