Home prices rise by 12.75%

Appreciation in 2003 across Maryland was fifth-fastest in U.S.

Baltimore area up 13.27%

Economy, low rates on mortgages credited for performance

March 07, 2004|By Daniel Taylor | Daniel Taylor,SUN STAFF

Home prices in Maryland rose last year by 12.75 percent, the fifth-fastest pace in the nation, according to federal statistics released last week.

Maryland bettered the national average of 7.97 percent, the Office of Federal Housing Enterprise Oversight reported. Only Rhode Island, California, the District of Columbia and Hawaii outperformed Maryland last year in terms of average price growth.

Patrick Lawler, chief economist with the Office of Federal Housing Enterprise Oversight, credits a strengthening economy and extraordinarily low mortgage interest rates with fueling the price growth.

In Baltimore and its five surrounding counties, prices rose 13.27 percent, ranking the area 27th among metropolitan areas. The agency tracks conventional home loans purchased by mortgage giants Freddie Mac and Fannie Mae. Those loans are limited to $322,700.

Many Baltimore-area real estate agents said they are amazed at the thriving market. Sharon Blough, a vice president for Long & Foster Real Estate Inc. and manager at the Perry Hall office, calls the market "phenomenal."

"I've been in this business since 1986, and I've seen all kinds of markets," she said. "This is just unprecedented."

The biggest problem for buyers, Blough said, is finding a home in their price range that's for sale. There were 6,095 homes listed for sale in January in the Baltimore area, 11.2 percent fewer than in January last year, according to Metropolitan Regional Information Systems Inc., the Rockville listing service used by agents and brokers.

"As long as rates stay down, it will stay a seller's market," Blough said.

Benchmark 30-year mortgage interest rates hit a four-decade low of 5.21 percent in June. The rates have bounced up and down since then but have remained below 6 percent for much of that time.

Experts predict that rates will finish the year closer to 7 percent, but many expect the housing market to remain strong. And, although many expect price appreciation to slow, few predict a decline in values.

Home prices in Maryland rose 5.73 percent in the fourth quarter, which tied the state with Nevada for the fifth-largest increase in the nation. The national average was 3.67 percent.

S. Lawrence Yun, a senior economist with the National Association of Realtors, credits low inventory and spillover from the hot Washington area as reasons for Baltimore's housing strength. The Realtors group said the median price of a single-family home in the Baltimore area was $208,900 last year, an increase of more than 16 percent from the median a year earlier.

"The primary driver is a relatively strong employment situation, helped out by federal defense-related expenditures, which flow into this region," Yun said.

Another important factor is construction, which Yun said has remained "essentially flat." Construction of single-family homes in the area fell 0.2 percent during the past year while growing 10 percent in the rest of the nation.

Growth limits in several jurisdictions have pushed up land prices, with home prices following. The average sales price of a detached new home in the Baltimore area rose 15.1 percent to $379,306 last year, according to Meyers Group, a real estate information and consulting firm that tracks sales.

"We see the rate of appreciation somewhat slowing down, but nevertheless it will be there," he said. "We anticipate a rise in mortgage rates, probably in the second half of 2004. That will hold back some of the demand and keep appreciation in check a bit."

Yun predicts the national home appreciation rate will reach about 5 percent this year. Yun said Maryland should outpace that with growth of 7 percent to 9 percent.

Many buyers have found the housing market difficult to navigate because sellers seem to have more say in the prices. Andrea Kurek, a loan-servicing manager in the lending department at Slavie Federal Savings Bank, bought a home in Perry Hall in May for $335,000. When a house became available, Kurek said, she had to act quickly.

"If you were interested [in a house], you had to put in a contract that day if you wanted it," she said. "I didn't have time to sit and decide. I had to make up my mind right then and there.

"I knew the houses were going to be expensive," Kurek said. "But the rates were helpful in getting a higher-priced home."

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