Baltimore's home market shifted this year, but a spike in interest rates may unsettle the balance again.
"Back in the beginning of January … all of the buyers thought they were still in the buyer's market. Then, in the beginning of February, all the rules changed," said Lynn Ikle, an agent with Redfin who leads a sales team that works throughout the metro region.
The number of homes for sale became too small to keep up with demand, and power returned to sellers, Ikle said. Eager to take advantage of historically low interest rates, buyers placed multiple bids on desirable properties, with some even waiving inspections and making other concessions unheard of since the bubble burst, she said.
Although prices rose only slightly during this year's prime selling compared with last year's, the number of homes sold increased considerably, according to data released Wednesday by the region's multiple listing service.
Now, with higher interest rates, the question is whether demand will continue to surge.
The average price of a home sold during the first six months of 2013 in Baltimore and its five suburban counties was roughly $279,300, about 2.4 percent more than the typical home sold during the first half of 2012, according to RealEstate Business Intelligence LLC, which released home sales figures for June on Wednesday.
Prices are returning to pre-recession levels — the average price of a home sold in metro Baltimore in the first half of 2005 was $282,000. But the pace at which that recovery is taking place slowed appreciably this year. The average price rose 6 percent between the first half of 2011 to the first half of 2012, more than twice this year's increase.
"It's been a steady gain [in prices] for 17 consecutive months," said Corey Hart, a senior product manager at RBI, a division of Metropolitan Regional Information Systems Inc., the multiple listing service that gathers home sales data for most of Maryland.
The modest price gains appear to be healthy and sustainable, he said.
"I look at Baltimore as really being pretty balanced," Hart said.
June closed with an active inventory of about 11,200 homes, enough supply to last about five months, he said. Though the Baltimore market "has been trending as of late more toward the seller's advantage," the current inventory level is adequate to keep buyers satisfied, he said.
Demand for homes went up markedly during the winter and spring this year.
About 13,100 homes were sold from January through June, about 1,500 more than were sold during the same period a year ago, a 13 percent increase. The year-over-year trend of modest price growth and substantial sales growth holds true in each of the six metro jurisdictions.
"Pricing was fair, but you had to move fast," said Tom Ainsley, summing up his recent homebuying and selling experience.
Ainsley, owner of a marketing and advertising firm in Canton, and his wife decided in late April to sell their home after they found out they are going to have a third child. The three-bedroom, 11/2-bath split-level in Lutherville that they bought three years ago for about $300,000 was not going to be big enough for their growing family, Ainsley said.
Knowing that inventory was low, they decided to save some money on fees and tried to sell without the help of an agent, he said. It was a smart move — within a week they were under contract.
All it took was a message on Facebook to their neighbors, who were in a semi-detached house around the corner and wanted to be in a single-family home and stay in the neighborhood. They sold for $349,900, Ainsley said, and the house was appraised at $350,000.
They also tried to buy their new home without an agent, but lost two properties to competing bids. After they solicited Ikle's help, they bought a home in Phoenix for $610,000, $20,000 less than the asking price, Ainsley said.
"This past six months there has been a lot of momentum, I think that's the best word for it," said Dean Johnson, a regional manager for Primary Residential Mortgage Inc., one of the nation's largest residential mortgage lenders. "It's just been a gradual building of momentum."
This April and May, in terms of the number of mortgages issued by PRMI's Baltimore-region offices, were the best ever, Johnson said.
"Good inventory is selling quickly. If a house is nice, it's selling quickly," Johnson said. That remained true, he said, even as interest rates began to tick up about two months ago. "Those properties are unaffected by the interest rates; those properties are still moving quickly."
In April and May, the average interest rate on a 30-year fixed mortgage was around 3.5 percent. By June, the average rate was above 4 percent, according to FreddieMac.
As a result of rising rates, Ikle said, she's recently had buyers raise concerns about their purchasing power. People who just weeks ago felt like they had a $450,000 budget are dropping down to $400,000, she said. She's also noticed fewer homes receiving multiple offers.
Though higher rates mean paying more in the long run, they could also mean less competition.
"I think buyers are going to have a little bit more ground here," she said.