• Sheena Saydam

DC Metro Real Estate Market 3-Year Forecast

"Yes, everything in this neighborhood is now valued at 5% less than last year." 

Imagine you are wanting to put your home on the market, sitting on your couch across from your real estate agent and you hear this — darn well knowing every home on your block sold for $500K last year. And your agent says that buyers aren't likely going to be interested unless you're listed at $475K. How can this be? Simple: Markets change. And, we are due for a shift. This exact scenario has quietly been playing out in various parts of the country, and sometime in the near future, the DC Metro market is going to feel it, too.

Let me explain.

Several key factors influence home values:

1. Home sales (which are up a bit nationwide)

2. Home prices (average of 6% increase nationwide)

3. Supply of homes (still very low)

4. Mortgage rates (on the rise this year, but still hovering very low near 4%) With 3%+ growth in GDP (which we haven't seen in 9 quarters), and with unemployment and inflation extremely low, the economy is extraordinarily strong. But, like all good things, this won't last.

Interest rates will be adjusted upward, which means that the home that cost $500K today will (at a higher interest rate) cost more tomorrow.

Slowly but surely, this curtails buyer urgency and homes sit longer. And when properties sit, then there's more competition between sellers as they compete with more sellers. Days on market go up, and as a result final sales prices dip because buyers have more options and thus more leverage on price.

The DC Metro Market has seen about 7 years of steady appreciation and low supply, which is a long time — again, change is coming. But, when? My estimate is that in the next 2 to 3 years, we will really start to see things shift in favor of buyers.

So, what should you as a buyer or a seller do now? 

If you're thinking of selling, now is an exceptional time — inventory is still low and buyers demand is high — and remember that if you're buying a pricier home, you'll benefit from a low interest rate on a larger purchase.

If you are considering purchasing, this time of year tends to bring better deals, and sellers are more serious. Interest rates are still extremely low and will very likely increase in December. If you fall in love before then, run (do not walk) to purchase your next home!