Home prices in region rise 20.5%

Sales of existing houses are flat in September

`Feeding frenzy' slows

Number of properties for sale increases slightly

October 12, 2004|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Existing-home sales in the Baltimore area slowed from their torrid pace last month compared with a year earlier but values kept climbing, with average prices increasing 20.5 percent.

September's average sale price was $253,371 in Baltimore and its five surrounding counties, according statistics released yesterday by Metropolitan Regional Information Systems Inc., the Rockville listing company used by agents and brokers. Buyers bought 3,663 homes last month in the region - 16 fewer than in September 2003.

Local real estate experts said the less-than-a-percentage-point drop in sales did not signal a decline in the area's three-year housing boom. Even though sales were flat, the average home took 41 days to sell last month - six days fewer compared with September 2003. And prices have posted double-digit increases for much of the year.

Agents said mortgage rates below 6 percent keep pushing first-time buyers into the market for homes priced below $200,000. While more expensive housing remains on the market longer, agents expect sales to stay healthy during the coming year. Housing sales and price appreciation posted records during the past three years helping to fuel an otherwise slumping economy.

"There's still not a lot of homes available [for less than $200,000], so when a new home comes on the market, buyers are aware they have to react relatively quickly," said Joanne Poole, president of the Maryland Association of Realtors. "If they like the home, there are probably two or three others who like it also, so they get into a bidding war and the prices escalate."

Home prices rose by double digits in every jurisdiction - from 17.8 percent in Anne Arundel County to as much as 22.5 percent in the city, which is in the midst of a real estate rebound. Agents said homes in the city continue to attract first-time buyers because they are the most affordable. The average price was $125,850 last month.

A limited number of homes for sale in the past few years boosted prices as demand outstripped supply. But there is evidence that those numbers are shifting. There were 7,564 homes for sale last month in the region - 120 more compared with September 2003.

"The market has changed considerably since this summer when a terrible feeding frenzy was going on," said Gil Boudreau, an agent with Long & Foster Real Estate Inc. in Towson. "There are houses ... that are sitting on the market much longer," than a couple of months ago.

Some real estate agents also reported a slowdown in the highest price ranges - properties selling for $1.5 million and up.

"It's like a pyramid, the higher the price the home, the fewer buyers you'd have," Boudreau said.

Nationally, "the pace [in the sales] of existing homes has been slowing," said Celia Chen, director of housing economics for Economy.com in West Chester, Pa. "It peaked in June, and it's been slowing since then."

While some market experts predict a slightly slower pace of sales in coming months, they're not anticipating a reversal in the red-hot market, partly because interest rates have remained low. Rates on 30-year fixed mortgages averaged 5.76 nationally in September, according to Freddie Mac.

"I would hesitate to call this the end of the housing boom, given that mortgage rates are still below 6 percent," Chen said. "We believe sales will remain strong and activity will still be pretty strong. And probably, not until early next year, that we see the slowing of the housing market."

But price gains likely will slow from the 20 percent range in the coming months, especially with more homes on the market.

"Price appreciation has been way too strong, and areas can't sustain that kind of price appreciation," Chen said. "I expect price growth will slow down significantly by the end of the year."

When that happens, "The buyers will be in more of a position to negotiate prices they feel they want to pay," Poole said.

But so far, it remains a seller's market in many areas around Baltimore, many buyers said.

Nidal Sousou, a Towson resident who is helping his business partner shop for a handicapped-accessible house for his mother, has been looking in Towson in the $300,000 price range. They have been in the market for six months.

Besides the challenge of finding a house suitable for an elderly, disabled person, Sousou said he believed some homes were overpriced, such as one off Providence Road that was asking $400,000. On another, the partners offered $15,000 above list price on a house, only to be outbid.

Betty Page, a single mother who was renting an apartment in Highlandtown, qualified for a loan of up to $100,000 but spent months looking for her first home as she tried to take advantage of low interest rates.

"There were quite a few homes on the market, but not a lot in that price range," said Page, who is the mother of a 6-year-old daughter. She saw some homes where "the prices weren't worth the home I was looking at. It was frustrating."

She stayed with it and closed last week on a Dundalk townhouse for $80,000.

"I figured I better try to go on and be a homeowner rather than paying rent," Page said. "I thought interest rates were going to start going up."

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