Sarah Toppins

I've just finished reading Michele Lerner's "Homebuying - Tough Times, First Time, Any Time - Smart Ways to Make a Sound Investment" and can recommend it as a good resource for agents working with first time homebuyers and first time homebuyers.

Lerner is a writer for the real estate section of "The Washington Times" (not my favorite newspaper, but it has a great real estate section). She came to my office to talk about the book (because Lerner bought her current home from one of the agents in my office) and sold out of the 50 books she brought to sell us. I think that's a pretty good recommendation for her knowledge and the information in the book. She's local, so she knows local customs, but the book does not have a local focus and would be good for buyers and agents across the country. (In fact, if I have any quibble it's that she doesn't quote local agents in the book.)

Each chapter begins with a story and ends with a checklist. The chapters deal with the current market, whether a buyer is ready to buy, financing, lease-to-own agreements, finding the right Realtor, choosing the right neighborhood, choosing the right house, short sales & foreclosures, contract & contingencies, insurance issues, legal and tax issues, and what to expect at the settlement table. There's also an appendix with a state-by-state and Canadian programs for first time homebuyers.

I might have organized the book a bit differently. For instance, lease options and writing a contract each get a chapter. I would have given more attention to the contract issues. But Lerner is very pro using a Realtor, so I guess it's my job to fill in the holes in the contract chapter.

The book is currently for sale on Amazon for under $11. http://www.amazon.com/s/ref=nb_ss_1_10?url=search-alias%3Dstripbooks&field-keywords=homebuying+tough+times+first+time+any+time&sprefix=homebuying

Since the first time homebuyer tax credit has been extended through April of 2010, this would be a good resource for those people who have been cautious about buying and want to do their homework.

I thought there would be a big increase in inventory after Labor Day since the supply of houses and condos in Montgomery County has been dropping for more than a year, but that didn't happen. In fact, there were nine (yes, I said nine) more unsold houses (2276) in September compared to August (2267). There were 27 more condos on the market in September (932) than August (905). As a reference, there were 4177 unsold single family homes at the end of September 2008 and 1200 condos.

September 2008 is when the public became aware of the problems in the financial market and when housing sales started to fall, so it's interesting to see what's happened in the past year.

Inventory of single family houses was at its highest in April 2008 and remained fairly steady for two more months before beginning a free fall that bottomed out in August of 2009. Contributing to that big drop is the number of contracts written in April, May, & June of this year, taking a lot of homes off the market. Just over 1100 contracts were written for single family homes in each of those months. The previous record for number of contracts written was in May of 2005 when around 1600 single family homes went under contract. The highest number in 2008 was around 800 contracts written, also in May.

Settlements seem to be lagging behind the numbers for contracts. I attribute that to the length of time it is taking to get responses from lenders on short sales and the increased restrictions from lenders for new mortgages. It normally takes 45 to 60 days between the date a contract is accepted and when settlement occurs. So for April contracts, we'd expect a high number of settlements in June. There were 1103 contracts in April and 557 settlements that month. In May, there were 680 settlements, and in June, 859. The highest number of settlements for the year was in July - 905 single family houses went to closing. That dropped in 760 in August and 635 in September. (My statistics, by the way, are from the Greater Capital Area Association of Realtors.) New appraisal and lending rules went into effect this summer and that may have slowed down some of the settlements.

Our local multiple listing service, MRIS, reports that the average list price of all Montgomery County residential properties (condos & single family houses) was around $410,000 in 2008. In 2009, that average is around $350,000. Over the summer, properties were selling for about $5000 over than average. In September, that averagle sales price dropped to $333,500 from $355,000 in August. I take that to mean that a lot of bargain hunters bought properties over the summer leading to the higher number of sales, but lowering the average price.

MRIS (Metropolitan Regional Information System), the multiple listing service for the Washington, DC area has issued its statistics for July. Of the 1130 homes in Montgomery County, MD that settled in July, half (565)of them were financed with conventional loans. That says a lot about the market. It means that many people have money to make larger downpayments and are able to qualify in today's tougher mortgage market.

The financing alternative for folks with less money for a downpayment and/or lower credit scores is the FHA loan. Thirty-two percent (359 buyers) used FHA, which requires as little as 3.5% of the sales price as a downpayment. Three percent or 36 people used the no downpayment VA loan.

The more surprising number is the number of people buying property and paying all cash. Ten percent of the July buyers did that. I think that many of those buyers were buying the many foreclosures that are on the market and needing cash buyers because of their sorry condition.

Another surprise is that 4% or 43 buyers assumed loans. We haven't seen many assumptions in years.

Inventory is down, as are sales prices, but volume is up. Welll priced houses in good condition are seeing multiple offers again, so days on market (DOM) is also decreasing.

Yesterday, I wrote about the 2008 rental market in Montgomery County, MD, to try and get a handle on whether it’s easier to rent a property in this declining real estate market than to sell it. I offered statistics, but very few conclusions.

Today, I’ll include the statistics for the 2008 Washington, DC rental market, which generally look very similar percentage wise to the Montgomery County figures.

In 2008, 1823 properties were rented in the District ranging form a one bedroom, one bath condo in Southeast, which rented for $500 a month, to a 5 bedroom, 5 full bath, 2 half bath estate in Kent that rented for $15,000 a month. In addition, 67 properties have rental applications pending.

Currently, 594 properties are on the market in DC. They range from at 2 bedroom condo in Anacostia for $475 a month to a 6 bedroom, 8 full bath, 2 half bath estate in Spring Valley, which is listed for a monthly rental of $35,000. It’s also listed for sale for $9.5 million, and has been on the market for two years.

(I want to make note that these statistics are probably less accurate than the Montgomery County rental statistics because I’ve only included the properties that are listed through our multiple listing service, MRIS. There are many buildings in DC that rent without going through the MLS, and most of my clients in the past have found it easy to rent their own properties through various bulletin boards and Craigslist. However, that seems to be changing. The reason I’ve done this research is because one of my clients has been having a hard time trying to rent his row house in the U St. area on his own and has now listed it through me.)

But if you look at the rental stats overall for Montgomery County and DC, the percentages are about the same – a 3 month rental absorption rate in Montgomery County compared to a 4 month rate in DC.

The more disconcerting figure from the DC stats is that 1319 properties were withdrawn or expired without being rented in DC, a number equal to 72% of what was actually rented. (That compares to 2284 in Montgomery County, a little less than 50% of what was rented.) I’m hoping that if I dissect that number further, I would find that many of those properties had been listed both for rent and for sale, and eventually sold.

In 2008, 5464 properties sold in DC, almost equally divided between condos (2640) and single family homes (2824).

A year and a half ago when I noticed that the market was beginning to slow down, I suggested owners might consider renting their properties if they couldn’t afford to sell at the dropping prices. Since then, I’ve had some experience with the rental market and have heard others’ stories – enough to think that the rental market might also be slow.

So as the good journalist I used to be, I decided to do some research. I looked at all the properties that had rented in Montgomery County, MD since January 1, 2008. 4283 properties were rented through the multiple listing service (MRIS) during that period. The least expensive property was a basement bedroom in the Wheaton area of Silver Spring that rented for $515 a month last summer. The most expensive properties were two estates in Potomac that rented for $13,000 a month. (The next highest rental was $9000 a month and a total of only 60 rented for more than $5000 a month.)

This compares to 2284 properties that were listed and never rented. I did spot checks on some of those properties and found that some of them sold (for much lower prices than their original list prices), some were relisted for a lower rent, some were taken off of the rental market, but left for sale, and others just disappeared from any activity in MRIS.

Currently there are 1087 properties (basement bedrooms to condos to estates) listed in Montgomery County. The lowest price rental is the same basement apartment that rented for $515 last summer. It’s currently for rent for $575 a month. The most expensive property for rent is a huge (11 bedrooms, 10 full baths, 3 half baths) estate in Potomac listed for $20,000 a month. It’s also for sale for $5.5 million. It’s been on the market (for sale) for two years and has dropped from a list price of $6.5 million.

There are also 132 properties with rental applications pending.

How does this compare to sales? MRIS wouldn’t give me an exact number of how many condos and houses had sold over the last year (the number was over 5000, the highest MRIS reports for any certain period). But I went to the Greater Capitol Area Association of Realtors (GCAAR) yearend stats and found that 8391 properties (1641 condos + 6750 single family homes) sold in 2008 (The 2007 number was 10,157). According to GCCAR, a total of 8912 went under contract in Montgomery County in 2008 (down for 10,106 in 2007). At the end of 2008, there were 4252 properties on the market for sale, the result of a dramatic drop in new inventory since summer. At the end of 2007, 4549 properties were active and available for purchase.

In my next blog, I’ll analyze the Washington, DC numbers.

My initial conclusion is that there is a market for lower priced rentals, $2500 or less, but it’s becoming very difficult for an individual owner to compete with property management companies that can offer free rent for 3-6 months.