Local housing market should continue climb

After years in doldrums, real estate agents see area catching up with U.S.

January 24, 1999|By Robert Nusgart | Robert Nusgart,Sun Staff

Housing sales in the Baltimore metropolitan area might not rise to the feverish pitch of 1998, but there is little doubt that the surge that started a year ago will continue into this year.

"I'm not sure that it is the best that it could ever be, but it is the best it has ever been," said Robert Van Order, chief economist for Freddie Mac, the quasi-governmental organization that helps to keep mortgage money flowing to lenders.

After years in the doldrums, the housing market in the Baltimore metropolitan area finally joined the rest of the nation in a rousing housing boom in 1998.

Low interest rates and high consumer confidence fueled the local resale market, bringing in first-time homebuyers, allowing families to move up into new homes and sparking one of the best years Baltimore builders have seen.

Industry observers doubt that 1999 can match or exceed last year's pace and are expecting a slight slowdown this year in sales, housing starts and mortgage originations. Recession is not at the forefront of anyone's forecast.

"This is the best market that builders [nationally] have ever seen," said Stanley F. Duobinis, director of forecasting for the National Association of Home Builders. "But one thing to note is that they are not as optimistic about the future. They know that maybe this is as good as it gets. They are saying that the next six months are not going to be as good for most of them as the last six months have been."

Although he sees new home starts falling 8 percent, Duobinis said the dip won't be as harsh.

"If you look backward to 1997 or even early 1998, we're talking about a forecast that takes us to a level that is basically higher than where we were. This valley is a little bit higher than that last mountain that we were on."

Marc Witman, president of the Greater Baltimore Board of Realtors, believes that will be true locally, too.

"It will be very interesting to see, because as you start going into January, February and March of 1999 you are going to be comparing yourself to months that were up 20 to 30 percent from the prior year," said Witman. "I don't know if you can sustain those types of increases, although we didn't think we could sustain the increases as far as we did in 1998. If we start looking in January and February with increases that are only 10 or 15 percent, that is still fabulous because you are comparing to such a strong prior year."

Mortgage rates, which began spiraling downward as economies in Asia, Russia and Latin America weakened and investors sought a "flight to quality" in U.S. bonds, were expected to dip in January but remain stable for the year.

"In terms of historical context, we are safe to say it was the most stable year for mortgage interest rates easily since the 1970s," said Keith Gumbinger, vice president of HSH Associates, a New Jersey firm that tracks and analyzes mortgage rates.

"The low point for the year is likely to be early, that is all we see right now," Gumbinger said. "Stability in 1999 is likely to be as good as 1998 -- the bottom will probably be about 6.5 percent and the top around 7.5 percent."

Said Freddie Mac's Van Order: "I think the economy will slow down next year, and I think housing will slow down, but with mortgage rates under 7 percent, that will support a pretty strong housing market for a long time."

Likewise, Fannie Mae officials said 30-year, fixed-rate mortgages should remain below 7 percent this year, averaging 6.73 percent compared with a projected average of 6.95 percent for 1998.

Overall, sales of existing homes in the Baltimore area in 1998 rose approximately 28 percent over 1997, and new-home sales are expected to post a 14 percent gain. For 1999, Anna Pitheon of Meyers Housing Data Reports, a Washington firm that analyzes new-home sales, expects a slight retreat.

"I don't see a whole lot of downside to the market," Pitheon said. "Interest rates could go up in the spring. That will have a hiccup effect, but overall [this] year will match what we've done in 1998. It may have a 5 percent pare-back, but that is about it."

Pitheon expects prices to inch upward, especially in the luxury market.

"Buyers are willing to spend money. They're not willing to fritter it away," Pitheon said. "They are still looking for a deal. They are still looking to make sure that they got a good value for their dollar."

New-home sales showed strength in every jurisdiction, except Harford County where townhouse and condominium sales have slowed.

"I think Harford will continue to struggle [this] year," Pitheon said. "I don't see a whole lot of relief in that market. It will be very price-driven; it will be very competitive. It will not be one of the leading markets in the region."

Conversely, the Baltimore County growth areas of Owings Mills and White Marsh should see continued success.

"The White Marsh/Bel Air market is going to see the most expansion and most growth because of the new [housing projects] coming out of the ground there," Pitheon said, adding that Hunt Valley will also benefit "because of the move-up tone of that market."

Jim Joyce, president of the Baltimore division of The Ryland Group, expects the area's second-biggest builder to grow 20 to 23 percent in sales.

"We see it as pretty stable and don't see a lot of pressure on interest rates," Joyce said. "And even if we get some pressure on interest rates, I don't see anything crazy happening. We are still in pretty affordable price ranges, and the places where we are high-end, well, that's just the world. Howard County is Howard County."

Pub Date: 01/24/99

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