Today, it’s my turn to blow the whistle on the reality of the DC metro real estate market. Specifically, I’m going to address the question, “Is now a good time to buy a home?”
Domestic economic factors and international trade tensions have caused the Fed to start buying treasuries again, just like they did in 2008. This has pushed the yield down, which has caused interest rates to drop for both treasuries and the mortgage market.
What has that done to the market? If you look at today’s rate, we’re hovering a little bit below 3.5% for a 30-year fixed note. In 2018, they were as high as 5% on the same type of loan.
So, is it a good time to buy a home? Let’s examine this question through the eyes of a buyer in the DC metro area. Most of them are using mortgages, so for the sake of example, let’s assume the buyer is purchasing a home for $750,000 with a 20% down payment.
With a 5% interest rate like we had last year, the buyer’s mortgage payment would have been $3,932, including principal, interest, taxes, and insurance. With today’s rate, the mortgage payment would have been somewhere around $3,411, which is about $500 in savings.
“If you’re planning to buy a home for the long-term and you make a smart choice, now is a great time.”
So what happens if the market recedes? How long would it take for someone to make that up?
With a 5% interest rate, in order for you to have the same mortgage payment on that $750,000 house at our currently lower rate, the price of the house would have to drop down to $634,000!
In the end, if you’re planning to buy a home for the long-term and you make a smart choice, now is a great time. In future blog posts, we’ll discuss how we further ensure that with either pre-builds (which give you a really good discount in the new construction market) or builder closeouts. We’ll also talk about how we buy wedge deals—those deals in a neighborhood that performs really well but is cosmetically a little bit off.
In the meantime, if you have any questions about buying a home or real estate in general, don’t hesitate to reach out to me. I’d be glad to help you.