City led way as home prices rose in '03

Average cost of a house in Baltimore grew 19% last year to $108,522

February 22, 2004|By Daniel Taylor | Daniel Taylor,SUN STAFF

The sizzing real estate market boosted average existing-home sale prices by at least 12 percent throughout the Baltimore area last year.

Sale prices in Baltimore and its five surrounding counties rose an average of 15.34 percent last year to $211,636, according to figures released last week by Metropolitan Regional Information Systems Inc. Prices in Baltimore rose the most, 19.08 percent to $108,522.

"The market keeps climbing," said Henry Strohminger, president-elect of the Greater Baltimore Board of Realtors. "And the appreciation is being received by everyone."

Home sales have posted records during each of the past three years locally and nationally. In the Baltimore area, sales grew 4.55 percent to 38,834 houses last year. The biggest increase was in Carroll County, where sales rose 8.29 percent to 2,561 homes.

Sellers and buyers said they are surprised at how much the houses are fetching.

Julie Wellein said she put her Parkville house on the market for $149,000 in May, then sold it for several thousand more. That helped her family afford the $280,000 house they bought in Rosedale in June.

"It's unreal what homes are selling for and how much money you have to put into a new one," Wellein said. "We probably would've been more comfortable around the low $200,000s ... but because there wasn't a whole lot on the market in our price range, we had to get something much higher."

The real estate market has been a consistent bright spot in an otherwise slumping economy during recent years. As mortgage interest rates kept falling, more buyers flooded the market in search of houses. That demand - coupled with lower borrowing costs - has helped fuel the price climb and increased taxable assessment values for most homeowners.

Affordability for first-time buyers has been a growing worry among real estate and government officials as prices keep rising.

The hot market and low interest rates have encouraged a record number of homeowners to refinance their mortgages to lower their monthly housing costs or tap the newfound wealth in their homes. The refinancing activity also is credited with sustaining consumer confidence because real estate values helped offset stock market losses for many Americans.

Real estate agents said activity has slowed from its frenetic pace of last summer but that sales remain healthy. Sales have slowed in more expensive areas such as Howard County, where the number of homes sold last year rose 1.26 percent to 4,760 homes. Many agents said homes selling for about $200,000 continue to move quickly. It took an average of 49 days to sell a home in the Baltimore area last year, the same as in 2002.

Several real estate experts predict that price growth and sales will cool this year. Also, mortgage interest rates are expected to rise, making it more difficult for some buyers to afford homes.

Benchmark 30-year mortgage interest rates averaged 5.8 percent last year, according to the Mortgage Bankers Association. The group predicts rates will average 6.1 percent this year.

"I expect that [the market] will start to slow down in the second half of the year," said Edward B. Montgomery, an economist at the University of Maryland, College Park. "I wouldn't be surprised if around that time interest rates go up a little, taking a little steam off. It'll be a good year, but not necessarily a great year."

There are also concerns that affordability is becoming a problem for many buyers as prices keep rising. The Maryland Association of Realtors said its affordability index for first-time buyers reached a four-year low in December.

"I think there is a little bit of impact on affordable housing," said Cindy Ariosa, president of the Greater Baltimore Board of Realtors. "That's the one pocket that we may be having difficulty in."

Scott Frohme, a former resident of Hamilton who bought a $282,000 house in May, said he felt rushed into making a decision on a house for a higher price because of the tight market. The Cockeysville home was listed at $275,000.

He and his wife looked at two other houses, Frohme said, but "there was nothing on the market. We felt we had to be aggressive, because on Friday the house went to market, and I talked to a listing agent on Sunday and he told me he was already expecting three offers and I was the fourth. We had to do whatever we could to make the offer as sweet as possible."

Frohme said he and others should be able to afford the higher prices for now because of low interest rates. He and his wife secured a 30-year loan at 5.5 percent. "When rates are at what they are," he said, "you definitely feel a little easier about going above your price range."

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