Baltimore region's homebuyers dig deeper

Average price of house rose to $262,600 in June

Inventory, sales pace increased

July 13, 2004|By Jamie Smith Hopkins | Jamie Smith Hopkins,SUN STAFF

Baltimore area home prices leaped more than 20 percent in June for the third month in a row, extending a real-estate boom unlike any seen before by local Realtors.

The average buyer agreed to pay about $262,600 for a home last month, a 20.2 percent increase over June of last year, according to numbers released yesterday by Metropolitan Regional Information Systems Inc.

Even with nearly 900 more properties to choose from, buyers snatched up homes faster than a year earlier: The average house sat on the market 38 days, compared with 48 days the previous June.

Prices rose most sharply in Baltimore County - nearly 30 percent.

"How about wow, in one word?" said Cindy Ariosa, president of the Greater Baltimore Board of Realtors and regional vice president for Long & Foster. She has been in the business 17 years and said the market has never been so good for sellers.

Agents are seeing signs that the steep run-up might be finally peaking after three years. Last month's increase is slightly below the 22.8 percent increase in April and 20.8 percent jump in May.

But increases were still in the double digits in every Baltimore jurisdiction, even as the number of new listings swelled by a fifth, showing that rising supply isn't meeting demand.

The number of homes sold last month - 4,628 - rose by 14.3 percent across the Baltimore region. Only Carroll registered a drop, which Ariosa attributed to the county's year-long freeze on new residential development that began in June last year.

Economists speculate that low interest rates are keeping the market hot as buyers rush to lock in mortgages. Though rates are higher than they were at the beginning of the year, they're expected to rise to about 7 percent by year's end, and people are apparently trying to buy now while they can afford more house for their money.

A drop in rates last week, to 6.01 percent nationally for 30-year fixed-rate mortgages, makes Ariosa suspect that sales will also be robust this month.

"There's a - I don't want to say `frenzy,' but a hurried attitude," said Bill Cassidy, sales manager for the Fells Point office of Long & Foster.

`Surprisingly strong'

S. Lawrence Yun, senior economist for the National Association of Realtors, said interest rates combined with a housing shortage help explain why Baltimore area prices are escalating twice as fast as prices nationally.

"It still is surprisingly strong," he added.

Prices for residential real estate usually rise only slightly above inflation, which is now at about 2 percent, he said.

"So home prices should be appreciating 4 [percent] or 5 percent under normal conditions," Yun said. "I'm just wondering when [these] exceptionally strong housing numbers will, in a sense, retreat back to more normal levels."

He expects a gradual change, and that may have already begun.

Judi Stull, a Realtor with ReMax Advantage in Columbia, has noticed that For Sale signs are staying up longer on some of the pricier homes.

Jo Anne Poole, associate broker with Coldwell Banker in Glen Burnie and president-elect of the Maryland Association of Realtors, said that's the third-time buyer market - the $500,000 to $700,000 homes. She believes more people are sticking with their second homes because they had to stretch financially to get there in the first place.

Downsizing is also increasingly popular for the baby boomer set.

But the market is no less a battle for people trying to get their foot in the door.

"It's very, very hard right now for first-time homebuyers and move-ins from other areas who aren't used to these prices," Stull said.

Last month was tremendous for her small team, which had as many settlements in June as it did for January through May combined. It has been much slower more recently.

Cassidy said his agents have been cautioning clients that "the days of being an overconfident seller may not be lasting much longer," though multiple offers are still frequently coming in.

Clouds on horizon

"The role of the listing agent is also to be a weather man, and there are some clouds on our horizon that say interest rates will continue to climb," Cassidy said. "Traditionally, rising interest rates start to eat away at the sellers' market."

Kathy Hackett and husband Richard are moving soon from upper Fells Point in Baltimore to Butchers Hill - two blocks all told. They weren't really in the market to buy, but they enjoy looking and happened to find something perfect, with more space, more amenities and enough room in the back to put in a parking pad.

Hackett, who runs a computer training program at the Johns Hopkins University, hopes it's still a sellers' market because her Fells Point home has just been listed.

But she feels the breeze - if not the winds - of change. The couple didn't get multiple contracts when they sold a rental property in Canton last month, and the Butchers Hill rowhouse sat on the market for a while before they made their offer.

That could be because more people were selling in June. The number of homes that settled or went under contract in the city rose 19 percent from the year before, the biggest increase in the region.

Or it could be the end of gold-rush fever.

"I think things may be slowing down," Hackett said. "I hope that my house sells quicker."

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