Frederick Real Estate Market Trends

Frederick County Real Estate Market Update

Provided by Chris Highland  ~ August 2023

…

Fall is here in the central Maryland real estate market. Demand has slowed a little bit, which is usual for this time of year. But there are still buyers looking for their dream home in central Maryland. It seems that buyers have adjusted to current interest rates.

The number of units sold in August was down 25% from last August. We’re seeing a cooling off of the demand year-over-year as rates are pricing some buyers out of their previous price points. But demand is still healthy, considering we have such a low inventory. Inventory is down 24% since last year at this time.

Being affiliated with a brokerage with agents all over the state, we’re hearing similar stories. *See Maryland market statistics below.

That’s just a glimpse of what is happening in the real estate market. Let’s look at the details…

FHA Raises Loan Limits

Before we get into the market statistics, one important announcement: The FHFA (Federal Housing Finance Agency) has raised the 2023 conforming loan limits across the US to match the rising home values we’ve seen in the last year. The FHA (Federal Housing Administration) sets a ceiling and floor each year for the loan limits based on median home prices.

The 2023 FHA loan limits enable buyers looking for a mortgage backed by the Federal Housing Administration (FHA) to borrow up to $472,030 for a single-family home in most parts of the country. That’s an increase of $51,350 from last year’s $420,680 FHA loan limit.

The new ceiling is $1,089,000 for high cost counties for one-unit properties, which is 21.21% higher than the limit of $970,800 from last year.

Local Maryland Loan Limits:

The limit for Frederick County and Montgomery County in 2023 is $1,089,300. Calvert, Charles and Prince George’s Counties have limits of $1,089,300.

Howard, Carroll, Anne Arundel, Baltimore and Washington Counties conforming loan limits will be $726,200, as well as all other counties in Maryland.

Additional Reading: Benefits of an FHA loan.

Mortgage Interest Rates

The (national) average rate on a 30-year fixed-rate mortgage has been on a wild ride since the FED started raising the base rate last year:

• As of today, September 18th, the average rate on a 30-year fixed mortgage is 7.55%, according to Bankrate.com.
• The average 20-year fixed rate is 7.57% today.
• The average rate on a 15-year mortgage is 6.8%.
• On a 30-year jumbo mortgage, the average rate is 7.58%.
• A 30-year fixed rate VA is 6.89%
• A 30-year fixed rate FHA is 6.65%
• Average on the 5 year ARM is 6.53%
• A 10 year ARM is 7.06%

A word about a 5/1 ARM (Adjustable-rate mortgages):  For the first five years, you’ll typically get a lower interest rate with a 5/1 ARM compared to a 30-year fixed mortgage. However, shifts in the market could cause your interest rate to increase after that time, as detailed in the terms of your loan. Similar for 3/1-, 7/1-, and 10/1 ARMS.

If you plan to sell or refinance your house before the rate changes, an adjustable-rate mortgage could make sense for you. Otherwise, changes in the market means your interest rate may be a good deal higher once the rate adjusts.

Where Will Mortgage Rates Go in 2024?

While no one has a crystal ball, here is speculation from Bank Rate . com:

“As for where rates go from here, it will depend largely on the stability of the financial system,” says Greg McBride, chief financial analyst for Bankrate. “At the point where core inflation gets better, mortgage rates will too.”

Mortgage rates are likely to continue at this rate, housing economists predict. Some have forecasted an easing of interest rates in early 2024.

Learn more about what the experts predict in Bankrate’s forecast.

Factors that determine your mortgage rate

Lenders consider these factors when pricing your interest rate:

• Credit score
• Down payment
• Property location
• Loan amount/closing costs
• Loan type
• Loan term
• Interest rate type
• Your debt-to-income ratio (DTI)
• The price of the property

All Real Estate Is Local

We are seeing a mixed bag when it comes to prices. Some sellers are seeing a longer time on the market, and some are seeing multiple offers. Different areas of the state, different cities, and different neighborhoods are having different experiences.

Real estate is local. That has never been more true than it is today...use a local real estate expert to help you navigate your market.

We’ve never seen this strange kind of market before, with mixed signals…it is definitely more complicated than anything a quick glance can tell us.

Demand for homes has slowed since last year, true, but there is still demand. 64% of the homes that sold in August\ went under contract in less than 10 days! 

In our experience, real estate markets turn on a dime. Most people see it in the rear view mirror after the statistics start to show the evidence.

However, the inventory is still really low. If and when inventory increases, we will see a more balanced market. This is truly a very unusual market.

Back to the Top

Real Estate Market Trends in August in Frederick Md

The Median Home Sales Price: $465,100, up 3% from last year.

Average sold price is up 2% over last year.

• Average Single-Family Sales Price: $571,000, up 1/5% from last year at this time.
• 178 single-family homes sold, down 26% from last year’s number.
• Average Attached Home Sales Price: $414,750, up 6% from last year.
• 162 townhouses and condos sold, down 23% from last year’s number.
• Altogether 340 homes sold, down 25% from last year. 48 of these were new construction homes…down from 51 last month.

Although demand has been slowing since summer, we must remember that the previous year the number of sales was abnormally high. In contrast, the demand that we are seeing is closer to a NORMAL market, the inventory, however, is about 20% of a normal market.

The Unicorn Years

The data reflects an increase month-over-month, but decreases year-over-year as far as sales numbers. This is an important observation that must be made:

Real estate activity during the pandemic was abnormal…let’s call them the “Unicorn Years”.  With unheard of interest rates (< 3% interest rates) and the lowest inventory we’ve ever seen, coupled with high demand, the market heated up like nothing we’ve ever seen. To compare anything to this time period is not an accurate synopsis.

The Inventory of homes for sale in August was down 24% over this time last year…to an average of 322 listings.

Keep in mind that a “normal” inventory is between 1200 and 1300 homes on the market. This abnormally low inventory has created a strong seller’s market for several years. Even though demand has cooled from the highs of last year, the low inventory still creates competition for those buyers who are in the market.

**As of today, September 18th, there are currently 337 homes listed for sale or coming soon in Frederick County. The breakdown is 198 existing homes, and 139 new construction homes.

Detailed Market Statistics for Frederick County

Average Days on Market (DOM) the time it takes to get a home under contract is: 14 DAYS, the same as this time last year, less than the 5-year average of 21 days.

New Listings in August: There were 345 new listings during the month, down 29% from last year.

Number of Homes Under Contract: There were 311 homes that went under contract during the month, 28% less than last year. There were 446 homes total under contract, making their way to closing, 35% less than last year. 

Back to the Top

What Are Contingencies?

Why is DOM (Days on Market) an important statistic? 

Find Out What Your Home May Be Worth

Real Estate Market Trends Across Frederick County

Sellers got 101% of the original list price on average, last year was 100%.

Possibilities this Fall: Home values are still be increasing, just at a more moderate rate…what we like to call NORMAL. Or, if interest rates fall, more buyers will enter the real estate market and competition will heat up. Prices may rise at higher rates.

It varies neighborhood by neighborhood. Real estate is local, hyperlocal. As of now, appraisers are telling us to see a more healthy value increase…3-5% increases.

Keep in mind: 

• In some price ranges, in some areas of Frederick County, there is naturally a higher demand and the market is more competitive for buyers. Some neighborhoods, like Urbana, Middletown, New Market, Mt. Airy, and a few neighborhoods in the city of Frederick, are in high demand and sell much quicker. We are seeing multiple offers on homes that are in great condition and priced to sell.

What are the best neighborhoods in Frederick County?

Luxury Homes in Frederick County:

• There is a slightly longer absorption rate for homes in the upper price ranges
• The average time on the market before sale was 14 days for all luxury homes.
• 17 homes sold
• Homes selling over $800,000 got on average 104% of original listing price. *Read on to see how new homes skew the data.
• The number of luxury buyers in Frederick County is quite lower than other price ranges. But, they are there, albeit in fewer numbers, looking for their dream home. As values continue to soar, we may have chosen to consider $800,000 the threshold for “luxury”. That is our subjective idea.
• There were 47 homes listed above $800,000.
• 14 homes sold between $800,000 and 1 million.
• 3 homes sold between 1 and 2.5 million.
• 0 homes sold between 2.5 and 5 million. There are currently no homes on the market in this price range.
• 14 homes in this price range were resale, 3 were new homes.
• The average time on the market for (resale) luxury homes was 14 days, The average sold price to original list price was 102% (this doesn’t include new homes, which skews the numbers…)

New homes skew the statistics. Separating out the new homes in the luxury market helps us see deeper into the trends:

• 2 new homes sold during the month of August in 0 days, three sold in 6 day
• When a home sells in 0, or one day, they are are listed after they go under contract. That is very often how new homes are reported.
• Custom homes are often reported differently. This is why “averages” don’t mean anything for the luxury market.
• New homes sold for an average 121% of list price. Separating out the new from existing homes shows the “extra” features that people choose over list price when building a new home.

What’s Notable for Buyers:

In any market, but especially  seller’s market, buyers must be prepared before they find a home. You must be pre-approved by a reputable local lender. Most sellers will not entertain offers from a buyer who has not been pre-approved.

If you have a house to sell, you need to get it on the market first, before you make an offer. Better yet, have your home under contract if you want to win in a multiple offer situation. Some people even find that having their home sold and having a temporary living set up gives them the greatest advantage if they are buying in a highly competitive price range.

• The majority of homes sold were in the $400,000 to $499,000 range. (higher competition for buyers) The largest number of listings are in the $600,000 to 699,000 price range (higher competition for sellers)
• Although rates have risen, as predicted, to help slowdown inflation, these rates are sitting at the historical average, which is 7%.

Notable for First-Time Buyers:

As we see home values continue to rise this year, first time buyers would do well to get in as soon as they can…to take advantage of the increased equity they will receive, although it is a difficult market for first time buyers, given the increased competition and lower inventory. But we are starting to see changes.

**Think of it this way, the elevator is going up… getting on the elevator now will be more advantageous than getting on the elevator next year or any time in the future. Buyers who bought last year have already seen appreciation as between 5 and 10 percent, depending on location and price range. 

As prices increase and rates increase, your buying power decreases. 

Back to the Top

Our Advice: Marry the House, Date the Rate…

and divorce your landlord.

All things are cyclical, especially the real estate market. What goes up (interest rates) will come down…at some time. If you can get into home ownership, our advice is to do it.

When mortgage rates come down, and they will, then refinance into a lower rate. You will reap the rewards of equity. If you sit on the sidelines and wait for the rates to come down, you will lose those years of building equity.

Something to think about also…when mortgage rates come down, buyers will enter the market in force! There will be more competition. We hope that more people will sell as well, when rates come down.

The other aspect to consider is that rents are increasing. Inflation has it’s effects on landlords too. As rents continue to increase, you will be paying more. Why pay your landlord’s mortgage at increasing rates, when you could be paying your own?

Buying real estate is a hedge against inflation.

And of course, make sure you use a buyer’s agent to help you through the process. We never waiver on this advice. Make sure your agent comes referred and is a trustworthy real estate agent.

Back to the Top

What’s Notable for Frederick Sellers:

• All indications are that buyers have been coming back into the market, albeit not in the numbers we saw a year ago.
• With an inventory that is very low, prices are still on the rise. When demand is normal and inventory is low…it’s a good time to sell.
• Homes in great condition and priced well for the market are going under contract in days, and fetching top dollar.
• Just remember, top dollar is not what it was during the “unicorn years”. Seller’s cannot expect to get 20% above similar homes that sold last month. Expectations should change with the market.

What’s My Frederick Home Worth?

When Median Prices Fall, but Average Prices Rise

There have been a few “click-bait” articles and videos in which prognosticators are calling for a drop in home values. What is interesting is that they all use the “median home price” as the metric to make these claims. If you remember from math class, the median is the point at which half the houses sold at prices above, and half at prices below.

Yes, the median home price has fallen since last year. With the increase in interest rates, buyers cannot afford as much house, so they are buying in a lower price range. While this is happening, we are still seeing multiple offers and prices increasing over time. Home values are not falling in our market. Maybe they are in some markets in the U.S., but not in ours.

Watch Chris’s explanation: https://www.facebook.com/724397783/videos/648049243653229/

Where Will Prices Go?

The Federal Housing Finance Agency noted a 19%-plus gain in home prices at one point in 2021. Across 2022, experts predicted anywhere from a 6% to 8% increase—less than half the increase we saw the previous year. 2023 is difficult to project, it depends a lot on what happens with interest rates.

That doesn’t mean prices will drop. The increase will eventually slow to resemble more of a normal market.

“Home price growth will slow,” says Robert Dietz, chief economist and senior vice president for economics and housing policy at NAHB. “We are not forecasting price declines in 2023 on a national level, but the pace of price growth will slow closer to the rate of inflation as some buyers are priced out of the market.”

Will We See A Housing Bubble?

NO. It makes great headlines and clickbait, but no, we do not think we will see a bubble bursting any time soon. This housing boom is completely a product of supply and demand, unlike the housing crash of 2008. That was an artificially inflated market, driven by the availability of loans to people who could not pay them.

The crash of the last decade bears no resemblance to what is happening today.

Recent Maryland Real Estate Statistics

June 2023 Market Statistics provided by Bright/MRIS (Mid-Atlantic Regional Information System – A Bright MLS publication)

These statistics are not guaranteed but are considered accurate. 

Chris & Karen Highland
eXp Realty – 301-301-5119

Find Out What Your Home May Be Worth (takes 15 seconds)

Search for Homes in Central Maryland

Need A Real Estate Agent in Your City? We Can Refer a Great Agent!

Broker supervision:  888-860-7369