The Comprehensive Housing Market Forecast for Bethesda, MD (2020)

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2019 was a tough year for both buyers and sellers across the nation, with low inventory, high entry-level prices, and the kind of economic uncertainty that makes baby boomers hang onto their older, larger home rather than putting it on the market. The housing market forecast for 2020 is expected to feature more of the same, with the millennials looking to make a splash only in the entry-level market, which is expected to account for about half of all mortgages by springtime.

The Bethesda housing market is echoing this national trend, with the real estate market down since 2018 as buyer preferences shift to smaller, newer homes requiring less work and more walkable neighborhoods. However, a recent uptick in home sales in Montgomery County indicates a silver lining.

About Bethesda

A bedroom community of Washington, D.C., Bethesda features one of the wealthiest and most highly educated populations in America. The community’s downtown has been designated an arts district by the state, and residents enjoy a tree-lined city that is rich in entertainment and a high-performing public education system. The unincorporated city — with a population of around 62,000 — has a median income of about $175,000 and a median home sale price of $840,500.

With a workforce that exceeds 43,000, major employers include Walter Reed Medical Center, the National Institutes of Health, Marriott, and Lockheed Martin. Other employers include:

  • American Society of Health System-Pharmacists
  • Johns Hopkins Suburban Hospital
  • Henry M. Johnson Foundation
  • Clark Construction Group
  • Howard Hughes Medical Center
  • Coventry Healthcare
  • Hospitality Partners
  • Diamondrock Hospitality
  • Host Hotels and Resorts
  • Total Wine
  • Comcast Sportsnet
  • Cystic Fibrosis Foundation
  • Pepplebrook Hotel Trust

The median age for Bethesda residents is 43, and more than 83 percent of the city’s adult residents hold a Bachelor’s Degree. Bethesda’s cost of living is close to 200 percent of the national average and is considered one of the most expensive places to live in the DC area.

Montgomery County requires 12.5 percent of all new home construction to be affordable for those making 60 percent of the median income. This is likely a draw for the younger, millennial population which values affordability in housing above all else. However, the requirement also poses a challenge, says the county regional services director, as the area is so desirable due to its schools and its strong community feel. 

One downside for the Bethesda housing market is that the area is car-dependent, meaning that homeowners there must own a car in order to comfortably move about the city. There is some structure for bicycling and some public transportation available, but still, the area remains largely accessible to those who own their own cars. This poses a challenge for sellers, as almost all buyers these days are looking at walkability as a major factor in where they choose to live. Another downside is that buyers with budgets of under $600,000 are unlikely to find very much available in Bethesda, though there are some neighborhoods just outside of it where they’re likely to have more options.

Bethesda has shown to be a safe community for families, with a crime rate that is 62 percent lower than the national average for cities its size and 70 percent lower than the average community in Maryland.

What Bethesda (And Other Montgomery County, MD) Buyers are Looking For

According to the Montgomery County Planning Department’s 2019 annual monitoring report for downtown Bethesda, the downtown sector is looking to add an additional 14,200 jobs by 2040 — a 38 percent increase over existing levels. These jobs will be great for individuals with families, who want a home close to where they work, as well as increased walkability, open space, and opportunities for shopping and entertainment. The planning department is looking to add 13 additional parks as well as a mix of different types of residential dwellings to reduce commuter traffic and continue making Bethesda a place that residents are proud to call home.

The plan calls for a maximum of 8,456 additional multi-unit residential units. Some of these units that are already approved include:

  • 7607 Old Georgetown Road, approved in January 2019 and featuring 200 new residential units and up to 3,000 square feet of retail space. 15 percent of the units will be moderately priced.
  • Edgemont at Bethesda II, approved in September 2018, features 154 multi-family units, 15 percent of which are moderately priced. The development also features a maximum of 4,000 square feet of open space.
  • ZOM Bethesda, approved July 2018, has up to 230 multi-family dwellings and will occupy an entire block of Arlington Road.

In addition to newly constructed apartments and condos, the single-family housing in the Bethesda housing market has become more diverse in recent years, with modern neighborhoods rising up alongside older, more established homes. However, while older single-family homes can be had for around $600,000, new construction generally puts the home’s price tag over $1 million.

One of the biggest draws to Bethesda for families is the quality of the public schools there. While Bethesda’s schools are still operating well within capacity, the downtown plan calls for additional facilities over the coming years in order to handle the population growth as more workers in the area seek to shave down their commute and live with their families in the community.

Already, with a student population growth of more than 10,000 in the past five years, parents in the Montgomery County School District — the largest school district in the state — have been complaining about over-crowded school buses in which there aren’t enough seats for all of the students. Not great for the housing market forecast – but it doesn’t seem to be immediately impacting anything.

Additionally, the schools in the county are having to put up temporary classrooms to deal with overcrowding. School district officials, however, say that the school bus crowding issue is not a matter of needing more school buses but, rather, a matter of designing better bus routes and encouraging those students who are able to walk to school to do so.

In December 2019, the Purple Line Corridor issued a report recommending that Montgomery County invest $100 million into its housing initiative fund in order to provide and preserve affordable housing along the light-rail commuter route. While the 16-mile commuter line has been an economic driver for the communities it lies within, it has posed danger to the predominantly lower-income communities that reside along either side of the line, with the convenience of the line increasing demand for housing there and — subsequently — increasing the cost of living in those communities as well.

Image from ggwash.org

While Montgomery County already has generous 12.5 percent moderate housing regulations in place, the problem is that the median income is so high in the area that even moderately priced dwellings are too expensive for the lower-income earning residents of the areas along the line.

What the April 2019 Housing Market Was Like in Bethesda, MD

The Bethesda housing market slowed down a bit in 2018, much like it did in the rest of the nation. By April 2019, it was reported that — while the median home price was up 4.8 percent since 2017 — the number of pending sales and active listings were well below the five-year average. Other highlights of the Bethesda housing market in April included:

  • Affordable housing in walkable communities around the beltway was leading the market, as buyer preferences have shifted in recent years. 
  • In spite of this, the number of Bethesda homes selling for more than $2 million increased by 67 percent between 2005 and 2018.
  • Homeowners in the Bethesda housing market were reluctant to sell due to uncertainty as to whether they would find a new home at a price they could afford. 
  • Baby boomers were not downsizing as expected because their cost of living cannot be downsized — selling a large home in favor of a condo means losing space but paying a condo fee. This was chiefly responsible for the reduction in inventory in Montgomery County.
  • Another reason for low inventory is the low mortgage rates that many would-be sellers currently have. If they have a mortgage rate of 2.75 percent now, they’re likely to be reluctant to take on a new, 30-year mortgage with a rate of 5 percent.
  • Yet another reason for low inventory is that new construction is not keeping up with demand. The number of new home starts in Montgomery County declined 13 percent from 2017 – 2018.
  • Low inventory has driven up the price of homes, at the same time that buyers have become increasingly price-sensitive, not wanting to overpay for their purchase.
  • From 2017 to 2018, the median home price in Bethesda rose .9 percent, from $857,000 to $865,000.

What the December 2019 Housing Market Was Like in Bethesda Maryland

In December 2019, closed home sales and pending home sales were up in Montgomery County, compared to the previous year. Details include:

  • 930 home sales in November, up 15.5 percent from November 2018.
  • 985 pending sales for the month — a 17 percent increase over the same time last year and a 3 percent increase over the five-year average.
  • Increases were seen in sales of all home types in November, with single-family detached homes up 14.4 percent, single-family attached townhouses up 23.8 percent, and condominiums up 10.4 percent.
  • In spite of the increase in home sales, the median price on those sales fell.
  • In November, there were 1,842 active home listings in Montgomery County, which was down more than 13 percent from November 2018.

Summarizing the Bethesda Housing Market Forecast and What 2020 Has In-Store

Experts surveyed by Zillow are now saying that the U.S. is not going to enter a recession in 2020, contrary to what half of them believed in the summer of 2019, though a third now believe that the economy is going to shrink in 2021. Other highlights of the 2020 Bethesda housing market forecast/predictions include:

  • Potential triggers for the economic downturn include ongoing trade volatility, a stock-market retreat from record highs, and a geopolitical flare-up.
  • While consumer spending slowed in the summer of 2019, it started to pick up pace in October. Healthy consumer spending is a sign of consumer confidence, a must-have for a flourishing housing market.
  • Unemployment is at near-record lows, which helps push wage growth up. The wage growth in the country has been increasing by about 3 percent per year every month since October 2018.
  • As it has done since 2016, the square footage of newly built single-family homes will continue to shrink in 2020, going along with the millennial trend for smaller, more affordable, easier to maintain homes as well as a growth in eco-consciousness that has potential buyers questioning the environmental-friendliness of their decisions.
  • In spite of the shrinking size of single-family homes, they’re still about a third larger than they were thirty years ago.
  • There is a shortage of land in desirable areas upon which to build new homes.
  • It isn’t just the millennials who are seeking smaller, more accessible, more convenient homes. About half of the buyers for new construction are over 40.
  • Prices for building material and competition for skilled labor have both increased and have partnered to further increase the cost of new construction.
  • The median home value in the U.S. is expected to increase by close to 3 percent in 2020 over 2019. The prediction for 2019 was a growth of 3.6 percent at the end of 2018.
  • Rents on single-family homes have been rising since June and are expected to do so until the spring of 2020 before falling about 2 percent by the end of the year.
  • If mortgage interest rates stay low, it will encourage more renters to turn to homeownership, which will keep housing demand high.
  • In 2010, during the housing crash, home sales bottomed out. They didn’t reach 5 million again until 2014. In December of 2018, after several years of climbing, sales retreated back to 5 million. In 2019, home value growth softened, but low mortgage rates were back, erasing the available inventory that places like Bethesda were accumulating. In 2020, home sales are predicted to climb slowly, bolstered by builder confidence. Builders are promising smaller homes at more attractive prices, which will renew consumer interest in new construction.

Planning on renting out your property in Bethesda? Get in touch with us today to find out how you can make the most of your investment property.

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