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While the Washington, D.C. market has tightened into a sellers market, you may find a good deal in your favorite vacation destination as investors have started moving to second-home buying. Meanwhile, average prices in the D.C. area keep moving up, up, up!
The National Association of Realtors 2013 Investment and Vacation Home Buyer Survey “shows vacation-home sales rose 10.1 percent to 553,000 from 502,000 in 2011. Investment-home sales declined 2.1 percent to 1.21 million from 1.23 million in 2011, but those sales had been well under a million during the market downturn. Owner-occupied purchases jumped 17.4 percent to 3.27 million last year from 2.79 million in 2011,” according to www.Realtor.org.
The survey revealed that “11 percent of vacation buyers and 16 percent of investment buyers purchased the property for a family member, friend or relative to use, often for a son or daughter to use while attending school.”
A good number of investors and vacation home buyers also used their cash to invest: “half of investment buyers paid cash in 2012, as did 46 percent of vacation-home buyers. Forty-seven percent of investment homes purchased in 2012 were distressed homes, as were 35 percent of vacation homes.”
Cash is still a popular means of purchasing even in the higher-end market of Northern Virginia. Buyers in Fairfax County in February 2013 paid all cash 13% of the time in February 2013 according to MRIS.com (the regional multiple listing service for the DC region.)
The median price of a home in Fairfax County was $420,000 in February – up more than 15% year over year. For a complete report for February 2013 sales, click here.
As you see markets around the country drop inventory and increase pending sales, the question arises – is this for real? Has the market turned around?
In the shadow of Washington, D.C. – you betcha. While some observers may say it’s all about the home buyer tax credit and low interest rates – they haven’t been watching pocket markets around the country.
Northern Virginia is one of those markets that even if you doubled the inventory – it wouldn’t be enough in today’s market environment. Multiple offers (half dozen or more in many cases) are the norm; houses selling above asking price; prices moving up in zip code after zip code, month to month and year over year.
The absorption rate is dropping dramatically. (Absorption rates are measured by dividing the number of pending sales into the number of active inventory – any measurment under 3 months is considered a sellers market).
While not all markets around the country have turned around at the rate here in the D.C. area – the sellers’ market has already arrived!
During the run up last time, interest rates were in the 8 – 9 percent range – so buyers aren’t afraid of rates nearly double today if they think they are buying in an escalating market. Which is starting to happen in market after market.
For more research, see www.MRIS.com and www.Realtor.org.
Until next time…
Here are the basics:
How Much:
- First Timers: Up to $8,000 (10% of home purchase) but not for anyone buying a house more than $800,000
- Move Up Seller/Buyer: Up to $6,500
Who?
- First Timers – meaning you haven’t held title on a property in the previous 3 years.
- Move up sellers/buyers: who have lived in their homes five consecutive years.
Income Limit:
- Adjusted gross income of $125,000 (single); or $225,000 (married filing jointly). The credit fades out from these incomes and is elminated for those making more than $145,000 (single); or $245,000 for married filers.
Check out this link from the Virginia Association of Realtors for more details: http://www.varealtor.com/Portals/0/docs/ConsumerInformation/EXTENDED_First-Time_Home_Buyer_Credit_09.pdf
Finally — it’s not just me. Forbes magazine is letting its readers know that the DC market is on the upswing. Take a look at the link above for the Top 10 as rated by Forbes.com
Yes, I understand we’re in the worst foreclosure real estate market on record; and that a lot of people did a lot of bad things; and that we’re probably only half way through getting through this real estate debacle. However — I just ask that the feds be careful how much they need to push along the recovery in the marketplace — it’s already happening.
- San Jose, CA: Sales up 51% in January 2009
- California: 2008 sales up 26% over 2007
- Northern Virginia (Metropolitan Washington DC): Pending Sales +41%;
- Manassas, VA: pending sales +50%
- Florida: January sales +13%
- Lack of inventory. The resale inventory has been primarily been made up of foreclosures and the federal programs to rehash old mortgages and stop the foreclosure cycle will create a drain on the need of inventory. Seller-owned properties are scarece because sellers who are okay financially are upside down on their mortgages and must wait till prices return to their previous levels before they can even consider selling.
- Prices have hit the psychological low. When you’ve been dealing in prices around a half million dollars for years, a house priced at $300,000 sounds like a real deal. Buyers are diving in with a vengeance and bidding up; again, removing the safeguards of home inspections, home warranties, and appraisals (if they have enough cash).
- Small new home inventory: New home builders pulled out of the market and must now ramp up again to build the product buyers want. This will take years to get going. They just can’t start building, they have to get the infrastructure planned, permited and approved before they can turn the first shovel of dirt – this takes time.
- Job growth. As go jobs, so goes the housing market. Several job markets have continued churning out employment even through this latest downturn. Washington, D.C.; Boston; Dallas/Ft. Worth; Houston have added, rather than shed new jobs over the last 18 months. Meanwhile, the surge of the stimulus packages (whether you like the package or not, the attention on the urban infrastructure is a good and needed thing – that will create labor jobs) these jobs will create the need for housing in those markets. States are already applying for and spending the stimulus millions.
I met up with a potential buyer last night at a well-priced listing that is seller owned and completely fixed up inside. She was worried the price was too high, we hadn’t hit bottom yet, things could get worse, etc., etc.
She was not unlike many buyers out there in markets across the country that have already started to show signs of recovery. In Northern Virginia – the bottom was hit months ago. It’s a challenge of Myth vs. Reality.
(See this piece from Mortgage News Daily on foreclosures dropping: http://www.mortgagenewsdaily.com/12112008_realtytrac_foreclosures.asp)
For instance, in Fairfax County (just a few miles from Washington, D.C.), the inventory is down 23% while pending sales are up a whopping 60% over the last 30 days. In addition, average prices have leveled off for months now at pre-2004 levels and starting to rebound.
Buyers are now competing on foreclosures with multiple offers and escalating their offers over list price.
Prices are still thousands higher than they were in 2002 and previous. The good news for homeowners who want to move up is that if they purchased before 2002, more than likely, they can sell for a profit and move up for a lot less than they could have just a couple years ago.
The concept that “My house has lost money” is only important when you’re selling. What the consumer should look at is the purchase price vs. the sales price – not the height of the market value vs. today’s value. If you bought for $275,000 and sell at $375,000 – there’s $100,000 in profit – regardless of the fact that your house swelled in value to $450,000 three years ago. Such a seller has NOT lost $75,000, instead, he’s profited $100,000. In addition, he’ll be moving into a good deal in today’s housing and financing market.