Frederick Real Estate Market Trends

Frederick County Real Estate Market Update

Provided by Chris Highland  ~ August 2022

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As summer winds down in Frederick and Central Maryland, the market has turned from a seller’s market to more of a balanced market. Rising interest rates have definitely cooled off what was the hottest market we’ve seen in more than a decade.

We are seeing a decrease in the number of sales compared to last year at this time. The volume has also decreased from last year (-18%). We are NOT seeing a decrease in prices…just a slowing down of the increases. (prices are still increasing…ignore the doom and gloom headlines…they are just clickbait!)

The inventory of homes for sale is still low…4% lower than last August, on an average day.

Interest rates have climbed, a discouragement for some buyers. As the FED has promised, rising rates are a reality. We are seeing the results in a less frenzied market. August has been active, and homes are still selling in days…14 days on average. Demand is still strong.

Read: Post Pandemic Real Estate Trends

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

Number of units sold in August was down 26% from last year. We’re seeing a little cooling off of the demand as rates are pricing some out of their previous price points.

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

FHA Raised Loan Limits

It may still be news to some: The FHFA (Federal Housing Finance Agency) has raised the 2022 conforming loan limits across the US to match the rising home values we’ve seen in the last year. The FHA sets a ceiling and floor each year for the loan limits based on median home prices. The new ceiling of $970,800 is 18% higher than the $822,375 from last year.

The limit for Frederick County and Montgomery County in 2022 is $970,800. Howard, Carroll, Anne Arundel, Baltimore and Washington Counties conforming loan limits will be $647,200. This means that FHA loans are available for homes in higher price ranges than previously. Learn about the difference between FHA and conventional loans.

Mortgage Interest Rates are on the Rise in 2022

The (national) average rate on a 30-year fixed-rate mortgage has been steadily increasing…but recently we’ve seen some relief…

As of September 14th, the average rate on a 30-year fixed mortgage is 6.08%, according to Bankrate.com today. One year ago the rate was 2.88%.

The average rate on a 15-year mortgage is 5.33%. On a 30-year jumbo mortgage, the average rate is 6.25%, and the average rate on a 15-year jumbo mortgage is 5.62%. The 5/1 ARM is 4.875%.

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. 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.

Demand for homes is slowing, but homes are still selling fast as the buyers who remain rush to beat rapidly rising mortgage rates.  55% of the homes that sold in August went under contract in less than 10 days! 

However, anecdotally, since July we are seeing fewer showings, fewer offers, and buyers are not paying so much over listing as before…sometimes they are paying list price…we believe the market is turning. We’re looking forward to a more balanced market.

Real Estate Market Trends in August in Frederick Md

Prices are still accelerating, but the number of sales is down.

The Median Home Sales Price: $450,000, up 6% from last August. We’ve seen an increase in both townhouse sales and single-family sales prices.

• Average Single-Family Sales Price: $568,800, up 8% from last year at this time.
• 242 single-family homes sold, down 26% from last year’s number.
• Average Attached Home Sales Price: $389,600, up 10% from last year.
• 211 townhouses and condos sold, down 26% from last year’s number.
• Altogether 453 homes sold, down 26% from last year. 85 of these were new construction homes…up from 56 last month.

Still a healthy demand, although slowing, combined with a very low inventory…slightly more than last month: 425, down from 452 last month, down 28% from last year) homes were on the market on an average 14 days in August, compared to 11 days last year.

Keep in mind that a “normal” inventory is between 1300 and 1400 homes on the market. This low inventory has created a strong seller’s market for a couple of years.

**As of today, September 14, there are currently 442 homes listed for sale or coming soon in Frederick County. The breakdown is 284 existing homes, and 159 new construction homes.

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Detailed Market Statistics for Frederick County

Average Days on Market (DOM) the time it takes to get a home under contract is: 14 DAYS , up from 11 days at this time last year, much less than the 5 year average of 28 days.

We’re looking forward to a balanced market in the future.

New Listings in August: There were 483 new listings during the month, down 28% from last August. There are 688 homes under contract, making their way to closing, 29% less than last year. 

Number of Homes Under Contract: There were 433 new contracts (homes that went under contract during the month) 29% less than last year. This will reflect in the number of closings next month.

Even though we’re seeing a slowing in demand…we still can refer to a homeowner’s favorite formula: 

Higher demand than inventory = price acceleration…just not as much acceleration as we saw in 2021.

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What Are Contingencies?

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

Find Out What Your Home May Be Worth

Frederick is no longer a Bifurcated Real Estate Market

Sellers got 100% of the original list price on average, lower than last year (102%). Appraisers are saying we can expect a slowing of these accelerated values, but still a healthy increase…expect to see ~ 6% increases in values…what we like to call NORMAL.

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.
• Homes in the $300,000 range, are in demand and have seen a 8 – 10% increase in value over the year. Less appreciation, 5 – 6% on average, for homes in the highest price ranges. But the good news is that homes above $800,000 have been selling again, after a few years of stagnation.
• There is a 1 month absorption rate for homes in the upper price ranges ( it took an average of 24 days to sell in this price range), compared to 14 days for homes in the lower price ranges.
• Homes selling over $800,000 got on average 100% of original listing price.

What are the best neighborhoods in Frederick County?

Luxury Homes in Frederick County:

• 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 to reconsider the threshold for “luxury”.
• There were 55 homes listed above $800,000, with 24 that sold in July in that price range.  (half of the luxury inventory sold last month, which is a big improvement over a few years ago…while in the overall inventory, homes sold last month were roughly 90% of the average number of homes on the market) 😲
• 19 homes sold between $800,000 and 1 million.
• 5 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.
• The average time on the market for the luxury homes was 24* days, The average sold price to original list price was 100% (this includes new homes, which skews the numbers…) *see below.

Separating out the new homes in the luxury market helps us see deeper into the trends:

• 6 new homes sold during the month of August…all between $835,000 and $910,000.
• All 6 sold between 0 and 1 day, which is the way they are often reported, so that skews the statistics. They are listed after they go under contract.
• Existing homes sold for 97.5% of list price.
• *New homes sold for 109% 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.

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.

What’s Notable for Buyers:

• 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 $400,000 to 499,000 price range (higher competition for sellers)
• Although rates are starting to rise, as predicted, to help slowdown inflation, these rates are coming close to 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 20 and 21 percent, depending on location and price range.

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

Our Advice: Marry the House, Date the Rate

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.

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??

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What’s Notable for Frederick Sellers:

• All indications are that buyers have been slowing down, as is normal as we approach winter and the holidays.
• With an inventory that is very low, prices are still on the rise. When demand is healthy and inventory is low…it’s a great time to sell.
• Homes in great condition and priced well for the market are going under contract in days, and fetching top dollar.

What’s My Frederick Home Worth?

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 have predicted anywhere from a 6% to 10% increase—less than half the increase we saw last year.

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 2022 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 will not 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, caused 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

Real estate market across Maryland

July 2022 real estate trends

August 2022 Market Statistics provided by Bright/MRIS (Mid-Atlantic Regional Information System – A Bright MLS publication)

These statistics are not guaranteed but are considered accurate. 

Contact Chris Highland to see homes for sale in Frederick Md. We are here to help you navigate through this currently challenging market.

301-401-5119

Broker:  888-860-7369

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