The all-important spring selling season for homes is proving more bust than boom this year in the Baltimore area — and not just compared with last year, when an $8,000 federal incentive got buyers to the table.
The 2,000 homes sold last month in the metro area represent the second-slowest April sales since Metropolitan Regional Information Systems began tracking the market through its multiple-listing service in the late 1990s, numbers released Tuesday show. Home sales were down 17 percent from April 2010, one of the months boosted by the first-time homebuyer tax credit.
The average sale price in the area — Baltimore and its surrounding counties — dropped nearly 4 percent compared with the year-ago period. That brought the average down to about $255,000, $55,000 less than the peak four years earlier.
Sellers are facing challenges across the country, according to John Burns Real Estate Consulting.
"We're hearing that the spring selling season is starting to slow — and it's been a lackluster spring selling season to begin with, so it's definitely discouraging," said Wayne Yamano, a vice president at the California-based firm, which does housing market analysis for builders and banks.
Buyers rushed last spring to beat a two-part deadline for the federal tax credit: Get under contract by the end of April and settle no later than the summer. Sales rose and so did prices — modestly — but the housing market has struggled to find its footing since then.
Critics of the tax credit say it encouraged people who would have bought later in 2010 or in 2011 to speed up their purchase, essentially stealing sales from the future.
Other economic forces are also at play.
"Prospective homebuyers either lack confidence in their job security, income prospects or the overall economy," said Greg McBride, senior financial analyst with Bankrate.com. "To some extent, prospective buyers may be holding out for still-lower home prices."
Mortgage rates, which had been on the rise, are back down to December levels, he said. The average for a 30-year, fixed-rate conforming mortgage is about 4.9 percent.
Contract-signing activity in the Baltimore area, deals that will turn into sales in a few months if all goes smoothly, was stronger than sales in April. Buyers and sellers came to terms on 2,700 contracts in April, compared with the 2,000 sales that got to the settlement table that month.
But that's still one of the slowest Aprils on record, outpacing only 2008 and 2009, when the recession and financial crisis were weighing heavily on the market.
The region's biggest year-over-year drop in the number of homes sold came in Baltimore County, down 25 percent. Carroll County posted the smallest decline, at 6 percent.
Most of the jurisdictions in the metro area also saw a drop in average prices. In the two that did not, Anne Arundel and Howard counties, it's difficult to tell how much of the price increases is the result of sellers getting more for their properties as opposed to buyers simply purchasing larger homes this year versus last year.
Moody's Analytics, which forecasts housing prices as well as general economic indicators, expects a further 4.1 percent drop in homes prices in the Baltimore metro area. The company predicts the bottom will be reached early next year.
A big question mark is foreclosures. Bank-owned homes usually sell at a discount, and they're such a significant part of the market these days that they're dragging down prices overall. More than 140,000 Maryland borrowers were behind on their mortgage payments at the end of last year, so the number of homes that could yet appear on the market as foreclosures is substantial.
John Burns Real Estate Consulting estimates the "shadow inventory" of homes that will likely go up for sale as foreclosures at 14 months of supply in the Baltimore metro area. By contrast, the supply of homes on the market now is just over eight months' worth — meaning it would take eight months to sell all listings at the current pace.
"We think we're about 50 percent through the foreclosures that are going to take place in this cycle [nationwide], but we're only 30 percent through the distressed selling that will come as a result," Yamano said. "It takes a while to make it through the pipeline and get either taken back by the bank or sold as a short sale."
Dominic Cantalupo, associate broker at Champion Realty in Pasadena, said one result of the price drops and distress is that people can afford to buy in neighborhoods that were out of their reach a few years ago. That has a domino effect, leaving fewer buyers for less-pricey — and less desirable — neighborhoods, he said.
Prices drops have also put a big dent in move-up buying because so many people who purchased in the past six years owe more on their mortgages than their homes are worth. The housing-market action Cantalupo sees is primarily first-time buyers and real estate investors.
"A lot of people are still hesitating — it's hard to get mortgages," he said. "It's not horrific out there, but it's certainly not on people's minds to buy homes."