New-home sales rise 22.3% Strong demand boosts prices, profit margins in metropolitan area

Great year is expected

Howard leads in sales of single-family homes, Arundel in townhouses

Housing

December 06, 1998|By Robert Nusgart | Robert Nusgart,SUN REAL ESTATE EDITOR

Builders in the Baltimore metropolitan area are coming down the stretch of 1998, riding new-home sales like a champion thoroughbred. Sales are up. Prices are up. Profit margins are up.

This is one race they don't want to end.

Through the first nine months of 1998, new-home sales in the area have increased by 22.3 percent over the same period last year, according to third-quarter statistics released by Meyers Housing Data Reports, a publication that tracks and analyzes construction. Through September, 7,234 homes were sold vs. 5,913 in 1997, a difference of 1,321.

"It [sales] has been pretty much across-the-board," said Jim Joyce, president of the Ryland Group's Baltimore division. "No matter where you are in the market, whether you are looking for your first home or if you are moving down, interest rates are helping you, both when you are purchasing and, if you have something to sell, it's going to help you there, too.

"I think what they say about rising tides raising all ships, I think that is what this is."

Families buying single-family detached homes made Howard County the area's leader in that category, capturing almost 27 percent of the market. There were 908 sales in the county, up 35 percent over last year.

The diversity of townhouse styles in Anne Arundel County -- from basic back-to-back to luxury waterfront -- had a magnetic effect on consumers as sales there shot up 40 percent over last year and accounted for 38.5 percent of the townhouse sales in the metro market.

Condominiums, though not as dramatic as single-family and townhouse sales, saw a 6.5 percent increase over 1997 nine-month totals with 809 units sold. Baltimore County captured the bulk of those sales with 330 units, representing almost 41 percent of the market.

And with mortgage rates hovering around 6.75 percent, and consumer confidence still riding high, those in the industry, such as Anna Pitheon of the Meyers Group, which publishes the report, see 1998 as one of the best years of the decade.

"At midyear, I was so pumped about [metropolitan] Baltimore -- probably the first time in the entire period that we've been tracking Baltimore since 1995," Pitheon said.

"Baltimore's year-over-year sales were better than they were in Northern Virginia, and we've always held out Northern Virginia as sort of the model of new-home growth because it has all the components so well in place -- that is, road improvement, solid schools, credible job growth and creation," Pitheon said.

"But Baltimore was actually doing better, which indicated to me that even if the job growth and roads and schools weren't as strong as Northern Virginia, that at least as far as other mitigating factors -- that being primarily interest rates, consumer confidence being so very high, consumer spending being pretty liberal -- totally fueled the resurgence to Baltimore's new-home market."

In the third quarter, home sales rose 15 percent over the same period in 1997.

"We had a good November," said Joyce, "a very good October and we've got a lot of stuff working for December. So we expect December to be better than they were the last couple of years."

"If they [buyers] are out looking this time of year, it's not for a joy ride," he added. "There are people who are seriously in the market."

But with such brisk sales, the number of new homes in the pipeline has shrunk to a one-year supply, according to Pitheon, who said the optimum time frame for builders is 18 months.

"I look at counties like Anne Arundel and Howard as being in pretty short supply," Pitheon said. "It would be just wonderful if a developer could come up with another 400 to 500 lots. What we're seeing come to market are more in the 30, 40 and 50 lot [range], and even smaller.

"How that will translate for the consumer is probably higher pricing, and it will be higher pricing on the new-home side as well as the resale side because demand will still be there, but supply will be under-served."

Bob Coursey, marketing director of Ryan Homes, said the region's No. 1 builder sold 1,140 units during the first three

quarters of the year, compared with 813 in 1997, a 40 percent increase.

"The [buyer] traffic is up 25 to 30 percent from '97 to '98, and not only are the numbers higher, but the level of interest is higher," Coursey said. "And there is more of a sense of urgency because people have seen the prices move upward in the last six to nine months."

The average price of single-family detached homes in the metropolitan region rose 2.8 percent through the first nine months when compared with last year, to $231,712. The biggest percentage increase came in Baltimore County, where a single-family home rose to an average of $213,288, a 6.5 percent increase over last year. Consumers who bought in Howard County paid the most: an average of $270,150.

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