Home prices in region continue to surge

Rise for existing houses averaged 22.78% in April

Sales also up, 25%, to 3,617

May 11, 2004|By Daniel Taylor | Daniel Taylor,SUN STAFF

Selling prices of existing homes in the Baltimore area surged yet again last month as buyers raced an uptick in mortgage rates to record what may be the peak in a three-year housing boom.

Sales in Baltimore and its five surrounding counties rose 25.03 percent to 3,617 homes sold last month compared with April 2003, data released yesterday show. Average sale prices rose 22.78 percent to $235,682 from $191,950, according to Metropolitan Regional Information Systems Inc., the Rockville-based database used by agents and brokers.

April was the second consecutive month that average home sale prices posted year-over-year increases of at least 20 percent.

The Baltimore market is experiencing some of the highest rates of appreciation in the nation, worrying some buyers and agents that prices may be too steep.

Most experts believe that housing sales, which have helped fuel the economy during the past three years, will revert to more normal levels this year.

"That rate of appreciation is somewhat surprising," said Lawrence Yun, an economist with the National Association of Realtors. "It would imply that Baltimore is in the very top tier in home price appreciation."

Yun attributed the above-average performance to a limited supply of homes for sale, a healthy local job market and the area's proximity to higher-priced Washington. He and other real estate experts said sales and price continue to be driven by fewer homes available and historically low mortgage rates, which remained below 6 percent until two weeks ago.

Borrowing rates have been on a steady climb during the past seven weeks, in the wake of several encouraging economic reports. The Federal Reserve has indicated that it may increase short-term interest rates this year. That expectation, in turn, has pushed up long-term borrowing costs such as mortgage rates, though most economists don't expect them to rise above 7 percent this year.

Many home shoppers have stepped up their search in recent weeks. But as interest rates rise, some buyers might find themselves priced out of an already expensive market.

The Maryland Association of Realtors said yesterday that the average first-time homebuyer earned 68 percent of the income needed to buy a starter home in March, down from 69 percent in February.

Baltimore was the fifth-highest overpriced market in the country during the final three months of 2003 based on price and income growth, said Celia Chen, an economist with Economy.com in West Chester, Pa. She expects the Baltimore area, which placed behind Miami, Washington, Orange County, Calif., and Monmouth and Ocean counties in New Jersey, to post similar results for the first quarter.

Brendan Gardes, a Laurel resident looking to buy a rowhouse in Baltimore for about $200,000, believes it is still a good time to buy. But the prospective first-time buyer said time may be running out.

Rising rates "do put on a little pressure," the 24-year-old engineer said. "You want to get in [a bid] before rates go up and you end up paying more."

Benchmark 30-year mortgage rates increased to 6.12 percent last week from this year's low of 5.38 percent in March. That increase would cost a homebuyer an extra $94 a month on a $200,000 loan, according to Bankrate.com, making the mortgage payment $1,214.57.

In the Baltimore area, the highest year-over-year increase was found in Anne Arundel County, where the average home price rose 28.31 percent to $327,700 last month.

That was followed by a 27.48 percent increase in Baltimore to $124,472. Howard County saw a 25.34 percent increase to $344,079, Baltimore County rose 20.47 percent to $212,498, Carroll County increased 19.77 percent to $269,012 and Harford County rose 16.02 percent to $218,663.

Home prices in the Baltimore area rose more than 16 percent last year, according to the National Association of Realtors, far outpacing the national average of 7.5 percent. The Realtors' group expects Baltimore to outpace the nation's 4.7 percent appreciation this year as well.

Cindy Ariosa, president of the Greater Baltimore Board of Realtors and a regional vice president for Long & Foster Real Estate Inc., said the interest rate increases have encouraged many potential homebuyers to "come out of the woodwork" to secure a deal on a house before rates rise further.

Sales in Harford County posted the highest year-over-year increase last month, rising 39.77 percent to 362 homes sold.

That was followed by Baltimore, where sales jumped 33.23 percent to 874 homes. In Howard, sales rose 23.8 percent to 411 homes. Anne Arundel increased 22.55 percent to 799, Baltimore County went up 19.17 percent to 951 homes and Carroll rose 12.24 percent to 220 homes.

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