Slump in sales for Baltimore area continues

July 14, 1991|By Timothy J. Mullaney

The hook is baited, the lake is the right temperature, the fishermen are waiting. But the damn fish aren't biting.

Selling a house is more or less the same way. There are lots of houses on the market, the economy is improving, and lots of real estate brokers are ready, willing and able to help buyers. But buyers aren't biting.

Existing home sales in most of metropolitan Baltimore were down 17 percent in June from June 1990, according to the Greater Baltimore Board of Realtors.

After the end of the Persian Gulf war, existing home sales actually jumped 2 percent in April, and industry leaders such as Board of Realtors President Brandon Gaines had hoped that the market was recovering from its slumber. But sales fell 9 percent in May, and now this.

"It's going to be an up and down year," Mr. Gaines said. "Things will be hot one month and cool the next."

The GBBR's statistics include all of metropolitan Baltimore except Anne Arundel County, which has its own Board of Realtors. The GBBR also covers Kent County on the Eastern Shore. Anne Arundel's board reports that existing home sales, which it measures using a different method than the GBBR, fell 16 percent in Anne Arundel and Queen Anne's counties during June.

Mr. Gaines and other experts still think a recovery in the housing market is coming. But they agree that the recovery, when it comes, won't look much like the boom markets of the mid-to-late 1980s.

"We have to start accepting that the 1980s were an exceptional time," said Robert Lefenfeld, vice president at Legg Mason Realty Group Inc. in Baltimore.

Mr. Lefenfeld predicts that an improving economy will lift the market and that local year-to-year monthly comparisons will "definitely" turn positive by the end of the 1991.

The 1991 monthly statistics could begin to look good -- compared to 1990 stats -- as soon as August.

In 1990, the number of homes sold more or less kept up with 1989's pace through July, but then fell 25 percent to 30 percent below 1989's levels for the rest of the year.

That means that starting in August, the year-to-year comparisons become much easier to match, even if sales remain well below 1989 levels, when the local housing market was stagnant.

The economy is the single biggest factor affecting housing sales, and that is improving, Mr. Gaines said. "Sellers are bullish," he said, noting that there are more homes on the market in the GBBR's area now than there were a year ago.

"We've hit the bottom, and we're bouncing around the bottom," he said. "We're on a positive track, but it's going to take a while."

Economist Michael Conte is slightly more pessimistic.

"We're looking at, at best, a stable economy in late 1991 and into 1992," said Mr. Conte, director of the Center for Business and Economic Studies at the University of Baltimore's Merrick School of Business. "Even with a moderate recovery, I'd expect that we'd be down 5 percent or 10 percent [in home sales]."

Mr. Conte, Mr. Lefenfeld and Mr. Gaines each point to a different reason why the recovery, when it comes, is likely to lack the momentum of the 1980s.

Mr. Conte cites the slowing of in-migration -- people moving to the area from other parts of the country. And Mr. Gaines cites the heavy debt loads that consumers piled up during the 1980s, when, he admits, even he was surprised by the prices people were willing to pay for homes.

"A lot of our growth industries have leveled, at least for now," Mr. Conte said, pointing especially to the defense and financial services industries, which were leaders in bringing newcomers to the area. The problems in those industries helped to stall in-migration 12 to 18 months ago, he said.

Mr. Lefenfeld points to another reason why the pool of potential home buyers is shrinking -- the waning of the baby boom. Now that most baby boomers have already reached home-buying age -- even the very youngest boomers are approaching age 27 -- the number of young, potential buyers in the future won't be enough to fuel explosive growth, he said.

"The pure demographic fact is that we have fewer people entering home-buying age," he said.

Experts disagree about how much the end of the baby boom will hold back housing sales.

Barbara Allen, an analyst who follows home building company stocks for Kidder, Peabody & Co. in New York, has argued that baby boomers' home ownership rates are still lower than their predecessors'. That, she says, means the remaining boomers will continue to buy homes in the years ahead.

Mr. Conte is also skeptical of putting too much emphasis on demographics.

"The baby boom didn't account for the latter part of the 1980s, locally," he said. By then, most baby boomers who were going to buy homes had already done so, so their impact had been mostly played out, he said.

Mr. Gaines said that a habit often blamed on the baby boomers is still having an effect -- high debt loads.

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