Home sales fall 19%

But prices in Baltimore area still climbed last year

January 11, 2007|By Jamie Smith Hopkins | Jamie Smith Hopkins,Sun reporter

The Baltimore region weathered the first full year of a nationwide housing slump in 2006, with sales falling sharply to pre-boom levels but average prices still showing a modest gain, data released yesterday showed.

Home sales dropped 19 percent across the metro area compared with 2005, according to preliminary numbers from Metropolitan Regional Information Systems Inc., the Rockville-based multiple-listing service. It was the first year of declines since MRIS began tracking the market in 1999.

Even so, the average home price in the Baltimore area managed to rise 6 percent from 2005 - still a far cry from the consistent double-digit increases since 2002. Many sellers had to settle for less than they thought they would get, sometimes to the tune of tens of thousands of dollars.

Economists are locked in debate about whether the worst is over or whether to expect price declines this year. The numbers for December provide fodder for both perspectives: The drop-off in sales wasn't as sharp as it was in the summer and fall, but half the region showed decreases in value - particularly Carroll County, where average prices fell about 9 percent.

The nationwide slowdown in housing sales is blamed in part on the unprecedented boom that preceded it, pushing prices to unaffordable heights. In the Baltimore area, the average home cost buyers just over $310,000 last year. That's about twice what buyers were paying at the start of the decade.

"Prices just got so high that they had to level off because they had gotten past the ability of people to buy them," said John McClain, a senior fellow at George Mason University's Center for Regional Analysis.

Last year's local housing market wasn't a disaster - the early 1980s and early 1990s were markedly worse, McClain said - but it was no seller's dream. Active listings nearly doubled, setting a record for the years MRIS tracked, even as the number of homes sold fell to 2001 levels.

In December, average days on the market rose to 83 from 43 last year - on par with 1999.

"If you look in terms of the sales volume, it was still strong in the longer context," said Celia Chen, director of housing economics at Moody's Economy.com. "But obviously the housing market was much weaker than it was in 2005 and 2004."

Baltimore City saw the biggest price increase last year - 11 percent. It remained the most affordable part of the region on average, averaging about $175,000.

Prices rose 7 percent in Baltimore County and 5 percent in Harford County, the cheapest of the suburbs with averages around $300,000.

The more expensive counties felt the market change most keenly. Anne Arundel and Howard, both with average prices that exceeded $400,000, rose 4 percent each. Carroll County, which averaged $360,000, inched up 1 percent.

The region saw similar trends in the number of sales, with bigger declines in the pricier places - except for Baltimore City, which topped the list with a 23 percent drop-off in units.

Investors, who flocked to the city in recent years to rehab and quickly resell properties, appeared to be largely behind the decrease. Though they still bought more than half of all homes for sale in Baltimore last year, according to the state Department of Assessments and Taxation, they made fewer purchases overall. Many can't get the same quick turnaround, high-profit result of a year or two ago.

Keith L. Cross, a Realtor with Century 21 Downtown who works with investors, said they've had to lower their expectations and increase their buyer come-ons. He's seen sellers offering bonuses to buyer's agents, flat-screen televisions with the house, even tickets for a cruise. In the once red-hot ZIP code of 21231 that includes Baltimore's Fells Point, where average prices top $350,000, sales plummeted nearly 50 percent in December.

"Once you get over the four-450 range, you really see a drop-off in activity," Cross said.

Chen expects price declines in the Baltimore region this year, with no real appreciation until late 2008. McClain is more optimistic, predicting flat prices for a month or two and then a return to normal with "a balance between supply and demand."

This sort of uncertainty about the near future is what helped drive off potential buyers last year, a time when they finally could win concessions from sellers.

"Buyers ... decided to sit back on their heels and wait to see if it was going to get worse," said John Menton, an associate broker with Coldwell Banker's Greenspring office who focuses on the northern part of the city.

But he said he's noticing a change. In the past three weeks, he's had more than 15 appointments to see a Guilford house priced just below $1 million - about as many as he had for it in the previous three months combined.

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