Md. home sale prices fall

4.8% decline in quarter is 8th-highest rate in nation

May 23, 2008|By Jamie Smith Hopkins | Jamie Smith Hopkins,SUN REPORTER

Maryland home prices declined more in the first quarter than in all but seven other states, the federal government said yesterday.

Home sale prices in the state fell 4.8 percent in the first three months of the year from the corresponding period in 2007, according to the Office of Federal Housing Enterprise Oversight.

Twenty-six states and the District of Columbia reported dropping prices - the biggest in California, down 19 percent.

Nevada, Florida and Arizona, other states hard-hit by the housing slump and mortgage restrictions, posted price declines of more than 10 percent.

Those rapidly falling values helped push the overall national price down 3.1 percent, the sharpest drop since OFHEO began tracking the numbers 17 years ago. The index also fell 1.7 percent in January-March versus the previous three months, the largest quarterly price drop on record.

"The large overhang of real estate inventory awaiting sale continues to force price declines in many areas, but particularly in places that had seen very sharp appreciation," Patrick Lawler, the agency's chief economist, said in a statement.

Prices doubled in Maryland during the first half of the decade, and its 21 percent increase in 2005 was the fifth-largest in the nation. Only Arizona, Florida, Hawaii and D.C. outpaced it, OFHEO said.

A separate report by the National Association of Realtors last week showed that the number of Maryland home sales dropped nearly 39 percent in the first quarter from a year earlier, the steepest slide in the United States.

Maryland "had absolutely tremendous appreciation during the boom, and affordability constraints are very intense in this area," said Andrew Leventis, a senior economist at the agency. "And so like other places that saw a tremendous boom-period appreciation, Maryland and Virginia and D.C. are sort of paying the price."

Another widely followed reading, the Standard & Poor's/Case-Shiller index, has shown larger declines for major U.S. metropolitan areas than OFHEO has.

Wall Street analysts have tended to focus on the S&P index, an update of which is due Tuesday, as a way to measure the value of securities backed by subprime mortgages and loans to borrowers in big metropolitan areas.

But economists say the government index provides a more comprehensive reading of the nationwide housing market. That's particularly true for Midwestern states, where prices never skyrocketed and have been less affected by the real estate downturn.

"Most people don't live in a Miami condo," said Michael Englund, chief economist with Action Economics in Boulder, Colo.

Still, declines in the government index, which focuses on less-expensive properties and includes fewer houses bought with risky home loans that have gone sour over the past year, show the depth of the housing market's troubles. The government index is calculated by tracking mortgage loans of $417,000 or less that are bought or backed by the government-sponsored mortgage-finance companies Fannie Mae and Freddie Mac.

Earlier this month, economic forecasters surveyed by the Federal Reserve Bank of Philadelphia projected the government index would show a 5.4 percent annual decline in the fourth quarter of 2008.

The survey projected the reading would not recover until early 2009.

Adam York, an economic analyst with Wachovia Corp., said yesterday's data was unsurprising. "It was pretty widely expected that we would see declines this quarter and for some time to come," he said.

The housing market is facing numerous troubles as buyers stay on the fence and rising mortgage defaults dump more homes on a glutted market. In addition, many banks have raised their lending standards in response to the surge in foreclosures.

jamie.smith.hopkins@baltsun.com

The Associated Press contributed to this article.

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