The 2011 Real Estate Market - What is the "New Normal"?

The Good News

The good news is the Real Estate Roller Coaster has (almost) come to a complete stop. Please exit to the right, watch your step, and hopefully, we won’t be riding again soon!

To understand the present state of the residential real estate market let’s take a look at recent history in my area of expertise, Frederick County Maryland. This last decade has certainly been an uncomfortable roller coaster ride for anyone involved with or affected by real estate (which means basically everyone).

We saw home values skyrocket at a rate of 15-20% year over year between 2001 and 2005. Then we saw values plummet 40% to 50% since 2006. The roller coaster has been slowing it’s decent during this last year and many of us are looking for the new normal.

Average and Median home prices have slipped over the last year, but only in the 3 to 5% range, as opposed to 15 to 20% declines we saw in 2007 to 2009. Home values are very close to 2001 – 2002 levels. (Remember that interest rates are lower than they were in 2001, so home buyers are able to afford more house than they were then. The chart reflects a higher average today than in 2001)

What is the New Normal?

The present market in Frederick County is the most affordable market in several decades. The combination of lower home prices and historically low rates (~5%) has created a great opportunity for buyers. We’ve seen consistently about 20 to 25% of sales have been distressed properties each month, and these have been about 10 to 15% under market value. Add to that the shrinking inventory and you have a supply and demand environment that is likely to see firming up of prices this spring market. This, along with upward pressure on interest rates, may make this the lower point of the ride.

As for the much dreaded “double dip” in real estate values, we don’t expect much of that here in Frederick County. Having sold real estate through three recessions, we’ve seen thorough evidence that the Washington D.C. Metropolitan area is typically the last in and the first out of “real estate recessions”.

What About Lending?

It is true that lending requirements have tightened up in the last 2-3 years, but we’re seeing most of the major lending institutions providing programs with combinations of lower rates, lower down payments and/or grants towards closing cost help (think underwriting guidelines circa 1992). Lenders are ready to help moderate income buyers who are well qualified but cash strapped.

Frederick County has been and still remains a friendly community, full of natural beauty and historic charm, a lovely and affordable place live. If you are considering making Frederick your home, give us a call; we’ll be glad to show you our town!

Chris and Karen Highland
The Highland Group – Real Estate Teams
50 Citizens Way, Ste. 400
Frederick MD 21701
301-831-9947 301-695-3020

Author's Bio: 

Karen Highland writes about real estate in Frederick Maryland on her blogs and websites. Along with her husband and his team, The Highland Group has been selling real estate in Central Maryland for almost 20 years. Frederick Md is a great place to live, work and play.
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