Sales of homes in region rose 27% in Sept.

Buyers rushed to lock in low mortgage rates lest they go higher

Average sales price gained 10%

Pending sales fell 3% in sign that market may be starting to cool

October 11, 2003|By Trif Alatzas | Trif Alatzas,SUN STAFF

Home sales in the Baltimore area surged at a frenzied pace in September as homebuyers rushed to lock in some of the lowest mortgage rates in decades, data released yesterday show.

Sales in Baltimore and its five surrounding counties rose 27.13 percent to 3,679 homes, compared with September 2002, according to figures compiled by Metropolitan Regional Information Systems Inc. of Rockville.

The listing service also found that average sale prices increased 10.34 percent to $210,300.

Housing has been one of the most consistent bright spots in a lackluster economy during the past three years as buyers, wary of a sinking stock market, sought a safe refuge for their money.

That demand, coupled with some of the lowest mortgage rates in 45 years, has sent home prices skyrocketing.

Most economists predict the sales pace can't be sustained, though many expect sales to remain healthy during the coming year.

Many economists expect the overall economy to improve during the coming months, which likely will move interest rates higher, making it more difficult for some buyers to afford a home. That figures to slow sales, which are on track to mark their third straight record year.

Several real estate agents said that the market seems to be cooling from its summer pace and that multiple contracts for homes aren't as common as they were a few months ago.

Pending sales, which offer a snapshot of future settlements, were down 3 percent to 3,166 contracts in September.

Even so, many agents said demand remains high among first-time buyers as well as homeowners hoping to take advantage of double-digit price appreciation to move up to a larger home. It took an average of 47 days to sell a home last month - 10 fewer days than in September 2002.

Exceeds expectations

"I won't say it's going gangbusters like it did when it started two years ago, but who would have thought we'd still be seeing this?" said Jan Hayden, president of the Greater Baltimore Board of Realtors. "It's exceeding expectations."

The benchmark 30-year mortgage rate hit a low of 5.21 percent in June - believed to be the lowest in more than 40 years.

Interest rates spiked above 6 percent last month but then retreated. They stood at 5.95 percent this week, rising sharply from 5.77 percent the previous week.

The Mortgage Bankers Association of America said it expects rates to average 6 percent this year and 6.4 percent in 2004. The National Association of Realtors estimates that home sales fall by as many as 300,000 units for each percentage point increase in interest rates.

"What you typically see when rates rise is that people who were sitting on the fence [are] thinking, `I better do this now while the rates are low,'" said Scott Hoyt, director of consumer economics for Economy.com in West Chester, Pa.

"Some of the recent strength may be from that. That bodes well for the immediate term but it may borrow sales from maybe three to nine months down the road."

Cautious buyer

Buyers like Charles "Adam" Keim continue to worry about rising prices and mortgage rates. Keim, 29, has been shopping since the summer for his first home.

He started out looking for a $160,000 home in Baltimore County but quickly pushed his budget to $170,000 when he wasn't satisfied with what he saw.

But Keim, who fixes power lines for Baltimore Gas and Electric Co., said he wants to make sure he stays within his budget.

"I don't want to be stuck with this outrageous house with nothing in it," Keim said. "I need to buy furniture and other things so I want to be careful about how much I spend."

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