Decline in sales of homes slows

November drop in region lowest since Feb.

December 12, 2006|By Lorraine Mirabella | Lorraine Mirabella,Sun reporter

The number of homes sold last month in metropolitan Baltimore posted the smallest decline in 10 months as sellers became increasingly willing to forgo price gains - a trend that could signal that the sales slump here may be nearing bottom.

The average price of 2,733 homes sold in Baltimore and the five surrounding counties was $309,753 last month, a slight increase from the $309,291 average in November last year and the weakest performance in at least five years, according to the Metropolitan Regional Information Systems Inc.

And the 12.91 percent sales decline from a year earlier was the lowest since February and a sharp improvement over the past five months, when year-over-year sales declines ranged from 22 percent to 30 percent. November marked the 14th straight month of falling sales.

"Baltimore prices are still positive, and they haven't gotten into negative territory," as prices have done elsewhere in the nation, including Washington and Northern Virginia, said John McClain, a senior fellow at the Center for Regional Analysis at George Mason University.

"I think we're close to the bottom. I think Baltimore is going to have a softer landing than Washington or a lot of other places."

That's because the area still has pockets of affordable housing such as in Baltimore City, he said. The city's average sales price rose 1.95 percent to $178,556 in November, said Metropolitan Regional Information Systems, a real estate data service that covers Maryland, Northern Virginia, Washington and other areas.

The MRIS released its report as the National Association of Realtors forecast that sales of existing homes would rise gradually in 2007.

5 straight declines

After five consecutive quarterly declines in sales of existing homes, the association expects sales to grow at an annual rate of 6.29 million in the first quarter of 2007.

"In terms of sales activity, we are very near the bottom," predicted Lawrence Yun, a senior economist with the Realtors association. "Sales will begin to improve and turn positive in the spring, if not the summer, of 2007. With the increase in sales, home prices will begin to strengthen."

But the national association warned that while much of the nation will see a sluggish expansion in the coming year, the market could contract in areas that had seen drastic price increases, such as Florida, Arizona, Nevada and Washington, D.C.

Baltimore's market could still see some declines in average sales price in the coming months, McClain said. The city has seen double-digit price increases that at times topped 20 percent during the housing boom.

The November MRIS report showed price declines in Anne Arundel and Harford counties, with prices flat in Baltimore and Carroll counties. Prices rose modestly in the city and Howard County.

And with inventory still high, homes sat on the market last month nearly twice as long - an average of 75 days, compared with an average of 38 days in November 2005, the MRIS said.

The area has something of a cushion, however, with its strong job market, especially if interest rates continue to stay relatively affordable, Yun said.

"With mortgage rates having fallen over the past six months, and home prices turning negative in this area, that will be a strong inducement for the buyers to enter the market," he said.

Some real estate agents said they are beginning to see more interest in the market from buyers.

"I'm seeing little pockets of renewed interest," said Carl J. Galler, head of the Carl Galler Group of Coldwell Banker Residential Mortgage. "We've been sitting on some listings for a while, but now are getting more activity with regard to showings and we're getting some offers."

It has helped that sellers have begun to come to terms with the current pricing in the market and are realizing it is unrealistic to expect to get last year's prices for their home, he said.

"A large majority of the sellers have had to go through that denial period," Galler said. "The new sellers coming into the market are educated as to what's going on. Sellers are willing to give back money for closing, and going into the process knowing they'll give concessions and steeling themselves for that.

"There're also buyers, who are excited at the aspect of getting their next home for a decent price." Galler said.

David L. Jefferson, a real estate agent with Long & Foster in the city, said it is common now to see a seller shave as much as $20,000 to $40,000 from an asking price, especially in higher-priced areas such as Fells Point, Canton and the Inner Harbor, where listings remain high.

Forgoing profit

Many of those sellers are investors who bought houses or condos during the boom, and some are now dropping their prices to the amount they paid originally, he said.

But homes that start at or under $200,000 are selling quickly in the city, he said.

"We're seeing those homes moving off the market, Jefferson said. "You'll go look, then go back a few days later and it will be under contract."

"At this point, the market is in a transition; it's kind of bottoming out," he said. He expects that in the typically busier market of the spring, "It won't turn from a buyer's back to a seller's market, but you'll see more interest from buyers."

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