Understanding Low Housing Inventory: Key Factors Impacting Frederick County Real Estate in 2024

 

 

As we usher in the new year, many are keen to understand what lies ahead for the real estate market. Home sellers, buyers, and investors alike are eager to strategize and achieve their goals in the coming months. 

Before diving into my predictions for the year, I want to lay some groundwork by discussing two key factors that will shape the market: mortgage interest rates and housing inventory. 

In my previous post, I explored the elements that influence mortgage interest rates. Now, let's delve into the significant reasons behind our current low housing inventory. In my next post, I'll share my predictions for the year. 

You've likely heard the saying that real estate, much like politics, is very local. While national trends do play a role, the most impactful drivers are often local. My observations will focus on Southern Frederick County, Maryland, where I conduct most of my business. 

Frederick County is a popular and desirable place to live. It has been growing steadily, is business-friendly, has a reasonably low crime rate, and boasts high-ranking schools. So, why is there a lower housing inventory in Frederick County, MD? Here are some factors contributing to this situation:

 

1. Underbuilding: Despite several new subdivisions being built over the past decade, the construction of new homes may not be keeping pace with demand. This has contributed to a deficit in the housing supply.
2. High Demand: Frederick County's desirable location, excellent schools, and high quality of life drive strong demand for homes. This demand often exceeds the available supply, leading to lower inventory levels.
3. Homeowner Reluctance to Sell: Many homeowners are hesitant to sell their properties for several reasons:
• High Interest Rates: Many people refinanced their home loans when interest rates were very low between 2019 and 2021. Buying a new home at a current rate of 6.5%, compared to their existing 3% loan, would make the purchase more expensive. Additionally, some homeowners may be waiting for even higher prices before deciding to sell.
• Low Inventory: This creates a circular problem. Homeowners are reluctant to sell because they worry they won't find a suitable new home or can't afford to own two homes simultaneously while working out their loans, even though there are strategies to address this issue.
• Seniors Aging in Place: Over the past 15 to 20 years, it has become easier for older adults

  

  Homeowner Equity by Generation
   

  
  to remain in their homes longer. They are in better health, have new ways of managing infirmities, and have often paid off their homes, with no desire to take on a new loan. Unfortunately, they hold a majority of home ownership equity. Nationally, the Silent and Baby Boomer generations hold about 51% of total housing equity. Assuming this is roughly true for Frederick County, a significant percentage of properties are effectively off the market.
4. Economic Stability: Frederick County's relatively stable local economy, with steady job growth and low unemployment rates, encourages people to stay in their homes longer, reducing the number of properties available for sale.
5. Tighter Lending Standards: Stricter lending standards have resulted in fewer distressed properties, such as foreclosures, entering the market. This has also contributed to the lower inventory, as there are fewer homes being sold under duress. 

Understanding the factors behind low housing inventory is crucial for anyone involved in the real estate market. By recognizing the impact of underbuilding, high demand, homeowner reluctance to sell, economic stability, and tighter lending standards, we can better navigate the challenges and opportunities that lie ahead. Stay tuned for my next post, where I will share my predictions for the real estate market in the coming year. Together, we can make informed decisions and achieve our goals in this dynamic market. 

If you'd like to discuss what's best for you, feel free to call or text me at 301-873-2106 or email me at BReynolds@LNF.com. We can have an open discussion about your circumstances so you can make informed decisions. Remember, I don't do hard sales or pressure you into action—buying or selling your home is entirely up to you. 

As always, I'm here to assist with your real estate needs, even if your purchase or sale is some time away. The better prepared you are, the less stressful the process will be. Finally, if you know anyone looking to buy or sell, your referral would be greatly appreciated. 

Let's get started. Contact me at 301-873-2106 or email me at BReynolds@LNF.com.

 

 

Decoding Mortgage Rates: The Key Factors to Watch

 

Mortgage rates significantly impact the housing market, yet their determination is often misunderstood. It may seem rates are set arbitrarily, but there's a logical framework behind them. By understanding these factors, you can make informed short-term forecasts. However, long-term predictions are challenging due to numerous and various influences, such as natural disasters, political upheavals, new government policies, and legislative changes, which complicate the landscape.

We'll explore the major influences on mortgage rates and considerations for individual borrowers.

1. Federal Reserve Policies: The Fed sets the federal funds rate, impacting overall borrowing costs. When the Fed raises rates to combat inflation, mortgage rates typically increase. Conversely, lower rates to stimulate growth lead to decreased mortgage rates. Mortgage rates often move in anticipation of future Fed moves.

2. Inflation: Inflation reduces the money’s purchasing power, prompting lenders to demand higher interest rates. Higher inflation usually results in higher mortgage rates. Conversely, low inflation generally leads to lower rates.

3. Economic Indicators: Key indicators such as employment rates, GDP growth, and consumer spending provide insights into the economy's health. Strong performance often leads to higher mortgage rates due to increased credit demand. During downturns, reduced demand can lead to lower rates.

4. Housing Market Conditions: Supply and demand dynamics significantly affect mortgage rates. High demand and limited supply drive rates up, while oversupply can lead to lower rates.

5. Global Events: International events, like geopolitical tensions or economic crises, impact investor confidence and financial markets. Uncertainty or instability can cause mortgage rates to fluctuate.

6. Government-Sponsored Enterprises (GSEs): Entities like Fannie Mae and Freddie Mac play a crucial role by buying and securitizing mortgages. Their policies and actions affect mortgage rates. Changes in GSE regulations can result in rate adjustments.

Investors balance these factors to determine acceptable returns from their loans. The final adjustments to the rate offered to specific borrowers depend on: 

1. Credit Scores and Personal Financial Health: Higher credit scores generally result in slightly lower mortgage rates due to perceived lower risk. Conversely, lower scores can lead to slightly higher rates due to increased default risk.

2. Lender Policies: Different lenders have varying criteria and policies affecting the rates they offer. Factors like the lender's cost of capital, risk appetite, and competitive positioning influence interest rates. Promotions and special offers can also lead to temporary fluctuations.

Forecasting interest rates months or years from now is challenging at best. Most 2024 predictions were off, so take future outlooks with caution—they're educated guesses too. For your edification, here are one set of predictions for 2025:

Figure 1: Source: US News

Should You Wait or Buy in 2025?

Understanding how mortgage rates are determined shows many uncontrollable variables make predictions short-lived. If you're a prospective homeowner waiting for rates to drop, remember macroeconomic issues are beyond your control. Decide if you're financially ready to purchase a home and manage its expenses.

Focus on What You Can Control: Instead of fixating on rates, prioritize actions to lower your individual rate, such as saving for a larger down payment and improving your credit score.

Should You Wait or Sell in 2025?

If you're ready to sell, don't try to time the market based on rates alone. In Southern Frederick County and northern Montgomery County, low inventory and eager buyers mean a well-prepared, appropriately priced home will likely sell quickly at a fair price.

If you'd like to discuss what's best for you, feel free to call or text me at 301-873-2106 or email me at BReynolds@LNF.com. We can have an open discussion about your circumstances so you can make an informed decision. Remember, I don't do hard sales or pressure you into action—that's entirely up to you.

As always, I'm here to assist with your real estate needs, even if your purchase or sale is some time away. The better prepared you are, the less stressful the process will be. Finally, if you know anyone looking to buy or sell, your referral would be greatly appreciated. 

Let's get started. Contact me at 301-873-2106 or email me at BReynolds@LNF.com.

Capital Gains Taxes on the Sale of your Home

This blog is primarily about helping people buy and sell homes. Earlier this year, I wrote a four-part blog on ideas for preparing your home for sale by decluttering and dressing your home for a successful sale. While that may be a lot of work, those tasks can help you save a lot of time and expense when you’re ready to sell.

This post is somewhat similar. When you sell your home, Uncle Sam, as usual, wants his cut of the action in the form of Capital Gains Taxes. Although it is not too painful for most of us,  I want you to be aware of the tax and help you understand some of the rules, so you can be prepared. Hopefully you will pay as little in taxes as possible or perhaps make a little more on the sale.

This is a complicated subject, so let me make my disclaimer here. I am a REALTOR, not a financial advisor, CPA or tax expert. The following information is deemed to be accurate, but not guaranteed. This post is not intended to provide tax advice, but rather to make the reader aware of the basic rules that may apply to their specific situation. You are encouraged to reach out to appropriate experts.

Most of the time, when we sell our homes, we sell it for more than we bought it for; we sell it for a profit or capital gain. The tax code requires us to pay taxes on those gains. Capital gains are essentially the appreciation in the value of the home. For the last 25 years or so, the average home in our area has appreciated 5.5% per year. Most homes are a great investment! As an example, let’s say I bought my home for $125,000 (Cost Basis) and sold it for $800,000. Stated in a formula:

Sale Price – (Purchase Price + Improvements) = Capital Gain (Loss)

The appreciation or gain in value is $675,000. This is income, classified as Capital Gains, for the year in which the home is sold. We will discuss adjustments and tax rates further down in the post.

The tax code allows for some immediate relief or exclusions for some of those gains, if you qualify. You can exclude $250,000 as a single filer or $500,000 if you file a joint tax return.

To qualify for the exclusion, you must meet both the “ownership test” and the “use test” as follows:

Ownership Test: You must have owned and used your home as your main residence for at least two years out of the five years prior to its sale and

Use Test: During those five years, the home must have been your primary residence for the required period.

For complete eligibility requirements, limitations, and exceptions to the two-year rule, please refer to IRS “Publication 523, Selling Your Home”, There are additional rules for military, some government personnel and installment sales.

Upon the closing of the sale, the Title company will normally file Form-1099S with the IRS. If they do, you will need to report the sale even if the sale is fully excludable. You report your home sale on your income taxes for the year in which you sold it, using the Form 1040. The home sale is reported on “Schedule D (Form 1040)” and “Form 8949” for your return. However, Capital Gains are taxed at a special rate. Based on your tax filing status, the rate you pay depends on the net capital gain as shown in the table below.

Rate	Single	Married Filing Jointly	Married Filing Separately	Head of Household
0%	$0 – $47,025	$0 – $94,050	$0 – $47,025	$0 – $63,000
15%	$47,025 – $518,900	$94,050 – $583,750	$47,025 – $291,850	$63,000 – $551,350
20%	$518,900+	$583,750+	$291,850+	$551,350+

Some special circumstances:

Surviving Spouse

1. Exclusion: If you’re a surviving spouse and you sell your home within two years of your spouse’s death, you may qualify for the full $500,000 exclusion from capital gains tax. The same exclusion rules apply.
• If you’re a surviving spouse Beyond Two Years, you can exclude up to $250,000 of capital gains from your gross income.
• However, any gain beyond that amount isn’t automatically taxable. It depends on other factors.
2. Step-Up in Basis: When a property owner dies, the cost basis of the property receives a “step-up” under federal law. Depending on the legal ownership of the property, this may mean at the time of your spouse’s death, the new cost basis is the fair market value of the property, and not the original purchase price.

Capital Improvements

The cost of home improvements that increase the value of the home, not just maintain value, may be added to the original purchase price to decrease capital gains. In general, you can’t include any costs of repairs or maintenance that are necessary to keep your home in good condition but don’t add additional value or prolong its life. Examples include painting (interior or exterior), fixing leaks, filling holes or cracks, or replacing broken hardware. However, you may include these costs if they are part of a capital improvement project.

Costs of improvements that add to the value of your home, prolong its useful life, or adapt it to new uses, may be added to the basis of your property. The following chart lists some examples of improvements.

 

Realistic Examples from Southern Frederick County:

Filer Type:	Married Filing Jointly	Married Filing Jointly	Single (Widower)	Single (Divorced)
Purchase Price:	$55,000	$254,960	$38,530	$177,000
Step-up	0	0	$333.495	0
Sale Price:	$560,000	$800,100	$600,000	$560,000
Capital Gains:	$505,000	$545,140	$266,505	$383,000
Exclusion:	500,000	$500,000	250,000	$250,000
Improvements:	$35000	$75,000	0	$65,000
Net Capital Gain:	$-30,000	$-29,860	16,505	$68,000
Capital Gains Rate:	N/A	N/A	0%	15%

*These examples are actual purchase prices; the rest of the numbers may be actual or reasonable estimates.

Of course, you will need receipts and documentation to substantiate the costs of these improvements. If you think you may need them, try reaching out to the company that performed the work to see if they can provide you with the information. Like decluttering and showcasing your home, gathering and organizing these receipts can be done long before you decide to sell, making the home sale and income tax season far less stressful.

I want to stress again: this is a highly complex tax topic, and we have only just covered the most common aspects of the law. I highly recommend that you consult a competent tax professional or refer to official IRS publications for specific guidance.  

If it would be beneficial to you to know the current market value of your home, offer a free service called a “Real Estate Review.” I can review with you the basis of the estimate and even provide a signed letter stating my opinion of the value.

I hope this has been beneficial to you. Please let me know how I can help you today.

Transform Your Home from “Just Another Listing”

Welcome to the fourth and final installment of preparing for your home-selling journey! If you’ve been following along, you know that decluttering is the first ingredient of the secret sauce to making your home irresistible to potential buyers. In our previous posts, we explored the Benefits and Roadblocks When Decluttering, and Overcoming the Difficulties of Decluttering. We examined specific methods for attacking clutter. In our last post, we even dipped our toes into the world of turning your home into a marketable commodity with strategies for showcasing your home for sale.

 Now, let’s dive deeper. Today, we’ll focus on specific areas of your home that can transform it from
“just another listing” to a showstopper that commands attention. So, grab your metaphorical paintbrush, because we’re about to create a masterpiece that will leave buyers saying, “Wow!”

But first, a quick recap: Decluttering isn’t just about tossing old magazines or hiding the laundry basket. It’s about creating space, flow, and a sense of calm. Buyers want to envision themselves living in their new home, so we want to depersonalize and neutralize the space and tastefully minimize the content of each space. 

Now, let’s embark on a room-by-room adventure, exploring creative ideas to transform each space into an irresistible home for potential buyers. 

Room by Room Enhancements

1. Outdoors

1. Curb appeal: Deep clean the outside. Obviously, the main entrance of the home as seen from the street is the priority. Pressure wash the siding, windows, gutters, sidewalk, porch, and deck to remove dirt and grime. Wash the windows inside and out and consider removing screens if they’re not in good condition.

2. Landscaping: Tidy up your yard by removing clutter, debris, and dead leaves. Mow the lawn, rake leaves, weed, mulch, and trim overgrown trees and bushes. Clean out all the corners and under bushes. If you are still a year or more out from selling, consider a lawn care service to overseed, feed the lawn and kill weeds. Also remember when aggressively trimming back trees and bushes it may take a year or two for them to grow back attractively.

3. Entryway focus:  This is the first-place potential buyers stop and look around. Survey the area to be sure it is attractive. This area should be immaculate. Consider polishing or replacing the door fixtures, such as the handle, kickplate, doorknocker, hinges, doorbell, and peephole. Be sure there is no rot around the door trim – I see this very frequently. Consider painting the door trim if cleaning is insufficient. A nice welcome mat is a thoughtful accent. If there is a garden, apply nice mulch. Finally, a floral touch such as a  pot of geraniums or other bright flowers near the front door to make the exterior feel alive and inviting.

2. Foyer: The first glimpse of the inside of the home comes when you walk through the front door, so this first impression is of the highest importance. Here are some ideas:

1. Open and Spacious: Keep your entryway open and spacious to create a better flow. Avoid clutter. Maybe add a mirror to make a smaller or darker entryway appear larger and brighter. 

2. Purposeful Decor: Each piece you add should serve a purpose in creating an ideal environment. Avoid random items that add little visual impact.

3. Lighting: A modern light fixture(s) can add elegance and style. Perhaps a table underneath it the light fixture with flowers would create an inviting atmosphere. Consider artistic lighting installations or simple yet chic options.

3. Kitchen: After the foyer, the kitchen is usually where the home tour heads next and where most families spend the most time. This space is a critical place for attention to detail. 

1. Clear Off Counter Space:

1. Remove almost everything from countertops. Put away small appliances like coffee makers (unless there is a coffee nook), blenders, and toasters. Declutter the top of the refrigerator as well. Remove all magnets, notes, and pictures. 

2. The goal here is to make your kitchen appear bigger, cleaner, and more streamlined. Be aware homeowners often become accustomed to their own clutter, making it almost invisible to them.

2. Inside Pantry, Cabinets and Drawers:

When buyers inspect storage spaces, it’s essential to remove nonessential items and meticulously organize what remains. An orderly cabinet conveys a sense of spaciousness and calm.

3. Update Hardware:

Dated cabinets can impact a sale. While replacing cabinets entirely might not be feasible, consider updating the hardware. Paint, new handles or knobs can give cabinets a fresh look.

4. Floor Fixes:

Address any flooring issues. Repair or replace damaged tiles or floorboards. Clean and polish the floor to enhance its appeal.

5. Windows That Wow:

Clean windows thoroughly to let in natural light. Consider adding sheer curtains or blinds to create an airy feel.

6. Eliminate Clutter, Not Personality:

While decluttering is crucial, add a touch of personality. Set the table with colorful plates, napkins, and a fruit bowl. Consider unique planters with blooming flowers. 

Fresh or Faux Flowers:

Place fresh flowers or high-quality faux arrangements on countertops or tables. They add vibrancy and warmth to the space.

7. Family Room: This room serves as a space where families can find solace and recover.” Many of our comforts are here. Ruthlessly decluttering and removing excess is critical. Pare Down Furniture:

Declutter by removing excess furniture. Professional stagers often take away up to half the furnishings to create a more spacious look. Ensure potential buyers can move around freely and access key features like the fireplace or built-in bookshelves. Avoid overloading the coffee table or the couch with pillows.

8. Increase Lighting Everywhere:

Brighten up the family room. Adequate lighting is essential. Consider adding floor lamps, table lamps, or even pendant lights. Well-lit spaces feel more inviting and spacious. If practical, a strategically located mirror will reflect light back into the room.

9. Depersonalize:

Remove personal photos, decor, and clutter. Buyers want to envision themselves in the space, so minimize family-specific items.

10. Wall Styling:

Let buyers focus on the room itself. Create a “finished” look by paying attention to walls. Group similar art together and avoid excessive wall decor.

11. Floating Furniture:

In smaller family rooms, consider floating furniture by pulling it away away from the walls. This creates visual breathing space and balances the room. Maybe choose scaled-down furniture for better proportions.

4. Bedrooms: These personal sanctuaries witness our dreams, late-night reading sessions, and early morning stretches. Here are some tips to maximize their allure.

1. Pay Special Attention to Your Bed:

1. Choose the right-sized bed that fits the room’s scale; ensure there’s enough space for a nightstand on each side.

2. Position the bed so that it faces the doorway and is immediately visible upon entering the room..

3. Layer the bedding to make the bed a focal point. Neutral colors work best to evoke a sense of relaxation.

2. Declutter and Clean:

1. Thoroughly clean the entire bedroom. A clean space feels more inviting.

2. Declutter by removing personal items, excess decor, and unnecessary furniture. Less is more when it comes to staging.

3. Neutral Wall Colors:

Stick to neutral colors on the walls. These create a calming atmosphere and appeal to a broader range of buyers.

4. Maximize Light:

1. Natural light is best. Open curtains or blinds to let in as much light as possible.

2. Consider adding strategically placed lamps to brighten darker corners.

5. Strategically Arrange Furniture:

1. Place furniture in a way that highlights the room’s flow and functionality.

2. Less is more: If the bedroom is small, remove non-essential furniture to create a sense of spaciousness.

6. Finishing Touches:

1. Add subtle decor such as decorative pillows, a cozy throw, or a small plant.

2. Ensure that the room feels welcoming and serene—a place where buyers can envision themselves relaxing.

5. Bathrooms: These are yet other important rooms which buyers look at critically. Even if it is dated, attention to detail is important.

1. Clean thoroughly: Start by deep cleaning the entire bathroom. A spotless space leaves a positive impression on potential buyers. If there is stubborn mold or mildew in caulk or grout, it is worth the expense to remove and replace it.

2. Remove personal items: Remove toothbrushes, toiletries, and makeup from the countertop. Buyers want to envision themselves in the space, so depersonalizing is essential.

3. Declutter and Organize: Remove excess items from countertops, drawers, and cabinets. Use mason jars or containers to store small essentials like cotton balls and hair bands. Storage areas should feel as though there is ample space. 

4. Swap in a neutral, clean shower curtain: This will add visual interest and uplift the room’s color scheme.

5. Enhance Lighting: Ample lighting is essential. Brighten the space by updating vanity lights with high-voltage bulbs or installing a backlit LED mirror.

6. Add Inviting Touches: Invest in fluffy, white towels. Display them neatly to evoke a spa-like feel. Place a preserved boxwood plant for a touch of natural greenery without the need for watering. Consider replacing a boring mirror with one in an interesting shape or frame. Hang appealing artwork with calming themes like nature or abstract designs.

6. Garages and unfinished basements: Finished basements should be treated like a family room. Use the same techniques to put your best foot forward.

Unfinished basements and garages should be just as clutter free and clean as anywhere else in the home, unless there are some special features that need to be showcased. 

Remember, when your home is listed on the market, it becomes a commodity to be sold, and it will no longer be your personal space. The art of showcasing your home lies in creating a neutral, appealing environment that allows potential buyers to envision themselves living comfortably in the space.

Our team is dedicated to providing exceptional assistance. Leveraging our unique perspective and expertise, we can help you clarify priorities and streamline processes, ultimately saving you valuable time and resources. Whether you need for sale-as-is, light staging support, professional advise, or comprehensive staging services complete with furniture and intricate details, rest assured that we’ve got you covered. 

Feel free to reach out by calling or texting me at 2301-873-2106, or you can email me at BReynolds@lNF.com. I would be very pleased to chat with you.

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