The pandemics of 2020 real estate performance numbers are formally in and guess what? The DMV market had yet another record-breaking summer. In July 2020, the mean price of a DC-area home increased by a whopping 13%, setting a ten-year record. What does it mean for the local homeowners and real estate investors? It means that those who purchased a home in July 2019 just got $26K wealthier – by doing essentially nothing.
Of course, “doing essentially nothing” does not apply to rehabbers who purchase distressed properties at below-market prices and rehab them for profits. As DC hard money lenders, we have a rule for our borrowers: do NOT count an appreciation while estimating your after-repair value. Still, the 13% appreciation is a significant tailwind. More significantly, the DC-area real estate market experiences such tailwind year after year, despite the housing crisis, recessions, and pandemics alike. It has been showing steady appreciation rates from July 2010, when the average sales price was $374,000, to the most recent $470,000 in July 2020.
To a large extent, the record appreciation rates of Summer 2020 are the results of the low supply of properties offered for sale. As it’s often the case in the affluent markets, the inventory levels declined as the sellers watched warily for any negative news. I remember the early days of the pandemic clearly. The world seemed to stay still, with both buyers and sellers reluctant to make the first move.
In hindsight, such pauses offer unique advantages. Some of our borrowers made a bet on the overall health of the economy and the strength of DC real estate market in particular. The fact of the matter is that not everyone was in a position to halt selling. For instance, wholesalers who put a property under contract in early March 2020 had no choice but to unload it. And what do you do when you suddenly face the dwindling demand? You lower your price. I am typically not a big fan of the wholesale channel, but between March and April 2020, a few of our borrowers snatched the wholesale deals with unbelievably high-profit margins. As Garry Kasparov quipped: If you don’t risk, you don’t drink Champaign.
Now that the initial fears on the Covid-19 impact on the local economy have subsided, we are back to normal. The volume is up by more than 7% (as compared with Summer 2019), and the new listings are up by more than 20%. The competition is fierce again. No market, even the DC-area market with all its health and splendors, offers a quick and easy path to riches. Yet, we are fortunate to live, work, and flip homes in the area that continues to provide strong fundamentals to build long-term wealth through real estate.
Our private hard money loans in Maryland, DC, and Virginia are specifically designed to help capture local real estate investment opportunities. They offer quick and easy access to private funds to help borrowers purchase and rehab properties. So get out there and make offers. Autumn is an excellent time to lay the foundation for the profits to reap in 2021! As a private lender in the DC area, we have your back with local competence, exceptional pricing, and fantastic personal service.
