The first quarter is in the books, and no real surprises. As things slowed last summer under the weight of “spiraling mortgages rates,” we reached the dizzying heights of 6.5-7% for 30-year mortgage rates.
I assured my colleagues that come Q1 of 2023, there would be three types of buyers in the market. First, those who retreated from the market to wait for the return of the days of 3-4% rates. Best of luck! Second, those who were in the market last August and smelled opportunity coming and thought they would figure out the mortgage piece. Third, new buyers who would enter the market without the baggage of longing for what used to be.
This week, I had the opportunity to meet with sellers who had bought their homes on the Hill in 1992-94. Then, there was a buyer’s market for those bold enough to seize it. Many of our friends were fleeing to the ‘burbs with their young families. Many with professional moves could not sell and were forced to rent their homes here on the Hill. Our local government was a mess and showing no hope. Crime was hitting all-time highs. And if you bought in 1989, you probably could not get out whole until 2000-02.
I can’t tell you how many settlements I attended in those days when the seller was bringing more money to the settlement table than their buyers!
A home is a long-term investment. It’s a place to live and to build wealth over time. Timing has nothing to do with long-term objectives. It’s more about dumb luck in the short term. Those who were buying in the early 90s were using double-digit 30-year mortgage rates or less expensive adjustables. They would have killed for a 6.5%, 30 year fixed-rate mortgage. With all of these factors, they were clearly taking risks at the time. In hindsight they were making one of the most significant financial decisions in their lives.
No one who bought then and still owns the property will be bringing money to the settlement table (unless they treated their home like a piggy bank), and they will see doubling, tripling or quadrupling of their original purchase price. Not the cash they put down but the gross value of the property.
So Where Are We Now?
It looks more like 2007-08, when financial markets and institutional lenders were in the tank and some residential marketplaces were devastated. Not here in DC and not on Capitol Hill. Our market slowed a little. Prices vacillated somewhat. Basically, we took a break from the sizzling market we had experienced for the preceding six or seven years. Once things settled down a little, we were off and running for another decade, with that pandemic.
Inventories today remain tight and that is holding property values at a stable level. Some homes may be selling for a little less than a year ago, but not many. More are on par with levels of a year ago and some higher ‒ stunning to see the strength in the market between $750,000 and $1,500,000. The drop in median price in the chart is more a reflection of the strength in the lower-priced part of the market than any decrease in value anywhere.
A Few Tips To Keep In Mind:
1. If you are thinking of selling in the next year or so, and your rental unit becomes vacant, DO NOT RE-RENT IT.
2. If your spouse were to die, have a legitimate professional appraisal done to establish the property value at the time of death. There could be significant tax implications when you sell. Consult with your accountant.
3. If you are approached by a friend or a neighbor or some nice young man who knocked on your door, and they want to buy your house without a realtor, and the price sounds fair, don’t sell unless you consult with a known local realtor or pay for that professional appraisal. What you pay in a real estate commission or appraisal fees might be a pittance compared to underselling your home for many tens of thousands of dollars. Put your property into our local multiple listing service and let the market speak!
Keep these things in mind and consult with a professional realtor from a reliable firm.
Don Denton, an associate broker with Coldwell Banker Realty, has lived and sold properties on Capitol Hill for more than 40 years. He can be reached at firstname.lastname@example.org.