Question: I’m reading a lot of negative news about the housing market. What’s the good news?
Answer: I’ve written quite a bit recently about the weaknesses in our local housing market (link, link, and link). Buyers have pulled back, homes are taking longer to sell, and sellers are adjusting their expectations. For those who need to sell now, these challenges are real and immediate.
We’ve become accustomed to treating rising prices, immediate sales, and bidding wars as evidence of a good housing market. But those conditions also make it difficult for new buyers to enter the market, existing homeowners to change homes, and for buyers to understand what they’re buying.
A market that gradually becomes more affordable and gives households more time to make major decisions is a healthier market.
A Healthy Market is an Affordable One
In my July Affordability article, I argued that sustainable affordability comes from a slow, long-term shift in which prices rise slower than income rather than from a sudden policy change. Sustainable affordability is a long way off in the DC area, but a modest price correction (which we’re currently experiencing in most sub-markets) followed by slower growth, can help ease us into a healthier housing market and should not necessarily be framed as a bad market or cause for alarm.
Mortgage rates, taxes, insurance, and maintenance costs also affect affordability, so slower price growth alone won’t solve the problem. A slowdown driven by job losses would undermine the income growth needed to make this work, so it needs to be supported by a healthy economy.
A Healthy Market Provides Buyers Reasonable Protection
For much of the past 7-10 years (in Arlington/DC Metro), buyers have been pressured to make decisions on whether to buy a home within hours or days and significantly reduce or completely remove basic protections (contingencies like inspection, financing, and appraisal) because of how much leverage sellers held in negotiations.
A healthy market gives buyers time to make better decisions and room to negotiate basic protections into contracts.
Earlier this month, I wrote about home inspection negotiations becoming more common. Understanding the condition of a home before committing to buy it should be an ordinary part of the process, but many buyers waived or flew through inspections, absorbing substantial risk in the process.
Your Next Home Matters, Too
Many sellers are also buyers, buyers of a more expensive home. So lower prices don’t mean a worse overall move.
Suppose your current home is worth $900,000 and the home you want costs $1.5M. If both decline 3%, you receive $27,000 less on the sale but pay $45,000 less on the purchase.
Of course, those two homes may perform differently, and giving up a low mortgage rate can overwhelm any absolute dollar savings. But the point is worth remembering that maximizing your sale price isn’t the only measure of a successful move.
Near-Term vs Long-Term Views Differ
In the near-term, buyers and sellers are each concerned, for different reasons. Selling into a down market is frustrating because pricing and timing are uncertain. Buyers face uncertainty over whether better prices and opportunity lie in the future or whether now is the best time to act. In the near-term, it’s easy to classify those market conditions negatively.
In the long-term, if we’re beginning to see a structural shift towards more inventory, a modest price correction, slower growth, and more balanced leverage between buyers and sellers, we’re actually seeing the early stages of a healthier housing market.
If you’d like to discuss buying, selling, investing, or renting, don’t hesitate to reach out to me at [email protected].
We have access to the most pre and off-market listings across the DMV of any brokerage and are happy to share what’s available with anyone who asks.
Below are some of our team’s pre/off-market listings, details and additional listings available by request:
- Ballston (Arlington VA)
- 4BR/3.5BA+office/4,000SF/Block to Metro, garage, driveway, and yard – Six townhouses (2027) – 11th St N Arlington VA 22201
- Rosslyn (Arlington VA)
- 2BR/2BA/1,800SF/Exceptional amenities, two parking, and balcony – Condo (2021) – 1781 N Pierce St Arlington VA 22209
- 1BR+den/1.5BA/830SF/Exceptional amenities and balcony
- Cherrydale (Arlington VA)
- 2BR/2BA/1,150 sqft/Penthouse with large terrace and Monument views – Condo (2013) – 2101 N Monroe St Arlington VA 22207
- Chain Bridge Forest (Arlington VA)
- 6BR/6.5BA/7,000+SF/Great lot, exceptionally finished – Detached Single Family (2028) – N River St Arlington VA 22207
- Barcroft (Arlington VA)
- 4BR/2BA/2,500SF/Large, landscaped lot with well-built brick home – Detached Single Family – 4th St S Arlington VA 22204
- Fairfax VA
- 6BR/6.2BA/7,000+SF/Half acre, golf simulator and wellness rooms – Detached Single Family (2027) – 4012 Taylor Dr Fairfax VA 22032
