If you’re looking to buy a single-family house in the Washington area this spring for less than $300,000, be prepared for heavy competition. The entry-level pricetraditionally has the highest proportion of buyers — yet a limited supply of houses.
Your best bet in the District is likely a rowhouse in need of a considerable amount of repair work.
Single-family houses in the $400,000-to-$500,000 range may be this market’s sweet spot. While demand for such houses is growing, inventory is, too.
The federal government’s new 3 percent down payment may put houses in that price point within reach of far more buyers this year than in 2014. Some real estate agents say they are seeing early signs of growing interest in certain Montgomery County neighborhoods that had stagnated last year.
If you’re trying to sell a single-family house priced at $1 million or more in Northern Virginia, better make sure it’s in tip-top shape. Demand for pricey houses in that range has cooled in that part of the region.
After nearly a year in the doldrums, the metropolitan Washington real estate market showed promising signs of improvement in December, January and February — traditionally the slowest months of the year. Overall sales, prices and inventory rose. Experts say they think that’s a good harbinger for the all-important spring market.
“Last fall, I think there was just fatigue in the city, with buyers getting tired of competing and not finding what they wanted,” says Suzanne Des Marais, an associate broker with the 10 Square Team in Washington. “We started seeing mobs of buyers at open houses in January, so I think buyers are ready to try again.”
“The surprise last year was rising inventory, but the surprise this spring is historically low mortgage rates,” says Morgan Knull, an associate broker with Re/Max Gateway in Washington. “I’ve had an active January and anticipate a robust and vigorous spring market, because we have the perfect storm of rising inventory and low interest rates.”
This spring, buyers will have different experiences depending on where they want to buy and their price range.
The D.C. region has significant differences from one area to the next, says David Howell, executive vice president and chief information officer for McEnearney Associates in McLean.
“In the city, the market is still competitive, and the pace of new contracts is exceeding the pace of new listings, but we’re seeing the opposite trend in Northern Virginia,” Howell says. “That trend is more pronounced the farther you go from the city.”
February’s inventory for the region was up 16.6 percent, compared with last year, according to RealEstate Business Intelligence, a subsidiary of the Rockville-based multiple listing service MRIS.
However, in the District, inventory was down 1.4 percent in February, compared with February 2014. Listings rose the most in Fairfax City, by 40 percent, followed by a jump of 31.1 percent in Fairfax County, 24 percent in Montgomery County and 23.3 percent in Arlington County.
Inventory remains tight in Prince George’s County, with an increase of 4.5 percent year-over-year, and in Alexandria, which had 2.0 percent more listings in February than in the previous February.
Sales prices in the region rose by 4.0 percent from February to February, but prices were sluggish or dropped in some parts of the region. The biggest gains were in Falls Church (27.9 percent) and in Alexandria (15.1 percent). However, there were only 12 sales in Falls Church, and this low volume tends to lead to big swings in median prices.
“Many buyers are already out looking at homes so they can lock in a mortgage at low interest rates,” says Nina Chen Landes, an associate salesperson with Avery-Hess, Realtors in Tysons Corner. “Inventory in Northern Virginia is still high, but it’s beginning to be absorbed because buyers are eager to beat an interest rate increase.”
Market conditions vary not only by location but also by price range, often with the most competition faced by first-time buyers looking for a more affordable home.
Ron Sitrin, an agent with Long and Foster Real Estate in Washington, says that 59 percent of all single-family houses listed for sale in the city under $500,000 in early February were under contract, which demonstrates the tightness of this market.
Single-family houses and attached rowhouses in the city are limited in supply, says Des Marais. She says first-time buyers can find homes near the Fort Totten Metro and along the east side of North Capitol Street across from the Bloomingdale neighborhood that are affordable. She says most of the listings for single-family houses under $500,000 can be found in Woodridge, Deanwood, Congress Heights, Anacostia and Michigan Park, although many of those may need repairs. Rowhouses priced under $500,000 are available in Petworth, Capitol Hill East, Brightwood, Congress Heights and Deanwood, she says.
Knull says competition for homes will be hottest in those neighborhoods cited by Des Marais, in part because first-time buyers can find a three-level home for the same price as a one-bedroom condo in communities such as Logan Circle or Dupont Circle. He says buyers race to get into a neighborhood before prices rise because of new development.
“I think Mount Rainier, which is just over the border in Prince George’s County, will change quickly since development is coming to the area, but now buyers can find less expensive homes there and the community has kind of a Takoma Park vibe with a strong arts community,” says Des Marais.
In Prince George’s County, says Michael Vaughn, an agent with Long & Foster Real Estate in Mitchellville, Md., competition for houses in good condition and priced well continued through 2014 and into winter 2015.
“Single-family homes priced under $250,000 are not as available, but when they are, sellers are getting four and five offers,” says Vaughn. “Homes priced up to $425,000 are also getting multiple offers, but there aren’t as many buyers in that price range, particularly because many of the homes are older Colonial-style homes that may need a little work.”
Vaughn says there are fewer buyers in Prince George’s County looking for single-family homes above $425,000, so even though inventory is low buyers face less competition.
Landes says there are very few single-family houses in Northern Virginia priced under $500,000, with most buyers in that price range turning to townhouses or condos.
“I think we’ll see a bump in the number of first-time buyers this year in the outer counties,” says Sitrin. “In D.C., the first-time buyers never really went away, but in other areas they disappeared. But now with interest rates so low and prices relatively affordable, plus the option for low down payment loans, I think renters are recognizing that homes will be less affordable a year from now.”
Sitrin says buyers can find older single-family houses from the 1940s in Silver Spring for less than $500,000 and newer houses in that price range farther out in the county, such as in Gaithersburg.
In early February, Sitrin says that 48 percent of all single-family houses in the District listed for sale between $500,000 and $800,000 were under contract, which shows that this market is more balanced than the affordable-home market. He says buyers can find houses in this price range in Silver Spring and some areas of Potomac and Bethesda.
Landes says that sales of houses in the $500,000-to-$800,000 range have been active in the Woodbridge area, perhaps because of the relative affordability of that area and the new HOV toll lanes that are improving traffic. Ashburn has also seen a high number of sales, possibly in anticipation of Metro’s Silver Line extension to that area, she says.
“The up-and-coming areas for single-family homes are near the Silver Line Metro stations and in Springfield because of the new Springfield Town Center,” says Landes. “The areas adjacent to the Mosaic District in Merrifield are probably the closest thing to a hip, cool neighborhood like Del Ray or an alternative to Arlington because they’re close to Metro and walkable to shops and restaurants yet not as pricey yet as those neighborhoods.”
Inventory is particularly low in the District in the “mid-range” price for single-family houses. In January, just 24 detached houses were available, primarily in Woodridge, 16th Street Heights and Brookland, says Des Marais. More rowhouses are available in that price range, particularly in Capitol Hill East, Eckington, Bloomingdale, Petworth and the east side of Columbia Heights. However, she says many houses in better condition in Petworth and Bloomingdale are priced above $800,000.
“In January, we started seeing inventory from last year that was priced incorrectly come back on the market and once they were re-priced buyers started to snap them up,” says William F.X. Moody, an agent and executive vice president of Washington Fine Properties in Washington. “Last year, sellers didn’t want to let go of the crown and thought they were still in control, but it was shifting to a buyers’ market. Buyers will start to see better deals this year unless they’re looking in one of those niche markets near a Metro station or other conveniences. In that case, sellers are still the boss.”
In early February, Sitrin says that 58 percent of all single-family houses listed for sale in the city over $800,000 were under contract.
“The four top upper-end markets are Georgetown, Logan Circle, Arlington and Bethesda,” says Tom Anderson, president of Washington Fine Properties in Washington. “The D.C. market has been consistent; we haven’t seen any softening in the market for homes priced above $1 million. In Montgomery County, it was quieter in 2014 than in 2013, but mostly it’s just a more price-sensitive market.”
Anderson says that overpriced, dated homes won’t sell as quickly as those that have been updated and priced right, particularly those in the higher-price ranges located farther from downtown Bethesda or D.C.
“There’s a lot of competition among double-income, high net-worth households that are looking for a family-friendly neighborhood with good access to private schools or good public schools,” Knull says. “These are buyers who are looking for a home that costs $1 million and up in Bethesda or Chevy Chase or in some parts of Northwest D.C.”
Howell says that the market for houses priced above $1 million has slowed in Northern Virginia because of a shift in demand for larger, more expensive homes.
“There’s still a market out there, but it’s just not as robust as it once was, and sellers have to be very reasonable in their pricing,” says Howell. “It’s not just a monetary decision; it’s also a lifestyle decision. People want a home that suits their lifestyle, and they don’t want a lot of expensive space that they don’t need.”
Howell says low interest rates can help sell more costly homes and will slowly bring first-time buyers into the market, too, but a lot of what happens in the housing market depends on confidence in the job market and the local economy. He says he thinks that 2015 will look a lot like 2014 in terms of the number of houses sold and price appreciation.
“The slow economic improvement will eventually bring an incremental number of millennials into the market, but it will take a while before we see a big influx of those buyers into the market,” Howell says.
A little bit of balance in the housing market could be a good thing, Knull says.
“I hope buyers and sellers see it that way,” Knull says. “It’s best when there’s a give and take and everyone feels satisfied, even if they didn’t get exactly what they wanted.”
Michele Lerner is a freelance writer.
This is the first in our three-part Spring Home Guide. Next week, look for a story on a house of the future, followed by upscale developments for the 55-plus crowd the following week.