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Market Commentary
Home price uncertainty increases. What should buyers do?
The risk of a short-term price correction has gone up.. With the right strategy, buyers can still come out ahead.
Within the past several Corus Reports, we’ve been reporting on the slowdown in real estate throughout the mid-Atlantic region. This slowdown has been particularly acute in the outer suburbs of the Washington, DC region, such as Loudoun County, Virginia and Frederick County, Maryland. In each of the past 6 months, the quantity of new listings added to the market has greatly out-paced the number of sales. In both the DC and Philadelphia metro areas, we’re experiencing inventory levels far above what we’ve seen in the past 5 years – months’ inventory has tripled in some regions.
Given current inventory levels, we believe that the risk of a price correction is higher than it was a year ago. On a quarterly basis, the PMI Mortgage Insurance Company publishes its Market Risk Index, which measures the likelihood of home price declines in markets throughout the U.S. They currently project that in the DC area, there is a 43.1% chance of home prices declining over the next 2 years. Nine months ago, this index stood at 24%. In the Philadelphia metro area, the Market Risk Index is much lower -- only 13%.
However, it is our position that if prices fall, they are unlikely to drop very far or stay depressed for very long. As we discussed in the last Corus Report, strong job growth projections over the next four years will exert considerable upward pressure on housing prices.
In an August 16th interview with WTOP radio, noted economist Stephen Fuller of George Mason University pointed out that while average home prices in the DC metro area dropped for the first time in many years, this was much more of a “normalization” of the market and that exceptionally strong local job growth will push prices higher soon.
Despite the uncertainty of the current environment, there are compelling reasons for buyers to enter the market. And with the right strategy, buyers can come out ahead. Here are our recommendations:
Heed the interest rate environment. Interest rates have a big effect on housing affordability. Mortgage rates have dipped in recent weeks, and remain at historically low levels. Given that interest rates may go up over the next 2 years, now may be the time that housing is most affordable. Even if future home prices go a bit lower, higher interest rates may effectively make a future purchase more expensive.
Look for bargains. In this environment, there are homeowners who are eager to sell. While not all listings are bargain priced, an anxious homeowner is often willing to sell their house at an exceptionally low price. Getting a bargain price now is an excellent way for a buyer to hedge against a possible future drop in home prices.
Take advantage of new home deals. The slowing market has caught many builders by surprise. Eager builders seeking to move inventory are offering fantastic rebates, incentives and option packages. In many cases, these incentives are publicized to real estate brokers, and not to the general public.
Get closing cost assistance. Most sellers are currently willing to provide purchasers with closing cost assistance. This is especially beneficial for first time homebuyers with limited cash. In some cases, this closing cost assistance can also be used to buy down the purchaser’s interest rate.
Plan on a 3+ year horizon. Even in a hot market, it’s difficult for a homebuyer to generate equity in their home if they own it for less than two years. If you’re buying a home, plan on owning it for at least 3 years. If you think your time horizon is less than that, renting may be the superior option.
Be picky. Today’s buyers have more choices than ever. In some neighborhoods, homebuyers can choose from hundreds of available listings. It’s easier than ever to find the house that really meets your specific needs, and that also has strong fundamentals. Even in a weak market, a house with strong fundamentals can be an excellent investment.
Market Stats
Today’s real estate market, by the numbers.
Key statistics on real estate markets in Pennsylvania, DC, Northern Virginia, and Suburban Maryland.
Housing Trends
A Very Different Way to Design Communities – New Urbanism
“Neo-traditional design” or “New Urbanism” is a new direction for designing – and will likely be coming to a town near you very soon.
Pushed along by problems with traditional suburban sprawl and a desire by many homeowners to return to a stronger sense of community, a whole new movement is taking new developments in a very different direction. And this new orientation seems to only be gaining steam as buyers flock to these communities. Recent features in USA Today, Time, The Chicago Tribune, Slate, and other publications attest to the growing influence of this new design direction.
What is “New Urbanism” or a “Neo-traditional” community?
You’ve no-doubt seen examples of this growing trend throughout the Washington, DC and Philadelphia metro areas -- new developments, new buildings, or re-designed urban centers that have a “nostalgic feel” to them.
The US Department of Transportation describes this movement on its website in this way: “"New Urbanism" and "Neo-Traditional Neighborhood Design" is a town planning principle that has gained acceptance in recent years as being one solution to a variety of problems in suburban communities throughout the country. Traditional neighborhoods are more compact communities designed to encourage bicycling and walking for short trips by providing destinations close to home and work, and by providing sidewalks and a pleasant environment for walking and biking. These neighborhoods are reminiscent of 18th and 19th century American and European towns, along with modern considerations for the automobile.”
Philip Langdon explained New Urbanism in his article in Planning magazine: “. . . the new suburban town centers are the result of conscious planning, aimed at creating compact places with a lively mixture of activities. They put housing, shopping, offices, and public gathering places close to one another, allowing residents to walk to work, to local stores and entertainment, and to parks and other public facilities.”
What’s fueling this movement?
Developers have begun to recognize homebuyer demand for a strong sense of community. However, many of the suburbs created in the last 50 years haven’t promoted such as sense of community. "Contemporary suburbanism isolates and separates," says Paul Murrain, an urban planner based in Oxford, U.K. Consumers are recognizing "in their hearts" the better quality of life offered by new urbanism,” he adds. "New urbanism is a return to romantic ideas of the past“ echoes Barry Berkus, principal of two California firms, B3 Architects, Santa Barbara, and EBG Architects, Irvine.
Where can examples be found?
As the New Urbanism / Neo-traditional community movement expands, elements of this movement can be seen, not just in new planned communities, but in single buildings, shopping centers, and urban revitalization projects. From new buildings with a “traditional flair” to huge new communities, the Washington and Philadelphia region has dozens of examples of the New Urbanism / neo traditional design in practice.
While towns like Reston, Virginia, developed in the 1960s, are often pointed to as the beginning of the neo-traditional movement, the community most often sited as being the true “ideal” for this movement is the Kentlands in Gaithersburg, Maryland. Designed in 1988 by New Urbanism pioneers Andres Duany and Elizabeth Plater-Zyberk, the Kentlands has been so successful and admired that hundreds of similar communities have taken elements of Kentlands and implemented them throughout the United States and abroad.
Another example of this new direction in community building is Ridglea. Ridglea is a traditionally designed neighborhood situated in South Coventry Township in Chester County, Pennsylvania.
The developer of this community describes Ridglea this way: “The homes and streetscapes at Ridglea offer the feel of a bygone era, different from most of today's suburban communities. Front porches, a favorite of many buyers, greatly enhance the village feel of the neighborhood. Additional design details such as attached garages set back from the front of each home, sidewalks and tree-lined streets all work together to showcase the front doors of each home as inviting and welcoming focal points.”
As a testament to the growing New Urbanism movement, the Home Builders Association of Chester and Delaware Counties recently voted Ridglea the Best Single Family Community of the Year.
King Farm, a new community in Rockville, Maryland has also been very successful applying the principles of neo-traditional communities. King Farm won a Charter Award from the Congress for the New Urbanism in 2001
The Yorksquare Condominium in downtown Philadelphia is an example of a new building that has been built with a neo-traditional design. These lofts have the feel of an older, quaint building from years gone by.
Critics of New Urbanism
As with any new idea, Neo-traditional communities / New Urbanism has its share of critics as well. Architect Peter Calthorpe, a co-founder of the Congress for New Urbanism points out that this movement still has a way to go. "Clearly, replacing cul-de-sacs and malls with traditional urban design, although desirable, is not sufficient, both practically and ideologically. If it were, beautiful main streets would not be dying across the country and traditional urban neighborhoods and many first-ring suburbs would not be in decline.”
George Washington University urban and regional planning Professor Dorn C. McGrath argues that New Urbanists fail to recognize the current realities of suburban life. “Despite its charming neo-colonial appearance, the New Urban model community of Kentlands has an uneasy relationship with the traditional American car, or cars. Kentlands is a relatively elite enclave located fairly far out in the Maryland farmland. Living there demands that residents have at least one car to get to and from work, the shopping center, the pediatrician, the dentist, the soccer games, the tee-ball games, the movies, and any of the many attractions of the metropolitan area. Moreover, while the project's narrow streets may discourage a few speeding hooligans, they also frustrate guests who need to park at a party and they slow down fire trucks and other emergency vehicles. These are aspects of suburban life that illustrate the awkward intrusions of contemporary reality into the saccharine imagery of the New Urbanism.”
The future of Neo-traditional design / New Urbanism
While many community design trend have a short life cycle, we believe that the New Urbanism movement should maintain momentum for some time. Not only does this design spur feelings of nostalgia for the “good old days” and allow for more “community feel” to new neighborhoods but there are some other benefits as well. A more condensed residential area allows for more people to live in a smaller area. Community shopping districts reduces the need for car travel. Plus, taking this plan back into older neighborhoods allows for revitalization and re-use of existing water and sewer lines and other infrastructure.
Cul-de-sacs and strip shopping centers have been hallmarks of our suburbs for more than four decades. Perhaps New Urbanism will prevail over the next four decades?
Transportation
Is the Orange Line Metro to Dulles still happening?
The Dulles Corridor Metrorail Project still appears to be moving forward, but funding is not yet secured.
Discussed for years, plans for expanding Metrorail in Northern Virginia to Dulles Airport are firming up. However, Federal Government funding has yet to be provided and not all of the details have been hammered out.
The current proposal calls for this project to be built in 2 phases. In Phase 1, track would be built from the current Orange Line near the East Falls Church station, continue through Tyson’s Corner, and then would follow the Dulles Toll Road to Wiehle Avenue in Reston. This phase is expected to be completed in 2011. Phase Two, targeted for 2015 completion, would continue the line along the toll road to Dulles Airport and then out the Greenway to Route 772 near Ashburn.
While most of the plans appear to be finalized, some crucial details are yet to be resolved. One of the current debates is whether the portion of the metro line that goes through Tyson’s Corner should be underground or elevated.
Original plans recommended an elevated track. However, the Commonwealth of Virginia recently created a “Tunnel Review Panel” of Civil Engineers to investigate the feasibility and costs of the tunnel option. In late July, this task force reported that it would be feasible to construct the system underground and that there would be a relatively small difference in cost and schedule compared with the elevated track option. (Cost differences would be about $250 million extra for the tunnel option - $2.5 billion vs. $2.25 billion)
However, WUSA9.com points out that Federal Transit Administration “isn’t exactly on board with the tunnel plan,” and warns that plans to build a tunnel could result in a new list of evaluations that could tack a lot of time onto the construction schedule.
Additionally, the Washington Post reported on July 27th that, “In a strongly worded letter to Gov. Timothy M. Kaine (D), Rep. Frank R. Wolf (R-Va.), the rail extension's top federal backer, Rep. Thomas M. Davis III (R-Va.) said that a tunnel under Tysons, although preferable in theory, would delay the project and raise its cost, imperiling key federal funding and the entire 23-mile extension from West Falls Church.”
While not yet committing to funding or final approval, the Federal Transit Administration currently has this project on their “recommended” list and it is part of their “new starts” program awaiting an application for federal funding.
The current plan for the extension of the Metrorail line calls for funding by Virginia, Fairfax and Loudoun Counties, the Metro Washington Airports Authority, and the Federal Government.
Most experts still expect that this project will eventually be completed and that most of the hurdles have been cleared. However, much work remains.
You can find much more information about this project at www.dullesmetro.com/
Notable Homes: Delaware Valley, PA
300+ year old homes for sale
In real estate, “old” is a relative term. If you want a REALLY old home, consider these.
When a Corus client asks us to find them an old home, they’re often thinking about homes built in the 1940s or 1950s. Some are thinking of homes built in 1900. But what about 1700? Believe it or not, there are several 300+ year old homes for sale in the Delaware Valley. Think about it – you can live in a home that’s older than the United States. Here are two such homes.
One of these unique properties is a 10,000sf historical manor home situated on 9 acres in Whitpain Township in Montgomery County, Pennsylvania. This 304-year old home with 5 bedrooms and 6 bathrooms has been redesigned by noted architect R.A. Hoffman to showcase it’s magnificent architectural features. When renovations are completed this home will have 6 fireplaces, a swimming pool, and a 3-car garage. (of course, the garage is NOT original!) Current list price for this home is $5,250,000.
Another home, at a more contemporary 301 years of age, is currently for sale in Bucks County, Pennsylvania. This gracious stone farmhouse was originally deeded to Joseph Smith, by William Penn. Enlarged in 1840, and again in 1940, this sprawling 4,000 sq ft home was totally renovated 2004/2005 to include all of today’s modern conveniences. This home has 4 bedrooms, 3-1/2 bathrooms, 6 fireplaces, front & back stairs, wood floors, deep window sills, gourmet kitchen, enormous 35' x 15' master bedroom, a private garden stone patio, massive front porch and detached 2 car garage. This home is currently listed for $999,900.
To find out even more details about these “seasoned” homes, a new home still in the planning stages, or anything in between in the Philadelphia area, please call Kathy Davila in our Delaware Valley office at: 610.825.3225.
Corus Home Realty News
Corus Home Realty celebrates 5 years in business
On August 15, 2001, Corus Home Realty officially opened for business. Now 5 years later, we have grown to 5 offices, 40 employees, and completed nearly 2,000 real estate transactions!
Our beginnings were certainly not plush. Mike Gorman, Eric Rossum, Dan Hartz, and Richard Barney, started Corus in a single room in a shared office. Soon, we found office space in McLean, Virginia and with furniture purchased from a failed “dot-com” and a lot of sweat, paint, and long hours, we moved into new digs in November 2001.
Along the way we’ve been blessed to have investors, employees, friends, business partners, and clients who have encouraged us, supported our efforts, and spread the word. We’ve won awards from LendingTree, HomeGain, ServiceMagic, RealEstate.com, and been one of Washington Business Journal’s top 25 real estate brokerages for the past 3 years running. And we’ve proven that a real estate company built around the customer, radically different from the “traditional model” can not only succeed, but flourish.
However, we’re most proud of the hundreds of letters and notes we’ve received from clients thanking us for our help, as well as the amazing employees who have worked so tirelessly to help us grow for these past 5 years. Thanks to everyone for your support!
We have lots of very exciting things planned for the next few months and years and we expect that the next 5 years will be even more exciting! Stay tuned.
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