Luxury sales defy slump

No downtime: Terrorist attacks, the dot-com bust and a national recession fail to dent the local luxury home market, which had a record year in 2001.

March 10, 2002|By Robert Nusgart | Robert Nusgart,SUN REAL ESTATE EDITOR

It was a combination punch to the solar plexus of this segment of the real estate market that should have taken it to its knees.

First, the dot-com phenomenon went poof.

Second, the stock market retreated as rising unemployment and recession took hold of the national economy, leaving many investors with a shell of a portfolio.

And finally, there was the tragedy of Sept. 11.

Yet, with every aspect suggesting a cooling of the luxury resale market in Baltimore, it turns out that in 2001 more people paid more money, purchasing more upscale properties than at any other time since this housing boom began in mid-1997.

Last year 834 homes priced at $500,000 or higher sold in the Baltimore metropolitan area, according to statistics provided by Metropolitan Regional Information Systems Inc., the multiple listing database used by real estate brokers.

That number exceeded 2000's total by 214 homes, or 34.5 percent.

The number of properties that sold last year for more than $500,000 was almost three times the number of homes sold in that category in 1997.

Yes, the well-to-do are doing just fine in the Baltimore market. Supply can't keep up with demand.

"This market is burdened with buyers, to be frank," said Karen Hubble Bisbee, vice president of O'Conor, Piper & Flynn ERA, who with her mother, Nancy Hubble, specializes in the high-end market.

"We have more buyers than we have properties to sell them. Our market has remained strong and ... that is very exciting, but it has made it very difficult. We've had a backlog [of buyers] for the better part of three years, and [they] get very anxious because there is very little supply, and when the properties come on, we do see overbidding again," Bisbee said.

Fifty-eight properties, each fetching at least $800,000, were sold in Baltimore and Baltimore County between Jan. 1, 2001, and the end of February, Bisbee said.

"I think 58 sales over $800,000 is pretty darn impressive when you consider that one entire quarter was perhaps lost to a tremendous national tragedy," she said, referring to the Sept. 11 attacks in New York and Washington.

Glancing across the landscape, from jurisdiction to jurisdiction, sales of homes of at least $500,000 were on the increase in 2001.

In Anne Arundel County, which includes Annapolis and its waterfront communities, luxury sales were up 24.6 percent.

In Baltimore, with a revitalized Inner Harbor adding to the sought-after communities of Guilford, Homeland and Roland Park, sales rose by 50 percent.

In Baltimore County, sales were up 14.5 percent.

In Carroll County, there were six sales of $500,000 and higher in 2000. Last year there were 21.

Harford County rose from 12 sales to 19, or 58.3 percent.

And in Howard County, where five properties - more than the previous four years combined - sold for more than $2 million, luxury sales rose from 115 to 194, a 68.7 percent increase.

"A million dollars used to be a staggering sum of money for a house," Bisbee said. "I remember every time a million-dollar house sold, it would be the talk of the industry for days. It was a big deal.

"That's a lot of money, but it is not what it used to be. It doesn't buy in the real estate market what it used to. Supply and demand has driven the value of luxury goods up. These are all discretionary buys. These people don't have to buy a $2 million house."

The depth of the luxury market is confounding those whose job it is to interpret economic data.

"Everything is telling us that the luxury-home market should be sagging right now. It should really be hurting," said Anirban Basu, director of applied economics at Towson University's RESI institute.

"I look at the economic indicators. I look at jobs. I look at personal income growth. And I look at all these indicators, and they are all down, down, down. The stock market is down and now it is trading in this sideways range for a considerable amount of time.

"Everything we have learned in graduate school tells us that it has to affect demand for various goods and services. And it tells us that it's the big-ticket items that people are going to forgo the most. Do I really need a six-car garage?

"I predicted many months ago that by now we would have seen considerably more weakness in the housing market than we have seen. And I've been wrong. In terms of all the variables that I try to predict, this is the one in which I have been most inaccurate in terms of my predictions. I think most economists are in my boat. We're all on the Titanic together."

Maybe that explains why developers such as Steve Smith of Gaylord Brooks Realty Co. Inc. can tell tales about 18 contracts being rapidly submitted for 12 lots costing between $262,000 and $340,000 in the new upscale Stonewall subdivision north of Towson.

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