Real Estate In The District
The Washington DC Spring 2024 Market You Didn't Expect
February 25, 2024
Why Are Interest Rates Going Up Instead Of Down?
The spring 2024 Washington DC real estate season is off to a slow start as interest rates top 7%. Industry blog posts trumpeting a return to the competitive pre-2023 market in the District were clearly written before mid-February, when the PPI (Producer Price Index) report release revealed a +0.3% increase when economists were expecting only a 0.1% rise. Monthly PPI reports are an inflation indicator. Core CPI increased by 0.5%, also much higher than forecasted. It was the second consecutive surprise CPI report showing an upward trajectory of inflation. The 10 year treasury yield rose to 4.28%, and the 30 year mortgage rate spiked to 7.2%.
This had an immediate impact on the Dow Jones Industrial Average, which dropped 525 points. The average rate for 30-year fixed mortgages then rose to 7.14%, according to Mortgage News Daily, and loan applications fell 2.3%, the Mortgage Bankers Association reported.
Where We Are Now
With the Fed holding fast to its 2% inflation goal and rates back up over the mid-6's, the Washington DC real estate market is stuck in the same holding pattern that brought activity to a halt in late 2023.
Homeowners need to see a significant drop in rates before giving up their historically low mortgage rates. Nationally, over 40% of homeowners don't have a mortgage at all, and a a majority of those who do refinanced when rates dropped to record lows from 2020 to 2022. In the District of Columbia, where real estate prices are high, there's little incentive for those homeowners to enter the selling market.
Finding A Win
Because there are always moves necessitated by job and life changes, we will still see new listings come on market, but with pent-up demand, competition may erase many benefits buyers might have seen from challenging market conditions. The best course for home buyers who can't wait out the Fed, is to utilize alternative financing programs and refinance in 2025, or pay cash.
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