MoCoRealEstate

Montgomery County Market Update

June 28th, 2009 Categories: Market Updates

We’re halfway into 2009 so it’s a great time to take a look at the real estate market in Montgomery County.  Especially compared to other areas, our overall market is very healthy.  Here’s an overview of the inventory and the number of contracts over the last six month by price range for all home types in the County.

What’s hot in the County? Single family homes priced under $400,000 and townhomes in all price points under $700,000 have three months or less available inventory.  There’s 2 months or less inventory in the following areas and price points:

• Bethesda - Homes priced $600,000 to $700,000
• North Potomac – Homes priced $600,000 to $800,000
• Potomac – Homes Priced under $600,000
• Olney – Homes Priced $300,000 to $400,000
• Germantown – Homes priced $300,000 to $500,000

What’s not? Inventory is relatively high for all condos in all price points.  Also, higher-priced homes in all areas are having a tough time finding buyers.

Charts showing activity by different home types and links to each area are added at the end of this article.  Several powerful forces are shaping our real estate market which help explain how some market segments are doing better than others.

Distress Sales

Especially for entry level homes, short sales and foreclosures are the driving force reducing prices and putting home ownership within reach for many.  As a result, transaction volume for entry-level homes has been on fire this year.  Foreclosures have pressured home prices down in most segments of our market.

Financing – The Good

Mortgage rates this year are at historical lows.  We may never see fixed rates this low for a long time.  Many economists predict higher inflation as the economy gets back on its feet.  If this prophecy comes true, many buyers will look back at 2009 wishing they had locked-in on a purchase.

The increase of the conforming jumbo limit in Montgomery County to $729,750 was a boon to well-qualified buyers who were challenged with higher down-payments requirements.  FHA loans are available up to this amount and only require a 3.5% down-payment.  The combination of low rates, a low down-payment and lower prices have dramatically improved the affordability of most of our market segments.

Financing – The Bad

Mortgage providers are being more selective and are requiring more cash.  The higher the mortgage amount, the higher the required percentage of money down.  This really isn’t a ‘bad’ thing, but higher down payment requirements are putting more expensive homes out of reach for buyers.  Right now, a buyer can find loans under $1M with 15% to 20% down.  At $1.5M, banks require 30% or more.  That’s a lot of cash – cash many buyers don’t have right now.

Strong Employment

Although unemployment has inched-up here, we still have the strongest job market in the country.  A diverse, service-oriented economy will keep our overall real estate market healthy for the foreseeable future.

Declining Inventory

Perhaps the most under-reported aspect of our market is that overall inventory continues to shrink.  If a home owner doesn’t have a strong need to sell, they are staying put.  As a result, we are seeing strong seller markets in surprising places fueled by a lack of available homes.

Overview by Area

Here’s a breakdown of the overall statistics for the County by area:

• Bethesda
• Potomac
• North Potomac
• Darnestown
• Rockville
• Gaithersburg
• Germantown
• Poolesville
• Clarksburg
• Olney
• Silver Spring

Overview by Home Type

Here’s a breakdown of the County statistics for single family homes:

As expected, most townhome activity is concentrated in the lower price points.  The market strength for more expensive townhomes priced under $900,000 may be a surprise.

The market for condos is weaker in all price points.  Financing is tougher requiring higher down-payments and condo fees make them less affordable.

Post a comment and let me know what do you think.  Do these stats reinforce your view of the market, or do you see a different story?

Posted by Bruce Lemieux

This entry was posted on Sunday, June 28th, 2009 at 10:14 am and is filed under Market Updates. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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