The USDA Loan and other Real Estate Issues in the D.C. Area

Photo courtesy of juggernautco
Comparables: 1633 Hermitage
courtesy of juggernautco

Many of you that frequent We Love D.C. know me as the writer for the Redskins, Nationals, and other sports, but in the day time and sometimes at nights I am a licensed Realtor in the state of Virginia with Weichert, Realtors. What we have in this area is a truly fascinating market. National interest rates are low and prices are still down compared to before the bubble burst. This area is more insulated than other parts of the country because of the number of jobs in this area with the federal government or connected to the government.

The market in this area is a lot healthier than in other parts of the country but due to perception and in many cases reality people are afraid to list their homes. That has caused the market absorption rate in most places in and around the nation’s capital to be right around two months. Some areas it is even under a month. The market absorption rate is the rate in which all current listings would go off the market if no more listings were added to the market. For example there are 33 active listings and 10 that are currently under contract in my zip code of 22033. This is better inventory than most of the area but it is still low and gives us a market absorption rate of 3.3 months.

A market absorption rate of five to six months of inventory is considered a fair market. Below that is considered a sellers market and above that a buyers market. Now when you hear that our current market is considered a sellers market that might not sound right. Prices are still down from their 2006 high, but there are more buyers out there than there are sellers due to the combination of low rates and low prices, but that doesn’t mean it isn’t a good time to sell.

Of those ten homes in my zip code that are under contract their average days on market was 43.6 and four of those ten went off the market in under 20 days. Three off them went off the market in five days or less. There is the perception that money cannot be made by selling*, but if someone bought their home in the mid-90′s or before 2004 then they very well could be coming out ahead on their net sheet. The average home that sold in my zip code sold for 96% of list price with two of the fourteen going for full price or above.

*Even if someone is currently upside down on their mortgage they could look into renting their current home so that they can take advantage of the low interest rates and get into the new home they want.

I have written all this about why it isn’t just a good time to buy, but also to sell and haven’t even touched on what I intended to write about. Homes in and around D.C. are expensive, but the government wants to encourage people to buy, and with an increased number of buyers and low inventory that means demand will increase. Everyone knows what happens when demand increases.

One of the programs the government has to encourage home buying and development in rural areas is the USDA loan program. There are many areas that are considered part of the D.C. area that are eligible for this loan. For an eligibility map you can click here. I am not a financial person so I cannot speak to the fine points of the loan but the basic layout is it is a 0% down loan of up to $400,000. Now think of how much home that would get you in D.C. If you are a person that would rather have a longer commute and more home in a rural area then this might be the loan for you.

A $350,000 to $400,000 home in D.C. is on average a three bedroom home. Out in Haymarket for that price a person can get a four bedroom home with larger acreage and more square footage. The story in Gainesville and Fauquier County as well as the rural areas of Maryland are much the same and all those areas are appear eligible for the USDA loan. This is an attractive loan that many home buyers might not even be aware of.

Some people might think their is nothing to do in those areas. In some ways they are right, but Gainesville and Haymarket are both growing. Their are exciting entertainment and dining options like The Lion and Bull in Haymarket, and the Wegmans in Gainesville. If a person works in D.C. their morning commute could be an adventure but that is true no matter where you live in this area. No neighborhood or housing option is going to be for everyone, but these are options people should know they have.

The last thing to return after a downturn in the economy is consumer confidence. With low rates and low inventory demand for homes is high but consumer confidence is still low. Until that returns prices will remain down and those of us that happened to by in 2005 or 2006 will remain in trouble. The good news is that this area is ahead of the rest of the country and many believe that the Capital Region will lead the country back to a strong real estate market.

There is a lot more I could share with everyone. I haven’t even discussed the issues people can run into condo fees and how much not paying that monthly payment to the association could increase purchasing power or how around a third of a people that rent could buy, but simply aren’t educated enough to know this. An educated consumer is a good consumer and the people with the knowledge in the real estate industry aren’t doing a good enough job of getting the information to the public.

If you have seen anything here that does interest you or have further questions then please visit my business site at www.SuperNoVaReatly.com.

David Huzzard

David Huzzard was born at Fairfax Hospital in 1981 and has spent his entire life in the Washington, D.C. area. He has been a fan of all the area sports teams either since he was born or since they arrived here. He is also very pleased that his hometown is a burger town.

2 thoughts on “The USDA Loan and other Real Estate Issues in the D.C. Area

  1. This is pretty much everything that’s wrong with our society. We’re paying people to move away from urban areas. Away from jobs and transit. Everyone else then gets to pay for the eight-lane superhighway to nowhere so that cheap people can have an easier commute in their giant SUVs to their stupidly oversized houses in the boonies. Ugh. Just change the name of the blog to “Move Away from DC”. Even better: keep your sports writer focused on sports.

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