If you are interested in real estate in Germantown, Maryland, you should read the article that appeared in the Montgomery Gazette on Wednesday. See the newspaper website for additional articles. www.gazette.net
Wednesday, June 25, 2008
Germantown called new foreclosure ‘hot spot'
Study says affordable homes, new growth may be contributing
by Meghan Tierney | Staff Writer
There were 266 people who lost their Germantown homes to foreclosure between March 2007 and February, and the worst is yet to come, according to a new report released by the Metropolitan Washington Council of Governments Germantown, which until recently recorded moderate foreclosure activity, is identified in the report as an impending ‘‘hot spot" for foreclosures. Released last week, ‘‘Foreclosures in the Washington DC Region: Evaluating the Scope of the Crisis" was complied by the George Mason University's Center for Regional Analysis for COG, which commissioned the study.
Local officials and market observers differ on the character and cause of the emerging crisis.
‘‘It's a region-wide phenomenon, and we've identified some areas as illustrative of what's happening," said John McClain, a senior fellow at the George Mason center.
Though the U.S. housing market has been on the decline since 2005, the Washington metropolitan area largely escaped the problems plaguing other parts of the country until late 2007, according to the report. The region, which includes the District and parts of Maryland, Virginia and West Virginia, now has one of the fastest-growing foreclosure rates in the country.
Some areas have been harder hit than others. The average price of an existing home plummeted 25 percent in outer suburbs like Virginia's Prince William County, while inner suburbs like Montgomery County saw prices drop just 3 percent.
However, Germantown has not fared as well. Montgomery has a relatively low amount of foreclosures overall compared to the rest of the region but has 21 clusters of neighborhoods with high foreclosure rates, most of which are concentrated in Germantown.
An area of Germantown bounded by Great Seneca Creek and Clopper and Schaeffer roads that had no foreclosures in the beginning of 2007 recorded 15 foreclosures in February, a figure that has been steadily rising, according to the report. Average home prices in the area went up 135 percent between 2000 and 2007 to about $350,000, but home sales fell more than 50 percent between the first quarter of 2007 and 2008. Most of the homes in the area are small condominiums and townhouses ranging from $150,000 to $500,000, the study states.
‘‘[The neighborhoods] that have been most affected are older areas with smaller homes," Richard Nelson, director of Montgomery County's Department of Housing and Community Affairs, said last week.
An abundance of new homes in Germantown may be playing a role, McClain said. Most of Montgomery's new growth is occurring upcounty near Germantown and Clarksburg, and new homes often attract investors or homebuyers eager to earn a profit, he said.
‘‘There was a thinking that there were areas that were appreciating and that that would continue to happen," said Realtor Marilyn Emery, who organized a bus tour of foreclosed homes in Gaithersburg and Montgomery Village in April. Houses in Germantown are often less expensive than those downcounty, she said, but rising gas prices may make commuting too expensive.
Downcounty homes are more in demand because they are closer to the District, McClain said, and wealthier enclaves like Bethesda and Potomac tend to have lower foreclosure rates.
Areas with higher levels of growth are more affordable and attract first-time homebuyers more likely to have a subprime loan, which often have higher interest rates, according to Gaithersburg-based Realtor Matt Rowland.
As for the report's warning that Germantown's foreclosure crisis would get worse before it gets better, Rowland said it was too early to tell.
‘‘Have we bottomed out? We don't know," he said. ‘‘We won't know until six months after it happens."