Will we ever see the Washington, DC real estate market simmer like it did in 2021? After COVID-19 limited home transactions in early and mid 2020, housing absolutely boomed in 2021, with new price records set regularly. DC real estate trends may be similar in 2022, but there are key nuances that both buyers and sellers should be aware of.
Below, you’ll find a brief summary of three market conditions that will set the market’s tone in 2022, plus a look at three things homebuyers are looking for in an environment where the pandemic is lingering and remote work is proliferating.
As always, if you have any questions about buying or selling in and around Washington, DC, the Lockard + Smith team is here to help. Please get in touch with us if we can answer any questions or provide any guidance related to the local real estate market.
DC Market Conditions as We Enter 2022
What key market conditions will drive Washington, DC real estate in 2022? You’ll find that many of the same market conditions that drove prices sky high in 2021 still exist. That said, other market conditions will provide balance and perhaps keep prices from rising at the same rate as last year.
1. Low Inventory
We’re experiencing low inventory in Washington, DC, just like in markets around the country. Across the nation, the number of overall home sales fell 57% between December 2019 and December 2021, according to Realtor.com. With fewer homes on the market, it’s only natural that prices would skyrocket. In Washington, DC, there were 340 detached homes for sale in November 2019. That number fell to just 167 in November 2021, mirroring the nationwide trend.
2. Moderately Rising Prices
Washington, DC’s median sales price leapt from $680,000 in November 2020 to $725,500 in November 2021 — a 6.69% increase. These aggressive price increases were driven by the aforementioned lack of inventory, plus record-low interest rates. Add in a growing corporate presence in the Washington, DC area (like Amazon’s second headquarters), and you have a recipe for skyrocketing prices.
Prices will continue to rise in the Washington, DC area, but we should see them rise more slowly than between 2020 and 2021. Realtor.com’s chief economist is predicting 3.8% growth in Washington, DC real estate prices in 2022. What’s tempering growth? Possible changes in interest rates.
3. Possible Interest Rate Increases
Thirty-year, fixed-rate mortgages had never averaged below 3% for a full year — until 2021. We heard after the Great Recession that interest rates could only go up, but the pandemic has kept interest rates at record lows. The combination of limited inventory plus record-breaking interest rates created a highly competitive environment where it wasn’t unusual to see long lines snaking out of homes during open houses.
Look for interest rates to rise into the 3.5–3.75% range in 2022. While that may not sound like a huge jump (especially for older buyers who remember the double-digit interest rates of the 80s), it’s enough of an increase to slow down price growth ever so slightly.
Keep in mind that the most competitive neighborhoods in and around Washington, DC get a lot of all-cash buyers — far more than the national average. For example, about 16% of all Washington, DC homes were bought with cash from January to October of 2021. But, in Georgetown, 33% of all homes were purchased with cash. Of course, all-cash buyers aren’t concerned with interest rates, so areas with more cash buyers may experience more price growth.
What Buyers are Looking for in 2022
Just as the pandemic (and other factors) have changed Washington, DC’s market conditions, they have also shifted what buyers are looking for in a home. What characteristics are most important to buyers in 2022? Here’s a look at three of the most prominent things that interest buyers.
1. Square Footage
It’s only natural that buyers would look for more square footage in a world that has experienced the COVID-19 pandemic. This is especially true in dense urban areas like Washington, DC.
When the pandemic first started and public spaces began closing, anyone living in a smaller condo or apartment in the heart of the city would have struggled more than someone living in a single-family home in the suburbs. With the emergence of the Omicron variant of COVID-19, it looks as though we’ll be dealing with the pandemic in some form over the long-term. For that reason, buyers will continue to look for more space.
In many cases, buyers want more square footage so that they can set up productive home offices. In 2022, companies will continue establishing fully remote or hybrid policies — hybrid being work in-office two or three days and work at-home two or three days each week. Again, it’s hard to carve out productive work space in a home with limited square footage.
2. Outdoor Spaces
About 85% of homeowners are more willing to invest in outdoor living spaces now than before the pandemic started. We’re talking about patios, pergolas, swimming pools, firepits, etc. Again, this makes perfect sense in light of what we’ve experienced since March 2020. When the pandemic first started, almost all public spaces closed to some degree: seating areas and water fountains in parks, zoos, football and baseball stadiums, patio seating at restaurants, plus more. In light of these closures, homeowners decided to create their own outdoor living spaces.
Outdoor living areas add space to homes as well as value. Outdoor spaces are also known to have significant physical and mental wellness benefits. It’s only fitting that anyone searching for a new home in 2022 would be interested in livable outdoor spaces.
3. Light
Lighting is also more important in 2022 than ever before. It all ties back to the pandemic, of course. Natural light makes a home feel larger, and natural light also improves mood, energy and productivity. As we’ve all spent more time in our homes over the past two years, the emphasis on and need for proper lighting has grown in importance, too.
Lockard + Smith: Your DC Real Estate Experts
A home is typically the largest single investment an individual, couple or family will ever make. It’s important that buyers get exactly what they want from a new home, and it’s just as important that sellers maximize their value during a sale.
At Lockard + Smith, we specialize in helping DC-area buyers and sellers get what they want from a home transaction. Whether you’re looking to buy in a competitive market or looking to sell at the best possible price, we can help you achieve your real estate goals.
Get in touch with us to schedule a brief conversation about what you’re looking to accomplish in 2022.