Washington, D.C. home prices have been rising with the rest of the country for the last eight years (Source). In fact, DC stands as the fourth most competitive housing market in the US, with 62% of real estate agents clients’ offers in July facing competing bids (Source).
So you would think that it would be more expensive than ever to own a Washington, D.C. home. Wrong. Average-priced DC Metro homes are more affordable than they have been since 2016. Here’s why:
Low mortgage rates.
These are the facts:
- In mid-July, it required 19.8% of the median monthly income to make the mortgage payment on an average-priced home — more than 5% below the average of 25% from 1995-2003.
- It requires a monthly payment of $1,071 to purchase the average-priced home — down 6% from the same time last year (despite the increase in home value)
- The average home buyer can afford nearly $32,000 more home than they could at the same time last year (keeping monthly payments the same)
Can We Expect This Trend to Continue?
During any time of economic uncertainty, the weakness in the labor market negatively impacts the housing market. Why? Because household income slows or declines and the economic uncertainty reduces supply and demand. On the other hand, just as we have shown above, housing benefits from the lower mortgage rates. It is these two factors (Household income and mortgage rates) that will drive house-buying power throughout the rest of the year in Washington, D.C.
According to Mark Fleming, house price appreciation (increase in price of homes) will continue for the remainder of the summer. And if we continue with the current trends (estimated 1 percent decline in household income), a mortgage rate of 2.9% (wow), and house price appreciation growth of 8%, their Real House Price Index would still be 2.4% lower than in May. In short, yes, affordability would still improve.
Mortgage rates hit all-time lows eight times in 2020 (source). Which means it’s now less expensive to borrow money than it has been in a long time. You can afford 10% more DC Metro (Montgomery County, Northern Virginia, etc) home than you could a year ago. It seems, then, that now is a great time to buy a home in the DC Metro area. If you are looking for a well-respected Realtor who takes good care of their clients, you should give the Estridge Group a call. During these unprecedented times, we have helped countless clients find the home they not just needed, but wanted. We hope we can do the same for you.