Home sales in city hit record

Prices increase by 33%, outpacing the region 2-1

`More than just rates'

Interest is expanding beyond waterfront areas

September 11, 2004|By Jamie Smith Hopkins | Jamie Smith Hopkins,SUN STAFF

Baltimore's real estate rebound, long awaited but mainly evident near the waterfront, hit a milestone last month when the city posted a record 33 percent increase in home prices - double that of the region as a whole.

Home prices are being closely watched by the industry, not to mention by buyers and sellers, who have been anticipating a cooling of the red-hot real estate market, locally and nationally. In fact, the regional increase of 15.4 percent last month, while still impressive, was below last spring's price escalation.

But the city's increase, reported yesterday by Metropolitan Regional Information Systems Inc., was the best month during an upswing that began two years ago. Home prices in the city increased by 19 percent last year and 13 percent in 2002 after having dropped 2.4 percent in 2001.

The last monthly increase that approached August in Baltimore was a 29 percent jump in November 2002.

"It's so much more than just rates and the economy. It's about the confidence level in Baltimore City," said Tracy Gosson, executive director of Live Baltimore Home Center, a nonprofit group aimed at promoting homeownership in the city. It expects more than 1,000 people at its biannual housing fair today.

The increase in values is still largely fueled by neighborhoods that have become popular for young professionals, such as Federal Hill and Canton. But other communities with a stock of old homes are also seeing renewed interest by buyers interested in rehabbing them.

In North Baltimore, for example, the popularity of Hampden and Wyman Park is propelling nearby Remington. Bolton Hill is driving interest in Reservoir Hill, where scaffolding is an increasingly common sight.

"So much of what's being bought up are shells," Gosson said. "Probably in the next two years, the average price for Reservoir Hill is going to explode."

A small city's worth of people - nearly 85,000 - left Baltimore for the suburbs and elsewhere during the 1990s, often citing crime and low-performing schools as their prime reasons for moving. The city still has those problems, but Cindy Ariosa, president of the Greater Baltimore Board of Realtors, said people see reasons to believe the situation is improving. Moreover, suburban sticker shock is convincing them to take another look, some real estate executives said.

The average home sold in Baltimore's suburbs last month cost about $301,300. The average price tag in the city was $155,600. Live Baltimore is also marketing to residents in Washington, which posted an average home price of more than $440,000 last month.

As cheap as Baltimore is compared with its suburbs, the city's price is practically double its own average in 2001.

The city also posted the region's biggest increase in activity last month, showing sales up 35 percent from the same time last year. Nearly 1,100 homes were sold in Baltimore.

That was one-quarter of all the homes sold across the metro area last month, about 4,500 - a 14 percent increase.

Homes are selling quicker in the city than they used to - an average of 62 days reported last month compared with 73 the same time last year. But there the suburbs have the city beat. Average time on the market ranged from 35 days in Carroll to 28 in Howard.

S. Lawrence Yun, senior economist for the National Association of Realtors, said the rise in prices throughout the region is "still very, very healthy," but he's not surprised to see a dip. He expects a continued deceleration in the Baltimore area.

"The pace of home price increase was certainly not sustainable," he said. "By say the early part of next year, we should see more of a single-digit appreciation."

Nationally, he expects, home prices will rise 7.5 percent this year and slow to 4.5 percent next year.

The Baltimore region's average yearly price increase during the 1990s was 3.7 percent, according to National Association of Realtors data.

The jump this decade has meant major changes for sellers and buyers both. Historically low interest rates helped fuel a surge across the country in the past few years. The residential real estate market was credited with a sizable role in the nation's economic recovery after the 2001 recession.

But interest rates are inching back up. The average this week was 5.83 percent for a 30-year mortgage. Yun said it will likely be half a percentage point higher by the beginning of next year.

Realtors say the recent mild pullback in price appreciation locally hasn't affected the part of the market that appeals to first-timers - homes under $300,000. Real estate in that range is still going quickly.

"It's just really tough," said Jean Andrews with Champion Realty Inc. in Severna Park, who has been in the business for 16 years. "I finally got a first-time buyer a condo. We compromised all her rights ... all the things you wouldn't dream of doing logically but had to do just to make it work."

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