A look at the biggest issues for the real estate market What's ahead for 1994

January 02, 1994|By Staff Report

For homeowners and homebuyers, 1993 was a busy -- and confusing -- year.

Declining mortgage rates created a frenzy of refinancings; buyers, in hibernation for much of the past two years, pounced on a depressed market; a succession of mergers kept industry watchers checking their scorecard; lenders by the dozen came to Maryland to offer borrowers a dizzying number of choices; and new and proposed rules -- including agency and seller disclosures -- kept everyone on their toes.

This year is expected to be just as hectic. Here are some of the major issues that homeowners, buyers, real estate agents and others in the industry will be following closely in 1994.

For sale

It took a while, but low mortgage rates in 1993 and a recovering economy finally prodded buyers to take the plunge. But will they keep coming out in 1994?

Many real estate brokers and economists think so.

They predict a continued recovery -- about a 4 percent increase for resales, and 5 percent for new homes. The upper end of the market, sour for some time, will likely benefit the most. First-time homebuyers -- who took advantage of record-low interest rates last year to get into a house -- will make up a smaller share of the market as rates stop falling and, perhaps, even rise.

"It's been a good year, definitely up over the past two years," said Nancy C. Hubble, president of the Greater Baltimore Board of Realtors. "The economic forecasts are very strong. People are feeling a little better about hanging onto their jobs."

In 1989, sales hit 18,000 for the Baltimore area, according to the Realtors group. But the market slumped the next two years, recovering somewhat in 1992. (The board tracks sales in Baltimore City and Baltimore, Carroll, Harford and Howard counties.)

Last year, the first six months were a bust -- with sales rivaling the figures for 1991, the depth of the housing slump. But buyers returned to the market with a vengeance in the last six months -- many pushed by the lowest mortgage rates in a quarter-century. By November, home sales for the year were up 2 percent compared to the previous year.

And agents and brokers see more good things ahead, especially because of a large increase in pending sales -- those under contract but yet to go to closing. Pending sales were up 24 percent in September, 20 percent in October, and 11 percent in November.

At W.H.C. Wilson & Co. Realtors, where Ms. Hubble is an associate broker, "we've already got buyers lined up after January 1st to start house hunting."

New homes, new hope

Many of the same ingredients that are expected to increase resales are expected to help new-home sales.

"I don't think there will be any great gains, but there should be continued improvement," said Clark P. Turner, the new president of the Home Builders Association of Maryland. "We're optimistic about 1994, and we're looking for good things in the spring market."

Though economists predict continued low unemployment, Mr. Turner says fears about losing a job still could hold some buyers back.

"The only negative is job security," he said. "People still have concerns."

Through the third quarter of 1993, 8,100 new homes sold in the Baltimore region, according to Legg Mason Realty Group. That represents a 2 percent increase over 1992. The realty group tracks sales in developments of 20 units or more in Baltimore and Baltimore, Harford, Anne Arundel, Carroll and Howard counties.

Analysts expect improved growth in 1994. Robert Lefenfeld of Legg Mason Realty expected about 9,500 new homes to sell by the end of 1993 and predicted 5 percent more -- or 10,000 -- this year.

"If the economy continues to improve, we could expect to do better than that," Mr. Turner said.

Sales have been especially strong over the past year in suburban areas planned for high density growth, such as the Route 24 corridor in Bel Air in Harford County, Odenton and Crofton in Anne Arundel County and Edgewood and Joppa in Baltimore County.

Mr. Lefenfeld expected another year of strong sales in those areas and in surrounding areas.

Which way for rates?

Perhaps the most watched figure in the real estate market -- by agents, by buyers, by homeowners, by builders, by sellers, by lenders -- is the 30-year mortgage rate.

The lower the rate, the more likely homeowners will refinance, buyers will sign a contract, agents will close a sale, lenders will find a borrower, builders will put up houses.

All anyone wants to know is: which way will they go next? The handicapping of mortgage rates peaked when the rate for 30-year loans dipped below 7 percent last year and hit quarter-century lows.

Now, as always, people want to know what's ahead. Well, analysts have begun to feel confident that rates finally have hit bottom -- of course, they said that at 9 percent and 8 percent, too. For now, though, the consensus is that rates will be stable, perhaps rising a bit. Rates on 30-year fixed mortgages are now about 7.25 percent.

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