With the turn of the new year and the new decade, many of us are taking a fresh look at our lives and what we want out of them. Are we really happy in our jobs or our homes? Maybe it’s time to move to a new place, get a new job, and get a new perspective on life.
If you’re looking at moving into or out of the Washington DC area, knowing the DC housing market can help you get the best deal on your house. This is especially important with the election coming up and the economy in such turmoil. Read on to learn more about housing market trends in DC area for 2020.
Nationwide Housing Market Predictions
Before we dive into the specifics of the DC area housing market, let’s take a look at the trends in the rest of the country overall. Unfortunately, outlooks are bleak for the 2020 housing market in the U.S. A combination of poor economic management, political upheaval, and threats of war are leaving consumer confidence shaken.
Experts predict that while more millennials will take action on buying homes nationwide, sellers will want to hang onto their assets. House prices, which have been on the rise, will plateau. There will be more bidding wars, and the South is expected to dominate the home value appreciation scene.
Rental Income Profitability
If you’re planning on investing in real estate, the best way to do it is to buy a property and rent it out to someone else. They pay for the mortgage and utilities, you use some of the extra to cover things like maintenance and repairs, and if there is anything leftover you can use this as passive income. If you’re looking to do this in DC, you’re in luck—rental income profitability is great right now.
On average, the monthly income for people renting out properties in DC is a little shy of $3,000. And because this is an average, if you play your cards right, you could do even better. Keep an eye out for cheap run-down properties in good parts of town that you can flip and then rent for a higher price than your mortgage.
There are a few neighborhoods in DC that are particularly affordable if you’re looking to buy. It is important to note, however, that when we say affordable, we’re speaking in relative terms. The median property cost in DC is about $685,000, more than double the national median of $325,000.
Although the name may not sound very appealing given the current state of politics, in Swampoodle, you can get a home for a median price of $260,000. The Fort Dupont and Catholic University neighborhoods are also good options. And Congress Heights and Skyland also have relatively affordable homes available with strong rental incomes.
One of the biggest things impacting the housing market in DC right now is the gross domestic product of the U.S. Last year, the economy started on an uptick, with a 4.1 percent annualized gain in the GDP. Exports also outpaced imports, raising hopes of a good trade year.
But over the course of 2019, the GDP lost momentum, with gains in the second and third quarters coming in around only 2 percent. This led to a drop in investments and a loss of consumer confidence. The Federal Reserve took action at the end of the year to try to boost the economy, but outlooks are still grim.
Another major influence on the U.S. housing market is the Federal Reserve’s monetary policy. That approach to economics both signals and responds to consumer spending habits. As we mentioned, the Federal Reserve took some action at the end of 2019 to boost liquidity in the financial system.
But at the beginning of the year, the Federal Reserve began on a policy of tightening the purse strings. Interest rates were supposed to go up, helping investors out, but they had to be cut instead. And world currencies dropped against the U.S. dollar, leaving the Reserve scrambling to keep economic momentum going.
It should come as no surprise that employment has a major impact on the housing market for any year. Following the trend of the rest of the economy, employment rates dropped off during the last three quarters of 2019. According to the Bureau of Labor Statistics, the number of new net jobs dropped by 27 percent compared to the same period for 2018.
One result of this slowdown was a drop in the number of new houses being built. Despite the fact that there is strong demand for housing in the U.S., construction companies are hiring 58 percent fewer employees right now. Wage increases are slowing down, and unemployment is at 3.6 percent.
2020 Economic Outlook
Overall, the economy in 2020 is projected to hold steady—not spectacular, but without the likelihood of crashing too hard either. Inflation is projected to rise about 2 percent year over year. And thirty-year fixed mortgage rates are estimated to stay around 3.85 percent for 2020.
The good news is that Washington DC is home to one of the strongest economies in the country. The DC area has the second-highest median household income in the country, at just over $91,000. The economy is also very diverse, with industries ranging from government positions to tourism and business.
The housing market supply spent a good bit of last year on the decline. The year started out as a buyer’s market, with plenty of houses to choose from. But as the economy declined, fewer and fewer homeowners were selling their houses, leading to something of an inventory shortage.
In 2020, you can expect things to be a seller’s market. We’re going to be looking for more houses, and as we said, construction rates are down. There will be a slight deficit of housing, so if you’ve been thinking about selling, this is the time to do it.
With rent costs going up and more millennials and gen Zers moving into home-buying ages, the demand for housing is going up. Millennials are settled into careers, are paying off student loans, and are starting or expanding families. They need more space and are starting to move into new houses.
Meanwhile, gen Z has joined the job market, and the first waves of that generation are already buying houses. Boomers and Xers aren’t leaving their homes, which is part of what’s causing the shortage in supply. Everyone wants the white picket fence, and you can expect to see that trend continue in 2020.
The Millennial Factor
On the subject of millennials, you’ve probably heard about them in relation to real estate before. And it shouldn’t come as a surprise, given that the generation makes up almost a quarter of the population of the United States. But aren’t millennials supposed to be killing the housing market?
In fact, millennials want houses in the suburbs just as much as anyone else. Their down payments are larger than ever, their savings are peaking, and in spring of this year, they’re expected to take out more mortgages than Boomers and Xers combined. This housing boom is already starting to make itself known in the sellers’ market.
Of course, when we’re looking at real estate in Washington, D.C., in 2020, we can’t forget about the election. While the election itself may not impact housing markets, the results certainly will. Different administrations set different policies that can shape the housing market for the next four years.
In addition to the presidential race this year, there will be 35 Senate seats and 435 House of Representatives seats up for grabs. The campaign tactics of each group will affect how the market changes over the coming year. If consumers believe their candidate has both a strong economic plan and a good chance at winning, they may be more likely to spend money.
In general, mortgage rates are expected to stay on the rise for 2020. For the last few years, they’ve hovered around 3.85 percent. And for most of 2020, they’re expected to stay around that same area.
But towards the end of 2020, mortgage rates are predicted to start pitching up. By the end of the year, experts are placing them around 3.88 percent. So if you’re planning to buy or refinance, you’ll want to do it around the beginning of the year.
Buyers’ Market Predictions
If you’re buying a home in 2020, your experience will depend a lot on your budget. Although construction companies are building more mid-range houses, the majority of projects in the last few years have been focused on high-end residences. So, as with everything else in life, the more money you have to spend, the easier a time you’ll have.
First-time homebuyers will still have a difficult time finding something affordable. So if you’re considering buying your first house and you can manage it, try to hold off for a little while. The luxury market is cooling, and more affordable houses should be on the market in the next few years.
Sellers’ Market Predictions
Although 2020 is projected to be a sellers’ market, it won’t be a perfect market. We’re likely to see the price growth start to flatten out as we go into the year. The pendulum will also start swinging back the other way, slowing growth and creating more of a buyer’s market.
If you’re looking at selling your home soon, try to get that going as quickly as you can. Be thoughtful in your pricing; setting your pricing to entry-level buyers can help keep you in an active market. In higher-price properties, it will take longer to move the house and there will need to be some extra incentives included in the sale.
Right now, the average home value around Washington DC, is just under $627,000. But they’re selling for a good bit less than that value; the median list price right now is $615,000. And by the time they sell, the median price is around $547,800, a trend that’s favoring buyers.
But if you’re a seller, you’re in luck; prices are expected to go up by 2.6 percent in 2020. And once you get out of DC itself, prices drop quite a bit. The average price per square foot for DC is $554, compared to $239 for the rest of the DC Metro area.
Average Selling Process
If you’re planning on selling a home in the DC Metro area, there are a few steps you’ll need to take. Before you list your home, you need to do some cleanup. A home with better curb appeal will fetch a higher price, and curb appeal is everything here.
Start by sitting down and setting your goals for the home selling process, including ideal price, minimum price, and ideal closing date. Then clean, declutter, and repaint your home, doing any repairs that are needed. Once your home is in good shape, contact a real estate agent about getting your home listed at the right time and in the right place.
Learn More About DC Housing Market Trends
The housing market for 2020 is going to be a tough one, but with the right information, you can make sure you get the most for your money. It’s best to act in the beginning of the year and to think about your options carefully. Markets are expected to slow down as the pendulum begins to swing back towards the buyers’ market and mortgage rates climb.
If you’d like to learn more about DC housing market trends, check out the rest of our site at Nomadic Real Estate. We can help you with leasing, management, sales, and peace of mind. Contact us today to start exploring your options in the DC housing market.