Before diving into more educational pieces about the home buying and selling process, I’d like to walk buyers and sellers alike through the current market landscape around the greater DC Metro area and Northern Virginia. Inventory is as low as ever and interest rates are still historically low, driving out a large pool of buyers, and as such (consistent with the last few years) the market is extremely competitive in some housing segments and locations, while others segments give buyers much more room for negotiations. In this post, I’m going to dive into the hottest segment of the market (best for sellers) down to the coolest segment (best for buyers), and in between.
Hot, hot, hot.
The hottest segment of the market is mostly going to include single family homes between a $750K and $1.2M budget throughout the greater DC Metro area and surrounding beltway suburbs. What’s the reason for this? While there are quite a few reasons that contribute, these are the top three from my perspective. First, there are plenty of buyers looking to move up to a larger home but there is little inventory, huge bidding wars, and the market is truly challenging. A lot of people stay put for this reason alone and either add on to their current home or adjust to make it work. When they stay put, it equates to less homes on the market. Second, this is about the lowest budget you can utilize to find a single family home closer in for those worried about commuting, and as such this is the price tag that many buyers focus in on. And third, there are fewer buyers who can stretch past this budget given their finances and as such this is a prime target budget for many people.
So what to expect when you match this particular search criteria and how to navigate the market. My first and most important piece of advice is to have your agent schedule a showing as soon as possible. Two reasons for this – first, there is a good chance the home won’t make it to the open house, and second, the showing slots fill up FAST. An example from just this morning – a single family home came on the market in Ashburn for $750,000. I sent it to my client at 10 AM and said that we needed to schedule ASAP. By the time they had determined when would work the listing was booked full for the entire weekend. When I spoke with the agent, he told me that he had two offers in hand, had been told by two other agents that couldn’t get their clients in to see the home that they planned to submit an offer site-unseen, and that the home would likely be under contract by the weekend. This home came on the market just this morning!
I don’t say all of this to scare you, but rather to prepare you for what’s at hand. The second piece of advice is if you like the home you need to submit a strong offer from the very start. Expect to waive contingencies and escalate about 10-15% above the list price in order to win. I’m going to dive deeper into contingencies at a later point, but in this hot market it is common that you will see the buyers who win the bid escalate up to 15% above list price and waive their home inspection, appraisal, and financing contingencies. This is a heavy sellers market and unfortunately for the buyer it usually comes at their risk. With a good agent, there are certain options that can be pursued to better protect yourself, but even the best agent at the end of the day is going to tell you that contingencies will likely need to be waived to make the house your own.
Medium to hot heat.
Located at this heat are townhomes. For a lot of people, these are going to be entry level homes ranging from $400,000 to $750,000, and again anywhere around the beltway. Currently, townhomes are a pretty hot commodity. Buyers rather than moving up from an apartment to a condo are going straight to a townhome. COVID-19 has pushed many to want more indoor and outdoor space and has made them less concerned with commute, as work-from-home practices have been in place for a while now. There are certainly some consistent recommendations here. Again, you really want to get in to see the home as early as possible for the exact same reason. With this segment primarily being first time home buyers, you can still anticipate escalation and waiving contingencies but there is a little more flexibility in terms of retaining safety nets. You will likely still have to escalate about 10% over the list price, but may be able to include an information-only home inspection or partially waiving your appraisal, amongst other contingency options. In this segment, there is more room to get creative and possibly keep some of the buyer protection in place.
The most buyer-friendly segment of the market right now are condos and coops. This comes as a result of what I mentioned above – buyers are more concerned with indoor and outdoor space right now as opposed to location. If you’ve been considering purchasing a condo, now really is the time! The condo market has begun to correct since the beginning of COVID-19 but you can still find good deals. What to expect in the condo market (most of the time, of course there will always be exceptions) – offering at list price and including all of your contingencies (home inspection, appraisal, and financing). These homes will usually be available for the open house and often will only have one or two offers submitted after the weekend.
Next week, I’ll dive in to contingencies (i.e. buyer safety nets), which I believe are an important topic for buyers to understand when they start their home search.