As the Washington, D.C. real estate market continues to evolve, experts describe current conditions as anomalous, presenting a mix of behaviors typically seen in both buyer’s and seller’s markets. Some properties remain unsold for extended periods, reminiscent of buyer’s market trends, while others generate fierce bidding wars, a hallmark of seller’s markets. This unpredictable environment leaves many wondering how to navigate the complexities of buying or selling in D.C. today.
“Since late September 2023, the market dynamics have settled into a peculiar state, and we are simply adapting,” remarks Brett West, an agent with McEnearney Associates. He observes that homes anticipated to sell quickly sometimes linger for ten days to two weeks, causing anxiety among sellers. “It’s essential for them to stay calm and resist the urge to hastily lower their prices,” he advises.
One of West’s properties lingered on the market for 79 days over the summer, even though it was competitively priced compared to similar homes. In contrast, a one-bedroom condo in North Bethesda, listed by Morgan Knull of RE/MAX Gateway, initially attracted no buyers for several weeks but eventually sold at full price to a cash buyer.
The standard sales drivers—location, pricing, and neighborhood appeal—remain influential, but high mortgage rates and limited inventory further complicate matters. “Everyone must acclimate to the market’s fluctuations,” says Corey Burr, senior vice president at TTR Sotheby’s International Realty.
Opportunities Amidst Market Fluctuations
Several agents attribute a weaker market in D.C. compared to the suburbs to buyers’ concerns over crime and school quality. “There’s a noticeable decrease in perceived safety within the city, and families with children are at the mercy of the unpredictable school lottery system,” West notes. “As a result, some sellers are relocating to suburban areas for better school options.”
However, West identifies a silver lining: “For those keen on city living, now presents an excellent opportunity. Many neighborhoods offer attractive housing options at more accessible price points than in previous years.”
For instance, West successfully sold an upgraded, detached five-bedroom house with four and a half bathrooms and a two-car garage for $1.45 million, significantly below its original asking price of $1.975 million. He had initially predicted it would fetch over $2.1 million. In a similar vein, another home in the same neighborhood sold for $1.1 million, whereas West had expected a sale price exceeding $1.2 million.
“Currently, receiving multiple offers on a D.C. home is a rarity,” he observes. Buyers relocating from highly competitive markets like Northern Virginia often find relief in not needing to waive all contingencies or escalate their offers excessively.
West highlights that previously thriving high-density neighborhoods, such as Trinidad and the H Street corridor, are now undervalued due to the pandemic’s impact, which caused many restaurants and retailers to withdraw from these areas.
Among the weakest segments of the housing market are condominiums in D.C., often serving as entry points for first-time buyers who are particularly sensitive to mortgage rates. “Many potential buyers have been deterred due to the recent exhaustion of funding for the Home Purchase Assistance Program (HPAP), which won’t see new allocations until October,” explains Ericka S. Black of Coldwell Banker Realty. She notes that two of her buyers recently withdrew from contracts due to a lack of down-payment assistance.
Even new condos are facing sluggish sales. A unit in Brentwood near the Rhode Island Avenue Metro took seven months to sell, while another in Columbia Heights lingered for nine months. Some sellers opt to rent out their condos to prevent financial losses.
Despite the excess supply of condos benefiting buyers, David Shotwell from Compass emphasizes the potential for long-term gains. “Once interest rates drop, buyer competition is expected to surge again, making it wise to enter the market now and refinance later,” he suggests. “Today, buyers can negotiate prices, request home inspections, and ask sellers to buy down interest rates.”
For buyers with larger budgets, there may be opportunities in the luxury segment. While high-end homes typically take longer to sell, the market for properties priced between $2 million and $3 million is particularly sluggish. Knull speculates that uncertainty surrounding the upcoming election, escalating home prices, or buyer behavior from 2020 to 2022 might be influencing this trend.
Essential Strategies for Sellers
1. Prioritize Home Condition
Sellers must prepare their homes to meet the elevated expectations of buyers who are increasingly price-conscious. “Buyers are more discerning than ever, as they invest significant amounts into a home and may lack additional funds for renovations,” explains Shotwell. Agent Lilian Jorgenson of Long & Foster in McLean concurs, highlighting the need for sellers to align their home conditions with current market standards.
2. Emphasize Staging
Home staging can significantly enhance a property’s appeal. “A vacant home can detract from its value, as flaws and outdated features become glaringly apparent,” says James Nellis, CEO of the Nellis Group. Staging, which typically costs between $3,000 and $5,000, can lead to bids exceeding the initial listing price by $15,000 to $25,000.
3. Pricing Strategies
Sellers face a dilemma regarding whether to inflate their asking prices or price them competitively. Burr suggests that sellers should abandon unrealistic pricing expectations in favor of reasonable listings to attract more buyers. Conversely, some agents advocate for pricing below perceived value to ignite bidding wars. “Listing a home lower than its true worth can stimulate multiple offers, propelling the final price upward,” says John Ippolito from Redfin.
4. Secure Nonrefundable Deposits
To minimize the risk of contracts falling through, sellers can request larger or even nonrefundable deposits from potential buyers, ensuring a more secure transaction.
5. Leverage Pre-listing Marketing
Utilizing a “coming soon” marketing strategy can create buzz before a home officially hits the market, generating initial interest among potential buyers.
Strategic Approaches for Buyers
1. Explore “Coming Soon” Listings
Buyers can take advantage of “coming soon” listings, allowing them to make offers with contingency clauses. “This gives buyers an edge by enabling them to gauge interest before others,” explains Nellis.
2. Utilize Escalation Clauses
In competitive scenarios, buyers can enhance their offers by incorporating an escalation clause that specifies automatic increments above competing bids. Shotwell recommends making these increments significant, such as $5,000, rather than minor amounts.
3. Offer Competitive Down Payments
Buyers prepared to offer more than 20% down can improve their standing, especially in multi-bid situations. Ippolito suggests conducting a thorough property inspection to assess the condition before making such offers.
4. Expand Initial Search Parameters
Buyers may benefit from looking at homes priced below their target range, allowing room for potential bidding increases. Waiting ten days to two weeks post-listing can also provide greater negotiation flexibility.
5. Offer Higher Down Payments for VA Loans
Nellis advises VA loan recipients to consider larger down payments if feasible, as sellers may be hesitant regarding zero-down financing. However, buyers can legally adjust their financing at closing to a zero-percent VA loan.
6. Compare Lenders for Best Rates
The current slowdown in sales means lenders are vying for business. Buyers should shop around for the most favorable rates and terms, exploring options for down-payment assistance and refinancing opportunities.
As the Washington, D.C. real estate market continues to shift, both buyers and sellers must stay informed and adaptable. By employing strategic insights and understanding the unique market dynamics, they can navigate these challenging waters effectively.
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