Home Sales Up By 10%

Year-to-year Rise Is Baltimore Area's Biggest Since 2005

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

Buyers snapped up 10 percent more homes in the Baltimore metro area last month than they did a year earlier, the biggest increase since 2005 and a sign that the long-depressed housing market could finally be turning a corner.

July was the second month in a row that home sales rose year-over-year, according to numbers released Monday by Metropolitan Regional Information Systems. In June, the increase was 2 percent. The Baltimore-area housing market hasn't seen two back-to-back months of improving sales since the peak of the buying frenzy four years ago.

But home sellers eager for values to follow suit could be in for a long wait. Average prices in the metro area last month were down almost 7 percent from a year earlier, to about $298,000, which is below what they were in 2005. Some economists expect continued declines for a while.

They're predicting two housing-market "bottoms." Sales first. Then prices.

"We have an enormous glut by almost every measure of housing," said Dean Baker, co-director of the Washington-based Center for Economic and Policy Research, an economist who warned of a housing bubble long before it disastrously popped. "Unsold existing homes, unsold new homes, the vacancy rates - whatever measure you want to look at."

Moody's Economy.com, an economic research and forecasting company, expects prices in the Baltimore metro area won't stabilize until the end of 2010. Celia Chen, a housing economist there, forecasts that prices will be nearly 30 percent lower at that point than they were at the market peak several years ago. Prices had fallen 12 percent as of the first three months of the year, according Economy.com's most recent data.

Blame foreclosures, she said. She expects bank-owned properties will hit the market in bigger numbers later this year and next, and "that will depress prices."

Chen does think sales in the Baltimore metro area have stabilized after their extended free fall. Nearly 4,400 homes changed hands in July 2005. Last month? About half that many - but it was the first time since September 2005 that sales had increased 10 percent.

And pending deals - contracts that will turn into sales if all goes well - were up 16 percent from a year ago.

Both economists and real estate agents think an important reason is the $8,000 tax credit for first-time home buyers. With the Nov. 30 deadline for the credit looming, "a lot of people are feeling very motivated," said Stephanie Bamberger Yungmann, an agent with ZipRealty in Towson.

The side effect she's seeing is more move-up buyers. As they sell their homes to first-timers, they can buy a bigger place.

"That helps the whole market move," said John McClain, a senior fellow at George Mason University's Center for Regional Analysis. "Theoretically, at some point we'll see better sales, higher sales, in the middle and upper housing brackets."

So far, the lion's share of the boost is going to more moderately priced properties. The number of homes selling for less than $250,000 rose about 25 percent last month from a year ago. Sales above that price range fell slightly. And nobody bought a home for $2.5 million or more, though 119 were on the market for that price.

McClain is more optimistic about the Baltimore housing market than Chen - he expects only small price drops from here out - but he thinks sales could be dampened when the first-timer tax credit expires. Political leaders might feel pressure to extend the credit if the economy is no better in November, he said.

"The housing market is a key component to getting the whole economy to recovery," McClain said. "Just like the 'cash for clunkers,' you want to get people out there to start buying."

A lot of would-be sellers are still waiting for buyers to bite. For every home that sold last month, 8 1/2 others were on the market in the metro area. In 2000, before the market got overheated, it was under five.

The oversupply is undercutting prices. They fell across the Baltimore area on average, from 5.5 percent in Carroll County to almost 11 percent in Harford County, according to MRIS. The Rockville-based company runs the region's multiple-listing service.

Home sales, meanwhile, rose throughout the suburbs and particularly in Howard County, up 27 percent. But 8 percent fewer homes changed hands in the city last month.

The tax credit seems to be having an effect in Baltimore City - just in lower price ranges. Sales of homes under $150,000 rose almost 4 percent.

Davon A. Key, 26, was one of those buyers. He settled on his $147,000 rowhouse in the city's Cedonia neighborhood at the end of last month. It's his first place, and he said the tax credit was "definitely an incentive."

But it wasn't the driving force. He was tired of renting and wanted to own. His housing costs have jumped from $650 a month to $1,140, "but I appreciate what I'm paying for, and I don't mind."

Key - one of two people to make an offer on the three-bedroom house - isn't wringing his hands over the possibility of future price drops.

"The market is volatile - you don't know what you're going to get," said Key, who works for the Social Security Administration. "All you can do is live in the now and not be fearful."

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