Md. home sales fall furthest in nation

But drop in prices over same 3-month period not as steep

May 14, 2008|By Jamie Smith Hopkins | Jamie Smith Hopkins,SUN REPORTER

Home sales fell faster in Maryland than in any other state in the nation in the first three months of the year, dropping more than even in hard-hit spots of the country such as California, a Realtors group said yesterday.

Sales in January through March dropped nearly 39 percent in Maryland compared with the same months last year, the National Association of Realtors said. Close behind were Washington, D.C., where sales were down almost 35 percent; Utah, down almost 34 percent; and California, down about 33 percent.

But the decline in prices was not as precipitous. The Realtors, who track values by metro area rather than state, said the median price of single-family homes fell 3 percent in the Baltimore metro area in those months, which was middle of the pack in the country. In the Washington metro area, which includes parts of Maryland, the price fell 13 percent, still a far cry from the drops on the West Coast. Sales prices fell more than 25 percent in both Sacramento and Riverside, Calif.

Marc Witman, a partner with Yerman Witman Gaines & Conklin Realty in Baltimore, strongly suspects that Maryland home sales are falling so fast because prices aren't.

"There's a disconnect between what the buyers expect to see and what the sellers expect to receive," he said. "It's like the buyers are the only ones reading the newspapers. I think when you see the median price come down 10 or so percent, then you're going to see more buyers come off the sidelines."

Though some sellers are dropping their prices enough to interest buyers, many continue to resist, he said.

Amna Kirmani, a marketing professor at the University of Maryland who specializes in consumer behavior, calls it the "my house is different" phenomenon: "People are anchoring on their own love for their houses instead of anchoring on what the market is doing right now. We never think it applies to us."

Maryland's continued job creation and low unemployment rate - compared with layoffs nationally - are probably adding to sellers' perception that their asking prices are reasonable, she said.

"They may feel they're a little more insulated than other areas," Kirmani said.

Some sellers, particularly those who bought in the past few years, think they have no choice. If they lower their asking prices, they'll get less than they owe on their loans.

"It's a challenging time right now," said Keith T. Gumbinger, a vice president with financial publisher HSH Associates.

Other mortgage issues are driving down sales too. The pool of potential buyers has shrunk since last year - let alone since the easy-money days of the housing boom - because borrowers are facing stricter rules and higher down payment requirements from many lenders. The National Association of Realtors said high-cost areas in particular saw a drop in sales because so few "jumbo" mortgages were given out in January through March. Such larger loans are important in communities where even average homes sell for more than $500,000, such as Montgomery County.

Economists say loose lending standards and fast-rising prices during the housing boom earlier in the decade set in motion the current nationwide slump. Maryland rode the wave higher than most: Prices here rose 21 percent in 2005, according to the Office of Federal Housing Enterprise Oversight - a bigger increase than all but three states and the District of Columbia. California's increase was just slightly smaller.

"Our prices went up most precipitously, and the prices aren't coming down" to the extent that they are in California and the D.C. area, said Witman, the real estate broker. "`Witman's theory' is the prices ran up so quickly that we need to give something back."

Many parts of the country are doing just that. Median prices for single-family homes in the first three months of the year fell in two-thirds of the 149 metro areas the National Association of Realtors tracks. That includes Cumberland and Hagerstown in Western Maryland, down 5 percent and nearly 8 percent, respectively. It's a sharp reversal for Cumberland, which saw big gains last year.

At the other extreme, three metro areas - Binghamton, N.Y., Peoria, Ill., and Spartanburg, S.C. - reported price gains of at least 10 percent. In each of those communities, median prices are well below $150,000.

Sales dropped everywhere except Indiana, New Jersey and Alaska, said the trade group, which had data on all states except New Hampshire. Nearly half the states saw sales declines of at least 20 percent.

In an effort to inject life into stalled mortgage markets and restart sales, the federal government is temporarily allowing Fannie Mae and Freddie Mac to buy loans as large as $729,750 in some markets, up from the previous limit of $417,000. Such "expanded conforming" loans have been on the market for about six weeks, which means they didn't help buyers and sellers in the first three months of the year, Gumbinger said.

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