In the first quarter of 2021, many sellers had multiple offers and we were seeing record prices. The residential market in our region and in many others was red hot. But, as we moved into Q2 of 2021, the market began to cool and by September, many sellers and many agents were looking at each other and wondering “What the hell has happened?”
Even though interest rates were still at record lows, prices were not dropping but sales had slowed dramatically. Then, as we turned the corner into Q1 2022, the market came alive and we were back in record territories once again. In the middle of Q2, the market began to cool. This time it was different. The Fed had begun raising rates and there was no hope that this rising rate scenario would reverse anytime soon. In the first quarter and half of 2022 we were setting records. We will close the year with two quarters of slowing sales, but prices holding steady.
What does this mean for the short term (the next year) in the residential sales market? Who knows? With 40 years of experience in the Capitol Hill residential market, I can confidently say that I certainly don’t know! If, in April of 2020 (COVID Spring), if you had asked me what I would be doing by the end of the year, I would have probably responded that I hoped to be a Walmart greeter! Then we went on a two-and-a-half year run which turned out to be the hottest market in the history of residential sales! No one predicted that in April of 2020!
My 2023 Predictions
Like many of you, I read all that I can about the bigger issues impacting our market and then I spend many of my waking hours talking with buyers and sellers and agents and developers. Here’s what I think is happening and could happen in 2023 in the broader market. I say broader because there will always be the one offs who panic and sell too low or those who pay more than what we thought a property should sell for. These are more general observations. First, there is no panic out there among buyers or sellers. Many in both groups have adopted a wait-and-see attitude. That means to me that for the foreseeable future, we will see a slight rise in inventory but no glut. No return to the mid 90’s when we were swimming in inventory and we were still looking for the bottom.
Second, interest rates are something that we can’t control, but we will learn to live with. For most of my career, I would have done anything for a 6%-7% 30-year fixed-rate home mortgage. Most of our buyers in 2023 will come into the market with no 3%-4% “mortgage baggage.” This new crop of buyers will find ways to do what they have to do to buy a home. 2-1 buy downs maybe. Improving adjustable rates maybe. Could be a new twist in the mortgage market that we haven’t imagined…yet! In 1982, adjustable rate mortgages came into our marketplace and, after working out some kinks, revolutionized how we financed home purchases. Got us through 20 years of an expensive 30-year fixed rate market.
Third, while many are able to work remotely, I don’t think the long term “remote worker” will look like what we have become accustomed to. Maybe some hybrid form that will include more time in the office. More will return to the office—maybe not 100%, but enough to tip the balance toward needing a home or an apartment nearer to their place of employment. These factors and more should maintain stability in our marketplace. A healthier balance between buyers and sellers.
Opportunities
Our new buyers need to step back and see the opportunity at hand. For the first time in a number of years, they may not have to compete. They may be able to buy a home for asking price and actually have a home inspection and get a little financial support from the seller! Novel thoughts. One thing that has not changed is that home ownership is still the source of great wealth in this country. In all of our lives, there has been a period of time where renting had its place. Long term renting is not the goal nor is it the American dream! Home ownership represents wealth and stability.
Our sellers have to measure a move up or out strategy and how that relates to your personal wants or needs. There is a market here on Capitol Hill. It’s not like 1980-1981 when you were stuck. Nothing was selling. Today, there are many buyers, but they are not desperate. Put a good, reasonable price on your home and we can sell it. Take your proceeds and get on with your life. That is particularly true if you will be facing a move to a place with one level or an elevator or to a retirement community where you will need to liquidate the equity from your home.
I wrote the following the first week in March, 2022, for inclusion in the annual Fagon Community Guide to Capitol Hill. Rates were still under 4%: “The only thing for certain is that if you are making retirement plans that include cashing out of your home, do it now and put the money in the bank.” Our marketplace is still strong and growing. Take advantage of it and fulfill your needs and your dreams and move forward.
None of us knows what the future will bring but, as these chart show, the trend has been—ever upward.
Follow my articles as we move through 2023 and I will give you the information to help you make the best decision for you. Don Denton, Associate Broker, Coldwell Banker Realty, 202-256-1353, ddenton@cbmove.com
