Shift to buyer's market stymies house sellers

Homes sitting on market longer as sales in Baltimore region fall more than 25% in August while prices rise less than 5%

September 09, 2006|By Lorraine Mirabella | Lorraine Mirabella,Sun reporter

The number of houses sold in the Baltimore area fell more than 25 percent in August compared with August 2005, and prices went up less than 5 percent, leaving frustrated sellers with houses sitting on the market longer than expected.

Sales in the city and five surrounding counties totaled 3,460 homes in August, down from 4,639 a year earlier, Rockville-based Metropolitan Regional Information Systems Inc. said yesterday.

The area has not seen such a sharp decline in sales in any month since the MRIS began tracking data in the region in March 1999. The number of sales slipped at least 19 percent in all jurisdictions, with the biggest declines -- just over 30 percent -- in Baltimore City and Carroll and Howard counties.

Prices rose, on average, 4.54 percent in the region -- from less than 2 percent in Howard and Carroll Counties to an area high of 6.86 percent in Baltimore City.

In a marked difference from the heated market of a year ago, August represented the third consecutive month of single-digit price appreciation on a year-over-year basis, far below the nearly 16 percent annual gain reported in August 2005.

"The market is returning to normal, before it became a crazy market," said Lisa Edleman, a real estate agent with Zip Realty in the Baltimore area. "Everything can't continue to go up by 25 percent a year. I'm not sure anybody could afford it."

Real estate experts suggested that sellers are resisting offers that fall short of the gains seen in the past few years. That, in turn, leads to a buildup of inventory as homes stay on the market an average of nearly two months -- nearly twice as long as the average selling time in August 2005.

In August, 17,161 homes were for sale -- more than double the 8,413 homes on the market a year earlier, the MRIS said.

That high level of housing inventory could lead to price declines of 5 percent to 10 percent in the region, said Anirban Basu, an economist who is chairman and chief executive of Sage Policy Group Inc. in Baltimore.

Basu and some real estate agents said sellers are still expecting increases and refusing to negotiate, even after the market turned in buyers' favor.

"The housing bubble was not necessarily forming during the time of rapid appreciation in recent years," he said. "The housing bubble formed because sellers have been so slow to respond to the reality of an emerging buyer's market. And because they have been so slow to respond, the active inventory has continued to climb and climb and climb."

Stephanie Bamberger, a real estate agent with Zip Realty who works a territory from Harford to Prince George's counties, said, "Sellers are not wanting to budge, and buyers are becoming very adamant about wanting sellers to budge."

She said she recently represented a couple that decided to hunt for a house over the summer when prices started coming down.

"They wanted closing costs, they wanted a reduced price," she said.

The couple made offers on two houses in Harford County that had been on the market at least a month, and both sellers rejected the offers.

The couple ended up buying a new house from a builder offering buyer incentives.

The increase in incentives on new homes has made selling an existing home even tougher, some sellers said. And the incentives that sellers of existing homes are expected to make -- from helping with closing costs to buying warranties -- can cut into price appreciation more than the statistics show.

Home sellers Eric and Chrys Boone aren't taking any chances at not getting their Canton rowhouse sold before they plan to move into a new house in Arnold in March. The couple is putting their three-bedroom Canton house with a rooftop deck on the market four months earlier than planned.

"We are concerned about it taking awhile to sell," Chrys Boone said. But she said they will list their house at $564,900 and plan to stick to that. "Our price really hasn't changed from what we would have done six months ago," she said. But, she added, "We're willing to make more concessions with closing costs."

Darlene and Robert Johnson put their two-year-old, four-bedroom house in Nottingham on the market in April for $550,000, and have reduced the price to $469,900. Despite cutting the asking price, the couple hasn't had a single offer on their home, which features Corian counters, hardwood floors, a fireplace and a finished basement.

"It's very frustrating," Darlene Johnson said, adding that she sold her previous home, a townhouse in Abingdon, in a day two years ago. "The market is not anything like it was two years ago. This is definitely a buyer's market, and they have quite a few to pick and choose from. I expected a couple of months, but I didn't really expect for it to go on this long."

Sun reporter Jamie Smith Hopkins contributed to this article.

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