Taking a fall

As the housing market rights itself, average prices don't tell the whole story

October 19, 2008|By Nancy Jones-Bonbrest | Nancy Jones-Bonbrest,Special to The Baltimore Sun

With the real estate market slowdown, what once made sense when it came to pricing a house no longer holds true.

Across the Baltimore region, as in the rest of the country, the average sales price of houses continues to drop.

In September, the average sales price in the Baltimore metropolitan area dipped more than $21,000 from the prior month to about $296,000, according to Metropolitan Regional Information Systems. Compared to a year ago, home prices were down almost 6 percent overall - retreating to figures not seen since 2005. That price drop was the largest since the housing slump began.

But it's all relative, say some real estate professionals who contend that the market is just correcting itself after years of a wildly overpriced housing boom. Others say that moderately priced housing in good condition is selling better and accounting for a lower average sales price, as buyers are more cautious in lean times than they were just one year ago. Also, distressed sales - homes being sold quickly at often-reduced prices - are greatly affecting the bottom line.

So how does the average sales price fit into today's market?

It depends on whom you ask.

Walter Molony, a spokesman for the National Association of Realtors, says that using the average sales price as a measurement of a housing market can be tricky, because the figure is not always a realistic look at what you can get for your money.

An average sales price can include trailers, condominiums, town houses, single-family houses, estate houses and farms. Just a handful of $1 million homes in a market can skew the average high, or a handful of low-priced houses can skew it the other way. Averages can sometimes leave such a misconstrued number that the National Association of Realtors uses a median sales price instead.

"Median prices are more typical of the market," said Molony.

Today, there's a greater percentage of distressed sales on the market than only a few months before, so it's not always an apples-to-apples comparison.

NAR's median price for the Baltimore region came in at $280,500 for the second quarter of 2008. This compares to a median price of $293,700 in the same quarter one year before, down only about 4.5 percent.

Nationally, the median price for existing homes was $203,100 in September, down 9.5 percent from $224,400 only one month before.

"It all gets down to location. In areas with high subprime exposure, you can have prices going down and in areas not far away, but with little subprime exposure, you can see prices rise," said Molony. "It's very neighborhood specific."

Lynne Bare, a real estate agent with the Hampstead office of Coldwell Banker Residential Brokerage, would agree. Bare said it's difficult coming up with an average sales price in northeastern Carroll County.

"I don't think it's as accurate in Carroll County," said Bare. "It's such a rural area and we also have neighborhoods. So you're looking at everything from a $200,000 house on Main Street to a horse farm that sells for $650,000 to $800,000."

Like most real estate agents, Bare said the buyer's budget is most pertinent - not what the average sales price is - when it comes to starting the house hunt. Once the budget is determined, Bare then determines what type of house the buyer wants and pulls up comparable listings. The search goes from there, with the average sales price seldom entering the conversation.

"People are saying the housing market is down and you should wait to sell," said Bare. "The other side of the coin is if the market is righting itself and prices are where they should be, you might not want to wait. Pricing is more reasonable now. It was out of control before."

As home prices fall, the market becomes more attractive to buyers. In September, the decline in home sales slowed markedly. Sales were off about 2 percent from a year earlier, compared with months of year-over-year declines around 30 percent.

Buyers are pursuing houses with lower prices and sometimes fewer amenities. Even sellers seem to be coming down to earth.

Last week, real estate brokerage Coldwell Banker launched a national 10-day "sales event" during which participating home sellers agreed to lower their asking prices by as much as 10 percent. More than 300 sellers signed on in the city and its suburbs, according to the real estate company.

"The fact [is,] the economy is tight, buyers are looking for more affordable housing. That's not necessarily a bad thing," said Melvin Knight, a real estate agent with the Roland Park office of Coldwell Banker Residential Brokerage. "Maybe that's why the city is doing so well. The buyer trend right now is less-expensive houses that are in decent shape."

Two years ago, Knight said, buyers went up to, and in some cases, beyond their budget. Now they're more prudent, often looking for houses below what their banks have told them they qualify for.

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