Home sales continued to slump in the Baltimore metro area in August, adding to concerns that a quick turnaround in the real estate market is unlikely and that a slower rebound could take years.
The number of homes changing hands dropped 16 percent compared with a year earlier, according to figures released Friday by Metropolitan Regional Information Systems. It was the second month of year-over-year declines after a homebuyer tax credit had provided a break from the housing market downturn.
Meanwhile, average home prices in the metro area, which have fluctuated widely in recent months, fell slightly in August, to about $295,000.
The outlook for the housing market — an important part of the U.S. economy that's already teetering on the edge — is anemic, at least in the short term. Home sales are all but guaranteed to decline for at least another month. Newly signed contracts — which usually turn into sales in 45 to 60 days — dropped 15 percent in August, the fourth decline in a row.
"We're going to see, I think, very weak demand at least through 2010 and probably into 2011," predicted Dean Baker, co-director of the Center for Economic and Policy Research in Washington. "The vast majority of people who intended to buy in 2010 already did."
Americans had to sign contacts by April 30 to qualify for the federal homebuyer tax credit, worth up to $8,000 for first-time buyers and up to $6,500 for certain repeat buyers. That was a powerful motivator for people who might have intended to buy a home later in the year — or possibly even farther down the road — to purchase earlier than planned, economists say.
The tax-credit deadline to close on home sales isn't until the end of this month. But most people rushed to the settlement table earlier because Congress didn't extend the original June 30 deadline until the last moment.
"We of course had an artificially strong housing market through the spring, and now have an artificially poor housing market," said Richard J. DeKaser, president of Woodley Park Research in Washington, which specializes in economic forecasting and housing market valuation.
The stimulus-fueled uptick in home sales during the spring in the metropolitan area was large enough that the falloff since then hasn't yet erased all the gains for the year. Baltimore-area homes sold this year — 14,900 — outnumber sales during the corresponding period last year by almost 1,000.
DeKaser expects to see buying increase, at least nationally, in the coming months. "I'd characterize the whole thing as sort of gradually recovering, albeit just barely," he said.
He thinks home prices have essentially stabilized. It could be several years before they rise much, with so many homes on the market and in foreclosure, he said. But foreclosures no longer appear to be rising nationally, and banks are putting those properties up for sale at a measured pace, he added, which leads him to believe there's not much risk of a big plunge in home prices.
Baker sees it differently. The slowdown in price declines in some communities and increases in others over the past year were a result of the tax credit, he said. That boost is over.
"I expect prices to really tumble the second half of this year," he said. "They'll probably level off early in 2011."
Many in the housing industry, from real estate agents to home furnishing stores, are feeling the pinch right now, said Paul Cooper, a vice president with Alex Cooper Auctioneers in Towson.
"It seems like things have really died down," he said.
That's true across the region. Home sales dropped 10 percent in Anne Arundel County and Baltimore City, 16 percent in Howard County, 17 percent in Harford County, 18 percent in Baltimore County and 36 percent in Carroll County, according to Metropolitan Regional Information Systems. The firm runs the multiple-listing service used to buy and sell homes in the area.
Even interest rates near historic lows aren't enticement enough for some borrowers.
"All the buyers are out, [but] nobody's pulling the trigger," said Cindy Ariosa, who manages the Baltimore and southern Pennsylvania region for Long & Foster. "Consumers think the rates are going to go even lower because they feel the government has to do something, and that's the only thing they have in their control right now. So there's a little bit of wait-and-see."
But Cooper said sellers are still finding buyers as long as the asking price is right. "They will sell at the correct price," he said.
Beth Carolan, who's trying to sell her home in Baltimore County for $250,000, said she's not letting pessimism about the housing market get her down. She upgraded the property, replacing the appliances, countertops, ceiling fans and bathroom tiles to get it ready for prospective buyers.
The three-bedroom townhouse — in the Cub Hill area of Parkville — is too cramped for the two adults, four kids and one cat in the family. So they're building a new place nearby.
"We were really waffling on whether to go for it now or not," said Carolan, who has lived in the townhouse since 1987. "We knew we were going to have to do it eventually, and we just realized we are just bursting at the seams and now is the time to go."