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McEnearney Sign

July 2012

MarketWatch, authored by David Howell, is published on a bi-monthly basis by McEnearney Associates, Inc. It provides useful and insightful summaries of current housing market trends. MarketWatch statistics include housing sales from all companies serving our Virginia - Washington DC - Maryland Metropolitan area.

 

07/30/12 by David Howell

 

Opportunity Knocking!

When 2012 comes to a close, we believe we’ll look back on it as a year of tremendous opportunity for home buyers and sellers alike – but for some it will be a missed opportunity.

We are witnessing something for the first time in our memory in Montgomery County real estate: the principal & interest payment for a median-priced home is now less than the median rental price. At the market’s peak in June 2006, the mortgage payment for a median priced home was 36% greater than the median rental price. Today, it’s 10% lower. We know there’s more to the cost of owning a home than the mortgage payment, and we’re certainly not suggesting that everyone should buy a home. But home prices are beginning to rise, and interest rates will almost certainly be higher a year from now – and we think that it will be a long time before we see the total cost of buying a home this low again.

Another indicator we look at is the percentage of homes going under contract in a given month that have been on the market 30 days or less. In times other than a boom or bust in Montgomery County, roughly 50% of homes going under contract are on the market for a month or less. In June 2004, during the boom, that climbed to 87% as buyers were snapping up everything in sight. In June 2008, it dropped to 30% as buyers were very nervous about market conditions. It’s now at 53%, a sure sign that buyers are willing to buy when they see value. Buyers still remain appropriately cautious – even in multiple offer situations they are rarely waiving home inspections and appraisals, and that’s a good thing.

These unique circumstances also mean there is great opportunity if you’re thinking of selling – inventory is very low and buyers in some areas and price ranges are having a tough time finding what they want. Take a look at the absorption rates tables that follow to see the hottest price ranges and property types. Attached and detached homes priced less than $300,000 have absorption rates well in excess of 50%, and all condos priced under $750,000 have absorptions rates higher than 30%. Generally, lower Montgomery County is faring better than the outlying suburbs. Still, your personal circumstances have to be right to consider making a move, but if they are, this is a great time to sell.


ABSORPTION RATE BY PROPERTY TYPE

The following tables track absorption rate by property type, comparing the rates in the just-completed month to the rates in the same month of the previous year. The absorption rate is a measure of the health of the market, and tracks the percentage of homes that were on the market during the given month and in the given price range that went under contract. [The formula is # Contracts/(# Contracts + # Available).] An example: The absorption rate for detached homes priced between $500,000 and $749,999 in June 2012 was 26.4%; that compares to a rate of 18.1% in June 2011, and the increase means the market was better in 2011 for that type of home. If the absorption rate was less in 2012 than in 2011, we have put the more recent absorption rate in red. This month there was improvement for 11 of 18 individual categories with activity, and one remained the same.

ABSORPTION RATES CONDOS AND CO-OPS
CONDOS & CO-OPS

  • The overall absorption rate for condos and co-ops for June 2012 was 35.2%, an increase from the 23.1% rate in June 2011.

 

 



Absorption Rates Attached HomesATTACHED HOMES

  • The overall absorption rate for attached homes for June 2012 was 41.3%, up from the 32.2% rate in June 2011.
  • This improvement is due entirely to much lower inventory; contract activity dropped significantly in June.

 



Absorbtion Rates Detached HomesDETACHED HOMES

  • June 2012’s absorption rate for detached homes was 25.5%, up from 21.5% rate of June 2011.
  • And as we have seen in the other property types, the absorption rates are higher for the lower-priced categories.

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877-624-9322 | 109 S. Pitt Street, Alexandria, VA 22314

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