Home sales in the Baltimore metro area have plummeted to their lowest point in more than a decade, with the temporary boost from a federal tax credit gone and the economy still struggling.
The number of homes sold fell 30 percent in October compared with a year ago — when the $8,000 incentive for first-time buyers was boosting activity — to just under 1,600, according to numbers released Wednesday by Metropolitan Regional Information Systems.
That is less than half the sales at the peak of the market in the middle of the last decade. And it is about 900 fewer homes than changed hands in October 1998, when MRIS began tracking home sales in the region.
"Homebuyers have really retrenched," said Celia Chen, a housing economist at Moody's Analytics, who thinks the expiration of the federal tax credit, weak job growth and tight lending rules are playing a role locally and nationwide. "Confidence is still low. People aren't sure what's going to happen with the economy, whether we're truly out of a recession or not and … whether the housing market is finished correcting or not."
The average sale price in the metro area — Baltimore and its five suburban counties — fell just over 1 percent to about $272,000 in October.
Economists warned that a tax-credit hangover was inevitable, with some buyers speeding up purchases they would otherwise have made later in the year. The number of homes sold so far in 2010 is slightly under the total sold in the first 10 months of 2009, with gains in the early part of the year outweighed by later losses.
Would-be sellers are faced with a lot of competition, given the limited number of buyers in the market.
At October's slow pace of sales, it would take 11 months to find buyers for all of the homes priced in the $200,000 range in the Baltimore metro area. For homes in the $600,000 range, the timeline is 15 months. And for homes priced at or above $1 million? Four and a half years.
Jim Carroll, whose 5,000-square-foot house in Ruxton is on the market for just under $1.7 million, hopes he doesn't have a years-long wait ahead of him. With one child away at college and the other preparing for graduate school, Carroll and his wife figured it made sense to sell their six-bedroom house and buy something smaller.
He's cautiously optimistic. He had had no immediate plans to put the house on the market until a would-be buyer asked to see it, which got him thinking about moving.
"We know we have to be patient," said Carroll, who razed the original house on the property in 2008 and built the current home, which has energy-efficient features such as geothermal heating and air conditioning. "It's going to be a longer market than some of the other houses we've sold over the past 10 or 12 years. But in my opinion, there's always a buyer for every property."
Carroll, an architect, renovated his last two houses. He likes taking on projects. But he's not about to buy a new place until his house sells.
"You literally can't bank on the market at this point," he said.
His real estate agent, Ashley Richardson with Long & Foster, said some homes that appear to be priced well "just sit and sit and sit" on the market. She has several clients who recently got multiple offers for their homes but decided they couldn't accept — either because the contracts were contingent upon the sale of the buyer's home or because the offer was too far below the asking price.
"If the sellers attempt to counter that offer, the buyers say, 'Mmm, no,'" said Richardson, who focuses on the Towson and Timonium areas. "The buyers aren't willing to play the game of negotiation."
The number of new contracts in the Baltimore metro area, which often turn into sales in a month or two, fell 26 percent in October compared with a year earlier. Contracts have slumped since the April 30 deadline to qualify for the homebuyer tax credit.
Buyers had until Sept. 30 to close those deals, but most did so earlier. Sales in the metro area began falling in July.
Chen said she expects home prices to bottom out next summer, locally and nationally. Moody's Analytics is projecting that prices in the Baltimore area will be 3 percent lower at that point than they were last spring. It foresees an 8 percent decline in prices for the country as a whole.
One element of uncertainty is the effect of foreclosures. Foreclosure documentation problems and the resulting lender-imposed moratoriums have slowed the pace of bank-owned homes hitting the market.
But most of the properties in question probably will end up being foreclosed on eventually, Chen said. She does not expect that home values will get a permanent boost from the delay.
"It won't really change the overall correction that's going to occur in the prices," she said.