Frederick County Real Estate Market Update
Provided by Chris Highland ~ February 2023
As spring arrives in the central Maryland real estate market, we are seeing the market heat up. Winter had slowed significantly, but it seems that spring has already sprung, with buyers out, multiple offers on a very low inventory, and homes going under contract in a shorter amount of time… in spite of rising interest rates.
As far as the numbers for February, they reflect the activity we saw in the winter months…a decrease in the number of sales compared to last winter. We are seeing a decrease in everything…except…single family home values. They were up 1% year-over-year.
We are seeing a mixed bag when it comes to prices. Some sellers are having price reductions, some are seeing multiple offers.
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.
Interest rates have climbed, a discouragement for some buyers. As the FED has promised, rising rates are a reality.
Read: Post Pandemic Real Estate Trends
Number of units sold in February was down 18% from last year. We’re seeing a 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.
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 in 2023
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, March 14th, the average rate on a 30-year fixed mortgage is 6.17%, according to Bankrate.com today. This is slightly down from last month when the average was above 6.55%.
The average rate on a 15-year mortgage is 5.41%, also down. On a 30-year jumbo mortgage, the average rate is 6.06%. The 5/1 ARM is 5.70%.
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, true, but there is still demand. 39% of the homes that sold in January went under contract in less than 10 days!
Since rates began to rise in July last year, we are seeing fewer showings, fewer offers, and buyers are sometimes paying over listing as before, sometimes they are paying list price, sometimes less than list price.
Anecdotally, we just had a townhouse in Ballenger Creek with multiple offers go under contract for $2500 above list price.
We also had a buyer miss out on a bid in competition with 17 other offers. Our buyer offered $15,000 above list price on a $400,000 home.
We believe the market is turning. The market has turned. The market has turned again.
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.
Real Estate Market Trends in February in Frederick Md
The Median Home Sales Price: $445,000, down 8% from last February. Average sold price is down 1%. We’ve seen an decrease in number of both townhouse sales and single-family sales.
- Average Single-Family Sales Price: $580,300, up 1% from last year at this time.
- 140 single-family homes sold, down 23% from last year’s number.
- Average Attached Home Sales Price: $398,600, down 1/2% from last year.
- 133 townhouses and condos sold, down 11% from last year’s number.
- Altogether 279 homes sold, down 18% from last year. 81 of these were new construction homes…down from 49 last month.
Although demand has been slowing since last 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…of course, we are not sure what the spring will bring, but so far we are seeing increased demand.
The Inventory of homes for sale in February was up 45% over this time last year…to an average of 305 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 a couple of years. Even though demand has cooled, the low inventory still creates competition for those buyers who are in the market.
**As of today, March 14th, there are currently 277 homes listed for sale or coming soon in Frederick County. The breakdown is 151 existing homes, and 126 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: 30 DAYS , up from 16 days at this time last year, less than the 5-year average of 36 days.
New Listings in February: There were 280 new listings during the month, down 41% from last year.
Number of Homes Under Contract: There were 282 new contracts (homes that went under contract during the month) 27% less than last year. There are 448 homes total under contract, making their way to closing, 38% less than last year.
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 99.6% of the original list price on average, lower than last year (102%), but up from last month. Appraisers are saying we can expect a slowing of these accelerated values.
There are two possibilities this spring: Home values may still be increasing, just at a moderate rate…what we like to call NORMAL. Or…Homeowners who purchased at the top of the market in late 2021 and early 2022 may be giving back a little bit of the value that they had, but how much is yet to be seen.
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 2-3 month absorption rate for homes in the upper price ranges
- Homes selling over $800,000 got on average 107% 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 to reconsider the threshold for “luxury”.
- There were 49 homes listed above $800,000..
- 15 homes sold between $800,000 and 1 million.
- 6 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.
- 9 homes in this price range were resale, 12 were new homes. The average time on the market for (resale) luxury homes was 52 days, The average sold price to original list price was 97.3% (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:
- 9 new homes sold during the month of February…all between $800,000 and $1 million.
- 7 sold in 0 days, one in one day, which is the way they are often reported, so that skews the statistics. They are listed after they go under contract.
- Custom homes are often reported differently…one sold in 698 days, one in 237 days, one in 110 days, and one in 28 days. This is why “averages” don’t mean anything for the luxury market.
- *New homes sold for 107% of list price, on average. 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 $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 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 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??
What’s Notable for Frederick Sellers:
- All indications are that buyers have been slowing down, as is normal in winter.
- 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 last year. 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?
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
What the Terminology for the Maryland REALTORS® Monthly Statistics Means
The monthly housing statistics are presented as reported by Bright MLS. The “Units” category represents sales settled in that month. The “Pending Units” category includes units currently under contract, which will settle in the future. “Active Inventory” includes units that remain on the market.
The average sales is the weighted average of sales prices in the county, calculated by weighting the price of homes by the number of homes sold. To calculate the weighted average Maryland price, we weight the average price for all 24 Maryland jurisdictions by the number of homes sold.
The median price is the middle value of the prices of all homes sold in the period—the price at which half the sold homes are above and half are below in selling price. We estimate the median price for home sales in each Maryland jurisdiction, because Bright does not provide this level of detail. Median price for the whole state is calculated by using the simple unweighted averages to calculate a state weighted average for all 24 Maryland jurisdictions and establishing a median value through appropriate weighting techniques.
February 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.
Contact Chris Highland to see homes for sale in Frederick Md. We are here to help you navigate through this currently challenging market.
Broker: 888-860-7369
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