The Effect of Distressed Housing on Frederick Real Estate

Effect of Distressed Housing on Frederick Real Estate

Many of us love to spout real estate terminology and often forget that everyone doesn’t always understand; to many it can end up sounding more like real estate jargon. Distressed Housing is made up of short sales and foreclosures. Even though the homeowners are in distress, in a very practical way, the houses are as well. The effect of distressed housing on Frederick real estate is a dynamic we will be facing for the next 2 or 3 years.

A home that is for sale and marketed as a “Short Sale” is on the market in an effort to avoid foreclosure. The home owner is negotiating with the lender(s) to sell the home “short” of what they owe. A foreclosure is already bank-owned.

All Real Estate is Local

The first thing that people need to keep in mind as they read and research about real estate is that all real estate information is only valuable if it is local. Real Estate is local and the market dynamics can change dramatically from state to state, county to county, and even from neighborhood to neighborhood. What is happening to the real estate market in California or New York has very little bearing on what is effecting the market in Frederick Md.

While much of the national real estate news has been focused on short sales and foreclosures, or what we classify as “distressed sales”, and they certainly have been a major influence on the real estate market, their effect differs with different localities. Take this chart for instance:

If you’ve been reading about the real estate market on a national level, you can see that the majority of the distressed sales which are skewing the statistics, (over 4%) are located in only 7 states. In some states, distressed sales are minimal and are not a strong influence on their local markets.

In Maryland the distressed sale inventory is comparatively low, ranked 36th in the nation; 1 in 569 homes are in foreclosure, or less than 2 tenths of a percent. In Maryland, Frederick County is in the bottom 6, with Prince Georges County overwhelmingly number one. Baltimore City is 2nd and Charles County is 3rd.

The Frederick Real Estate Market

In Frederick, although the percentage of homes in Foreclosure is relatively low, the number of homes on the market has a number of distressed properties. For most of the 2012, about 20% of the inventory has been short sales and foreclosures. The number of monthly sales was about 25%. The shortage of homes on the market, 30% less than most of 2011, has created a seller’s market, of sorts, that has put upward pressure on home prices which has been a counter weight to the downward pressure of distressed properties.

The one factor that has changed over the 2012: there have been fewer foreclosures and more short sales, which sell for more, thus lightening up the otherwise downward pressure on prices. As we see fewer distressed sales over the next 2 years, we are expecting less and less downward pressure.

We may even see some appreciation. We hope that the effect of distressed housing on Frederick real estate will dissipate over the next 2 years.