Real Estate Market Conditions, Q1 2013

Does everyone remember the real estate bubble and its abrupt bursting back in 2007? For some time during the boom, anyone that wanted a mortgage could get one, but when these “toxic” mortgages started defaulting, demand for homes stopped overnight, and as a result, the people that were trying to sell them got stuck trying to hold on. A large portion of the homeowners that couldn’t sell began to default as well, causing the biggest housing crisis in our country’s history.

Fast-forward a few years into around 2010. The reverberation from the impact of the housing market crash worked its way throughout the rest of the economy. Unemployment rates climbed up over 10%. Some banks, most of which having received bailout money from the Federal Government, had stopped lending money entirely, despite the fact that their business was created entirely to lend money to consumers.  

Now, we are seeing the housing market recover in the areas that fell apart first. Las Vega s, California, and areas in Florida are reporting hot seller markets, while prices and interest rates remain at all-time lows. Also, the national unemployment rate is down to 7.6%, down from the 8.2% from just one year ago.

The real estate market in Aberdeen, MD has shown some glimpses of recovery, but has yet to catch up to some other areas nearby. A total of 35 homes changed owners in the first quarter of 2013, which is only two more than the same time a year ago. There was an average of 110 homes actively listed in the area at any given time, which is actually a bit more than what was available last year. Most other zip codes are reporting much lower inventory levels, which tends to reveal the shift toward a seller’s market. Home prices will appreciate when there is more demand than supply in a given area.

Despite the fact that home prices and interest rates are still quite low, home prices will need to recover a little more before we see the recovery in Aberdeen, MD that we are seeing in other areas. Over the past few years, the FHA loan program (typically associated with first time homebuyers) carried the market on their backs, representing as much as 50% of the total home sales across the country.  FHA home loans were only used on 37% of the homes sold in Aberdeen, MD during the first quarter of 2013.

Another factor to consider is distressed home sales. The percentage of homes sold in Aberdeen, MD  as either a short sale or foreclosure over Q1 spiked upward from 34.29% from 21.21% in Q1 2012. We can probably expect to continue to see distressed properties being listed and sold, since the banks have been pacing the rate at which they place these homes on the market, and because they recently resolved a nationwide lawsuit involving the way they had been processing foreclosures.

Since prices and interest rates are still low, and as the unemployment rate continues to drop, we will start seeing a greater level of real estate demand in the Aberdeen, MD  area. As prices start to rise, more people will continue to sell, and moving up from one home to another will seem more feasible. Also, since the banks are expected to start reducing their lending standards and make loans more accessible, we will see the market return to a more healthy condition.   

For more information about the local or national market, give me a call at (443) 866-6728 or email me at scott.miller@century21.com.