Washington D.C. Real Estate – Keeping it Real in an Uncertain Economic Times

Posted On Wednesday, 19 January 2022 19:38

Words like recession, inflation, housing bubbles, and similar terms mean very little when you need to purchase a home. Whether you’re relocating to the D.C. area for employment, in the way scores of people do each year, or you’ve always wanted to live a heartbeat away from one of the most famous homes in the world, there are a few key details you need to know before applying for a Washington D.C. mortgage.

Interest Rates are on the Rise

After several years of record lows, interest rates for mortgage loans are beginning to rise. Yahoo Money reports a rise in interest rates for 30-year fixed-rate mortgages from 3.11 percent to 3.22 percent. While that may not seem like a shocking increase, it is more than half a point higher than rates of only one year ago when they were just 2.65 percent. When combined with other factors such as rising gas prices, higher costs of groceries, and a higher cost of living in D.C. for people coming from other parts of the country, it can represent a significant amount of sticker shock if you’re not fully prepared.

While some might find rising interest rates to be concerning, the truth is that they are expected to continue rising throughout the coming year. What this means for house shoppers is that now is going to be the best time to buy. Interest rates are set to increase again and again as the year goes on without some major form of intervention (which is unlikely) from the government. The sooner you buy, the more you stand to save over the life of your home mortgage loan.

Fixed-Rate vs. Adjustable-Rate Mortgages

The age-old question that has plagued mortgage borrowers for decades now takes on new meaning. While the last few years buyers have enjoyed historically low interest rates, the day of reckoning is coming for all who took on adjustable-rate mortgages during these good times for home buyers.

The problem now is that rates are on the rise and adjustable rates will continue to increase from year to year unless you elect to pursue a fixed-rate refinance mortgage to replace your existing adjustable-rate mortgage. Of course, you’ll need to read the fine print to make sure that is a favorable option for you and that you face no penalties for early loan repayment.

The bottom line is that adjustable-rate mortgages are usually better suited for people seeking short-term real estate solutions who plan to sell before the first (or second) adjustment period. However, if you’re planning to remain in the D.C. area for longer than your “grace” period where your interest rate is guaranteed not to increase, you may wish to consider the longer-term price security a fixed-rate mortgage delivers.

Is the D.C. Market a Good Investment?

The D.C. area has a lot to offer home buyers. Especially those who are looking for specific features in the homes you purchase. One of those sought-after features is growth projections. After all, your home is one of the largest average investments you’ll make. You want to make sure that investment is one that is poised to gain value over time. Fortunately, the D.C. region is experiencing an expected growth rate of 3.8 percent in the coming year.

If you’re a first-time homebuyer, it means you’ll want to plan your purchase early in the year or you could be priced out of the local market. However, if you’re buying now with an eye on selling in the next few years, it means you’ll likely enjoy a healthy return on your investment when that time comes.

What Does it All Mean for Real Estate Professionals?

Real estate professionals are wearing more hats than ever before. This means you need to develop new partnerships with people who provide services that are essential to home buyers, including mortgage brokers and mortgage providers. The more you can offer to help put buyers in properties, the better poised you are to experience growth in the years ahead.

While there are always challenges for real estate pros to overcome, the combination of rising home prices, rising interest rates, and rising costs on all other fronts can lead to sluggish home sales as people seek to wait out a potential crisis. Especially with the market woes of the aughts still fresh in the minds of many investors and ordinary home buyers alike.

That doesn’t mean it’s time to consider a new career. Only that you may need to reconsider your approach to selling homes so that you’re poised for greater success in the year ahead. This may include greater seller education, more hand-holding for prospective buyers, and increasing the services you offer to include things like property management, leasing, and meeting various other real estate needs of the D.C. community.

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