THE WEEK IN REVIEW

Welcome to my weekly newsletter featuring a personal note on the ever-evolving world of real estate along with a few newsworthy updates. Enjoy!

SAFE HAVENS

The big story of 2025 will be how investors globally turned to gold as a safe-haven asset. The other asset that is always seen as a good place for capital? Real estate.

Real estate is hyper-local. Not unlike stocks, some regions and neighborhoods rise, while others fall. Some are more 'boring' and don't experience the booms and busts. Not unlike our Capital Region which tends to be more slow and steady.

Are prices going down? Or is the rate of price growth simply slowing? In the majority of our region, it is the latter. Some further thoughts about price:

1.  Most home "prices" experience ups and downs. While we use the term "price," what we are really talking about is a home's valuation on paper. Price (and therefore loss or gain) is only meaningful at the time of sale.

2.  No home disappears when prices fall, and the day-to-day existence of that home - or the financial ramifications - remain mostly unaffected... unless you sell. 

3.  Most homes are used, providing essential shelter. A depreciated asset providing an essential need is different to one sitting empty. The equation differs, of course, for an investment property - valuation impacts rental income.

4. The carrying costs of a home are mostly fixed: mortgage, insurance, real estate taxes, regular maintenance, etc. The variable expenses tend to rise at a rate similar to inflation. Of course, when income is impacted by a job loss, "fixed costs" are something different altogether.

5.  Most people stay in their homes around 12 years - time to weather most economic cycles. US home prices took approximately 4–5 years to recover from the 2008/2009 recession that hit a low around 2011.

6.  The silver lining of lower prices? Those forced to sell at a loss or lower price create opportunities for others to buy homes at more affordable prices.

7. The other silver lining? Lower home appreciation usually means lower capital gains taxes. I have often remarked that "success" in owning real estate should be measured over a lifetime vs a single transaction.

8. Building costs, i.e., replacement costs, are high and heading higher. There are a good number of homes in our market that can be purchased at a significant discount to what they would cost to build today.

9.  Approximately 40.3% of U.S. owner-occupied homes are mortgage-free, up almost 23% from 32.8% in 2010.

10. Right now total assets in US money market funds is valued at a record $7.26 trillion... That's a lot of cash on standby waiting to buy up assets at reduced prices.

real estate & the news

• On Wall Street, "The debasement trade" is a bet that government borrowing and money printing will erode the value of the U.S. dollar, so investors are shifting cash into assets like gold, crypto, stocks... and real estate... that can hold their value. (CNBC)

• 21 states and the District of Columbia, which contribute about 33% of U.S. economic activity, are already in a recession, according to Moody's. Another 13 states, comprising roughly 33% of the economy, are treading water, and the remaining 16 are growing. (USA TODAY)

• JP Morgan Chase reported better-than-expected earnings and revenue, an important indicator that the banking sector is thriving. Higher trading revenue from investors repositioning themselves, investment bankers taking advantage of a more relaxed stance toward mergers, and reduced regulation to ease capital requirements and stress tests have helped. Stock market indices that are at or near record levels also bode well for the wealth management divisions of banks. (CNBC)

around dc

THE 6 BEST FARMS AND PUMPKIN PATCHES

IN THE DC AREA

A chill is starting to fill the air, which means it’s the perfect time to explore one of the area’s many farms brimming with the fruits—and pumpkins—of the season. Here are our favorites in both Maryland and Virginia. See Details.

Lee Arrowood

Principal, Arrowood Advisory at Compass

M: 202.251.3175

O: 202.448.9002

lee.arrowood@compass.com

+$173M Sold In 2023

#3 Team Lead 2022