The history of nearly six months of 2013 have been written in the books. Here we are. Real estate has experienced a decent rebound from the more sluggish springs of the recent past.
What can homebuyers who are first time buyers, move up buyers or families transferring into the area expect in the next six months and into next year? The Washington, DC, metropolitan area has been one of the better performing markets, not in percentage increase from year to year but in returning to median home prices that existed before the dislocation. Other markets, particularly in California where home prices were trampled, have seen greater year over year percentage increases.
Here are a few items to consider as you ponder a change in your housing or an investment in real estate. The market continuously changes and is in flux. The houses and prices from last month, perhaps last week may be meaningless this week.
Interest Rates Have Jumped Higher
This recent increase in 30 year fixed rate mortgages has had two separate effects. First, when rates started to rise it created a stampede of buyer and refinancing activity. Those who had been waiting for possible lower rates finally decided to throw their hat in the ring.
Secondly, the bounce off the historically low rates has also eliminated some potential buyers and refinancing candidates from moving forward. Someone who was planning to stay in their home for 10 years or so could have benefited handsomely from refinancing to 3.5% from 4.0% especially if they had a mortgage near the conforming limit of $417,000 or more – an agency jumbo. A true jumbo is a mortgage greater than $625,500.
Interest rates began to moderate this week and there were buyers of the Mortgage Backed Securities (MBS) returning to the oversold bonds. This may continue or it may not.
Housing Prices Have Climbed Quickly
I have heard some potential buyers express dismay in the rapid rise in home prices over the past 6 months. They are wondering if there is a “bubble” once again. Although prices did rise there is reason to believe that value still remains and that there will be a continued demand for well priced, well maintained properties. Even though mortgage rates have bounced, they are still relatively low. When one compares a mortgage payment to a rent payment for the same property the value inherent in purchasing becomes very evident – before tax considerations and the effect of wealth growth from principal pay down.
Anecdotal Stories from the Trenches
A Realtor who is one of the top producers in the Vienna, Oakton and McLean markets has privately said to me that they have recently seen a drop off in buyer interest. Their systems which produced a constant flow of prospects during the late winter and spring months suddenly stopped. There is a seasonality factor going on here but we both believe that interest rates played a factor even though they are still relatively low.
On the other hand, one of our home builder clients is swamped. This is for the market in and around Vienna, Virginia. This home builder is finding it difficult to satisfy the demand that new home buyers are exhibiting at the moment. This is a combination of the desire to be in the Town of Vienna and the supply of available properties on which to build a new home.
Those are two widely diverging experiences. If you are considering a purchase or refinance here in Northern Virginia or any other locale find a competent professional who you trust. Let them know you concerns and intentions. Start the process and learn as much as possible.