Home Prices in Md. Push Upward and Outward
For Affordability, Think Older, Not Near Transit

By Barbara Ruben
Special to The Washington Post
Thursday, April 27, 2006

With its Potomac McMansions, sprawling old-money Tudors in Chevy Chase and new inside-the-Beltway homes all fetching well over $1 million, you might think Montgomery County would have the fastest-climbing real estate prices around.

In fact, it had the second-lowest rate of appreciation in the region for houses and townhouses compared with the previous year. Only in Alexandria did house prices grow more slowly in 2005 (17.2 percent) than in Montgomery, where houses appreciated by 19.8 percent. But at $435,000, Montgomery did have the highest median sales price for suburban Maryland, according to a Washington Post analysis of government records across the region.

House and townhouse prices in suburban Maryland -- Montgomery, Prince George's, Howard, Anne Arundel, Frederick, Charles and Calvert counties -- appreciated at an overall rate of 24.9 percent in 2005; the median sales price was $337,350, lower than in the District or Northern Virginia. (St. Mary's County is not included in the calculations. The median price of houses there in 2005 was $269,900, up 26 percent from 2004.)

The median is the point at which half the sales were more expensive and half less.

Condominium prices rose quickly in Maryland, by 35.5 percent, to reach a median of $210,000.

In suburban Maryland, affordability boils down to the old real estate agent mantra: location, location, location.

Howard County's $384,000 was the second-highest median price, followed by Anne Arundel's at $314,900 and Frederick County's at $306,000.

For lower-priced houses, look south and east of the District. But be aware: These areas are also appreciating quickly. For example, the median house price in Prince George's County shot up 28.7 percent last year, to $287,000. Calvert County's median jumped to $304,000, a rise of 28.9 percent. Charles County's median price rose 25.7 percent, to $298,000.

A recent check of sales listings showed that many townhouses and older detached houses sold at or below $300,000 in both Charles and Calvert counties, a reflection of the relatively long commutes into Washington.

Thirty-year-old split-levels with five bedrooms and two or more baths were on the market for less than $375,000 in Waldorf. A similar house in western Montgomery County would easily fetch double that price.

Prices in Prince George's County are relatively low. A five-bedroom Upper Marlboro Colonial was selling recently for $369,000, and a three-bedroom, 2 1/2-bath townhouse in Lanham for $329,900. Both offer quick access to the Capital Beltway and the District.

Despite the high cost of houses in Montgomery County, more houses were sold there last year than in Calvert, Charles, Frederick and Howard counties combined. Montgomery also has a larger population than those four combined.

But some pockets of affordability remain in Montgomery County, according to Janice Fife, an agent with Weichert Realtors in Silver Spring.

"There are still some very hot neighborhoods under $500,000. Some are well maintained, but a lot are in need of work," she said.

Fife suggests looking in Wheaton, Glenmont and Aspen Hill north of Silver Spring, and Lincoln Park in Rockville. All have modest older homes and easy access to Metro's Red Line.

"These neighborhoods used to be considered less desirable, but convenience is the deciding factor. You might be near semi-industrial areas," she said.

Maryland's ever-skyrocketing housing prices were mirrored throughout the region last year. As prices rose during 2005, fewer areas could be deemed "affordable." In the Washington area, stretching from Southern Maryland northwest to Loudoun County and northeast to Frederick County, the median price of a detached house or townhouse in 2005 was $419,000, up from $330,000 just a year before.

Northern Virginia had the region's priciest houses, with a median of $491,447 in 2005, an increase of 26 percent from 2004. The median price in the District was $412,000, but the city had the highest appreciation rate in the area, 28.8 percent.

Although condos remain considerably less expensive than houses, they appreciated more steeply, to gain 33.8 percent regionally in 2005, for a median price of $281,000.

The District, where there has been a boom in luxury buildings, led the region in condo prices, with a median price of $365,750. The median sales price for condos in Northern Virginia was $308,000; in suburban Maryland, it was $210,000.

If those prices leave you with sticker shock, Luis Lama, an agent with Long & Foster in Falls Church, suggests you ratchet down your expectations a little: Don't look for a house near public transportation. Think about a fixer-upper. Consider whether you can live without a basement or a garage. "If you want to live by transit, forget it: You don't find anything under $500,000," he said.

Betty Holmes, managing broker with the Vienna-Oakton office of Weichert Realtors, echoed that thought: "There has always been a parallel between distance and price," she said.

Fife said that in some cases, a fixer-upper might be the best bet to get the most for your money.

"There are a lot of people paying for their houses in sweat equity," she said. "Ironically, they go in, fix the house up, making the neighborhood all the more unaffordable."

But there is good news on the affordability front, according to a number of real estate agents. Condos, the object of fierce bidding wars just a year ago, are coming down in price. With more condos being built and apartments being converted to condos, supply is outstripping demand.

And that means more choice and lower prices.

The cooling real estate market gives buyers a little breathing room so they won't be forced to rush into a decision.

"New property availability across the board has helped affordability," said Michael Turk, managing broker with Weichert's Old Town Alexandria office. "In many areas, because inventories have increased, buyers are getting their dream townhome and not having to put in an escalation clause." In the hottest days of the real estate market, buyers commonly included such clauses in contracts, committing them to raise their offering price if there were competing bids.

Holmes said, "People are coming back and revisiting homes again. People now have time to step back and say, 'What trade-offs am I willing to make?' "

Adjustable-rate mortgages and interest-only loans -- which require the buyer to pay only interest and none of the principal, thus bringing down monthly payments -- also mean that buyers may be able to afford more house than they could under a traditional 30-year, fixed-rate mortgage, Lama said. "Financing plays a very important role in affordability. If you understand how the loans work, understand the risks, then you may be able to buy a house where you thought the prices were out of your range," he said.

But agents offer some caveats.

Think twice about interest-only loans if you're planning to stay in the house more than five years, Turk cautioned.

Fife worries that some buyers, feeling priced out of a neighborhood, have taken on more debt than they should, and if the huge price increases of the past five years suddenly come to a standstill, they will be left owing more than their house is worth.

"You have to realize you are not going to have 25 percent appreciation forever," she said. "And while that will be good for buyers, sellers with no equity may be hurt."