Oct. sales of homes lowest in 6 years

Area's average price crept up 3.15 percent

November 11, 2006|By Lorraine Mirabella | Lorraine Mirabella,Sun reporter

In a climate of nervous buyers and frustrated sellers, the average Baltimore-area home price posted the fifth consecutive month of single-digit increases in home values as the number of houses sold fell by more than 22 percent. It was the weakest October since 2000.

The average sales price in Baltimore and the five surrounding counties crept up 3.15 percent from October 2005 to $307,190, Rockville-based Metropolitan Regional Information Systems Inc. reported yesterday.

Prices were essentially flat in Harford and fell in Carroll and Howard counties.

Regionwide, 2,810 homes were sold last month, about 800 less than a year earlier, with all jurisdictions posting double-digit declines. The figure was the lowest October number since 2,708 homes were sold in October 2000, when the average price fell.

October's performance - part of a nationwide slowdown - contrasts sharply with the peak of the housing boom, when values routinely rocketed 20 percent or more over a year earlier and sales reached record numbers.

The seller's market of the past few years has been shifting to favor buyers after several years of rapid appreciation driven by historically low interest rates and speculative buying, real estate experts say.

Even though mortgage rates have remained low, buyers have held back, worrying that prices will fall, experts said.

"This has everything to do with buyer psychology," said Anirban Basu, an economist who is chairman and chief executive of Sage Policy Group Inc. in Baltimore. "They're nervous about buying at the peak of the market. The buyer believes mortgage rates are even higher than they are."

That conflicts with the realities of today's market, because rates will likely not drop more, he said.

Rates for 30-year, fixed-rate mortgage loans averaged 6.33 percent for the week that ended Nov. 9, slightly lower than mid-November last year, when the 30-year loan averaged 6.36 percent, according to Freddie Mac, a stockholder-owned company that purchases residential mortgages.

As sales have stalled, the number of homes on the market has grown, to 17,353 last month from 10,585 a year earlier, MRIS statistics show. With an increased number of homes available, it's taking longer to sell. Homes that sold last month had been on the market an average of 70 days, almost double the average 39 days in October 2005.

"What we are seeing is inventory is definitely high," said Gayle Hagan, a real estate agent with The Hagan Group of Coldwell Banker Residential Brokerage.

The uncertain market calls for some new tactics, Hagan said. She is encouraging her buyers to sell their homes first, contingent upon buying another home.

"Sellers are saying, `I have to sell my home for this price, because I want to buy this house, and it costs more,'" she said. "We're saying, find out the true market value, then use those funds to go out and buy another house. They're still going to win."

Average home prices had posted their weakest performance, on a year-over-year basis, in more than five years in September, when the average price rose just 1.69 percent.

Basu said he expects that each of the jurisdictions in the Baltimore area will eventually experience a decrease before the market bottoms out.

"The transition from a seller's to a buyer's market has occurred, and it is likely that the market will become even more favorably tilted toward buyers in the months ahead," Basu said.

"And this is because for many buyers, the optimal strategy is now to wait and do nothing. Sales volume will continue to slump, and the result will be motivated sellers will be required to further reduce prices in order to generate a sale."

Prices could start to firm up, at the earliest, he said, by the middle of next year, but that's dependent upon the national economy picking up and mortgage rates remaining relatively low.

Some in the industry took heart from the fact that October showed improvement over September. William L. Yerman, president of the Greater Baltimore Board of Realtors, said agents are reporting once again getting multiple contracts on homes that are well-priced.

"I feel very encouraged by it," Yerman said yesterday. "There's been activity over the last 30 days. It's very palpable and people are upbeat."

lorraine.mirabella@baltsun.com

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