Industry Notes

INDUSTRY NOTES

July 17, 2005

Realtors group expects 9.4% rise in price of houses

Existing-home prices will rise 9.4 percent in 2005, the fastest pace in 25 years, spurred by low mortgage rates and a declining supply of houses for sale, according to a forecast by the National Association of Realtors.

The median price for an existing home will increase to $202,600 from $185,200 in 2004, the Washington trade group said today. That would be the fastest pace since 1980, when prices rose 12 percent. The median is the price at which half the homes sell for more and half sell for less.

A shortage of homes on the market and mortgage rates near record lows are fueling price increases, David Lereah, the group's chief economist, said in the report. Borrowers can qualify for higher loans when financing costs are cheaper, meaning they can bid more for a property.

"Mortgage interest rates have remained lower than expected, and job gains are providing additional stimulus," Lereah said in the report. "The most notable problem in the housing market is the shortage of homes available for sale."

The supply of existing homes for sale in May was 4.3 months, meaning it would take that long to sell all properties currently on the market, the Realtors group said in a June 23 report. A balanced market, with supply meeting demand, would be 6 months, Lereah said. From 1999 to 2004, supply averaged 4.6 percent.

`Green community' under way near Salisbury

Two men are developing a 150-acre riverfront farm near Salisbury as a "green community" of 46 homes. Thirteen will be waterfront properties.

Stephen Pusey and Walter Maizel said the rest of the homes on Riverside Drive west of Shad Point will have open-water views.

The project, called the Village Down River, will feature more than two miles of trails for hikers and bikes and a 50-slip marina.

The developers said the development will use an on-site plant for its sanitation with a drip irrigation system.

Public pension funds going into real estate

There's a new source of wind puffing up the real estate bubble, says Forbes (July 25) - public pension funds, which "are rushing into real estate the way they rushed into technology in the late 1990s." The top 50 public pension funds want to raise their real estate holdings by $34 billion, or 37 percent, from current levels, which would put real estate at 7.2 percent of their assets.

An Ernst & Young analyst said the real estate market is "drowning" in money.

"Banks are lending aggressively, and every flavor of institution thinks real estate is the best alternative out there."

The best-performing stock funds in the second quarter focused on real estate or Latin America, Barron's (July 11) says in its quarterly mutual fund survey. The financial weekly says investors can look forward to "more ho-hum and choppy activity, for both bonds and stocks, in the second half of the year."

Winchester Homes open model in Odenton

Winchester Homes has opened a new model home in Chapel Grove in Odenton in Anne Arundel County

The Garrett is one of seven different single-family homes the homebuilder is offering at Chapel Grove, a high-end development of single-family homes and townhomes.

In addition to a solarium and finished lower level that includes a game room, a computer room and bath, the Garrett model also has a two-story family room, first-floor study, a rear staircase, formal living and dining rooms and a gourmet eat-in kitchen with walk-in pantry.

Prices for single-family homes at Chapel Grove start in the mid- to upper $600,000s.

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