Post-pandemic challenges remain, but opportunities are equally abundant to capitalize on the state’s real estate market
If you’ve been paying attention to market indicators and casting a wary eye toward that all-important inflation index since the pandemic (and let’s face it, who isn’t?), you’re probably shaking your head about the uncertainty of it all, especially if you are even remotely interested in buying or selling real estate. Will the Fed continue to raise interest rates to combat inflation? Will that affect how much of a house I can afford? Sound familiar?
For the following report we went straight to the experts in these matters. To provide a better understanding of the numbers, market indicators, and trends, we recently spoke with Yolanda Muckle, President of the Maryland Association of REALTORS for her take on everything real estate.
Fortunately, part of Muckle’s role with the Association staff is to monitor the environment of the real estate market, determine where problems and opportunities are, and advocate on behalf of home buyers and sellers. So, whatever the market conditions, consumers’ concerns are addressed, their interests are protected, and they understand the value of working with a REALTOR when looking for their next home.
We’ve also tapped the Institute for Luxury Home Marketing for the organization’s market assessment, according to its June 2023 Luxury Market Report, the most recent available at press time. For 20 years, the Institute has served as the premier independent authority in training and designation for real estate agents working in the luxury residential market.
What Muckle and the Institute are seeing in the market state-wide and nationally are conditions that have been developing over some time. Interest rates and how they’ve affected inventory is only part of the story. Let’s dive in…
By the Numbers
“As of the beginning of June, interest rates were standing around 6.79 percent. But one of the biggest things that affect the markets everywhere is the lack of inventory,” Muckle explains. “It’s really a basic supply and demand situation. There are fewer homes to buy, which means that more people are placing offers on the same house. I actually had a conversation with someone today…they had 42 offers on one listing.”
Just how low is inventory? According to the National Association of REALTORS 2023 State of Maryland Housing Report, over the last three years an industry condition known as “missing middle housing,” has increased from 88,000 missing units to its current number of 122,000 in 2023.
“It is what we’ve seen in Maryland for many months,” Muckle says. “Of course, it was more frenzied during the pandemic. But even now, the inventory is low, the prices are higher. To date, they’ve not fallen in Maryland. You have a supply issue, yet prices are still increasing.”
The Institute confirms that increasing prices are not deterring buyers—demand within the luxury market remains strong and homes are selling. “Despite lingering uncertainty outside the luxury real estate market, the steadiness of prices, sales, and inventory levels have resulted in a consistent increase in the demand for luxury properties during the first five months of 2023,” states the Institute.
“The number of luxury properties sold has risen month over month since the start of 2023, aside from January, which did see a downturn in sales. Despite the slight plateau in April, May’s figures saw a 33 percent increase in sales for single-family homes compared to April, and attached properties sales were 26 percent higher.”
For first-time home buyers, however, the market remains challenging. “It also shouts for the need of housing that we desperately lack here in Maryland; it’s considered missing middle housing,” Muckle says. “It’s kind of hard to find these days. Much of this is not new, it’s just that it’s not being built, it seems.” Muckle says, however, that at least from an inventory standpoint, the state of Maryland is clearly not alone.
Missing Middle Housing is a range of house-scale buildings with multiple units—compatible in scale and form with detached single-family homes—located in a walkable neighborhood.
Source: missingmiddlehousing.com
“We recently attended the NAR (National Association of REALTORS) legislative meetings and conferences in D.C.,” Muckle says. “What’s happening in Maryland is happening, to an extent, everywhere. We had people from California to Guam to everywhere. This lack of inventory is everywhere.”
This has definitively created a seller’s market according the Institute, with a 37.01 percent sales ratio for single-family homes nationwide, which defines market speed and type according to previous month’s sales versus current inventory. In the luxury space, the median luxury threshold price is defined as $950,000 and, in May, the actual median luxury home sales price was $1.388 million. Amazingly, luxury homes are selling for 99.8 percent of their list price. And of all luxury markets nationwide, two of the top four with the highest sales ratio are in Maryland (Howard County and Frederick County).
In terms of attached homes—which includes condominiums, townhomes, duplexes, etc. with a median threshold price of $700,000—all four of the top markets in the United States are in DMV region (Howard County; Fairfax County, Virginia; Arlington and Alexandria, Virginia; and Montgomery County in Maryland). These properties are selling at an average of 99.75 percent of their list price.
Overall, single-family and attached homes are averaging only seven to 10 days on the market.
Lobbying & Legislation
Muckle is encouraged by what she says was recently brought to the floor during Maryland’s last general assembly session to address and enhance opportunities related to inventory and affordability.
Top of the list was the concept of providing the ability to build Accessory Dwelling Units, or ADUs, on already existing property. What Muckle referred to as the Association’s signature piece of legislation that they have been lobbying for in the last session would allow existing homeowners to build another separate or attached living unit onto a property they already own.
According to LegiScan, House Bill Number 239 and Senate Bill Number 392 establishes “…the Accessory Dwelling Unit Policy Task Force to survey and document a representative sampling of the variety of ordinances, laws, codes, and policies regarding the development and operation of accessory dwelling units in areas zoned for single-family residential use; and requiring the Task Force to report to the Governor and General Assembly on its activities on or before November 1, 2023, and its findings and recommendations on or before June 1, 2024.”
“This provides occupancy for whomever…an aging parent, a young person just starting their career, or simply renting it out,” says Muckle, who notes that the Maryland REALTORS will serve as a member of the task force. “Hopefully, that will help with the missing middle housing [issue].”
Another piece of legislation that Muckle says the REALTORS are pleased with is the passing of House Bill Number 98 and Senate Bill Number 403, which will reform the laws governing condominium insurance for the tax units.
Before this bill, according to Lisa May of the Maryland Association of REALTORS, State law did not differentiate between attached and detached condos in terms of what property insurance they needed to have. Now it does. So, if you live in an attached condo unit, nothing changes. You’ll still have a master insurance policy that covers the shared walls, roof, hallways, and systems.
“However, if you are in a detached unit, your insurance will now resemble an HOA, where unit owners insure the unit (because it doesn’t share those systems with other units), and the Association insures the common areas,” May explains.
“This helps consumers who are comparing similar properties. It was hard to know that one had a low HOA fee and one had a high condo fee because of the differences in insurance coverage that was required. This allows them to compare like properties to like,” May adds.
Muckle says another bill will address an increasingly troublesome practice of retaining buyer deposits after a real estate contract is canceled for substantive cause. Sometimes, situations can go awry because serious issues are discovered upon inspection causing the buyer to want to step back from the deal. Should a seller choose to delay signing off on a release form for the deposit, that can hold up that money and the buyer’s ability to look for a more suitable property.
According to LegiScan, House Bill Number 1235 and Senate Bill Number 651 will seek to address this by “Requiring a real estate broker or an escrow agent, if a purchaser terminates a certain transaction under certain circumstances, to distribute trust money to the purchaser within 30 days after a certain written notice of the termination is sent; requiring a holder of trust money who makes a certain distribution to notify the seller and purchaser of the distribution within a certain period of time, subject to a certain exception; etc.”
“If you have a seller who, for whatever reason, is not happy and refuses to sign, then my client has his money tied up in a contract that he can’t use to move forward with another contract,” explains Muckle, who adds that overall, the REALTORS were very pleased with the results of their lobbying efforts over the course of the last session.
“We appreciate the fact that the ADU task force bill passed and there will be a study, but we also need action now, not just studying. We actually need them to move forward.”
Something Muckle surely will be keeping her eye on.
What Buyers and Sellers are Asking for Now
In other matters of real estate, Muckle says she is definitely observing new trends emerge out of the last several years of uncertainty due to COVID and all that came with it. One of them plays directly into the scarcity scenario.
“Fewer people are selling their houses,” she says. “At one point, people were selling houses maybe every seven years. You have people now, 10, 15 years, they’re still in the same house.”
And if they are moving, Muckle says, they are asking for easy properties to manage. “People want to be able to travel now and not have to worry about what their property is going to look like when they get back.” They are looking for homes with yards and landscapes that are maintained by someone else.
Another trend with benefits is moving to a well-executed community when it comes to walkability, which not only saves money by saving on gas, but creates less of a carbon footprint. “I’ve noticed more and more people are asking for walkable communities in which they don’t have to drive to get to a grocery store, or a restaurant, or whatever. Buyers are looking for those kinds of communities, where they literally don’t have to get in a car to be a part of the neighborhood.”
The Institute agrees, suggesting, “Smart technology and wellness amenities are certainly top favorites of the affluent homeowners, but today’s buyer is also looking for the home that will fulfill their lifestyle decisions—this more than just the style of the home or its location, it is the experience offered by the property that will likely set it apart.” Once a buyer finds a neighborhood that works, they want a house that works exceptionally well in terms of efficiency. Muckle says that clients prefer the benefits of energy-efficient homes.
The Institute confirms consumer gravitation toward efficiency and sustainability: “Net-zero interior design and architecture are not new; still, there is not only a growing demand from affluent homeowners but a drive that is being taken up by builders, developers, and designers.”
“From energy-efficient equipment and features such as water purification systems and ambient heating and cooling systems, use of floor-to-ceiling windows to capture the natural light (as well as views), saltwater pools that require less chlorine to electric car charging stations, these are just a few of the expectations of luxury buyers in today’s market.”
When it comes to design and layout, it was thought the pandemic might have us turning back to more traditional floorplans, but Muckle says she isn’t seeing that change yet.
“I have clients who still want the open floor plan, where they can have an open kitchen, and be able to have conversations with guests and that sort of thing. Then have, let’s say—a deck. And rooftops are really big now, too! I have clients who [are saying], ‘You know what? I don’t need to have a big yard. And if I’m getting a townhome, if I can have a rooftop [deck], I can entertain.’ Those are really, really big [points] for anybody building [or selling] that type of space.”
According to the Institute, “The post-pandemic frame of mind has filtered into everyday surroundings to capture peace, a sense of well-being, warmth, and wellness. Overall expect to see a renewal of bright, bold, and inspiring interiors. Plus, organic and sustainable design is gaining more traction. These may not be new concepts, but the passion for creating a natural and healthy space is certainly a growing trend.”
And maybe in that regard we can end on the positive note of believing that the State’s real estate outlook is looking positive.
One thing is certain from this discussion—Muckle, her fellow REALTORS, and the Institute for Luxury Home Marketing are working hard and thinking innovatively to problem-solve and advocate on behalf of their constituents.
The current upside, Muckle says, is that while inventory is low, prices are still increasing, so those who are able to let go of a property, are in the sweet spot.
“If you’re looking to sell, you still have buyers who are willing to purchase. Think about it. Interest rates are higher than they’ve really been for years. Yet, you still have people buying, and the prices are still going up. It’s still a great time to sell if that’s what you’re looking to do.”
