Baltimore-area home prices declined for the first time in at least a decade last year, preliminary figures released this weekend show, as the region's housing market feels the sting from the worsening recession.
Sales statistics released by the area's real estate listing service indicate the average home price dropped 3 percent last year to $306,500 in Baltimore and its five surrounding counties compared with 2007. The figure was less than the average in 2006 as well.
Sales on an annual basis slumped 28 percent, with 21,500 homes changing hands. That's the lowest number since Rockville-based Metropolitan Regional Information Systems began tracking local sales in 1998. Twice as many homes sold in 2005, the height of the national buying spree that many now blame for the nation's economic trouble.
The 2008 figures - calculated by The Baltimore Sun from MRIS numbers - are preliminary and could change. MRIS released December sales late Saturday but will not announce an official 2008 tally until next month.
Housing activity continued to slow last month with sales slumping nearly 17 percent and home values declining almost 6 percent compared with December 2007, MRIS reported.
While many real estate professionals hope that declining mortgage rates will help bolster sales and prices during the coming months, some economists predict the housing market still faces weaknesses as employers cut jobs and jittery homeowners pull back on spending.
"I don't think you will see any breaks from any of the negative trends that have been established in recent months," said Anirban Basu, chief executive officer of economic consultants Sage Policy Group in Baltimore. "There had been subtle signs of recovering for much of 2008, but that momentum was crushed by events of September last year and tightening of credit."
He said a recovery is not likely to occur until home prices begin to stabilize. In November, house prices had fallen to the lowest level in more than three years.
In December, the most recent monthly report shows, the average sales price fell 5.9 percent, to $294,954. Only 1,482 homes changed hands for the month, compared with the 1,779 homes sold in December 2007, MRIS said. Prices fell in all jurisdictions, from just barely in Carroll, a 0.26 percent decline, to an almost 10 percent drop in value in Howard.
For the year, sales declined by at least 24 percent in every jurisdiction, falling the most in the city, according to the preliminary figures. About 5,100 homes were sold in Baltimore - a 34 percent decline compared with the year before. Average prices in the city, however, were flat last year at $187,000. Carroll County posted the largest average price decline last year as buyers spent $323,500 for homes - an 11 percent fall from 2007.
"Once buyers feel prices are set to rise, you will have the requisite level of urgency that will drive the market ahead, but for now, there's not much reason for buyers to act with urgency," Basu said. "The presumption is prices will continue to fall and as a result the optimal strategy is to wait."
With inventory high - more than 18,000 homes were on the market in December - sellers are finding they have to present a house in move-in condition to attract buyers. Or, they need to price a home that requires upgrades below market, agents said. On the flip side, the buyers who want to make a move can't always get financing.
"Buyers right now are so scared about the depreciating market," said Rob Preston, an agent with Long & Foster in Timonium. "It's one thing to buy a house in move-in condition, but it's harder to sell when people are not only worried about an asset continuing to depreciate but have to put in money to get it up to their standards after they purchase."
Homes stayed on the market, on average, almost five months before going under contract, nearly 23 percent longer than in December 2007, the MRIS statistic show. And sellers got, on average, about 89 percent of their asking price.
Recent drops in mortgage rates combined with moves to make financing more readily available to buyers could start to bring buyers back into the market, the head of a local Realtors board said.
Rates on 30-year mortgages have fallen to 37-year lows and last week hit 5.01 percent, down from the previous week's record of 5.1 percent, according to Freddie Mac. Rates have been falling since late November, when the Federal Reserve announced an intervention to boost the economy and housing market by investing up to $500 billion in mortgage-backed securities.
"The pent-up demand we feel exists in Baltimore is going to be satisfied by the bottoming-out of prices," said Vito Simone, president of the Greater Baltimore Board of Realtors. "Certain price points are not selling, but price points that are affordable are, in fact, selling," such as the $200,000-to-$250,000 range.
A glimmer of hope for recovery is coming from first-time buyers, who are still active in the market, and from the interest in showings for homes priced between $300,000 and $400,000, agents said.
"There is some pent-up demand," Preston said. "You can feel that in the amount of people coming through [open houses]."
He said he senses that many would be ready to make a move if they felt more confident, not only about their investment but about their job outlook.
The U.S. unemployment rate rose to 7.2 percent in December and brought the total jobs lost for the year to the largest number since 1945, the Labor Department reported Friday. A staggering number of jobs have been lost in the past four months alone - 75 percent of the 2.6 million jobs lost in all of 2008, the government said.
With joblessness on the rise, Preston said, potential buyers "just need to know the rug isn't going to be pulled out from under them."