By Steve Hendrix
Washington Post Staff Writer
Thursday, January 31, 2008
In Montgomery County, how badly you are feeling burned by the real estate downturn has a lot to do with the Zip code in which you live.
In Rockville, for example, the average price of existing homes in the 20853 Zip code, an eastern stretch of the city along Norbeck Road, fell more than 17 percent in the fourth quarter of last year, compared with the same period in 2006, according to data from Metropolitan Regional Information Systems, which tracks home sales in the area.
But just a few miles away, in Rockville's more central 20850 Zip code, the average price rose 12 percent.
"There is a lot of granular difference in the county," said Stephen Fuller, a professor at George Mason University's Office of Housing Policy Research. "Montgomery is actually doing pretty well overall, but it does have these pockets of softer market conditions."
Although not suffering the collapse of home prices seen in some outlying Northern Virginia counties, Montgomery is experiencing a slowdown, according to real estate agents and market data. Countywide, home prices in Montgomery slipped about 4 percent in the third quarter of 2007, compared with a drop of almost 8 percent in the greater Washington area, according to the Case-Shiller Home Price Index.
But within that overall decline are huge market differences, Fuller and other analysts say, with the greatest disparity having to do with distance from the Capital Beltway. The older neighborhoods closer to Washington have tended to fare better than the once-booming new-house developments upcounty.
"Bethesda, Silver Spring, those areas are still pretty good markets," Fuller said. "Farther out, Germantown, Gaithersburg, there are just fewer and fewer people interested in those markets, and they've had to cut their pricing."
A countywide analysis by Fuller's office shows that the average sale price of existing homes in the several Zip codes of the Bethesda-Chevy Chase area fell 3.5 percent in the fourth quarter of 2007, compared with the same period in 2006, from $894,125 to $862,712.
In Damascus, by contrast, at the county's outermost stretch of Interstate 270, the average house price fell more than 14 percent, from $427,416 to $367,298.
"It has been like two different markets," said Phil Kelly, a Remax broker based in Gaithersburg. "The upper part of the county was hitting the doldrums much earlier than the lower part of the county. We've seen more oversupply of homes, falling prices. It's only in the last three or four months that what we've been experiencing for a while is catching up in the lower part of the county."
Kelly said it has taken time for some sellers, who remember the bidding wars and hot markets of recent years, to come to terms with the new conditions.
Larry and Dianna Long are a case in point. The retired couple priced their 30-year-oldMontgomery Village house at $525,000 in May, still thinking in good-old-days terms. They received few visits from would-be buyers and no offers over the summer, and dropped the price to $495,000.
Finally, sweating over the contract they'd put on a house in Baltimore to be near their daughter, they came down $20,000 more. They received two offers the next day and settled in September. In their part of the county, a house took an average of 68 days to sell at the end of 2006. By the fourth quarter of 2007, it had climbed to 119 days.
"A few years earlier, the house right next to us had sold within a week for more than the asking price," said Larry Long, a retired Labor Department lawyer. "It was painful to realize it wasn't going to sell for what we thought it was worth."
Increasingly, the sluggishness has taken hold in more parts of the southern county, said Jane Fairweather, a Coldwell Banker agent in Bethesda.
"I haven't seen any neighborhood that's completely immune," she said. "The neighborhoods surrounding downtown [Bethesda] are better protected, where people can walk to dinner, walk to the Metro, walk to movies. But eastside Bethesda has been struggling."
The Montgomery market overall had been showing new signs of life in the summer, Fuller said, with prices stabilizing and inventory falling. But then came the nationwide credit crunch stemming from failing subprime loans. Now, banks are tightening their credit requirements and seeking bigger down payments, putting a new drag on the local market.
"They've almost entirely stopped making jumbo loans [the term for mortgages of more than $417,000]," Fuller said. "It's really difficult to buy a house anywhere in Montgomery County without a jumbo loan."
Although it took Montgomery longer than other parts of the region to experience the slowdown, the county should be among the first to enjoy any future recovery, Fuller said.
"It's strong markets like this that feel the benefits sooner," he said. "You're looking for a leading indicator, Montgomery County is always the best in the state."
Fairweather and Kelly both took heart from a promising start to the winter sales season.
"October, November and December were pretty bad," Fairweather said. "But two weeks ago, the phones started ringing again. Last weekend, I had seven open houses and each one had 20 or more people. That's new."