Welcome to 2023!  As we start another real estate year, with national and global economic certainty anything but certain, I am reminded that all real estate is local. 

As with so much that changed during the height of the COVID 19 pandemic, the behaviour of both sellers and buyers in the DC metro market could not have been easily predicted pre-pandemic.  The frenetic pace of many local markets was attributed to the abrupt shift from in-office work to remote-work, FOMO, insufficient inventory of homes, a shift in personal spending priorities, historically low interest rates and most anything else pundits chose to use to explain a "wild and crazy" sellers' market.  In this area, all of 2021 and the first 6 months of 2022 were solidly a sellers' market, with many homes receiving huge numbers of offers hugely escalated in price from the already escalated sellers' asking prices.  Inspections and contingencies of any type were not a part of most offers and buyers sometimes had to write offers on many homes to ultimately be rewarded with a ratified contract. Some buyers expressed a sense of euphoria akin to winning the lottery when their offer prevailed over many other offerors.  

Towards the middle of 2022, as interest rates rose both abruptly and steadily,  the market began to change to reflect the new challenges of buying a home, with monthly mortgage costs up as much as 25-30% over the previous year. To some, it suddenly seemed that the cooling market would quickly become a buyers' market with falling prices.  Buyers who had not been able to win in competition the previous year became hopeful that they would finally be able to purchase a home; offers suddenly included inspections and other contingencies and some sellers accepted these offers and moved ahead with their own life and real estate priorities.   

However, the expected large drop in prices anticipated and hoped for by buyers in late 2022 and early 2023 has not materialized because of a continuing inadequate inventory of homes to meet overall buyer demand.  During the time of historically low interest rates, many owners re-financed to take advantage of these low rates.  Moving now to a home of the same or larger size would now cause significantly increased monthly payments so these sellers are choosing to or forced to stay in their current homes.  Having said this, starting in mid 2022 and expected in 2023 is the need for sellers to price strategically and realistically, or in other words, to return to a pre-pandemic strategy that established a price based on location, size, features, AND buyer demand.  

Other factors affecting buyers' ability to buy and sellers' ability to move up are inflation, an expectation that the Federal Reserve will continue to raise interest rates for several more quarters and consensus predictions that a recession will be a part of some or all of 2023.  These economic uncertainties make predicting the 2023 market both difficult and subject to change as the year progresses.  

At any time, the Washington, DC Metro region is an exciting place to live! With the Congress and the White House in our back yard, we are part of both national and local events every day.  Our local news is often followed by the rest of the United States and the rest of the world.  However, for those of us who live here, it's also just home and our daily lives are no different than those of our friends and family living in urban areas elsewhere in the United States. 

Our real estate market, on the other hand, is not always like real estate market in other parts of the country.  It's often more expensive than the housing market those new to the area left behind. Although we have well paying jobs and a resilient economy, the demands of residents seeking to avoid traffic to those jobs raises the price of homes in many neighborhoods good for both easy commuting and lifestyle offerings.   The good news is that we have homes for every lifestyle, so you'll find a mix of condos, townhomes and single family homes in great neighborhoods throughout the region. We have already seen how the coronavirus remote work changes have created some new housing trends and demands (think work from home space) but the longer term implications for housing preferences are not yet clear as employers are unsettled on future workplace arrangements.

What should a buyer or a seller planning to buy or sell in 2023 do to achieve their real estate goals?

1.  If you plan to buy, work with a Realtor to develop a realistic action plan and move forward deliberately!  Start with real numbers and facts rather than what you wish was true. Meet with a couple of lenders to get pre-qualified for a purchase. Use today's interest rates, not those that were in effect in early 2022 when you first started looking.  Do this before you start looking at homes; even with lower interest rates, not every buyer qualifies for the loan amount they might like.  If your income limits you to a $500,000 purchase, don't waste your time looking at $700,000 homes or even $500,000 homes which will likely see multiple offers asking price. And be prepared to deal with competition which may waive home inspections, radon inspections, and appraisals and require more of your money to obtain financing approval.

2.  If you plan to sell, work with a Realtor to develop a realistic plan for getting top dollar for your home. Use real facts and data to prepare and position your home in the market. It's important to know what your neighbor's home really sold for, not just what they told you or you heard through the grapevine.  It's also important to clinically assess how your home compares to that sold home to develop a realistic price for the sale of your home. If that comparable seller renovated their bathrooms and kitchens or replaced their windows it is likely that these new items of value increased their sales price.  Emotion has no place in the sale of a home.  Most importantly, understand that the market conditions of the timing of your sale can fundamentally change what you can expect to sell your home for.  Most importantly, do not use comparable sales from 2021 or early 2022 as your benchmark for success; in real estate as in much of life, timing is a major predictor of outcome.  

3.  Step back to view your home through the eyes of any 10 anonymous prospective buyers who will walk through your home. Buyers remain fixed on their needs and wants and even a relatively good price will not always overcome dated, highly personalized and offbeat choices in paint, flooring, lighting and fixtures. In addition to de-cluttering, which almost all of us have to do, make time to do some touch-up painting, modernization of lighting, spiffing up of the yard, and general delayed repairs which you have been meaning to do for years.  Thinking in terms of what a home inspector will find is also a useful exercise as it's easier to schedule those necessary fixes before the house goes on the market than when the clock is ticking toward a closing date.  

4.  Remember that not every home meets every buyer's needs.  However, what every buyer is looking for is a home that is priced to reflect its condition, location, and comparable market value.  Simply wanting more for your home than recent comparable homes sold for is not a good prospect for success and, even if prices go up, a home that has been on the market for a long period does not benefit from those increases.  Unlike boats, a rising tide/price does not lift all homes! 

For a quick snapshot of what is happening metro-wide, read our Market in a Minute report and call me to relate your home to our current market. 

Actively searching for a home?  Visit my site often to find the most comprehensive display of listings in the DC metro area.  And be sure to check Monika's Blog on this site to read about emerging issues and solutions for buyers, sellers, investors and prospective homeowners.

When you decide to buy or sell, I have the market knowledge and experience to help make a complicated real estate transaction as stress free as possible.  To learn what I offer my clients, click on About Me and then call or email me now!