Area's home sales rose to record level during past year

Interest rates, demand overcome steeper prices

Average was at $228,328 in Dec.

January 13, 2004|By Trif Alatzas | Trif Alatzas,SUN STAFF

Buyers pushed the volume of Baltimore-area home sales to a record level last year as extraordinarily low interest rates fueled demand despite double-digit price increases.

A total of 39,372 existing homes were sold in Baltimore and its five surrounding counties last year - 6.07 percent more than in 2002, preliminary figures show. The data will be finalized next month by Metropolitan Regional Information Systems Inc., the Rockville-based listing service used by area real estate professionals.

The average sale price in the region was $228,328 last month - a 17.36 percent increase compared with December 2002.

"It was our best year," Gilbert D. Marsiglia, president of the state Realtors' association, said yesterday. "I think we're going to be in a good market [this year, too]. I can't believe it's going to be better than 2003, but I also can't believe it's going to be a lot worse."

The real estate market was one of the regional economy's brightest stars over the past three years.

Sales and prices have climbed consistently, providing more equity to many homeowners while raising real estate tax assessments. Record numbers of refinancings have helped consumers lower their monthly mortgage costs or allowed them to tap into their home's equity and offset the sting of stock market losses.

December home prices were highest in Howard County at $320,863 and followed by Anne Arundel County at $318,296. Carroll County was next at $284,478; Harford at $214,922; Baltimore County at $205,095; and Baltimore at $110,191.

Average sale prices for the region recorded double-digit year-over-year gains every month last year except in March and November, though prices also were up substantially in those months.

Sale prices in Maryland rose 8.65 percent during the 12 months that ended Sept. 30, according to federal data, giving the state the fourth-best housing value appreciation rate in the nation.

Rising prices have given buyers like Paul and Kimberly Adkerson sticker shock. The couple, both 23, moved to Baltimore last year from Mississippi and have been renting in Cockeysville. They visited about a dozen homes during the past several months and hope to find a house in Rodgers Forge, since they both work in Towson.

The couple sent out about 200 letters last week to Rodgers Forge homeowners, asking them if they were interested in selling. The Adkersons hope to find something later this spring. And when they discuss the housing market with their parents back home, the topic centers on prices.

"They're overwhelmed by the cost of houses up here," said Kimberly Adkerson, a legal assistant who hopes to attend law school next year. "Most of our friends back home are buying their first house for about $100,000 and $125,000. That's not going to happen here."

Area real estate agents said homes in the Rodgers Forge neighborhood don't last long, and that recent prices have averaged $225,000, up from about $150,000 two years ago.

Some government and industry leaders worry that rapidly rising prices could push many first-time buyers out of the market altogether.

But demand has not slowed.

Even last month, when sales traditionally slow, buyers purchased 3,359 homes - a 15.95 percent increase compared with the corresponding month last year.

Experts doubt that the housing frenzy can continue, and signs nationally indicate that sales are starting to cool.

Benchmark 30-year interest rates averaged 5.8 percent last year, according to the Mortgage Bankers Association of America. The group expects rates to average 6.1 percent this year. Lending costs averaged 5.87 percent last week, and some economists predict 30-year rates to end the year closer to 7 percent. That likely will price some buyers out of the market, economists said.

"We can't maintain this extraordinary pace," said Celia Chen, a senior economist with Economy.com in West Chester, Pa., who ranks Baltimore as the seventh-overpriced market in the country. "With expectations that the economy will improve, we expect mortgage rates to rise. And housing is going to slow."

The Baltimore area's rapidly growing prices are attributed to several factors: low interest rates; a limited inventory of homes and land for sale; building limits in many jurisdictions; and a stable job market.

Concerns about rising prices pushed Gov. Robert L. Ehrlich Jr. to form a committee last year to offer solutions to the affordability problem. Recommendations are expected by the end of this year.

"It's still a hot market out there," Marsiglia said. "Especially in that under $250,000 market - people are just clawing at those listings."

Industry figures showed the average home in the Baltimore area took 52 days to sell last month - six days fewer than in December 2002. There were 6,145 homes for sale in the area last month - 8.57 percent fewer than last year. Pending sales last month, which offer a peek at future sales, were up 4.87 percent compared with December 2002.

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