Home sale boom -- or blip? April's surge: Nervous about rates, home-buyers post strongest market gain in 2 years.

June 04, 1996

THE COMBINATION OF spring weather and uncertainty over interest rates has proven irresistible for hundreds of Marylanders. Home sales in the Baltimore region jumped 35 percent in April, registering the strongest gain in two years.

Yet while increases were recorded in both settled sales and contract signings from Baltimore City to the suburban counties, the short-term prospects of the region's housing market remain cloudy.

The good news now is that a modest rise has been spotted in prices. The bad news: Interest rates are edging up again. One can view the cup half-full or half-empty.

The real estate industry produces so many spin-offs that an uptick in sales ripples through the overall economy. More new furniture and appliances will be sold. Garden and plant shops will enjoy brisk sales. Cash in the hands of families who finally sell a house after having it languish on the market for a while also is likely to be redirected to new acquisitions.

As the residential real estate market slumped in recent years, there was much speculation about whether some basic assumptions had changed. For example, families could not automatically assume that their homes would appreciate at the exceptionally high rates that were common during the 1980s. Instead of making a heavy investment in an upscale home, some financial consultants advised putting money in the stock market.

Yet the fact remains that for most Americans, purchase of a home represents one of the soundest long-time nest eggs. The tax benefits alone, due to mortgage interest deductions, create a powerful enticement. In recent years, many types of homes have gone through a "price correction." Yet some observers are now encouraged by prices that have firmed up.

"For the first time in a long time, it's definitely moving away from a buyer's market. It's not a seller's market yet, but it has moved more that way," said David McIlvaine, a real estate agent in Columbia.

Besides interest rates, many other factors help determine the pace of sales. As summer approaches, Marylanders will be watching keenly to see whether potent home sales in the first thaw after our rough winter were merely a blip or portend better times.

Pub Date: 6/04/96

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