Montgomery Home Prices A 7-Figure Shock

By Philip Rucker and Nancy Trejos
Washington Post Staff Writers
Thursday, September 27, 2007

In a trend Montgomery County officials called shocking, the median price for a newly constructed single-family detached home in Montgomery rocketed to a record high of $1.13 million in the first quarter of this year, according to government data released yesterday.

The figure, up from $881,600 last year, underscores the escalating cost of new construction in the Washington region and is a troubling sign for officials seeking affordable housing solutions.

Although specific home sales data were not available for all jurisdictions in the region, it appears Montgomery has the area's most expensive new homes. The median price of new single-family homes in Fairfax County was $965,200 last month, according to county data.

In the District, the median sales price for single-family homes, the majority of which are existing, was $534,450 last month, according to the Greater Capital Area Association of Realtors.

Montgomery's new-construction home prices are soaring, county officials said, because developers are responding to the downturn in the housing market by focusing on building large, high-end homes for affluent buyers.

Karl Moritz, research chief of the Montgomery County Planning Board, which released the report, said the data show that construction of new middle-market homes has tapered.

"What we see when we look at the data, though, is not so much that all the houses are becoming more expensive, but that in the current market, builders stopped building middle-of-the-market houses," Moritz said. "What they continued to build was the most expensive."

Board Chairman Royce Hanson said the $1.1 million figure is "pretty startling."

"I don't know that we expected it would go over a million," Hanson said. "In 2006, it was just under $900,000, but this reflects a robust market in big houses. Single-family homes are tending to be larger."

The housing market across the nation has softened over the past two years, with median prices falling in many areas. The tightening in lending standards as a result of a rise in foreclosures has further weakened the market.

But experts said Montgomery has several factors that insulate it, such as a strong job market, proximity to downtown Washington, strong schools and a generally well-run government.

"It's a very competitive place, and there isn't as much land to build on, and so it's going to build at a high price," said Peter Morici, a University of Maryland economist who added that the $1.1 million figure is not surprising.

Meanwhile, median prices -- the point at which half the homes are sold for more and half for less -- for townhouses as well as existing single-family detached homes remained stagnant this year.

In Montgomery, newly constructed townhouses were $505,462, and existing single-family detached homes were $540,000, modest declines from 2007. The median price for existing townhouses increased slightly, to $364,000.

Reflecting a housing market that has cooled nationally, the number of homes sold in the first quarter of 2007 fell compared with the same period in previous years. For example, 98 newly constructed, single-family detached homes were sold in the first quarter of 2007 compared with 195 in the first quarter of 2006, according to the report.

Still, officials said the report represents an alarming trend for Montgomery, a county that has some of the region's most expensive homes and where affordable housing is scarce.

County Council Member Marc Elrich (D-At Large) said developers are "catering to very, very high ends of the market."

"I think a lot of the folks in the other income brackets have been squeezed," Elrich said.

County Executive Isiah Leggett (D), who has decried the county's dwindling supply of affordable housing, expects a task force report this fall to outline ways the county can make inexpensive homes and apartments more available.

A combination of condo conversions and redevelopment in the county's more urban communities, such as Wheaton and Bethesda, have hampered efforts to keep mid-priced and low-cost housing available for rent and purchase.

Barbara Goldberg Goldman, who co-chairs Leggett's task force, said affordable housing in the county has reached "crisis proportions."

"We several years ago . . . claimed that we are approaching crisis proportions, and lo and behold, we are here," she said.

Montgomery now has more than 16,000 families on the waiting list for the federal government's housing choice program, which provides rental subsidies, said Tedi Osias, legislative director at Montgomery's Housing Opportunities Commission.

There are 4,500 more families on the county's public housing waiting list, she said.

"Frankly, long before the median price passed the $1 million mark, there's been a dire problem in Montgomery about how to make housing affordable for people who don't make a lot of money," Osias said.

Staff writers Miranda Spivack and Kristin Downey contributed to this report.

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