Housing price slump spreads

Decline accelerates in suburbs, begins to show up in the city

August 26, 2007|By Jamie Smith Hopkins | Jamie Smith Hopkins,Sun reporter

An increasing swath of the Baltimore region is caught up in a housing slump that is getting worse and appears to have further to fall.

Average home-sale prices in the first six months of the year fell in a little more than half of Baltimore's suburban communities and a third of city neighborhoods, while sales volume in the region was the lowest for the first half of a year since 2000, a Sun analysis found.

The number of areas with declining prices has swelled since 2006, the first full year of the housing market downturn. Many of the losses were fairly modest, but some areas were significantly affected.

In the well-to-do Anne Arundel community of Severna Park, for instance, average prices fell more than 10 percent compared with the first half of last year, to about $550,000. That is a $70,000 drop in a year.

Economists have said for months that prices cannot keep rising amid plunging sales, and now that basic lesson of supply and demand is being demonstrated. Not only did prices fall in more places than in previous periods, but areas with declining prices saw less severe drops in sales on average. A sizable chunk had sales gains.

Marc Witman, a partner with Yerman Witman Gaines & Garceau Realty, sees that as evidence that average prices in the region will have to fall further before sales pick up again. Prices would already be lower if sellers were adjusting fully to the new market conditions, he said. Prospective buyers are looking for bargains, and many are willing to wait.

They have plenty of possibilities to consider, as the number of homes for sale continues to rise.

"I call it Economics 101," said Witman, who is based in Baltimore County and has been a Realtor since 1989. "The buyers that are out there are sitting on the sidelines, saying, `I don't see the value out there; I'm not buying.' ... If your house has been around for quite a while and it's not selling, it's the price."

Sales fell 10 percent in the Baltimore region in the first half of this year, with about 16,600 homes changing hands, according to Rockville-based Metropolitan Regional Information Systems Inc.

Saturated market

Worse for sellers, there were six homes on the market for every one that sold in the average month during the first half of the year. At the peak of the housing boom, the first half of 2005, there were about 1.5 homes listed for every sale.

"The market is saturated," said Dahlia Kaminsky, a Realtor with City Life Realty who does most of her business in neighborhoods near Baltimore's Patterson Park. (In the neighborhood north of the park, prices rose modestly, but sales fell more than 20 percent.) "It's a great time to be a buyer, let's put it that way."

The Sun analysis used sales data from MRIS, which tracks homes sold through the multiple-listing service - usually previously owned homes, though some are new. The analysis looked at suburban sales by ZIP code - a stand-in for communities - and city sales by neighborhood, comparing January through June of this year with the corresponding months last year.

Price comparisons aren't a perfect measure because people can sell markedly different homes in a neighborhood from one year to the next. To cut down on such skewing, areas with few sales were not included in the analysis. Suburban ZIP codes had to have at least 10 sales in each half-year period, and city neighborhoods at least five sales. But the percentage of areas where prices fell was consistent whether places were excluded or not.

Some regions are feeling the slump much more keenly than Baltimore and its suburbs, where prices rose slightly overall. A third of the 149 metropolitan areas that the National Association of Realtors tracked from April to June lost ground. But the Sun analysis shows that some Baltimore communities are doing much worse - and some much better - than the average.

"As the old adage goes, real estate is all local," said Celia Chen, director of housing economics at Moody's Economy.com, who thinks the Baltimore market as a whole won't pick up before the middle of next year.

Neighborhoods where prices increased were less expensive on the whole than neighborhoods where prices didn't. Baltimore City and Harford County, the least expensive jurisdictions in the area, had the most gainers, including some where prices were up more than 10 percent. Meanwhile, prices declined in a wide swath of expensive Howard County. And in nine out of the region's 10 most expensive suburban communities, average prices have dropped this year.

Most of those 10 communities posted higher sales, however, and some of the Realtors who sell very expensive properties say such homes are moving even better than usual.

"We're working with people in the $8 [million to] $9 million range, and they're primarily cash buyers," said Michael Hamby, an agent with Champion Realty in Annapolis.

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