When we hear that a market is cooling or has taken a dip, usually it’s cause for worry or stress. But for potential homebuyers at this moment, that’s not the case.
The U.S. real estate market has been on the extreme side of hot for years. Home values rose faster than ever before, and buyers struggled with affordability and finding a footing amidst cutthroat competition. But as the real estate market enters a cooling trend, those conditions are changing. Let’s break down what this market slowdown means for Montgomery County homebuyers.
Home prices are coming down
In May 2022, home prices in Bethesda hit record highs. The median value was $1,275,000, a 21.4% jump from May 2021. Since then, the market has started to cool, and that price has dropped. The current median home value is $936,707, representing the first negative year-over-year change since those ultrahigh values in May—and down 1.1% from this time last year.
Montgomery County’s home values are more stable, but still trending downward. In July, the median home value peaked around $588,000. In September’s report just two months later, that number is down about $1,000. Homes on the market are also experiencing price cuts at a five-year high rate of 37.9%.
For buyers, dropping home prices mean more affordability—especially if you’re buying all in cash.
If you’re not buying in cash, chances are current mortgage rates have you stressed out. But if you can, you shouldn’t let higher rates prevent you from buying a home. Why? Because though interest rates are higher than they were in 2020 and 2021, they’re still historically low. See the following graph from the St. Louis Fed that demonstrates the average U.S. mortgage rate since 1971.
The low rates from mid-2020 to mid-2021 were unprecedented, and we don’t foresee their return in the near future. If you’re not excited about a mortgage with a higher interest rate (who is?), remember that you have the option to buy the home you want at the current interest rate and refinance if rates drop in the future.
Contingencies re-enter the scene
During the pandemic home buying frenzy, many homes sold in bidding wars, over the asking price, in just a few days. Since there were so many buyers looking for homes, sellers had most of the negotiation power. That means things that buyers can normally ask for—like inspection and home sale contingencies—went out the window. Sellers were looking for the fastest, cleanest sale possible and buyers eliminated any potential bumps to stay competitive.
But as the market cools, that’s changing too. Rising interest rates and a flood of inventory have reduced homebuying competition, which means buyers have more leverage. We’re seeing the reappearance of inspection contingencies—the clause that makes a home sale dependent on a clean inspection—and home sale contingencies—the clause that makes the purchase of a home dependent on the sale of the buyer’s current home.
What does this mean for Montgomery County buyers? A better shot at having a contingent offer accepted by a seller. Contingencies are important because they give you more protection during your real estate transaction. With an inspection contingency, you can back out of a deal if the inspection turns up defects the seller won’t repair, and a home sale contingency protects you from ending up with two mortgage payments.
Options open up
This cooling real estate market also comes with added home inventory—giving you more options. Gone are the days of only a house or two in your desired area. Inventory in Bethesda and Montgomery County as a whole is slowly but steadily rising, while the overall number of homes sold has dropped.
That means you have more houses available to you, so you don’t have to snap up the first one you see. You can dust off that must-have list and be more selective, taking the time to find the home you really want.
You’ve got time to think
Speaking of time, the cooling real estate market means you’ve got more of it. The average number of days a home spends on the market is up to 30 in Bethesda—a big jump from its lowest point at seven days in May. In Montgomery County, homes are spending 25% longer on the market than they did this time last year, which means you no longer have to make high-pressure, snap decisions about making such a huge purchase.
Instead, the cooling market means you have time to consider each option carefully. It’s true that homes in some desirable areas will sell faster than others—and when you find your dream home, we encourage you to jump in. But overall, the amount of time you have to visit multiple options, find the right home for you, and construct a winning offer is trending upward.
Ready to buy?
If these shifting market conditions sound favorable to you, give us a call. The Speicher Group of Long & Foster specializes in helping you conquer your impossible—whether that’s finding the perfect house, selling and buying at the same time, or another real estate situation as unique as you are. Our team members are experts at navigating tricky real estate markets, and we can’t wait to help you achieve your goals. Fill out the form below to get started.
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