Brian ran into an old friend recently and after some catching up his buddy said with some hesitation, "Real estate is doing pretty well, right?"  Brian replied, "Sales activity in Bethesda is up significantly, but detached home prices, surprisingly, have fallen a bit."   This month's email will review the latest statistics for our area over the past six months.  No analysis would be complete however without first a discussion of our current interest rate environment.  Interest rates have hit an all-time low.  This is a historic opportunity to lock-in long-term financing.

According to Freddie Mac, the 30-year conforming loan interest rate, for loans less than $417,000, averaged just 3.56% this past week, the lowest rate since Freddie Mac began tracking the rates in 1971. By contrast in the fall of 1981 the average rate was 18.5% and you had to pay an additional 2% of the loan balance up front to get that rate!  Effectively the rate was near 20%. 

To recap some recent 30-year loan rate quotes with no points (i.e. no upfront interest):

Loans at or below $417,000

Loans from $417,000 to $625,500

Loans above $625,500 = 4.125%

Can you afford to lose $100,000?  Most people would of course say "no" but that's what's at risk for most people in our area when interest rates go up about .75%.  Small changes in rates have a significant impact in the mortgage outlay over a 30-year period and the math works out to over $100,000 for most people in our area.  I surveyed the past 10 years of historical interest rate data to see what the range of values have been in any given year.  Nearly every year fluctuated between .75% and 1% from the high to the low rate for the year.   Will rates go even lower?  Waiting could cost you $100,000.  You can always refinance if rates fall but if rates climb the impact financially is huge.  If you are considering a refinance do it now.  If you are considering a home purchase - don't delay.

Bethesda Real Estate Update
This month's update will break the Bethesda real estate market down into two segments: Single family detached homes vs. Townhouses and Condo Apartments.

The good news is that with near record low interest rates, nearly 400 detached homes have been sold so far this year in Bethesda, up 14.7% over the same period last year.  The bad news is prices have slipped a bit.  Compared to the period January through June of 2011, the average price of a detached home in Bethesda is down 4.7%, or over $46,000. The average price for the first half of 2011 was $990,118 and this year's six-month average is $943,570.  So far this year homes are receiving on average 97.2% of their asking price.  In 2011 this figure was 96.4%.  It's also taking longer to sell a detached home this year with the average days on the market prior to obtaining a contract at 70 days vs. 57 days in the first half of 2011.  This statistic reveals some weakness in the market relative to 2011.

The good news for single-family home buyers is they are on average paying less for a house this year not only in terms of price but also in terms of very attractive financing.  The bottom line is it's a great time to buy a single family  home with prices softer and 30-year financing hovering at or below 4%!

Townhouses and Condo Apartments
The number of townhouses and condos sold so far in 2012 is down nearly 11% from the same period last year.  However the opposite is true in terms of pricing compared to the single-family home market.  The average price in this group is $445,992, an increase of 11% over the same period in 2011.  The number of days to sell a condo or townhouse has dropped from nearly 80 days to just 62 days, reflecting stronger demand this year for the lower end of the market.  This is very encouraging because strength at the entry of the market typically leads to a "domino effect" in the single-family market.

Further positive news is that the broader market around Bethesda is experiencing falling home inventory and rising prices.  In the District of Columbia overall home inventory is down 35% from a year ago and the average detached home price has jumped nearly 7.75%.  The condo market in DC is up nearly 5% in price with the available supply of condos down 31%.  The inventory of available single-family homes in Montgomery County is down 22% with the median price up nearly 5%.  All these trends should provide further demand and price support for our housing in Bethesda.  Will the current "dip" in the detached home market in Bethesda reverse to sync with the upward macro forces in DC and greater Montgomery County? Could we be in store for a surge in prices for the second half of 2012?  Will we see a climb in interest rates soon?  We often have clients that are economists and financial experts at the World Bank, IMF, and the IADB.  Several of them recently have predicted a rise in interest rates sometime in 2013.  Time will tell.

We continue to be optimistic about our local real estate market and very enthusiastic in our message to prospective home purchasers  - now is a great time to buy a home, Whether you are a first timer or an 'old hand' we meet new clients every week and help them figure out their home strategy.  Call us and put our 30+ years of combined experience to work for you!