In a tight real estate market, many Washington area home buyers are finding it challenging to snag a property in the half-million-dollar range. Although $500,000 is considered the gateway between starter and higher-end properties, what you get for that amount can vary widely from one community to another.
The supply of homes on the market is at historic lows — especially in the $500,000 range, which experienced a 25 percent surge in sales during the past year, according to data from MRIS, the Rockville-based multiple listing service.
But Bannister lucked out: After looking about a month for a three-bedroom house in the $500,000 range in both Northern Virginia and suburban Maryland, he recently put a contract on a three-bedroom single-family home in Takoma Park that was built in 2008.
“We saw a bunch in Silver Spring that were rather older houses, built in the 1920s or 1930s, but those can have their drawbacks,” he said. “There was also a house that I saw that was really nice for $615,000, but then it was sold. It was a little expensive, so that worked out.”
Francesca Gianaris of Re/Max Metropolitan Realty, who was Bannister’s realty agent, said the market for homes in the $500,000 range has picked up. She said it was a race for another of her clients to get a seller to accept an offer on an Arlington home in the low $500,000s before the open house.
“She was able to buy the house last month. It was a small, charming, older duplex-style home in Arlington with a lovely little back yard,” Gianaris said. “It was a fight, though, and she had to throw in more money.”
With interest rates at near-record lows, more people are being enticed to move up to the $500,000 price range, experts say.
“The low interest rates are driving buyers in all price ranges, including the $500,000 range. The low cost of borrowing the money allows for much more buying power,” said John Stone, a real estate agent with Keller Williams.
In addition, he said, what was a starter home that was under water may now have reached a point where the owners can sell with some equity and make the jump to a higher price bracket.
John L. Heithaus, chief marketing officer of MRIS, agreed that low interest rates are heightening the demand for homes in general.
“Clearly we’re in a hot market, and the demand factor is high because rates are so low,” he said. “We see younger families moving back to the District in this price range.”
In addition, some real estate experts say the $500,000 price range is particularly competitive because of the conforming loan limit of $417,000.
“For buyers with 20 percent down, they can qualify for the best rates if they’re borrowing $417,000 or less, so when we are looking at a $500,000 price point [$100,000 down and a loan of $400,000], it’s extremely competitive,” said Katie Wethman, an agent with Keller Williams. “In other words, many buyers can only afford up to $500,000, so as we bump up against that ceiling, the competition can become very tough.”