DC & Arlington Named Best Places to Be During a Recession

Worried about the economy? Here's a bit of good news: DC and Arlington were named by Business Week as two of the top ten places to live during a recession. Cities with a focus on health care, law, education, energy, and government rose to the top. The article notes:

Government towns tend to be relatively stable because—even though budgets are slashed—the public sector still must pay the salaries of politicians, building inspectors, police officers, military personnel, and tax-authority employees. Cities that we think might benefit from government employment include Chesapeake, Va., near the massive Norfolk Naval base, and the state capitals of Baton Rouge, La.; Lincoln, Neb.; and Madison, Wis.

And another piece of good news for our local area: the bailout will be a boon to our local economy. The Washington Business Journal notes:

...the most massive government takeover of private capital in U.S. history likely will bring economic activity to the region’s economy, in much the same way the tragedy of the 9/11 terrorist attacks spawned a new homeland security sector, the panelists said. The savings and loan crisis of the late 1980s also led to another government boon, the creation of the Resolution Trust Corp., which maintained office space in downtown D.C. for a decade to deal with fallout from the S&L insolvencies.

“It’s going to create a whole new industry of services for all of us, for the banking sector, for commercial real estate, the advisory and brokerage sector, legal and accounting,” said David Kessler, a principal with the accounting firm Reznick Group P.C. “We’re going to see a boost in the local economy as a result of that.”

Another boon from the bailout: the $5000 tax credit for DC first time home buyers was included in the bill! (Not buying in DC? You can still take advantage of the $7500 first time buyer "credit" (really an interest free loan) until July 9, 2009.)

Real Estate Market Update - Montgomery County, MD

A review of the current Montgomery County market statistics confirms what most people already know: it's still a buyer's market. Inventory is up almost 15%, and median price is down to $410,000, about 8.5% from May 2007. Number of sales is down 33% from 2007, and days on market is up 24% from a year ago.
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Does this mean buyers should wait? Maybe. As always, it depends on your personal circumstances. However, with the passage of time comes the uncertainty in the lending market. Just in the past year, we've seen the elimination of 100%, 95%, and even 90% financing in many cases, meaning much larger down payments for buyers. We've seen higher interest rates, stricter credit requirements, and fewer loan options. Though FHA has become a viable option thanks to higher limits in our area, the loan limit of $729K remains temporary through the end of 2008.

Waiting might bring lower prices, but with the looming threat of inflation, high rates become more and more likely, and unless you have large cash reserves AND outstanding credit, changes in credit guidelines may surprise you (would anyone be surprised if 20% down payment requirements again became the norm given how badly banks were burned by defaults??)

Further, market statistics may be lulling buyers into a false sense of security that time is on their side. Similar to Arlington (see my 2007 Post: Some Sellers Do Get It, and Get It in 30 Days) the average days on market in Montgomery County of 103 is very misleading, and buyers may be fooled into thinking they have plenty of time to think about whether or not to make an offer on that house that they love.

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A review of the successful sales in May reveals that over 1/3 of the homes that sold were on the market less than 30 days, and almost 2/3 were on the market less than 90! Then, as with every market in our area, there are the homes with sellers that drop and drop and drop the price to what is eventually the 'correct' price, and they sell sometime in or after the 4th month.

As I've mentioned before, once a buyer sees 10-12 homes in a given neighborhood, it becomes pretty easy for one to identify the 'value priced' homes, that is, that 1 in 3 that will sell quickly. The issue for buyers is that all the other circling buyers out there recognize it too, and at least some of them will jump on the opportunity when they see it.

Montgomery County is a big place, and it's unfair to paint the entire area with one brush. Contact me to discuss the neighborhood you have your eye on, and to see whether it's one that is following the trend, or whether waiting may not bring as much benefit as you hope. After all, an average is made up of points higher and points lower--see where your dream neighborhood falls in the range.

Interested in learning more? I will be teaching a free, one-house first time home buyer class at Montgomery County Library on July 31st at 7:30. We will be covering a general market overview in addition to the mechanics of the home buying process, including tips and tricks. There is no cost to attend, but registration is required. Contact me to sign up.