All Things Frederick - A Real Estate Blog

Although I said Chris and I don’t like to make predictions about real estate in a previous post,  I decided to change my sentiments.  Chris and I have been bombarded with questions about what the Frederick real estate market will look like in 2009, so I thought I’d answer a few of the questions to the best of my ability on this blog. 

1.  The Frederick Real Estate Market will continue to be driven by foreclosures, or REO’s (Real Estate Owned).  With a forecasted 8.1 million new foreclosures coming in the next 4 years, the Frederick Real Estate Market will see its fair share.  We see several short sales added to the MLS weekly, and know that as much as 97% of them will become foreclosures.

2.  This has created a 2-faceted real estate market in Frederick, one for distressed properties, or Short Sales and REO’s, and one for traditonal home sales.  But don’t mistake from my last statement that I’m saying there are two markets.  There is one market and unfortunately, the traditional home sales are greatly affected by the distressed sales.  REO’s act as an ever-present anchor dragging on market values.  The other anchor is the huge inventories and lack of buyers, more about that later.  Conventional reasoning tells us that until the number of foreclosures slow down, they will continue to drag the market down. 

3.  When will the market bottom out?  There is so much debate on that, some saying mid-2009, some saying mid 2010.  That is one thing that is an iffy question, simply because the bottom is going to be wide and long.  We believe we have hit bottom, because we are seeing multiple offers on foreclosures that are priced well below market.  This is one indicator that we are at the bottom.  But don’t mistake the bottom for recovery.  Recovery of a normal healthy market, where homeowners see appreciation of 3% to 6% per year is something we probably won’t see for 2 or 3, or maybe as many as 5 years.

4.  With the lower interest rates, the lowest in 37 years, at least lasting the first half of the year, and the prices reaching affordability, we will see increased sales at the entry-level market.  First-time buyers are entering the market again after being conspicuously absent for several years.  This will have a small ripple effect on the move-up market, but not a lot, because a lot of what they will be buying will be foreclosures.  The interest rates will start to rise when we all hear the dreaded  word: “inflation”, which some say will be looming mid 2009, some say later.

5.  I’m not going to be one of those salespeople who automatically say, “Sure, now is a great time to buy…sell…refinance!”  It really depends on your personal goals, short-term and long-term, your overall plans and many other subjective issues.  I will say, however, “There are opportunities in any market for someone,” I can’t tell you if its you.  This time, first-time buyers are in the happy spot:) I will say, though, that interest rates under 5% are something I never thought I would see. 

6.  Inventories are still high.  The simple laws of supply and demand come into play.  Until there is a combination of fewer homes being sold and more homes being bought, we’ll see prices forced lower.  This will not be fixed any time soon.  Remember the stagflation of the 90’s?  It’s baa-aack.  Houses will still be bought and sold.  Kids will grow up and get married and want a house.  Retirees will downscale.  Families will grow and need more space.  But it won’t be the boom that we experienced in the early 2000’s.  This is the correction to that boom. 

  7.  As far as the recession, one of the sayings I’ve heard for years is that the Washington D.C. Metropolitan area is the last in to a recession, and the first out. Now I’m an optimist, don’t forget, so my glass is half-full, and I think we are at the beginning of the end.  We’ve been in a recession for almost a year, and some industries, like the real estate industry, have felt the recession a lot longer.  Some industries are just now feeling it.  Well’s Fargo’s economists are predicting we’ll be out of the recession by mid-2009.  I found an interesting article that explains the History of Recessions, from Harvard Business Publications, if you want an expert’s take on it.
Now for the predictions that are, lets see…fairly esoteric.

• One of the unfortunate consequences of this (mother of all) mortgage meltdowns is that people have even less trust in business and government.  One might say this is actually a good thing, because the effect of this distrust is that consumers, as a whole are going to take it upon themselves to become more informed about not only their personal financial health, as concerns homeownership, but the entire industry. HUD has lauched a brand new website to equip consumers with better knowledge of the homebuying and mortgage industry.  (One of the main purposes of this blog is to share information with Frederick homeowners and homebuyers.)  The positive note in all this: An educated population can better avert small-scale and large-scale financial crisis.

• This lack of trust has spilled over to most real estate professions.  Consumers will increasingly demand a relationship with professionals in which the professional is a ‘trusted financial adviser in the purchase of real estate’, not a salesman.  The relationship will be based on a set of standards, full disclosure, and transparency.  Our society has fully entered the information age, and consumers will find professionals who give the information freely, in exchange for their trust, but will avoid those who hoard and control the information in exchange for a “capture”.  The way that people do business is changing for every industry.  Back in the day, we worried that the internet might replace some professionals.  But I’m seeing that it is forcing them to be better.  People go to the internet for information, but they still want to do business with someone who is local, reachable, and in whom they can trust.

Chris and I wish you a prosperous and happy 2009.  Thanks to the readers of this blog and Chris’s Blog, we wish you success in all your real estate endeavors!  As always, Its Our Pleasure to Serve You!

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