Brian and Amy Maury, Maury Real Estate
Brian and I like to say that a crystal ball would sure come in handy in our line of work! While we can’t offer that, we do have the benefit of decades of collective frontline experience and have witnessed several market ups and downs during that time, including the Great Recession that began in 2008.
Since the 2008 collapse, prices have rallied across the country, particularly over the last 5 years and now hover at or above the previous market peak in most areas. However, there is talk on the real estate beat that some steam is leaking out of the hot market. Many major metropolitan locations are seeing market slow downs this year, indicating that incomes are not keeping pace with the rising costs of housing. In California, there was an almost 10 percent drop in sales in the last year, according to CoreLogic.
“The tax bill changes limiting home equity loan interest and property tax deductions, lack of affordable housing supply, wage stagnation and higher interest rates are all problems California shares with the rest of the country,”
according to Eric Sussman adjunct professor in accounting and real estate at UCLA Anderson who was quoted in a Bankrate article on August 13th, 2018.
In the lead-up to the crash in 2008, extremely relaxed credit standards created a huge sub-prime housing market that, when it imploded, caused short sales and foreclosures to skyrocket throughout much of the country, gutting home values nationwide. Borrowers had been granted purchase money using “NINA loans” (no income, no asset verification) and “Stated Income” loans (you could “tell” the lender your income without verification
and qualify for a home purchase based on your word and your credit). Homes were considered to be the nearest thing to an ATM in the lead up to the collapse of 2008.
Although today’s housing prices are historically high, they have not been bolstered by the hysterical sub-prime lending practices of bankers playing fast and loose. While we have started to notice the return of “Stated Income” loans just recently, the market resurgence we have experienced was not built upon those types of weak lending practices.
What seems to have pushed the prices ever higher in recent years has been a lack of inventory coupled with rising employment and low interest rates. Millennials have now entered the purchase pool en masse, particularly in urban areas, and the overall demand for housing has far exceeded the inventory available –
simple supply and demand economics. This is especially true in our Bethesda/Chevy Chase area and, of course, in the DC market.
According to a report issued in September 2018 from the Greater Capital Association of REALTORS based on multiple listing service data, the active listings in Montgomery County
“heading into August represent 2.3 months of supply given the average sales pace over the last twelve months, favoring the seller
slightly more than the 2.4 months of supply last August. Half of the homes sold in August were on the market 17 days or less, four days quicker than the median DOM in August 2017.
Chart by Greater Capital Area Association of REALTORS (GCAAR)
The $443,000 median price in August was 4.2 percent higher than last August ($425,000), and represents the highest August value since 2007.
The average sales price in August was $549,035, a 2.5 percent increase over the August 2017 average of $535,508.” Modest but favorable improvements overall.
Although the Fed has raised the rate three times in 2018, mortgage loan interest rates remain historically low at around 4.625% for a 30-year fixed conforming loan. We don’t expect that to last and most mortgage lenders are predicting a modest 1.0-1.5% rise in 2019.
So even though we don’t have a crystal ball, the market changes do not seem to suggest a collapse but a cooling off of sales prices and activity. Real estate remains an excellent investment in the greater DC and Bethesda area.
If you are considering a home sale or purchase, please contact us for a complimentary consultation to discuss your plans.
We can provide a market analysis of your home, tips for preparing your home for sale and counsel on the home purchase process as well.
Please contact us at 301-229-3652 or [email protected]
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