Wednesday, Jan. 30, 2008

Downcounty neighborhoods take less of a real estate hit

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Brian Lewis⁄The Gazette
Home construction nationwide and in Montgomery County is seeing a marked decline.
While residential markets stagger nationwide, the downcounty’s affluent neighborhoods are continuing to see million-dollar homes built.

Some argue the market will falter if county or municipal construction laws become more restrictive. But for now, builders are still breaking ground in Maryland’s Beltway suburbs.

Prospective residents of ‘‘submarkets” like Bethesda and Potomac are less likely to use money from a previous home sale to purchase a new residence, according to Kenneth Wenhold, a Washington-area housing market expert.

‘‘Most of them are building specifically a house for themselves, that they will live in for a long period of time,” Wenhold said. ‘‘These are people who are not under the influence of interest rates, market conditions.”

Wenhold said the schools and proximity to employment draw more new-home buyers to areas like Bethesda and Potomac than anywhere else in the region.

‘‘Even though the real estate market has slowed down to a degree ... those people who can are opting to go into the premier areas,” Wenhold said.

Building permits are one indicator of strength or weakness for the new-home market.

More than 300 new-home construction permits were issued last year in Bethesda, Potomac, Chevy Chase, Kensington, Cabin John and Garrett Park — compared to 240 in 2002. There have been 16 new-home permits issued for those areas this month.

Countywide, the story is different.

‘‘There has been a dramatic downturn in the number of building permits,” said Susan Scala-Demby of the Department of Permitting Services.

The county issued 1,157 new-home permits last year, a drop from 1,850 in 2002. And Scala-Demby said permit activity has ‘‘dropped off significantly” in recent months.

The impact of the decline could have a ripple effect, impacting county income.

Each residential building permit costs $400, meaning that if building rates had stayed at the 2002 level, the county would have collected an additional $280,000 in fees.

Despite the increased number of new-home permits in the downcounty, Jane Fairweather, a Realtor who sells homes in Bethesda and Chevy Chase, said the market in that area has ‘‘slowed down considerably.”

She said $1.3 million to $1.9 million homes especially aren’t selling.

‘‘There’s a glut of new homes that are just sitting,” Fairweather said. Builders and outgoing homeowners are lowering the prices on these waiting houses, creating a market that shrewd buyers could take advantage of, she said.

Building moratoria and recently introduced building regulation overhauls will contribute to the lull in new homes, she said.

‘‘You’re going to see fewer Chevy Chase homes,” Fairweather said. ‘‘Fewer people are interested in taking on the risk of buying a home in Chevy Chase that has the potential for development” because of interim bans and forthcoming law changes, she said.

The Town of Chevy Chase and Chevy Chase Village have introduced new laws governing home building in those municipalities — laws that some residents have worried are too restrictive.

Most of the 68 brand-new homes for sale last week in Bethesda-Chevy Chase have been on the market more than 100 days, she said. One new house has waited more than 550 days for a buyer.

Fairweather said only 10 percent of homes for sale in Montgomery County went off the market in December, compared to 40 or 50 percent in December of 2005.

Construction on new homes fell 14 percent nationwide in December. It was the lowest level of new-home building that the U.S. has seen in 16 years, according to the Commerce Department.

Fairweather said she sees ‘‘absolutely more of the same” in the future.

‘‘I think we’re into this until 2010,” she said.