David Charron, president and chief executive of Rockville-based multiple-listing service MRIS, writes an occasional column about the Washington area real estate market.
While 2015 has been a good year for the real estate market, we expect 2016 to be even better. The Washington area weathered the ups and downs of the past few years without as many difficulties as most other regions in the country, leaving us in a stronger position to take advantage of the return to a favorable real estate climate.
Mortgages aren’t as difficult to obtain for most buyers, more homes are coming to market, and several programs by Freddie Mac and Fannie Mae have rolled out to make buying a home more accessible to first-time purchasers. For the coming year, the following are the things we anticipate will have the biggest effect on whether 2016 turns out to be better than the last:
All eyes are on the interest rates. They have been so low for so long that just about everyone expects them to rise several times during the coming year. The increases will start off in small increments, so we don’t anticipate a sudden impact on the housing market, but it could make it more difficult for some buyers to qualify for a mortgage.
However, the pent-up demand for buying a home in the D.C. area is large enough to offset the potential loss of those who won’t be able to qualify for a mortgage as rates increase. After all, buyers have had a few more years to save up for larger down payments and improve their credit scores so there are more qualified buyers than even a few years ago.
Given the predicted rise in interest rates, the selling season might kick off earlier than usual. Buyers will want to lock in as low of a rate as possible. The ones who know that they want to buy a home this year will most probably try to get a head start on finding one that fits their needs before rates rise again.
Spring real estate activity is also always weather-dependent. Heavy snow late into February and March can deter people from going out to tour homes. That has a domino effect in delaying any offers, which then delays the final closing date. Thus, only if we have a mild winter do I predict an early start to the spring market.
The lack of homes for sale has been the biggest factor affecting real estate for the past few years, but all the numbers indicate that we have finally turned the corner with more homes coming on the market. In 2015, the D.C. metro area saw an increase in the number of homes for sale every month when compared with last year. Year-to-date through November, the number of homes sold was 9.5 percent higher than the same period last year, and we expect to see a greater number of homes come to market in 2016.
There is more activity in new construction, which brings new listings to market. Homeowners also have regained more equity these past few years, putting them in a much better position to sell than they have been in recently.
The median sales prices for our area are definitely on the upswing, and we expect this to continue well into 2016. In May, the District set a record high of $560,000, but for most months of the year, median sales prices in the D.C. metro region averaged $410,000. Even though we expect prices to continue increasing, we don’t think there will be a sharp rise. It is also likely that the rate of increase will slow down compared with 2015. Since a greater number of listings usually translates into prices staying competitive, we’re unlikely to see any dramatic increases next year.
Thankfully, 2015 has been relatively peaceful for real estate. There were more homes for sale, which kept the market moving at a healthy pace, and the interest rates made buying a very attractive option over renting. We fully expect more of the same trends in 2016 without too much upheaval in any segment of our market.
Catch up with some of David Charron’s previous columns: