2022 was marked by some unfamiliar territory in the residential real estate market. Most principally, mortgage interest rates increased from the low 3’s in late 2021 to the mid 6’s at the time of this writing. There is no way of sugar-coating how these numbers hinder many buyers’ purchasing power. Broader macroeconomic factors such as persistent inflation, a sharp drop in the stock market and fears that there will be a recession this year contribute to trepidation in the market.
These factors seem to have resulted in something of a buyer/seller standoff in 2022, especially during the year’s 2nd half. Just-released data show a dramatic decrease in number of transactions over the calendar year (24% decrease in number of single family homes sold in 22207 from 2021 to 2022). This may well suggest that some sellers are deciding not to sell and some buyers are holding off on making that big purchase.
Where does this leave us in early 2023? I wish I had a crystal ball but can, with confidence, leave you with the following thoughts. It certainly is logical to think that there could be a release in some pent-up demand from those buyers and sellers who decided to step aside in recent months. What’s more, particularly in the DC metro region, continued robust federal spending (love it or hate it) of the Omnibus Appropriation and other bills will protect our region from negative economic turbulence affecting other regions of the country. Finally, to avoid high interest rates many buyers have turned to adjustable-rate mortgage (ARM) loans, which begin with much lower rate than a 30-year fixed product. I note that despite the economic uncertainty, final sold prices have remained strong (8.19% increase in average sold price of single family homes in 22207 from 2021 to 2022) and there are independent analyses predicting higher home prices in the DC area in 2023.
I am sensitive to the fact that a home sale or purchase is often the biggest economic transaction in one’s life. I constantly monitor data such as what I’ve outlined here to provide my clients with the best, most up-to-date information. As always, I stand ready to assist you with a complex real estate transaction, just to have an informal chat or anything in between. Please call on me whenever you see fit.