Because people in Montgomery County are wealthy, they can easily afford big mansions, right? WRONG.
The residential real estate boom started in Montgomery County in the late 1990s, as it did in many other parts of the country. According to Zillow.com, the average market value of a home in Montgomery soared from under $200,000 in 1999 to just over $500,000 in late 2006. The county’s Department of Finance estimates that the average residential sales price topped out at $601,995 in July 2007 before falling to $506,151 in May 2008. These are high prices and steep declines, even for “rich” people to bear.
Montgomery County has long been an attractive place to live, but has had problems generating affordable housing. We have previously explored the inadequacies of the county’s Moderately-Priced Dwelling Unit (MPDU) program and the unfortunate tendency of its subsidized housing programs to funnel poor people away from transit. But easy money from sham loan programs convinced many people that high housing prices were no barrier to home ownership in Montgomery County. The inevitable result: massive foreclosures.
The Maryland Department of Housing and Community Development’s property foreclosure report for 2008’s second quarter listed foreclosures by county. Montgomery County’s total of 1,314 ranked behind only Prince George’s County (2,853). Montgomery’s total was almost as high as the combined total of Anne Arundel and Baltimore Counties. Below is a complete list of foreclosures by county from the report.
Montgomery also had two of the top ten foreclosure “hot spots” ranked by total number of foreclosures and foreclosure rates: zip codes 20874 in Germantown and 20877 in Gaithersburg. Below is a complete list of zip codes in Maryland that recorded at least 50 foreclosures in the second quarter.
The second quarter report credits recent state laws lengthening the foreclosure process with reducing foreclosures by 22% since the first quarter of 2008. That effect has been especially strong in Baltimore City, where foreclosures dropped from 1,654 in the first quarter to 832 in the second quarter (down 40%). Montgomery’s foreclosures decreased from 1,646 to 1,314, a more modest drop of 20%. Clearly this county’s foreclosure problem is far from over.
The foreclosure data reinforces a fundamental truth we revealed in Part One: high incomes in nominal dollar terms do not compensate for higher costs faced by Montgomery County residents. In the housing market, that fact contributed to economic pain unsurpassed by the vast majority of the “poorer” counties in Maryland. This is not evidence of wealth – it is evidence of overburdened Montgomery home budgets that is ignored by politicians from elsewhere in the state.
But it does not end here. Tomorrow we examine gas prices.