Home prices leap 8.65%

One-year Md. increase is fourth-largest in U.S.

$220,200 metro area median

Factors include economy, jobs, proximity to D.C.

December 02, 2003|By Trif Alatzas | Trif Alatzas,SUN STAFF

Home prices in Maryland jumped 8.65 percent during the 12 months that ended Sept. 30, giving the state the fourth-highest appreciation rate in the country, according to federal statistics released yesterday.

Maryland's housing-cost growth rate was more than 3 points higher than the 5.61 percent national average, the Office of Federal Housing Enterprise Oversight said. Only Rhode Island at 12.35 percent, California at 9.7 percent and the District of Columbia at 9.1 percent recorded bigger gains.

During the third quarter alone, Maryland prices rose 2.46 percent, again outpacing the 1.39 percent national average, the agency reported.

Shelly Harter-Dreiman, a senior economist with the Office of Federal Housing Enterprise Oversight, attributed Maryland's home appreciation to spillover from Washington-area prices and the region's strong economy and low unemployment rates. The agency tracks conventional home loans purchased by mortgage giants Freddie Mac and Fannie Mae. Those loans are limited to $322,700.

Area real estate agents said demand is still brisk despite the typical slowing due to the holidays. Sellers who price their homes accordingly usually are fielding several offers, agents said. But some agents acknowledge that several homeowners are testing the market to see just how high buyers will go.

"Sellers are still making the rules," said Creig Northrop, a Long & Foster Co. real estate agent in Howard County.

Home prices have been climbing steadily during the past three years as record sales and historically low mortgage rates have increased demand for housing. The housing industry has been one of the most consistent drivers of the economy during that time as many investors have sought the security of real estate instead stock market uncertainties.

Baltimore-area homeowners have seen an average increase of $57,900 in home equity during the past two years, according to S. Lawrence Yun, a forecasting economist with the National Association of Realtors. The Realtors' group said the median price of a Baltimore area home was $220,200 at the end of September.

Yun predicts that house price appreciation nationally will be between 8 percent and 10 percent this year and between 4 percent and 5 percent in 2004. Prices grew by 7 percent nationally last year. Housing experts predict that long-term interest rates will grow steadily next year as the economy improves. That figures to slow price appreciation, they said.

"By mid-next year, we expect long-term interest rates to be around 6.5 percent; that likely will cut off some of the demand and the buying power of people who can afford those prices," said Celia Chen, a senior economist who studies housing for Economy.com in West Chester, Pa.

Several economists worry that prices are growing faster than personal income and that affordability will become a larger problem for first-time buyers, even with the low interest rates. Maryland officials are studying those pricing issues and expect to offer recommendations to Gov. Robert L. Ehrlich Jr. by the end of next year.

Melissa Golinsky and her husband, Jeff, bought their first home in May and moved from Elkridge to Bel Air. They had looked around for about a year before buying. They lost out on two homes to higher bids and eventually found what Melissa Golinsky calls a "fixer-upper" for $175,000 and a half acre.

"We were floored" by the prices, Melissa Golinsky said. "We had actually thought about buying a townhome because we didn't think we could afford what we were looking for. But when we started looking at townhomes, they were just as expensive."

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