Region's realty market cooling

Home sales decline, price growth slows in key April period

May 11, 2006|By LORRAINE MIRABELLA | LORRAINE MIRABELLA,SUN REPORTER

The housing market in the Baltimore area showed broad signs of cooling in April, the first month of the crucial spring selling season, according to sales data released yesterday.

Year-over-year price appreciation dipped to its lowest rate in more than two years -- and the average price actually fell in one county. Sales volume sagged more than 13 percent, reflecting the toll of rising mortgage rates and decreasing housing affordability.

Homes took longer to sell everywhere but in the city, and the number of homes on the market more than doubled compared with April 2005, the statistics showed.

In Carroll, the average sales price dipped 2.76 percent -- the first decline in any jurisdiction since 2002. In Howard County, houses sat on the market more than twice as long and the number of homes listed for sale jumped to 1,381, from 562 in April a year earlier, according to Metropolitan Regional Information Systems Inc., a Rockville company that tracks houses sold through the multiple listing service.

Real estate agents blamed sellers who want last year's prices in this year's market.

"Unlike last year, where it was truly a seller's market, it's not as much a seller's market, and buyers are beginning to negotiate prices," said Melvina Brown, an agent with Re/Max 100 in Ellicott City, Howard County. "Buyers are not coming in over the asking price; they're coming in either at the asking price or negotiating on the price. Sellers got spoiled last year, with inflated prices and multiple offers."

The number of homes sold in the city and five surrounding counties fell 13.86 percent, to 3,189 from 3,702, marking the seventh straight month of decline from the previous year, the MRIS reported. Listings more than doubled, to 13,206.

Home prices in the region appreciated 10.52 percent to $304,589 over last April -- the slowest pace of price growth since February 2004.

Pricing remained strongest in Baltimore, where the average sale price soared 25.45 percent to $179,646. Aside from Harford County, where the average home sale price increased more than 13 percent, and Carroll, which registered a decline, gains in the counties were in the single digits.

A cooling of what had been an overheated market with unprecedented price appreciation for several years means the beginning of a return to a more normal tempo, many in the industry said yesterday.

"We've had such an incredible five years that it really could not be sustained, so it had to level off some," said Karol Hess, of Re/Max Advantage Realty in Columbia. "I'm seeing more listings this quarter, since January, than we've had in a few years. We have more of an active inventory than we've seen in quite a while, and we have fewer buyers, obviously, and part of that would be because interest rates are going up. And some people are frightened by the fuel costs and the expectation of where that's going to be."

The area's numbers mirror the national slowdown in both sales and price growth that is occurring as homes have become less affordable, economists said.

Rising interest rates and rapidly increasing prices have contributed to decreased affordability, edging more and more people out of the market, said Celia Chen, director of housing economics for Moody's Economy.com. Home sales have declined nationally for the past three consecutive quarters.

"The housing boom is over," Chen said. "We're seeing the down side of the housing cycle. The housing market has been overheated, and price appreciation has been very, very strong -- stronger than can be supported by economic growth. Affordability is eroding really quickly, and exacerbating that is the fact that mortgage rates are rising. These forces are making it more difficult for households to get into a mortgage."

The rate for a 30-year fixed-rate loan averaged 6.59 percent last week, the highest in nearly four years.

Sellers are having a tough time adjusting to the new reality of the market, some real estate agents said.

Brown, the Ellicott City Re/Max agent, said one of her sellers got an offer on a Columbia townhouse just four days after it was listed but turned down the contract because it offered less than full price. Two more contracts have come in since that were not as good, she said.

"We're waiting now, and the seller is willing to make concessions," she said. "We've offered some money toward the closing costs but left the price the same, but we may have to look at reducing the price."

Lisa Edleman, an agent who works in Howard, Carroll and Baltimore counties for Zip Realty Inc., a real estate brokerage that relies on the Internet to link buyers and sellers, said the days of steadily advancing prices could be over.

"You can't go back a year and say, `This sold for $290,000, let's price ours at $300,000,'" Edelman said. "If it sold for $290,000 a month ago, then you need to list it in that range."

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