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Dealing with the Affordability Crunch in Washington Area Home Buying
According to the U.S. Census Bureau, approximately 1,500 people move into the Washington area each week. By 2027, there are projected to be 1 million more residents—all needing someplace to live. The region's desirability, booming success, and continuing growth has led to increasingly rising home prices and lower inventory. As a result, more families looking to buy a home in the Washington area are running into "affordability crunch."
The median home price in the Washington DC area is $371,772, well above the national average of $211,731. That's why some prospective buyers moving into the area experience "sticker shock" once they start looking. Shrinking inventory levels can mean stiff competition. To further compound the squeeze, little is being done to create entry level affordable housing. That's because developers can often build higher priced luxury homes, townhomes or condos on the same footprint and make two to three times the profit.
Because of these market dynamics, many buyers are seeing their dreams of home ownership becoming more and more elusive.
While there isn't a single answer for dealing with the affordability crunch, there are some strategies that can help prospective buyers.
Manage Expectations and Plan a Strategy
Today's buyers need to enter the process with their eyes open. This means knowing what they can afford; what they will need as a down payment; and what to expect throughout the process. From a strategic standpoint, buyers should get pre-qualified for their loan in advance, which will give them a stronger negotiating position.
Make it a Family Affair
One of the biggest challenges is the perception that first-time buyers need to come up with a 20 percent downpayment. The most common trend among younger buyers is to go to their parents or relatives. Parents, relatives, or even friends who can afford it will either gift the down payment funds or gift the money as a low-interest loan. Either way, the terms will be more favorable than the bank, and will get the buyer over the down payment hurdle.
Location is Number One… Until it's Number Two.
Most buyers will start their search with a specific neighborhood or area in mind. However, the reality might be that there aren't homes available that they can afford. Sometimes the solution is a shift in location. By driving another 15 or 20 minutes the buyer may be able to save tens or hundreds of thousands of dollars. One strategy is to start the search at the center of the targeted neighborhood, then work outward in concentric circles.
A Little TLC Can Go a Long Way
With fewer affordable homes being built, many buyers have had to turn to transitioning neighborhoods. These neighborhoods, which just a few years ago might have been considered undesirable, are often a good source of affordable homes. Thanks to the popularity of home renovations shows on HGTV, more buyers are willing to consider properties that might need some work to be transformed into their dream home. Having a walkthrough with a qualified contractor and/or designer can help the buyer come up with a budget and visualize the end results.
Scarcity of affordable housing has driven some buyers to be more flexible and creative in their search. This includes everything from conversions to tiny homes. Agents and their clients should keep an eye out for these options during the search.
Special Financing, Grants and Other Sources
Some buyers may qualify for special loan programs, such as those set aside for veterans or special needs. Certain properties may also come packaged with financing incentives. Grants can also be an untapped funding source.
What's on the Horizon?
In the coming years the area will only continue to grow as hundreds of thousands of people move here. There are a number of encouraging plans, programs and developments underway that will help accommodate the influx.
· Metro Expansion -- With the addition of the purple line and stations as far out as Ashburn, the Metrorail system will expand significantly over the next decade. Because housing is comparatively more affordable in these further out areas, buying in those areas now could be a smart investment that pays off in a few years.
· Residential Developments – There are a number massive development projects underway or upcoming that will add tens of thousands of new homes across the region, such as along the widening I-66 corridor, and expansion and revitalization in Leesburg. Some municipalities are requiring developers to include affordable housing as part of their plans.
· New Designs and Technologies -- Designs for "micro apartments" and "micro condos," which have long been popular in higher priced cities like Tokyo and San Francisco, are starting to catch on in Washington, DC. Micro-unit projects are being planned for some of the city's most appealing neighborhoods such as The Wharf development in Southwest D.C (https://www.tripsavvy.com/
With thousands of individuals and families moving into the area every month, the Greater Washington Metropolitan Area real estate market will only continue to grow. While the real estate affordability crunch shows few signs of reversing, there are strategies that can help many buyers overcome the hurdles—from widening the geographic search area or finding a property that needs a little work… to asking a parent to help with the downpayment or getting qualified for a special financing program. AveryHess agents are constantly staying current on the market trends and opportunities, so that we can turn prospective home buyers into satisfied home owners.
Founded in 1992, AveryHess, Realtors® is an independent real estate brokerage that operates in eight offices serving Washington DC, Maryland, and Virginia. With more than 180 agents, the company is committed to providing the best services, market knowledge, technology, and support to its clients Every Step of the Way.