Home Sales Show 1st Rise In 2 Years

Area's 2% Gain In June Comes As Prices Continue To Ease

July 11, 2009|By Jamie Smith Hopkins | Jamie Smith Hopkins,jamie.smith.hopkins@baltsun.com

Sellers handed buyers the keys to more homes last month than they did a year ago, the first sales increase in the Baltimore metro area in 2 1/2 years and a hopeful sign for a housing market caught in the worst downturn since the Depression.

The uptick was modest - 2 percent - but every local jurisdiction saw a gain except Baltimore, and there the loss was just 1 percent. Multiple-listing service Metropolitan Regional Information Systems said Friday that 2,375 homes changed hands.

And pending deals, which aren't counted as sales because they haven't closed, were up 16 percent from a year ago.

This comes as average prices continued to fall, down 10 percent compared with June 2008.

Sellers capitulated to buyers who could not or would not pay more: The average home in the metro area sold for just under $290,000, about $30,000 less than its asking price.

An increase in sales is no guarantee of more to come - the last time that happened, it was a blip. A 4 percent increase in January 2007 was preceded by more than a year of declines and followed by many more. But Mark Zandi, chief economist with Moody's Economy.com, thinks the long-awaited end of the housing slump is finally in view - at least in terms of sales.

"Prices have more to fall, given the high level of foreclosure, but sales and construction, I think, are at bottom," Zandi said. "And part of it is related to much-improved affordability."

Zandi's not expecting much in the way of sales gains, though. Just the promise of some stability after years of retrenching.

"As long as the job market is sinking, it's hard to imagine home sales taking off to any considerable degree," he said.

An unprecedented price run-up here and nationwide in the early part of the decade, helped along by low rates and loose lending rules, pushed prices beyond the reach of many prospective first-time buyers.

Sales started to slump in the fall of 2005. Falling values, rising foreclosures, tougher lending standards and - ultimately - a recession and Wall Street meltdown sidelined even more buyers. Half as many homes sold in the metro area last month as in June 2005, near the peak of the housing bubble.

But now, with average prices below what sellers got four years ago, buyers are re-emerging. Another carrot is the federal $8,000 tax credit for first-timers, which comes with a deadline: settle before Dec. 1.

"We're seeing a lot more sales," said Azam Khan, a real estate agent with Coldwell Banker Residential Brokerage in Baltimore. "I've got more and more people writing offers, offers being accepted."

A lot can go wrong before a sale closes, however.

Khan and other agents say the newest wrinkle is deals falling apart after the appraisals have come in lower than the contract price.

The National Association of Realtors blames this trend on a change in rules that affects appraisals for many mortgages - those that will be bought by financiers Fannie Mae and Freddie Mac.

The new Home Valuation Code of Conduct aims to defuse pressure to inflate appraisal values - a problem during the bubble - by preventing mortgage brokers, loan officers and real estate agents from selecting appraisers themselves. The National Association of Realtors released a survey this week showing that more than a third of agents say they have lost at least one sale since the code went into effect May 1. Appraisal management companies, which are increasingly handling the selection of appraisers, are assigning professionals to value homes in communities they're not familiar with, agents and appraisers said in the survey.

The Appraisal Institute, another industry trade group, criticizes some aspects of the code but doesn't appreciate the Realtors' argument that faulty appraisals are spiking home deals. And Ryan Hlubb, president of the institute's Maryland chapter, said he hasn't come across any deals that didn't close because the appraisal was lower than the contract price.

Prices that buyers and sellers are agreeing to have generally "been reflective of current conditions," said Hlubb, a principal with Hlubb Realty Advisors in Ellicott City.

But Khan said he had two deals unravel recently because the appraisals came in significantly lower than the contract sales price. "The buyers couldn't bring cash to settlement and the sellers couldn't reduce their price any more because they'd be upside down," he said.

First-time buyer Sean Browne, one of Khan's clients, made an offer on a Columbia townhouse last month and thought he and his wife would be moving in at the end of July. But then the appraisal pegged the value $19,000 below their $259,000 offer.

"We were all set on every part of our sale, including inspection," said Browne, who had looked at more than 70 homes and is convinced the contract price is a good deal. "We were all ready to go. We had started packing."

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