We know solar panels are increasingly being added to properties to cut down on energy costs and reduce emissions from other heating sources, but does that translate into value for homeowners?

A reader of The McEnearney Blog recently asked us a question about the resale value for homes with solar panels. Did it help, hurt or have no impact at all?

It wasn’t as easy a question to answer as we thought. 

When we last addressed the topic of solar panels in 2020, it was a topic garnering a lot of discussion but not a lot of clarity about what impact it had in the housing market. And while there has been plenty of homeowner education about other popular green tech in properties – such as energy-efficient appliances, sustainable construction material, improved insulation – the insight on solar panels remains clouded as to what that means in actual dollars for home value.

Each year the National Association of Realtors® releases a report on sustainability issues facing the real estate industry. The 2023 REALTORS® and Sustainability Report – Residential was released in May and showed that a majority (63%) of agents and brokers said promoting green technology in listings is “very” or “somewhat” important. 

When it comes specifically to solar’s value to a home, 34% (a 2-point drop from 2022) said properties with solar panels increased the perceived property value, compared to 17% who said it decreased value and 29% that said they had no effect (19% said they didn’t know the impact on value). Also, 38% of agents and brokers said that days on market was neither longer nor shorter for properties with solar panels and 37% believed the difference in time on the market due to the solar panels was unclear. 

The green home features that Realtors® believed were most important to clients include windows, doors and siding (39%); proximity to frequently visited places (37%); a comfortable living space (37%); and a home’s utility bills and operating costs (25%). Solar panels don’t make the cut of top features cited.

However, of the top five (out of 12) sustainability issues facing their markets, four were questions about solar panels with most agents and brokers citing the need to understand how solar panels impact a transaction (35%), understanding lending options for energy upgrades or solar installations (33%) valuation of solar panels on homes (32%) and the lack of MLS data about home performance and/or solar installations (25%). 

In short, there are still a lot of questions about how solar panels are impacting home values and for a feature that can cost anywhere from $16,000-$23,000 to install. So, we asked some of our McEnearney Associates to tell us about their experience with solar panels in the Virginia, Maryland and DC markets.

Christine Robinson works in Virginia and said consumer education will go a long way to having homeowners experiment with solar technology. When her clients finally found a home that fit their needs, it came with solar panels and also with a lien against the property for the solar panels. The buyers didn’t want to assume the loan for the panels so the sellers had to pay it off before closing. And the listing agent wasn’t knowledgeable about how the solar panels worked so it was up to the buyers to educate themselves about the pros & cons.

Several years ago, even Robinson’s client who is a LEED professional with a background in green technology found it difficult to get clarity on how to get solar installed with new construction, and even harder to get information about solar installations in existing homes. 

“I feel strongly that consumers want this type of product but it’s more involved than just dropping panels onto the home,” Robinson adds, running through a list of considerations to keep in mind. 

“What upgrades may I have to consider for my home installation? What are the rules in my state? How will it affect my insurance? What safety precautions regarding energy storage, battery back-up, fire suppression, and local utilities do I have to consider?” 

Sometimes there are issues with solar panels that have nothing to do with energy supply. Jillian Keck Hogan works in all three jurisdictions and said most owners are indifferent as to whether the panels added value to their home, they installed them for personal reasons. However, the results aren’t always positive.

“We just listed a house for sale/rent in DC that had solar panels and during the listing process we discovered that the installation had caused damage to the roof and led to water damage during rain storms,” Hogan shared. “The company was good at coming out for repairs but it still doesn’t feel like it was contributing to the home in a positive way besides the advantage of a low electric bill and a potential positive environmental impact.”

And for some buyers, it’s simply a no-go. Bob Shaffer, an agent who works in DC and Maryland, has had buyer clients who were definitely “turned off” by solar panels (no pun intended!) “My clients do not take a liking to solar panels and avoid homes with them, even if there were other elements in a home that they liked,” he said. 

Some other tips from agents:

– Pay for the upgrades on solar panel roof installation. Just like any home improvement project, there are upsells that will add extra costs but are worth it in the long run. For example, spring for the barriers that will prevent animals from nesting under or damaging solar connections.

– Be sure to check for tax incentives regarding solar or green technology, including those in your local jurisdiction

– Check out this recent segment on WAMU’s 1A radio program that discussed the Inflation Reduction Act and solar energy incentives.

Take a look at our website for all of our listings available throughout Washington, D.C., Maryland, and Virginia.

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This week we would like to share some insight from our partners at Luxury Portfolio.

Women account for 54 percent of luxury homeowners under 35, indicating a significant female presence in the purchasing of luxury real estate.

Per a new study from Luxury Portfolio International, more women are climbing the corporate ladder and achieving financial success on their own, with an equal percentage of men and women in corporate leadership – 48 percent – reporting that they hold executive leadership positions. This is reflected in the changing demographics of luxury homeowners.

“Affluent young women are on trajectory to level the playing field, wielding purchasing power, wealth accumulation, education and corporate positions to make serious real estate decisions earlier in their life,” said Mickey Alam Khan, New York-based president of Luxury Portfolio. “This has major ramifications for brands and retailers targeting homeowners and the luxury property sector.”

A Family Affair

Luxury Portfolio’s research has unveiled some interesting changes and value differences amongst Gen Z and younger millennial luxury consumers.

While men continue to dominate luxury homeownership in older age groups (59 percent of those 35-64), women make up 54 percent of luxury property owners under 35. Forty-eight percent of younger women also report holding executive positions at work.

Family dynamics are changing, as well, with more consumers under 35 remaining single (18 percent) and only 77 percent reporting that they are married. Only 6 percent of the older age groups say they are single and 88 percent are married.

Despite this difference, the younger age group seems to hold higher “family values” than their older counterparts.

While 68 percent of both groups want to ensure generational wealth, 92 percent of those under 35 said they prioritized family financial security versus 87 percent of older homeowners, and 65 percent of those under 35 wanted to provide ongoing financial security for their family versus 56 percent of those 35 and up.

The younger age group also owns more extended-family properties – 52 percent of them do, in fact, compared to just 38 percent of older homeowners.

Priority Shifts

When it comes to sustainability, all age groups take small steps, such as using reusable bags and water bottles.

But younger generations are more willing to take big leaps at home: 74 percent said sustainability is a major factor in their home search criteria and 52 percent will pay more for sustainability features, compared to 62 and 47 percent, respectively, for the older generations.

Most luxury homeowners surveyed (91 percent) are considering making more real estate investments.

Multi-family apartment buildings are a popular choice with all age groups.

Interestingly, younger buyers also invest more in office properties (45 percent vs. 37 percent) and properties in college towns (22 percent vs. nine percent). Those under 35 are also looking for vacation homes at a much higher rate.

Unsurprisingly, younger consumers are much more interested in owning digital or metaverse property – 25 percent do so, while only 19 percent of older consumers do.

Agent Advice

For real estate agents looking to tap into the market of younger homeowners, they should look no further than these consumers’ favorite luxury brands for inspiration.

While both age groups expect name recognition from their brands of choice, younger generations put high importance on originality, exclusivity, reputation and social responsibility.

When it comes to the skills their agent possesses, all age groups reported similar interest in a real estate professional who has access to exclusive services, attention to detail, a digital marketing strategy and knowledge of the local market.

However, younger homeowners showed a significant preference for the brokerage’s brand affiliation (38 percent vs. 28 percent) and their agent’s ability to use high-tech tools (32 percent vs. 19 percent).

Younger consumers also look to social media for property content such as photos and videos of homes and a behind-the-scenes peek into the luxury market.

However, the digital sphere will not replace in-person visits or the importance of agents any time soon. Forty-three percent of those under 35 also said they prefer a real estate professional as a resource.

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Seeking perfection is noble but it could cost you in this market.

We’ve all read the industry reports and heard buyers’ distress about the lack of inventory in our area. Interest rates have stabilized but are still much higher than what’s been available for most of the last decade. Listings are few, competition is fierce and homes are getting snapped up at top dollar. In a very hot seller’s market, what’s a buyer to do?

Enter “The 85% Perfect Home.” In the HGTV-era, this challenges the notion that the “perfect” home is out there and that all a buyer has to do is wade through multiple listings to find “The One” that will deliver exactly what they want. But this kind of thinking can lead to buyer frustration because holding out for perfection can often mean missing out on an otherwise great home.

As we reported in an earlier article, even in this hot seller’s market more than half the homes on the market are taking more than two months to sell and are selling at a discount. That’s a lot of inventory that’s being overlooked in the pursuit of perfection.

McEnearney Associates recently held a panel with a number of agents to brainstorm ways to help clients find properties that are within their budget, fit with their timeline, and helped solve their housing needs. Here are suggestions from our agents who have successfully helped their buyer clients get unstuck from the belief that the home had to be perfect to be theirs.

Rebecca McCullough

Don’t get stuck on things that are beyond your control like rising interest rates and limited inventory. Figure out what you can afford now. If you are motivated to move, you buy within those means. If last year that was a $1million house and this year it’s an $800,000 house, that’s just the way it is. Stop living for last year’s market.

Renneye Pike

Bring a foldable paper template of your largest or can’t-live-without pieces of furniture that includes the floor parameters as well as height dimensions. This will allow you to see if the house fits your needs logistically but it can also give you an idea of how you will live in it.

Kate Crawley

Is this home meant to be your “Forever Home” or is this a stepping stone? Younger buyers can expect life changes that mean they’ll be shopping for a larger home or taking a job in another area sooner than they expect.

Shagufta Hasan

Think of the “Pareto 80/20 Rule” and how it applies to how you’d live in your house. If 80 percent of your time is spent in 20 percent of your dwelling, then focus on the spaces that you will be using the most. For example, don’t elevate the importance of a dining room if you’re only using it for special occasions.

Gordon Wood

Especially for buyers who move here from less competitive markets, reaching even 70-80% in a home is a win! You can learn that in the first week, or you can take a year to learn that lesson. But there’s a chance that you will miss “The Right Home” by searching for “The Perfect Home” for too long.

Another good suggestion is that buyers can also enlist the advice of a contractor to help see past the current floorplan and price out changes big or small that could make the property fit what you’re looking for. Just having an expert set of eyes to envision how moving a wall here or a doorway there can open up possibilities that are within your budget. Agents have these contacts at their fingertips so don’t be afraid to ask!

Buyers have many concerns that can prevent them from buying a home: paying too much, buying a home that’s not in good condition, missing out on a better property, and more worries. These are valid reasons to keep looking but it’s as important in homebuying as it is in life to know that perfection is almost always unattainable.

Make the best decision with the information and circumstances at this moment and heed the advice of experienced agents who are here to get you into a home that you can make just right for your needs.  

Take a look at our website for all of our listings available throughout Washington, D.C., Maryland, and Virginia.

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Tapping into monetary gifts and family financing can be a creative – and caring – way to help loved ones get the home they want.

Real estate is one of the most effective ways that families build, generate and protect their wealth. Home appreciation offers cash equity, vacation and investment properties bring consistent revenue streams, and multigenerational living allows extended family to share expenses.

But with rising home prices, interest rates the highest they have been in a generation, and a lot of graduates carrying significant college loans (often for decades), it can be difficult if not outright impossible for new buyers to fund the purchase of a first home. According to the most recent report from the National Association of Realtors, the share of first-time home buyers in 2022 dropped to a record low of 26%, while the age of a typical first-time buyer increased to an all-time high of 36 years old, in part due to the time it takes to save for a down payment. 

So, how can parents, guardians and caregivers help the next generation get to that first rung of the home investment ladder? Here are a few important family financial strategies that can guide cash-strapped relatives to the home of their dreams.

Family as Landlord – It’s often the lament of would-be Empty Nesters: a kiddo moves back home after school, during a break-up, or, more recently, into a COVID-19 bubble and just never left. Yet, all this togetherness can be a great opportunity for lessons on budgeting, saving and investing. Assuming your live-in lodger has an income, charge a small but fair amount for rent and household expenses that will be put into savings or an investment account to be used as a down payment. It may take time for this nest egg to grow but with each deposit the goal of moving on will be closer and the practice of regular saving will pay off in the long run.

Give Money – Monetary gifts for a down payment are the easiest way to assist a family member with a home purchase and can be tax free within IRS guidelines. Gifts must come from immediate family – parents, siblings, grandparents, spouse or even a partner (if engaged to be married) – and there can’t be a plan for repayment, so nothing with “strings attached.” This will be spelled out in a gift letter that will be shared with the lender. Current monetary limits are $15,000 per person buying a home, meaning if a purchase has two buyers then there can be $30,000 in gifts. Discuss any gifts with your lender to ensure they are documented properly and used accordingly.

Finance the Mortgage – Someone looking to park their cash in real estate can make it work for the greater family good and act as the lender, funding the purchase but without additional fees and a reduced interest rate. Family lenders must charge at least the Applicable Federal Rate (AFR), the minimum interest rate required to keep the assistance from being considered a gift. These rates are almost always much less than the current market rate and are three AFR tiers based on the repayment term of a family loan:

1. Short-term rates, for loans with a repayment term up to three years.
2. Mid-term rates, for loans with a repayment term between three and nine years.
3. Long-term rates, for loans with a repayment term greater than nine years.

Rates change monthly. For example, the short-term rate for May 2023 is 4.30% (for April it was 4.86% and for March it was 4.50%); mid-term rate for May 2023 is 3.57% (for April it was 4.15% and March was 3.70%); and long-term rate for May 2023 is 3.72% (for April it was 4.02% and March was 3.74%) (Figures from NationalFamilyMortgage.com as of April 24, 2023). Before finalizing a family loan be sure to consult with an accountant or tax authority for any potential tax liability.

Co-Sign the Mortgage – Being a signatory on any debt can have risks, but sometimes it’s the fastest way to get to the settlement table. When co-signing a mortgage, the bank will take all borrowers income, assets, debts and credit worthiness into account and hold all parties equally liable. This is where having a clear and mutually agreed upon plan is critical as missed payments or a default on the loan will negatively affect all parties. Co-signers do not have to be on title, but it might be in their interest to be named on the deed so that they are co-owners and not just co-borrowers, giving them more say in management of the home as an asset.  

Family as Landlord, Part 2 – Buying a home for a relative to rent is another win-win option, especially if the payment is going to a rent-to-own situation where a portion of the rent is banked toward equity in the home, or for down payment on the purchase of another property.  For example, parents who buy a home and allow their child to live in it might be able to take tax deductions on property taxes, mortgage interest, repairs, maintenance, and structural improvements. Check IRS guidelines to determine rent requirements vs. personal use so there are no tax surprises.

It Takes a Village – It’s not for everyone, but bringing several relatives under one roof can be a windfall in more ways than one. Multi-generational living is nothing new, with benefits like convenient & trusted childcare, shared expenses and the ability to “age in place” giving families support and a safety net to help through life’s joys and challenges. Pooling resources among relatives increases buying power and can offer different options for what the living structure will look like: a larger traditional home, a multi-unit building where the family lives in one part and rents out the other, or a large tract of land where family dwellings can be built close together and share a common space.

As with any financial arrangement, it is important that all parties are clear about expectations and responsibilities. This is even more important with family members where emotions and personal history can have an outsized influence.

But when looking at ways to help the next generation get on the road to home ownership, sometimes it is the case that “family knows best.”

Take a look at our website for all of our listings available throughout Washington, D.C., Maryland, and Virginia.

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If you know how to read them, sales and inventory statistics reveal what is really happening in the local real estate market.

Listening to the news, it’s easy to be confused about what is really happening in real estate. Some analysts predict a crash, others say there’s no end in sight to rising prices, and others hold their fingers to the wind and take a check whenever interest rates rise and fall.

But if you are a buyer or seller and want the best strategy for your needs, where do you get real answers?

David Howell, McEnearney Associates’ Executive Vice President & Chief Information Office, gave a deep dive discussion on statistics to help address the questions and concerns that clients are sharing with their agents.

 “It’s easy to get discouraged if one is a buyer or seller by some of the national headlines and media that talk about how terrible the market is,” Howell observed of news coverage of rising interest rates and other challenges, but he noted that, “We have the good fortune of being in a metropolitan area that is probably among the strongest residential real estate markets anywhere in the country.”

 “We don’t want clients to make decisions based on fear or inappropriate information about what’s really going on in the market,” Howell said. There are still opportunities at every level of the market to make a great deal come together, if you know where to look.

 Here are a few of the takeaways.

 Is the DC/MD/VA Housing Market Really Crashing?

The DC-Metro area is one of the strongest housing markets in the nation, thanks to many factors including our employment anchors – government, technology, military, media – that keep people moving steadily into and out of our region. Howell shared that our region was never as overheated as some markets elsewhere in the country like Austin (ex: recent +350% increase in inventory should push prices down), Phoenix, Las Vegas and others.

 Looking at Northern Virginia in February, for example, 43 percent of homes sold at or above the original list price. Howell added that at this time last year housing inventory was at less than a half-month’s supply and that still remains the case today. A four-month supply of housing is generally considered the threshold of a “balanced” market and we are nowhere near that in any price point in any jurisdiction throughout our region, Howell shared. DC has the highest at 2.2 months inventory.

 “This is in fact a Seller’s Market,” Howell said. “Buyers need to know that in terms of negotiation strategy, sellers need to know it because it’s an incredible opportunity if they price right.”

 Price Matters & Time Kills

Even in a strong seller’s market, proper initial pricing is more important than ever before. “If you price it right, you’re likely to be rewarded in a significant way. If you price it wrong in the beginning, you’re likely to get hammered in a significant way,” Howell said.

 And if a listing is not getting offers within the first three weeks, the market is telling you that the price is wrong.

 For February 2023, in Northern Virginia 43 percent of homes sold an average 3 percent at or above list price in an average of 13 days, while the remaining 57 percent of homes sold an average 5 percent below list price in an average of 63 days. In other areas the numbers showed a similar trend, with an overall difference of about 10 percent between pricing right and pricing too high:

• DC – 27 percent of homes sold an average of 3 percent above list in 21 days while the remaining 73 percent sold at nearly 7 percent below list price and in an average of 85 days.
• Montgomery County – 44 percent of homes sold an average of 4 percent above list in 12 days while the remaining 56 percent sold at 6 percent below list price and in an average of 64 days.
• Prince Georges County – 27 percent of homes sold an average of 4 percent above list in 19 days while the remaining 73 percent sold at more than 5 percent below list price in an average of 56 days.
• Loudoun County – 44 percent of homes sold an average of 3 percent above list in 14 days while the remaining 56 percent sold at almost 6 percent below list price in an average of 64 days.

 And it’s not just the sales price that some sellers took a hit on, Howell noted. When you factor in the months of carrying costs (mortgage, taxes, utilities, homeowner fees, etc) sellers who initially overpriced their home netted significantly less overall.

 Buyers, Don’t Give Up!

The combination of rising home prices and rising interest rates means that buying a home in this area today is about 40 percent more expensive in terms of monthly costs than a year ago. It’s no surprise there’s been a drawback in buyer activity, simply because many people have been priced out of the market.

 And Howell said, with few exceptions, prices are not coming down. “The inescapable reality is there is not enough quality supply to reach the limited demand there is… If you believe that home prices are coming down, it’s OK to have that belief but the data does not support that belief.” And waiting could be a very expensive mistake.

 But, looking at the statistics above about pricing, more than half of the homes on the market are taking more than two months to sell and are selling at a discount. Consider searching for homes that have been on the market longer than three weeks for an opportunity at a price reduction and better negotiating terms, like home inspection and other contingencies.

 One Last Stat About Off-Market Sales

BrightMLS, one of the largest Multiple Listing Service databases in the industry, tracks listings and sales and is a wealth of statistical data. Off-market sales — properties sold without being listed through an MLS or sold privately or without the assistance of an agent – account for 15 percent of the market and are by nature difficult to track. However, Howell shared that from the data BrightMLS has collected, 80 percent of homes that initially started as “private exclusives” end up as active properties in BrightMLS and do not sell off-market.

 Howell added that Bright MLS and external research partners examined differences in the prices of properties sold on and off the MLS and concluded that listings available to the public netted 16 percent more going through MLS than selling off-market. Howell explained that this doesn’t mean that off-market sales aren’t right for some sellers, but statistics show that sellers will net more money by listing their home publicly than only to a small subset of buyers.

 Remember, when you hear doomsday national media declare the real estate market is in dire straits, there is no such thing as a “national” real estate market…all real estate is LOCAL! Keep track of what’s happening in your market with McEnearney’s Market in a Minute, Weekly Meter, Market Reports and McEnearney Blog updates, and consult with a McEnearney Associate to understand the statistics in your neighborhood and be informed, not afraid.

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It’s the news that set Arlington County abuzz and could be coming to a neighborhood near you, but what exactly is “The Missing Middle” and how will it affect local real estate?

After years of debate, the Arlington County Board unanimously voted 5-0 on Wednesday (March 22) to expand housing options in portions of the county that currently only allow single-family detached homes. The changes will take effect July 1, 2023 and per the County press release, the passage of the zoning amendment “will allow for Expanded Housing Options (EHO) development for up to 6 units per residential lot—if certain conditions are met, including the same building height, setbacks, and size as allowed for single-detached homes.”

The initiative came in response to the lack of housing inventory – especially affordable housing; from March 2022 to March 2023 single family detached homes in Arlington sold at a median price of $1,167,000 and an average sales price of $1,315,000 – and encountered passionate discussion for and against the plan. 

Those in favor of the amendment pointed to the fact that 75% of land zoned residential in Arlington is exclusively for single-family, detached homes, leaving a large portion of the population, including many communities with diverse demographics, with limited housing options. Those opposed had concerns about overcrowding, construction that was out of place with existing homes, and declining property values for homes next to multiplex construction. Both sides are unsure about unintended consequences to county infrastructure such as utilities, schools, parking and traffic.

While Arlington County is the first local jurisdiction to adopt a “Missing Middle” strategy, it’s an acute crisis in dense cities nationwide and local governments are moving to end outdated zoning regulations that were often enacted on the basis of racial discrimination and segregation. The Washington Post recently reported “the push to relax zoning rules, first implemented in cities such as Minneapolis and Portland, Ore., marks something of a departure from Arlington’s existing ‘smart growth’ philosophy, which encouraged density along mass-transit lines but generally kept it to a minimum everywhere else.” 

It is expected the “Missing Middle” debate will be taken up throughout the DC-Metro area as inventory continues to decline and more and more buyers and renters enter the market. Demographically, there are at least five generations of buyers or sellers of real estate, ranging from Gen Z (upper range is age 26) to Post War (lowest range is age 78). 

Rising construction costs due to inflation and supply chain issues and recent halts in new home construction (mid-2000’s and the Covid-19 pandemic) means more competition for existing homes while the hike in interest rates in 2022 meant many would-be sellers are staying put. In short, there are not enough homes for the people who need them and the homes that are available are often out of the price-range for Arlington citizens. 

This is a continuing story and McEnearney Associates will be reporting on updates throughout the year.

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This year will shake up how everyone is involved in the homeownership process as consumers, lenders, and Realtors explore solutions to keep the housing market moving at a healthy pace. The days of throwing a home on the market and watching multiple offers roll in is probably a thing of the past, but there are still advantages available to both sides to ensure people can buy the homes that are available, even with rates at their highest in several years.

For buyers, taking an (honest!) inventory of finances and speaking with a lender is the first step. While it is advisable to have a healthy cash reserve when buying a home, the old standard of 20% down is rarely the case today. The National Association of Realtors 2022 study of homebuyers and sellers showed that the typical down payment for first-time buyers was 6% while for repeat buyers it was 17%.

But even with lower requirements for a down payment, buyers will still have to qualify for financing and bring money to closing. What are some options to make every dollar count on the pathway to homeownership?

Rate Buydowns: Buyers over the past several years were treated to historically low interest rates in the high 2-percentiles to low three-percentiles. With rates now in the low to mid six-percentile, diminished buyer power is leading to creative solutions in adjusting where buyers start out with their rate – and where they might end up.

Brian Bonnet of Atlantic Coast Mortgage shared insight into two buydown strategies – one that’s traditional and one that has been sparking conversation among Realtors looking for every option to help their clients. The tried-and-true rate buydown is where buyers lower their interest rate by buying “points” at the time of closing. The lowered interest rate is fixed for the lifetime of the loan and offer buyers a consistent amortization schedule. The “2-1 Buydown” is a temporary rate adjustment where a buyer uses cash to lower their interest rate by 2% in the first year of their mortgage and 1% in the second year of the mortgage, coming back to their full rate at the 25^th month of mortgage payments. For example, the buyer who would qualify at the loans note (which is generally slightly higher than the current market fixed rate – let’s say 7% —  would pay to bring their rate down to 5% in 2023, 6% in 2024 and back to 7% — the rate at which the buyer was qualified – in 2025.

The benefit of this scenario is that buyers will have a cushion of two years before they start paying the fully amortized rate, and the cash can come in the form of a seller credit (see more on this topic below). Bonnet points out that consumers can’t assume rates will drop or that refinancing will be cheaper in 2025, and must think carefully about whether they will be in a better or worse position when the full rate goes into effect.

“Will rates be better after two years? Will you be in a better financial position to account for the increased interest payment? Will you be able to refinance if you aren’t?” Bonnet said the 2-1 buydown option is good for buyers who don’t expect to be in their home long-term, such as a military buyer who isn’t using their VA opportunity and plans to sell at the end of their assignment. “The typical buyer is not a 2-1 buydown consumer.”

Seller Credits: As buyers navigate higher interest rates, inflation and other economic factors, sellers may see homes taking longer to sell and with more negotiating on terms. In some cases a seller chipping in cash can be what gets a deal to the closing table. An example of a seller credit would look like this: A home is listed for $600,000 and gets an offer from a buyer who is putting a little less than 20% down and financing $500,000. Rather than negotiate the price to $590,000, the buyer offers the seller their asking price of $600,000 but asks for $10,000 to help them cover their closing costs. The net to the seller is $590,000 and the buyer is able to qualify for their loan and close with help from the seller.

Down Payment Assistance: Buyers can explore local grants and down payment assistance (DPA) programs that offer financial resources, some based on income and some are available to certain types of workers (ex: HUD’s Good Neighbor Next Door program that offers available homes at a discount to educators, civil servants, First Responders). To see what local monies may be available in your area, check these HUD resources for Virginia, Maryland and DC.

Government-Backed Mortgage Programs: FHA and VA loans are popular government-backed loans aimed at specific types of buyers and with specific criteria to qualify, usually less restrictive than conventional mortgage loans but with their own mandated processes and procedures. And for buyers who aren’t afraid of a fixer-upper, there are FHA 203(k) loans that serves as a construction loan that finances both the purchase and repairs to a home.

Adjustable Rate Mortgages: While these were popular in the mid-2000’s as buyers were trying to qualify for homes as prices dramatically rose, the economic factors aren’t as favorable for ARMs in 2023. Bonnet explained that because the bond markets currently have an inverted yield curve with a very wide spread, ARMs are generally not offering more favorable terms than fixed rates and signs do not indicate that this will improve anytime soon.

In many ways, consumers are back to basics when it comes to buying and selling a home in 2023. Save money, research options, be prepared to get creative, look for ways to collaborate. There is no magic wand when prices are high, inventory is tight and buyers are squeezed. But working with the right professionals like trusted local lenders and expert McEnearney Associates will get you where you want to go!

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Last month we reviewed the Blueprint for a Renter Bill of Rights, the Federal Government’s recommendations for how to make rental housing more equitable and expand renters’ rights when it comes to rent increases, lease terms, and evictions. This month we’ll take a look at the rental market from the Realtor® perspective.

McEnearney Associates recently convened a “Masterclass” with several of our top agents who have made a name for themselves as rental experts – both for tenants and landlords – as well as staff from our Property Management team. It was a lively discussion and we’re sharing some of the tips and processes that Lauren Budik (McLean), Ann Duff (Alexandria), and Sarah Picot (Arlington) believe will make the rental process more efficient and less stressful for everyone involved.

Stay tuned next month for tips from our DC and Maryland offices!

FOR TENANTS

DON’T: Start your search too early. We understand, it’s exciting to imagine your next home and see all the options out there. But if you are looking to move in May and want to start looking in January, you will be spinning your wheels. Most leases require a 60-day notice to vacate, and the landlord will look to turn them over quickly. Most landlords will not hold a property if you’re not ready to make a move on their terms.

DO: Understand that most leasing documents are standardized and will have to be completed before or during the rental search. Expect to sign a representation agreement that spells out the responsibilities of both you and your agent, review, and sign disclosures about the property, and understand that leases are standard forms used by most landlords and brokerages in the area. Changing boilerplate clauses or asking for too many changes in terms likely won’t be possible.

DON’T: Hide or be shy about sharing credit issues. Financial setbacks happen and the best way to work around them is to let your agent know if there are credit dings that could affect your rental application. Your agent will help to strategize on the best approach, such as offering to pre-pay several months of rent in advance. A letter explaining how your credit was affected and what you’ve done to repair it can go a long way in assuring a cooperative landlord that past issues have been resolved.

DO: Have a good amount of cash ready for securing a property. Between the first month’s rent, security deposits, pet fees, building move-in/move-out fees, and other moving costs, you may need an outlay of several thousand dollars just to secure a lease. Make sure you’ve set a reasonable budget and saved your money for those immediate payments.

DO: Work with a Realtor®! You’ve heard it before: inventory is extremely tight and great properties go quickly. Having a leasing agent working with you in your housing search ensures that you get access to listed properties quickly (and safely), that your application will be submitted correctly with the proper documentation. Helping clients find the right home is what Realtors® do every day so use their expertise to your advantage in this competitive market!

FOR LANDLORDS

DO: Follow all Fair Housing requirements. Your Realtor® is bound by a professional code of ethics and will ensure that the public is treated fairly during the leasing process of your property. Fair Housing violations can be reported to the local Realtor® association and may result in fines. Learn about your Fair Housing requirements and explore resources for Virginia, DC and Maryland, and ask your agent for clarification on anything you have questions about.

DO: Understand the difference between pets, emotional support animals and service animals. Tenants with registered support animals and service animals do not fall under “no pets” provisions. Virginia has a helpful brochure that outlines what qualifies for what and how tenants with service animals must be accommodated, and you can see DC and Maryland guidelines here.

DO: Consider accepting Housing Vouchers. The lack of affordable housing is a growing problem throughout the country, and is felt by many in our region. Housing vouchers – awarded to eligible tenants after a complex and thorough screening by government and housing officials – ensure that low-income, elderly, disabled and other housing-insecure people have access to a decent, safe and sanitary place to live. Landlords who participate in voucher programs will receive government subsidies for a portion of the rent and tenants will pay the difference based on their voucher award. This ensures consistent payment with tenants who have already passed federal and local screening processes.

Because of the lack of landlords who participate in subsidized housing programs, there are some voucher recipients who have been waiting several years to find an affordable home match. We encourage landlords to speak with their agent to find out how they can be part of helping many deserving tenants find a place to call home.

DO: Work with a Realtor®! It may seem like a landlord could put a “For Rent” sign in the yard and wait for qualified applicants to roll in without any help from an agent. But good Realtors® know that the right presentation, careful application screening processes, and a professional approach to onboarding a tenant can make all the difference between a smooth move between tenants and a logistical leasing nightmare. Count on the expertise and market knowledge that a seasoned agent brings to assist in the successful renting of your valuable investment!

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It has been a tense few years for renters and landlords, with rising housing costs due to shrinking inventory and inflation running headlong into the Covid-19 pandemic and federal and local moratoriums that prohibited landlords from evicting tenants. 

Adding complicating factors like the rise of short-term rentals such as AirBnB and VRBO, and private equity investors – many from outside of the United States – who are buying up starter homes, apartment buildings and the land beneath trailer parks, the roughly 35 percent of population – approximately 44 million people – navigating the U.S. rental market may feel like it’s the Wild, Wild West with few places to turn for help.

Enter the White House’s Blueprint for a Renter Bill of Rights.

Released on January 25, this policy paper areas that the Biden Administration wants to see implemented at state and local levels to follow the lead of “the new commitments by federal agencies to advance a stronger, more equitable rental market.” Included in the new Blueprint is the Resident-Centered Housing Challenge, which seeks input from stakeholders and community leaders and “encourages states, local, Tribal, and territorial governments to enhance existing policies and develop new ones that promote fairness and transparency in the rental market.” 

These are not new laws but instead are a set of principles that the White House and participating agencies – including the Federal Housing Finance Agency (FHFA), Federal Trade Commission, Consumer Financial Protection Bureau, Department of Housing and Urban Development, Department of Defense (involved on behalf of military personnel) and Department of Justice – say will “support the development of policies and practices that promote fairness for Americans living in rental housing.”

According to the White House announcement, the Blueprint “sets out five common-sense principles that create a shared baseline for fairness for renters in the housing market,” including access for renters to: 

• Safe, Quality, Accessible, and Affordable Housing
• Clear and Fair Leases: Lease with defined rental terms, rights, and responsibilities
• Education, Enforcement, and Enhancement of Renter Rights: Federal, state, and local governments should do all they can to ensure renters know their rights and to protect renters from unlawful discrimination and exclusion.
• The Right to Organize: Renters should have the freedom to organize without obstruction or harassment from their housing provider or property manager.
• Eviction Prevention, Diversion, and Relief: Renters should be able to access resources that help them avoid eviction, ensure the legal process during an eviction proceeding is fair, and avoid future housing instability

However, without judicial consequences behind this effort, what the Blueprint means for the local Washington-Metro market is still to be worked out. But rising eviction rates in all jurisdictions makes this an issue that local leaders are being pressed to address. 

For more information about rental assistance in a specific local area, please visit these resources for additional information:

VIRGINIA

• Virginia State Rental Assistance Program 
• City of Alexandria, Office of Housing
• Arlington County Housing Assistance
• Fairfax County Housing and Community Development
• Loudoun County Health & Human Services, Rent & Mortgage Assistance

MARYLAND

• Maryland Department of Housing & Community Development
• Montgomery County Department of Health & Human Services – Emergency Eviction Prevention
• Prince George’s Emergency Rental Assistance Program (currently closed to new applications)

WASHINGTON DC

• Washington, DC Rental Assistance
• DC Department of Housing and Community Development

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