Market will recover this year or next
By Jackie Friedlander
Today's guest is Maureen O'Hara, vice president and associate broker at Long & Foster of Reston. After a successful real estate sales career, Maureen became a manager for Long & Foster in 1988 and has consistently won its Manager of the Year awards for many years.
Q. What market fluctuations have you seen since becoming a manager 20 years ago?
A. This is the third down market that I have witnessed, and the market always comes back. Twice before, in the ’80s and in the ’90s, three down years were followed by three strong years, if not more. Therefore, we are looking for a stronger market, if not this year, next year.
Although all real estate is proverbially local, the world economy is now affecting many areas of our lives, so the market is a little more unpredictable.
Most of us feel we have hit bottom here in Northern Virginia. The media keep reporting what is happening around the country, in areas that are in much worse shape than Northern Virginia, and this has traumatized most buyers and sellers.
Homes are selling and people are buying. The media speaks to the national real estate market and not necessarily to the local market. In this area, this is a great time to buy.
In most downturns that I have seen, interest rates were high and prices were lower. Today we have low prices, low interest rates and a huge supply of homes. All these points make this an especially strong buyer’s market.
Cycles do not concern me because the market always has come back and it will.
Many people are renting and rents have gone up quite a bit. When the renters realize that they are spending a lot of their income for rent, they will want to buy for the tax benefits and the long-term investment.
We see that our open houses are very busy, and that is always an indication that people are out looking for homes. Last fall we did not see that, but there is a lot of activity now. This is an indication that the spring market will be strong.
Everyone was very spoiled by the sensational upswing in prices we had in 2002, 2003 and 2004, when homes sold in hours and with multiple contracts. This market could not have lasted, and we are now in a correction. However, there is a larger selection of homes, and prices and mortgage rates are down and sellers are willing to negotiate. The buyers are now in the driver’s seat
There are other differences between the earlier market slowdowns and now. We now have foreclosures and short sales. We did not see many of them in the previous down markets. There are many great investment opportunities because of the foreclosures and short sales.
Q. How is the situation different for different areas and price ranges?
A. The hot areas are Arlington, Alexandria and parts of Fairfax County like Reston because they are closer to the major workplace centers. Almost 25,000 homes sold in just these jurisdictions in 2007. The cost of gasoline has buyers and sellers rethinking moving far from their workplace because long commutes are more expensive.
Homes under $500,000 seem to be doing just as well as those over $1 million in these areas. The move-up market is not doing as well, and getting loans is difficult but not impossible. This "move-up market" ranges from about $500,000 to $1,000,000. Amazing, but we still do get multiple contracts on houses that are priced right and are in great condition.
Many people seem surprised to hear that there is good mortgage money out there. Financing can be a problem for some, but not all. The better your credit, the easier it is to get a loan. Federal Housing Administration loan limits have just been increased to $729,750.
That is amazing!
In short, it is really a wonderful time to buy real estate. It is the first challenging market where prices and interest rates are low and a lot of people are not aware of that. Looking at interest rates over the last 30 years, they are almost at record lows.
Over the long run, you are much better off buying a dwelling than renting. People who buy and stay in a home for three to five years or longer will not lose money. If you look at the history of sales prices, people who invested in real estate over the long term are 9 to 10 percent ahead than if they had invested those same dollars in the stock market.