Low mortgage rates and growing demand for housing caused Maryland home prices to rise nearly 23 percent in the year that ended in June, the largest yearly increase in three decades.
The state's one-year increase ranked seventh in the nation, the Office of Federal Housing Enterprise Oversight said yesterday. It compared with a national average gain of 13.43 percent for the one-year period - the largest increase since the 12 months that ended in June 1979.
Maryland joined three other states in reaching the highest level of price appreciation in the 30-year history of the agency's housing index.
The Office of Federal Housing Enterprise Oversight's index tracks average price changes reflected in mortgages or refinancings up to $359,650 in each quarter.
The index showed that one-year appreciation increases in Virginia, Arizona and Florida also rose to record levels. Maryland's 22.98 percent increase in home prices was the highest since the one-year period that ended September 2004 at 22.73 percent.
The housing market in Maryland, as in much of the nation, has remained strong as interest rates have stayed near historic lows, allowing buyers to afford pricier homes.
But escalating prices have raised concerns among many economists, including Federal Reserve Chief Alan Greenspan, who fear the market could suffer if mortgage interest rates rise.
Even so, experts pointed to the report as proof the market remains sound.
"There is no evidence here of prices topping out," said Patrick Lawler, chief economist at the Office of Federal Housing Enterprise Oversight, which oversees Freddie Mac and Fannie Mae.
Mortgage giant Freddie Mac said yesterday that benchmark 30-year interest rates across the nation fell for the third straight week to 5.71 percent from 5.77 percent.
Some economists said investors are worried that rising energy prices in the aftermath of Hurricane Katrina will hurt the economy. That could prompt investors to look for safer investments, such as bonds, which may help drive interest rates lower, said Anirban Basu, head of Sage Policy Group, a Baltimore economic consulting firm.
"It is likely that we will be in a historically low interest rate environment for potentially several more months," he said. "People do not care about the price they're paying for a home. They want to know a monthly mortgage payment.
"Even if home prices are rising, mortgage payments are not rising as dramatically as home price, and this is fueling the marketplace."
