Also See: Extraordinary Homes
Although the slowing market has given way to housing bargains by the dozens in the D.C. suburbs, there are still many homes resisting the downward pricing trends, including a surprisingly hot market in multifamily housing — that is, clusters of apartments, condominiums and townhouses.
This trend has gone mostly unnoticed by much of the public in part because it counters the common notion that everyone in the suburbs wants a big detached house with a large yard.
Researchers such as Nico Larco, a professor at the University of Oregon, have been examining this phenomenon of multifamily housing, which challenges typical images of life in suburbia and the kind of people who seek it out. Larco has completed several studies of this trend, and in a phone interview, he told The Washington Diplomat that one in four suburban dwellers is now living in some form of multifamily housing instead of a detached single-family home. “It’s a common suburban housing type that’s been flying under the radar,” he said.
Multifamily housing attracts a wider range of people in terms of age, income and ethnic affiliation than single-family homes. It also appeals to advocates of “smart growth” development for metropolitan areas because it uses resources efficiently, and it includes both inexpensive garden apartments and pricey penthouses. Like the sizes, prices vary widely. You can get a small garden apartment for $200,000, while upper-echelon homes are presently priced at more than $1 million.
In this higher-price range, multifamily housing generates what researchers call “mixed-use lifestyle centers” — that is, pedestrian-friendly walkways and retail establishments mixed with moderately priced or luxury townhouses and apartment buildings.
“It’s a very hot thing right now,” said Suzanne Simon, managing broker for the Arlington, Va., offices of Long & Foster. She cited popular multifamily developments cropping up in Reston, Clarendon, Shirlington and Ballston, all in Virginia, as well as the new National Harbor complex in Prince George’s County in Maryland, which is also home to multifamily mainstays such as King Farm in Rockville and the Kentlands in Gaithersburg.
“It’s very popular with young single professionals who want to take the subway to work and with ‘empty-nesters’ or retirees who want to live in a low-maintenance home,” Simon said. “And all of them want to be able to walk or bike everywhere — to restaurants, theaters and shopping.”
But a big house with a white picket fence out in the “burbs” still represents the homeownership dream for many, and if you’re looking for a single-family detached home in the Maryland or Virginia suburbs, these are certainly tempting times to buy. Gripped by a housing debacle that has seen many homeowners — even affluent ones — unable to make mortgage payments, plummeting home value assessments and prices, as well as a surplus of empty properties flooding the market, today’s American housing industry can spell anguish for some and amazing bargains for others.
“Many homes are unsold. It’s a buyers market and if you’re careful, it can work to your advantage,” said Mary Greiner, a veteran real estate agent with Long & Foster in Northern Virginia. “$600,000 houses in the suburbs are going for $300,000 to $400,000. I’ve even seen a home worth $0900,000 on the market for half that because it was going to foreclosure.”
As an example of a suburban bargain, she pointed to a four-bedroom, two-and-a-half bath Colonial in Manassas, Va., that might have sold for $500,000 in better days. Assessed at $472,800 in 2007, it was recently placed on the market for $369,900. It boasts three living levels, a basement, family room, recreation room, library, garage, deck, large yard and a fireplace. “It’s gorgeous,” Greiner said.
But both Greiner and Simon warn of the pitfalls behind seemingly red-hot deals. Although such bargains are not unusual, they’re also not universal, said Simon, who added that in Arlington, prices are declining very little and bargain-hunters “are losing houses they want because they’re making low offers.”
“If a home has been on the market for a short time and the open house looks like a busy railroad station, you’re not going to steal that property,” she said.
Similarly, prices for homes listed at $2 million or more, termed “extraordinary homes” in real estate parlance, are more stable, according to Greiner and Simon. “This is not a segment that is having problems. They sell, although it takes a little longer,” Simon said, noting that new luxury homes are still being built in the Washington area.
Greiner echoed that sentiment: “They’re holding their prices pretty well, but they are staying on the market longer. And you do see the prices coming down by, say, a $100,000 to $500,000. So even at this level you can look for a bargain.”
However, if you want to buy now, be careful, Greiner warned. “Do all your homework and look at the pitfalls before you get into this market.”
One reason: Lenders are stricter and financing is becoming increasingly difficult for borrowers. Timelines for a loan approval can now run several months, and the value of a house can greatly change in that window — affecting your financing arrangements. And the competition for that true bargain can be fierce.
“The market is upside down, the exact opposite of what it used to be,” Greiner explained. “If you want a house now, you’re likely bidding against all those people out there who want to pay as little as possible — and lenders and sellers can choose their buyers and their contracts. The fewer complications you have, the better.”
For example, if your future purchase is contingent on selling your present house, you could easily lose out to a buyer who lacks that complication. “Why take yours? [Sellers] can pick and choose,” Greiner said.
Greiner has a list of tough-love advice for people who want to buy now to help them minimize financial risk and the chances of future heartaches.
“First, don’t rush. Bargain hunting can get exciting. Don’t be pressured. Don’t skip steps. Before you start house hunting, go to a good loan officer and get a letter that states the amount you qualify for — and stick to that limit,” she advised. “Don’t try to put a contract [or bid] in on a house you’re not qualified to buy on the hopes the price will come down.”
Second, “be extremely careful about down payments,” she said. That means being prepared to put at least 10 percent down on the purchase, and more if possible. “Be ready. The appraisals of house values are fluctuating in this market. Your bank can’t lend you the amount you requested three months ago if the value of the house you want to buy has gone down since then. In that case, you may have to put in more of your own money to get it.”
Simon explained that buyers looking for conventional financing in an area defined as a declining market —“and that’s everybody these days,” she noted — will face bankers who say, for instance, that you need 5 percent more on your down payment, or even 15 percent. “That’s a huge down payment. An FHA loan won’t require that.”
The Federal Housing Administration (FHA) provides mortgage insurance on loans made by FHA-approved lenders throughout the United States. These FHA loans, which can now go as high as 0,000, have their own complications, however. They’ve recently begun to require two separate appraisals of a property’s value if a loan goes above $417,000 or if the property is in a “declining market.”
Third, Greiner recommended doing your research before putting in a contract or bid on a house. When you initially locate a home you’re interested in, “go to the neighborhood during the day and during the evening,” she said. “Walk around. Talk to homeowners. Research the area on the Web, checking police departments and crime information, school ratings, places of worship, shopping — it’s all online now.”
With housing markets in flux, Greiner cautioned that getting an exact fix on a home value is difficult, yet it’s still a vital step that shouldn’t be overlooked. “You or your realtor should look up the tax records and find out what the current owner paid for a house. Find out what other homes in the area are actually selling for. Check records and talk to people.”
Simon agrees. “You need to look at neighborhood sales within the last 30 days, 60 at most. Things change that fast now,” she said.
Part of your background research must also include looking into homeowner’s insurance before you sign any contract. “If you want to buy a house, make sure it’s insurable. And as part of that check, see if there are any claims against a house,” Greiner advised, noting that this has become a bigger potential pitfall than it used to be. “If a home has been sitting empty for some time, there could be problems such as water damage or vandalism. In case of a foreclosure, an angry owner may have trashed the place or deliberately damaged it in some other way.”
These concerns make a home inspection before purchase critical, Greiner said. Not all types of loans require a home inspection, but don’t skip it. “Write it into a contract and make the sale contingent on a successful inspection. That way, if there’s a problem you can get out of the contract,” she said.
“One of the things you might need to look at is called ‘short sales,’” Greiner explained. “Under this, a bank forgives part of a loan. For example, if a house is listed at $450,000 but doesn’t sell, a bank may do a short sale, saying, ‘We’ll forgive you $50,000 and accept $400,000.’”
However, in a short sale, as well as in a foreclosure, the seller may not have to pay the buyer’s real estate agent’s fee, so buyers may be asked to cover that expense. Simon called short sales “very risky” in general for buyers. Purchasing foreclosed properties is “much better” because the home is owned by a bank and the price is clear from the start, Simon said, noting that foreclosures and big bargains are more common in the outer suburbs.
And last but not least, don’t stop looking even if you’ve put in a contract or bid on a house because you never know what’s going to happen in such a tough and volatile market, Greiner advised. “And make sure you formally withdraw a contract if you find another house.”
If you are interested in “extraordinary homes” — properties priced at $2 million or more, which have held their value in these turbulent times —or you simply want to see how “the other half” lives, the Internet is a good place to start.
Long & Foster’s Extraordinary Properties Division (http://homes.longandfoster.com/Real-Estate/Extraordinary_Properties.aspx) offers an online “luxury portfolio” of mansions and manors, estates, waterfront properties and historic residences for sale in the mid-Atlantic region, with listings for Maryland, Virginia and Washington, D.C.
It also lists properties across the United States and around the world, including castles, cottages, contemporary masterpieces of architecture and Caribbean island homes. (One sales listing includes a powerboat, golf cart, bicycles and four kayaks.)
The directory is published in six languages and also includes a multimedia magazine of U.S. luxury properties that features video tours of residences ranging from a historic property on Chicago’s lakefront “Gold Coast” that boasts a greenhouse on the second floor to a Lake Tahoe vacation retreat complete with cabins, cabana and a 350-foot beachfront.
Closer to home, Washington Fine Properties, which deals only in specialty properties (www.wfp.com), offers on its Web site an online magazine and slideshow tours of homes in the District (including Kalorama and Georgetown), Maryland (including Bethesda and Potomac), and Virginia, (including Northern Virginia and the Virginia countryside). Recent offerings included 28 homes priced between $10 million and $20 million.
Similarly, “Luxury Homes in Maryland” (www.luxuryhomesmaryland.com) is a Web site for brokers serving the luxury market in Maryland that lists properties priced at $1 million and up. It notes that Anne Arundel County has 341 homes listed at the $1 million mark or higher, going all the way up to $11.5 million for a luxury estate on 20 acres with 1,600 feet of water frontage on the Severn River.
Montgomery County, meanwhile, boasts 471 homes for more than a million. According to the site, the highest priced luxury home in Montgomery County for sale is a 2.5-acre luxury estate priced at $14.5 million in Bethesda.
The choice is yours: Eat your heart out or do your homework and take your pick.
About the Author
Carolyn Cosmos is a contributing writer for The Washington Diplomat.