Buyers’ Preferences Are Changing
Today’s consumers want newer homes with open floor plans and a modern look, which means that unrenovated older homes tend to sit on the market longer unless they are priced low enough to appeal to buyers, agents say. Sellers need to decide if they’re willing to drop the price or spend money to renovate before putting their homes on the market.
“Buyers’ expectations have changed,” says Margie Halem, a senior vice president with Compass. “They want everything done before they move in. They see HGTV and [the website] Houzz and they expect every house to have a current kitchen and bathroom.”
Some buyers don’t want to spend the time it takes to renovate a house, according to Burch-Murton. “Buyers are very willing to sacrifice size for a quality renovation and a great location,” she says. “They want houses that are open and light, and they don’t want a yard.”
Condo and Townhouse Options
The area’s condo developments, with their range of amenities and services, are also attractive to buyers looking for a certain style of living. But while living in a condo in a walkable community like downtown Bethesda may seem appealing, some people are finding that the math in the current housing market doesn’t work in their favor.
“Homeowners whose homes were once worth $1.5 million and are now worth $1 million are frustrated and not willing to pay the premium on a condo,” says Jamie Coley, an agent with the Heller Coley Reed team at Long & Foster. “They’re pulling back and waiting and watching to see if condo prices come down or their home values rebound.”
The condo market is showing signs of the strain. The average sale price per square foot for condos in Bethesda, including resales and newly constructed buildings, dropped 10 percent in 2018 from the previous year, Sheehan says, while the number of sales declined 21.7 percent. In 2017, 355 condos sold in Bethesda at an average price of $416 per square foot; in 2018, 278 condos sold at an average price of $376 per square foot, she says.
“Bethesda’s not necessarily ready to pay $1,000 per square foot for a condo,” Davis says. “That’s why the condo market is struggling a little and there’s inventory that hasn’t sold.”
“It takes a long time to build a condo, and in Bethesda, the building of high-end condos has now outpaced demand,” Sheehan says. “Sales will probably pick up again in a year or two, when that supply is depleted.”
Townhouses, on the other hand, are a “home run” for builders, Fleisher says, because very few new units are available. Among the new townhouse developments under construction are The Brownstones at Chevy Chase Lake, Grosvenor Heights, Westside at Shady Grove Metro, and Montgomery Row, all by EYA. At Chevy Chase Lake, 41 of the 62 townhouses have sold since sales began in July 2016. At the other three communities, all of which started sales in 2015, 123 of 142 townhouses are sold at Grosvenor Heights, 135 of 148 have been purchased at Westside, and 149 of 168 are spoken for at Montgomery Row.
“This market in Bethesda and Chevy Chase is missing a lot of townhouses, so those that are in a good location, especially if they have an elevator or an elevator shaft to add one later, sell fast,” Halem says. “In 2017, 35 townhouses sold in Bethesda at an average [price] of $978,000 and for an average of 98 percent of the asking price. In 2018, 56 sold by Nov. 1 at an average price of $990,000, which was an average of 99 percent of the list price, so clearly there’s great demand there.”
The 2019 Forecast Is Uncertain
Hopes for a strong real estate market in 2019 in the thriving local economy are tempered by concerns about the overall confidence of consumers in the face of rising mortgage rates, a volatile stock market and political turmoil. Galanti anticipates a slight increase in sales this year because of the expected bump in listings and because more millennials are reaching milestones that encourage them to buy, such as starting a family.
Adds Wydler: “The real estate market has generally been pretty flat the last couple of years, with a couple hot spots sprinkled around, typically around gentrifying neighborhoods in town. We expect the market to remain fairly stable and are cautiously optimistic that we may even see a mild uptick.”
Sellers becoming more realistic about pricing is a key to a better market in 2019, Burch-Murton says. “People think the economy’s doing great and so they should price their house higher,” she says. “But this is an unforgiving market. If you have a place to sell that’s priced under $1.5 million and there’s not a lot of action, then that means it’s overpriced for its condition and location.”
Sellers also should remember that “everyone is time-starved in this area and no one wants to renovate,” she says. “Buyers are willing to wait until they find the right place.” And that means sellers will need to adjust expectations about how quickly they can sell and for how much, depending on where their home is located and its age and condition, agents say.
“The past five to 10 years proves that we’re a vibrant market, but everyone needs to be mindful now of the downward shift in our market,” Coley says. “Sellers are going to have to be more realistic about getting their homes in good condition, staging them and pricing accordingly.”
Michele Lerner has been covering real estate, business and personal finance for more than two decades as a freelance journalist.