Happy times continuing for Maryland home sellers

Those Maryland home prices figure to keep on going up

January 28, 2004|By JAY HANCOCK

THE AMAZING ascent of home prices in Greater Baltimore began around 1999 and was already stoking salon chitchat in Guilford and sofa sales at IKEA a year later.

"Sellers seek, get big bucks," was the headline in The Sun in August 2000.

But the bucks weren't that big. Although the median sales price of a metro-Baltimore home was $153,000 in 2000 - up 15 percent from the year before - the party hadn't progressed beyond hors d'oeuvres and aperitifs.

In June 2002 this column predicted "home-price inflation in the next five years like we haven't seen since the 1980s, with multiyear, double-digit percentage pops." It came true. Area homes appreciated 14 percent in 2002 and will probably show an even greater gain in 2003 after all the results are in.

The median price of a Baltimore-area home likely hit $208,000 last year - according to projections by the National Association of Realtors - nearly double prices of the mid-1990s and requiring household income of at least $60,000 to support.

Perhaps this is the top. Are Maryland homes poised to mimic the stock market in 2001? The Chicago Bulls in 1999? Napoleon in 1812?

Not by a mile. Pessimists worry about a U.S. housing bubble - the same one they worried about two years ago - and for some regions they're probably right. But not in Maryland, and not in Baltimore. Perhaps more than any other part of the country, this region enjoys the kind of sunny economic outlook and relative under-pricing of shelter that promises continued gains for home values.

Maryland is the fourth-richest state in the country, with a median household income of $55,000. Yet our houses are far cheaper - still - than those in other wealthy states.

A house that costs $250,000 in Howard County would go for $400,000 to $500,000 in various Boston suburbs, according to Coldwell Banker. The home that fetches $200,000 in Harford County costs twice as much in some outskirts of New York. And a $500,000 dream manse in Anne Arundel will set you back at least $800,000 near San Francisco or Los Angeles.

Such lopsided values for similar assets present the sort of "arbitrage" opportunity often sought by financial pros on the theory that eventually the disparate prices will converge. Buy Columbia! Sell Palo Alto!

Of course, the theory works better with abstract assets such as stock options, for which geography is not an issue. You can't move the center-hall Colonial you bought in Westminster, Md., to Rye, N.Y. You can, however, move New York homebuyers to Maryland, which is what's happening. Almost every year during the 1990s Maryland lost residents, on balance, to other states. But that trend has reversed itself as this state's economy, lackluster as it is, has outperformed those of its peers.

"While people in the state realize that things aren't great here, they are better here than in most other places," and that draws extra residents, said Mark Goldstein, an economist for the Maryland Department of Planning. Maryland's interstate "in-migration" - the number of people moving here minus those leaving, as calculated from federal tax returns - reached nearly 12,000 in 2002, the highest since 1989. And the four top contributors, not counting Washington D.C., are Virginia, New York, New Jersey and California - all places with monster home prices.

When somebody from Northern New Jersey takes a job in Baltimore and sees a local house on the market for $300,000, she bids $320,000 and figures she got a bargain.

And there will be plenty of jobs to take in Maryland - and not so many houses. The need for national security has ensured that the era of big government is back. This is the home of big government.

Gov. Robert L. Ehrlich Jr. has left his predecessor's growth-control policies largely intact, which means that the inventory of housing is tighter. Interest rates figure to stay low for a long time.

Let the bidding continue.

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