With the market rapidly changing and buyer demand declining, are all parts of the market being affected equally? Actually, the "luxury market", consisting of homes over 1million dollars, is mostly untouched. Bright MLS statistics for the DMV area show us that buyer demand in the luxury space remains extremely high and has been largely unaffected by interest rate hikes. Why is this? First, there is a much higher concentration of cash buyers in this space who's buying power has not been touched. Furthermore, there are still very many Jumbo Loan products with interest rates in the 4s. When the loan amount is over $640,000, and the down payment is over 10%, most lenders can offer loan products significantly below what conventional loan rates are. High income buyers with large sums of money to put down are typically seen as less of a risk to lenders as those taking out smaller loans with minimum down payments. If you're in the luxury space, be prepared to compete!
Meanwhile in the "mid priced" range, between 500-750k, Bright MLS has downgraded the buyer demand index from "high" to "moderate". Total showings per listing in this price range are down 25% and houses are selling much closer to asking price. Buyers in this price range are more monthly payment conscious and have seen 40% of their buying power disappear in just 6 months. Personally I can tell you that my last 3 transactions in this price range sold for asking price or under and had full contingencies present in the contract. I see this part of the market as a huge opportunity to lock in a townhome with fee simple ownership at a favorable price without bidding wars!
Demand in the "lower priced" range from 200-500k has been significantly impacted by the changing rate environment. These are mostly condos, and the condo market has been extremely soft in the DMV since 2017. Demand is down well over 10% in this price echelon, and average days on market are rising. The demand for higher-priced condos is actually very high in DC, but between 200-500k buyers are able to largely take their pick. Just for reference, a 1BR 1BA $399,000 condo in DC with 10% down and a $450 monthly condo fee is roughly $2950 monthly now, whereas it was $2200 in January. Talk about pricing out a segment of buyers that do not want to compromise on monthly payment!
Be aware of what the competition is going to be like in your segment of the market. Your realtor should be able to tell you what strategies you'll need to use to land your dream home and what you can expect from a monthly payment perspective. If you're looking to buy in the under 700,000 price range and are not looking at single family homes, you may have significant leverage, and I can help you land an incredible deal!
Comments