A year and a half ago when I noticed that the market was beginning to slow down, I suggested owners might consider renting their properties if they couldn’t afford to sell at the dropping prices.  Since then, I’ve had some experience with the rental market and have heard others’ stories – enough to think that the rental market might also be slow.

            So as the good journalist I used to be, I decided to do some research.  I looked at all the properties that had rented in Montgomery County, MD since January 1, 2008.  4283 properties were rented through the multiple listing service (MRIS) during that period.  The least expensive property was a basement bedroom in the Wheaton area of Silver Spring that rented for $515 a month last summer.  The most expensive properties were two estates in Potomac that rented for $13,000 a month.  (The next highest rental was $9000 a month and a total of only 60 rented for more than $5000 a month.)

            This compares to 2284 properties that were listed and never rented.  I did spot checks on some of those properties and found that some of them sold (for much lower prices than their original list prices), some were relisted for a lower rent, some were taken off of the rental market, but left for sale, and others just disappeared from any activity in MRIS.

            Currently there are 1087 properties (basement bedrooms to condos to estates) listed in Montgomery County.  The lowest price rental is the same basement apartment that rented for $515 last summer.  It’s currently for rent for $575 a month.  The most expensive property for rent is a huge (11 bedrooms, 10 full baths, 3 half baths) estate in Potomac listed for $20,000 a month.  It’s also for sale for $5.5 million.  It’s been on the market (for sale) for two years and has dropped from a list price of $6.5 million.

            There are also 132 properties with rental applications pending.

            How does this compare to sales?  MRIS wouldn’t give me an exact number of how many condos and houses had sold over the last year (the number was over 5000, the highest MRIS reports for any certain period).  But I went to the Greater Capitol Area Association of Realtors (GCAAR) yearend stats and found that 8391 properties (1641 condos + 6750 single family homes) sold in 2008 (The 2007 number was 10,157).  According to GCCAR, a total of 8912 went under contract in Montgomery County in 2008 (down for 10,106 in 2007).  At the end of 2008, there were 4252 properties on the market for sale, the result of a dramatic drop in new inventory since summer.  At the end of 2007, 4549 properties were active and available for purchase.

            In my next blog, I’ll analyze the Washington, DC numbers.

            My initial conclusion is that there is a market for lower priced rentals, $2500 or less, but it’s becoming very difficult for an individual owner to compete with property management companies that can offer free rent for 3-6 months.