House prices in area show a record rise

November average is up nearly 25% from 2003

Price spiral expected to slow

Regional market is hot, mortgage rates steady

December 11, 2004|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Baltimore-area housing prices posted their largest year-over-year percentage increase on record in November, amid a buying binge that continues to outpace much of the nation.

Low interest rates, confidence in job security and continued interest in housing as an investment pushed more buyers into the market, experts said.

But economists caution that the area's strong price appreciation will likely slow from double digits next year, when mortgage interest rates are expected to rise.

Some agents said that while sales remain healthy, they have slipped from the frenzy of this past summer, when sellers often entertained multiple offers.

The average sales price in the Baltimore area was $258,283 last month - up almost 25 percent compared with November 2003, according to Metropolitan Regional Information Systems Inc., the Rockville-based listing service used by agents and brokers.

The price growth outpaced last month's record, when average prices rose 23.42 percent compared with a year earlier.

Sales rose 25 percent to 3,716 homes sold. It was the biggest increase since September 2003, when home sales jumped 27 percent. The average home sold in 44 days last month - nine days faster than in November of last year.

"There's a comfort level that rates are as historically as low as they have been and people are out taking advantage of it," said Cindy Ariosa, a regional vice president for the Baltimore region of Long & Foster Real Estate Inc. and a former president of the Greater Baltimore Board of Realtors.

Low mortgage rates

Mortgage interest rates have remained below 6 percent for much of the year, pushing home sales and prices to what is expected to be the third straight year of record spending.

Through November, sales of existing homes in the Baltimore area are almost 12 percent higher than in the first 11 months of 2003.

Baltimore-area prices have continued to appreciate faster than in many parts of the country. Prices in the region were up an average of 15.9 percent for the first nine months of the year, said Lawrence Yun, senior economist with the National Association of Realtors. Nationally, the appreciation rate stood at 8.8 percent through October.

"While the rest of the country is in a sense struggling to create jobs, the Baltimore/D.C. region has been benefiting more from the government spending on homeland security and other spending related to government," Yun said.

Future of bubble

Some industry experts have been warning that the housing bubble will ultimately burst since prices have continued to post records. But few economists expect prices to fall, saying sales and price growth will revert to more normal levels during the coming months.

In the Baltimore region, sales and prices rose in every jurisdiction last month compared with November 2003. Howard County posted the area's largest gains: Sales rose 32.27 percent to 414 homes sold compared with 12 months ago; prices climbed 28.71 percent to $386,806.

Pending sales for the region, which offer a snapshot of future transactions, were up 17 percent to 3,498 last month compared with November 2003.

Area real estate agents said business has remained brisk in the under-$300,000 market since the low interest rates continue to nudge first-time buyers to shop.

"If you're looking in that range, you're one among many who's waiting for something to pop," said Pat Hiban, an associate broker with ReMax Advantage Realty in Columbia.

Hoping to capitalize on the current market, Judy Reese, a Howard County government employee, and her husband, a Howard County firefighter, have decided to sell their four-bedroom Colonial on 2 acres outside Granite in Baltimore County.

Money for retirement

They are shopping for a less expensive home in the city so they can invest the proceeds into property for their retirement.

The couple figures they can sell their current home for about $400,000 and buy a home to renovate in the Garwyn Oaks neighborhood.

"It's a good time ... and interest rates are low," Reese said. "As a seller, when we decide to put our house on the market, it shouldn't stay on the market long."

The Realtors' group predicts that housing sales will remain strong during the coming months despite the expectation that mortgage rates will rise. Yun expects 30-year rates to average 6.5 percent by the middle of next year.

"That will certainly pull back some of the enthusiasm to buy homes, bringing the market more in balance," Yun said.

Home prices are expected to rise about 5 percent nationally next year, but prices likely will remain stronger in the Baltimore market with gains in the 7 percent to 8 percent range, Yun said.

"Everyone continues to be amazed at the appreciation," said Henry Strohminger III, president of the Greater Baltimore Board of Realtors and a sales associate at Long & Foster in Timonium.

Patty Smallwood, past president of the Howard County Association of Realtors, said houses with reasonable asking prices aren't getting snapped up in a weekend as they were over the summer, and there are fewer multiple offers.

Buyers "don't have that anxiousness about them" anymore, she said.

"There doesn't seem to be any urgency," said Smallwood, a Realtor with Century 21 H.T. Brown Real Estate in Scaggsville. "The frenzy has cooled down. ... Now we're accepting contingent contracts - contingent upon the sale of their house. In August, [sellers] wouldn't have accepted."

Sun staff writer Jamie Smith Hopkins contributed to this article.

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