Real Estate Market Trends Archives - Page 6 of 7 - Real Estate News and Commentary

June 24, 2007November 23, 2021

Condo Craze or Just a Phase?

by Dan Krell © 2007
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When you think of a condo, what may come to mind is the typical flat in a building. However, condos come in many shapes and sizes, including duplexes, townhomes and semi-detached homes. The term condo is actually in reference to ownership, rather than style of home. Condominium ownership means that your home is part of a condominium association that owns and maintains common areas, while you own the interior space of your unit. The common areas typically include the building exterior and common grounds as well as amenities, such as a pool or play ground.

Everyone in who owns a unit in the association pays a fee, typically monthly, for maintenance costs. Condo fees vary depending on the size of the association, types of amenities, and whether or not utilities are included.

For some, living in a condo offers convenience and worry free living that a single family home does not. Many condos developments are convenient to the amenities of downtown areas, such as Rockville, Bethesda, Gaithersburg, and Silver Spring. These homes can be close to metro too, reducing your need to drive a car. Additionally condo ownership typically means that you don’t have to concern yourself with mowing a lawn or repairing a roof, as the association takes responsibility for these things.

Condo living is an affordable opportunity to owning a home. Compared to single family homes and townhomes, condos tend to be less expensive and a viable option for many first time homeowners.

There is a downside to condo ownership, however. Although condos may be more affordable, history suggests that they do not appreciate as fast as other types of homes. Because some condo buildings appear densely populated, some neighbors can be noisy. Additionally, the level of maintenance may vary depending on the condo association and management company.

If you are considering purchasing a condo, here are some ideas to assist you. First, exercise your right under Maryland law to review the condo docs. The condo docs include the association rules and bylaws as well as a recent budget, which includes reserve funds for emergencies. Reviewing the condo docs can reveal rules that may impact your lifestyle, such as having a pet. Additionally, the budget and reserves can reveal how well the association manages condo funds.

If you have an opportunity, attend a board meeting to get a feel for what is happening within the association. Internal politics can impact the way the condo is managed. If you want to have input in the direction of the condo association, get involved with the association board.

Although the condo association has an insurance policy that covers the physical building, you may want to consider a policy to cover your possessions inside your unit.

Parking in your development can be easy or it could be a problem. You may have one or two reserved spaces for your unit. However, if your condo is convenient to metro or other amenities, you may find non-residents taking advantage of this.

No matter how you look at it, purchasing a condo can be a practical and affordable home for any home buyer. As there are many considerations when purchasing a condo, ask your Realtor for additional resources and ideas in helping you decide on the best home.

This column is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of April 30, 2007. Copyright © 2007 Dan Krell.

May 16, 2007October 5, 2019

The Market Forecast for 2007 and Beyond

The first quarter of 2007 is almost at an end. Tax returns are due in a few weeks. Spring Training has begun. And the spring real estate market is in full swing. Or is it?

Yes and no. Home buyers are looking. However, many of the homes that have languished on the market through the winter are still unsold, or have gone under contract at greatly reduced prices. If this is happening now, what are we to expect in the future?

Looking back to 2006 we all agree the market slowed down a bit and almost to a stand still by winter. Although it was a sluggish year, the National Association of Realtors considered 2006 to be a respectable year. Looking at the numbers nationwide, it was indeed a respectable year. Although existing home sales decreased 8.4% last year, it was the third best year on record for such sales. Additionally, new home sales decreased 17.3% and recorded the fourth best year on record for new home sales. Believe it or not, the NAR reports that homes prices increased nationally 1.1% for 2006, which is a record thirty-nine consecutive years of home price gains.

For 2007, the NAR forecasts a year much like last. Existing home sales will be consistent, but not as strong as last year, while there will be a slight increase in home prices. It is uncertain, however, how new home sales will manage (Realtor.org).

Fortune’s picture for the immediate area isn’t as rosy. Their December 21, 2006 forecast of home prices for the Washington area predicts a decrease of 3.8% in 2007 and 3.2% decrease in 2008. The forecast for the Bethesda-Gaithersburg region predicts a 2.7% decrease in 2007 and 4.3% decrease in 2008.

As a whole, economic forecasts point to a stable economy with stable employment and minimal to moderate growth. As you can imagine, many reports indicate that housing will continue to be a burden on the national economy. Reports predict that the burden will continue, however, through mid year 2007 and remain stable through 2008.

Prognosticators projected that the spring market for 2006 would be business as usual. Locally, the market preformed inconsistently. The spring market for 2007 will be inconsistent as well. As the local real estate market attempts to find its balance the market will continue to be slow through spring. Unless there is a major disaster, the sales pace will pick up in May as the market levels off.

Contributing to the continued lethargy is the fallout in the sub-prime mortgage industry. The tightening of credit guidelines due to over zealous speculators in the secondary mortgage markets has recently reduced the already shrunken pool of home buyers. Like most market commodities, investors will one day again find their appetite for sub-prime mortgages.

Home prices will continue to adjust, having an effect of tightening the available housing inventory. As many home sellers are already offering their homes at a break-even price, some home sellers will find that they cannot afford to sell as they would lose money on the sale effectively taking them out of the market.

By the end of the summer 2007, the effect of a tightening market will bring about the balance that we have been waiting for – hopefully.

May 16, 2007November 23, 2021

The Future of Real Estate Brokerage

by Dan Krell © 2007
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I am going to share my feelings about a recent article that appeared in the March issue of Realtor® Magazine. The article is one of a series of interviews with the innovators in the field. This article was a synopsis of a round table to discuss the future of real estate brokerage with some of the top Brokers in the field.

Although many responses made sense, other responses were disappointing. Reading about future developments such as one stop shopping, discount services, and internet leads sounded more like a rehash of the recent past rather than ground breaking innovations.

Where is the future of real estate headed? In an interview on National Public Radio (March 3, 2006), Economist Steven Levitt discussed the idea that the real estate agent is an endangered species and at that traditional six percent real estate commission may become a thing of the past because of the pressures of the internet and the economics of a housing boom. At the time, it made perfect sense. However, as the market has slowed this past year, home sellers are now offering higher commissions, and sometimes even a bonus, to sell their homes.

Ok, so what about the future? Like the Amazing Criswell, I may make some wild claims. However, the difference is that I look to history to help define where we are going.

Real estate brokerage started out as a means to bring buyers and sellers together while playing gatekeeper and controlling information. Over time, legislation and legal challenges have transformed the nature of agency and representation to become the present practice of real estate. Additionally, technology and the internet have forced changes in the type and amount of information available as well as how it is disseminated.

Generally, the core of real estate profession of tomorrow will be much like yesterday and today-people. Real estate contracts will continue to grow as brokers will continue to try to limit liability. Agency and representation may change from a transactional management model to a consultant or case management model, where the client can get assistance and direction in the buying or selling process.

Information technologies will continue to develop and will deliver high quality and detailed information as well as increasing efficiency to all users. Possibly one day, you wouldn’t have to go to an open house as you can experience any home in full scale 3D. Although contracts are getting longer and thicker, the use of the internet and email to execute and deliver documents has been helpful such that one day settlements may be conducted in a similar manner.

As economics and legislation played a large role in the development of real estate brokerage, it is difficult to predict future economic cycles and future government regulation. Even with this uncertainty, it is clear that these influences will impact the future growth of the industry. For example, economic cycles dictate the number of Realtors entering or exiting the marketplace as well as contraction and mergers of large real estate brokerages. Additionally, future legislation may impact compensation structures.

Although technologies, laws, compensations, and business models may change, one thing will continue to remain the same- the human animal. Developments will certainly make the process easier, but ultimately home buying and selling is an emotional and subjective process that requires human interaction.

This column is not intended to provide nor should it be relied upon for legal and financial advice. This comlumn was originally published in the Montgomery County Sentinel the week of March 12, 2007. Copyright (c) 2007 Dan Krell.

May 16, 2007October 5, 2019

Home prices, Zillow, and Formulating an Offer

Are you waiting for the bottom to drop out of the local real estate market? Although there has been a market correction, the Greater Capital Area Association of Realtors home statistics report shows that the average home price in Montgomery County increased to $611,443 from $593,801 the same time last year (GCAAR.com).

I hear some out there saying there is more correction to come, but in reality there not much more that the home seller can absorb. Those home sellers who are not in dire financial straights will either wait for the right buyer or take their homes off the market. As we are coming out of winter and the spring market has yet to go into full swing, it seems as if there is no end to the lethargic market. However, like the flowers that bloom every spring, so too do homebuyers.

If you look at online valuation systems such as Zillow, it seems as if home values will continue to fall, because the values listed are higher than the list prices of homes for sale. Although web based valuation systems strive for accuracy, they will continue to offer imprecise data because these sites cannot account for real time fluctuations in the marketplace. If you are a home seller, please don’t solely rely on valuation websites to determine a sale price for your home, as the comps offered by such websites may not be the most recent or may not be directly comparable.

If you are a home buyer, you may want some tips on formulating an offer. Basing your offer on the price the home seller paid or the tax assessment is unreasonable. Many of my clients have told me that that they read somewhere or heard from someone that their offer should be based on the price paid when the home seller bought the home. Will someone please tell me whose idea this is? I neither have read this anywhere nor have I met the original source of this “wisdom.”

Additionally, using tax assessments to determine your offer can set you up for disappointment as well. Tax assessments are typically a fraction of the home value and are calculated by the locality for tax purposes. It is common for a home owner to appeal a tax assessment so as to lower the assessed value and subsequently his tax burden. The price the home seller paid and the tax assessment are mutually exclusive figures that have no bearing on market forces.

If you are ready to put an offer on a home, you should do your research and look at pertinent factors such as recent sales and market trends to assist in formulating your offer and terms. You should find the most recent sales prices for similar style and size homes in the neighborhood of the home you are considering. To determine a market trend, look at sales prices in six, three, and one month increments. Additionally, try to determine the home seller’s level of motivation, as the home seller may be open to lower offers if they are highly motivated to sell.

The real estate market is dynamic and cyclical. In determining list prices and offers, home sellers and home buyers should use the most recent and pertinent information to assist in their decisions.

December 15, 2006May 11, 2019

Expectations for the 2007 Market

The past year’s real estate market was not what people expected. With much speculation and pessimistic media reports many expected the worst. The worst never happened and the numbers for 2006 were respectable, as home sales go. What’s expected for the 2007 market?

It was interesting to see the inventory grow as the number of active listings increased through the year. In fact, 2006 has had the most active listings at one time since before 1999! Many home sellers were taken aback by the amount of competition they faced for potential home buyers; while at the same time home buyers were overwhelmed with the amount of choice.

Now that we are heading towards the end of the year, many home sellers are taking their homes of the market after a disappointing fall and many days on the market. These home sellers are anticipating re-listing their homes in the spring. In fact the number of active single family homes listed in Montgomery County has hovered around the 4000 unit mark since June, however recently dropped to about 3000 units in November (which is still more than last year at the same time) (GCAAR.com). While some of those homes did sell, most did not.

Although the average home price has steadily increased in the county, many neighborhoods are seeing depreciation in the form of lowered sales prices. The home price average in Montgomery County is more likely skewed due to the increase of home sales in the million dollar or more range. November showed a decrease in sales in all price ranges except $1.5M or higher. There was an increase of almost twelve percent in sales in November as compared to the same time last year for this price range; there were 296 sales of homes priced $1.5M and higher in November 2006 in Montgomery County.

Many are anticipating a brisker market this upcoming spring. Many forecasters are predicting a nationwide recovery in the real estate market place. While perusing the optimistic reports about the 2007 real estate market don’t expect a huge appreciation in home values. Many forecasters predict a balanced market across the nation. Economists for the National Association of Realtors predict that the number of existing home sales will maintain at the roughly the same level as 2006, however new home sales will continue to slide into 2007 (Realtor.org).

Locally, the outlook is also positive due to a strong economy, relatively low unemployment, and relatively low interest rates. Another positive sign for the market in 2007 is the foreclosure rate. A recent article in the Baltimore Examiner (examiner.com) reported about a 12% drop in Maryland foreclosures from 2005, while the rest of the country realized a 27% increase during the same time!

As the spring market arrives, we will see many homes returning to market along with new listings of existing homes. Adding to the many options available will be the high builder inventory, which has been accumulating through the fall.

Spring will also bring many home buyers to explore the market as well. However, with many choices to consider, the average days on market for listed homes will remain high. Let’s face the truth that the market has slowed; however, the good news is that we are not heading into oblivion.