Home prices in the Baltimore region rose more than 16 percent in May compared with a year earlier, showing continued strength in a housing market that keeps defying predictions of a slowdown.
Home sellers routinely are getting multiple offers above the listing price as buyers, encouraged by low mortgage interest rates and flexible financing, compete for houses, area real estate agents and brokers said.
Many buyers said they have no choice but to take on larger mortgages so that they can afford the rising prices.
Average sale prices in Baltimore and its five surrounding counties reached $284,249 last month, 16.38 percent more than in May 2004, according to data released yesterday by Metropolitan Regional Information Systems Inc. The number of homes sold last month was 4,258, an increase of 7.25 percent compared with May 2004, according to the online listing service used by agents and brokers.
Buyers and sellers in the region have seemed undeterred by recent warnings of a possible housing bubble.
Greenspan told Congress' Joint Economic Committee that the housing sector is overheating in some markets. The Fed chairman attributed the rise in home sales to some forms of adjustable-rate mortgages and to a sharp increase in interest-only loans, in which the borrower does not begin paying off the principal for several years.
Greenspan and other economists have voiced surprised that long-term mortgage rates have not climbed in response to the Fed's recent increases in short-term rates.
The average 30-year fixed rate mortgage stood at 5.56 percent this week, according to Freddie Mac. It was 6.3 percent a year ago.
In response to those low rates this week, the National Association of Realtors issued a new forecast, predicting that home sales will reach a fifth consecutive record this year.
Many experts think interest rates will rise by the end of the year but will remain low enough to keep the housing market healthy even if the rate of appreciation slows.
Louisa Townsend, a real estate agent in Coldwell Banker's Jacksonville office in Baltimore County, said there is no fear of sharp price drops in the mostly upper-end part of the county, where houses priced between $400,000 and $900,000 are typically selling within a week, many to clients paying cash.
"I don't think northern Baltimore County is one of those bubble neighborhoods, because of all the companies and headquarters here, and we get people who drive down to Washington from here," Townsend said.
Yesterday's data showed that homes for sale in the region stayed on the market an average of 39 days last month, eight days fewer than in May 2004.
About half of the sellers broker Pat Hiban works with sell their homes after one weekend on the market. Typically, he said, homes are listed on a Thursday, shown on a Saturday and buyers make offers by Monday or Tuesday.
"Ten years ago, we would put a house on the market and you couldn't say whether you would sell it or not, and you had to ask, 'What's plan B if it doesn't sell,'" said Hiban, a broker who works primarily in Howard and Anne Arundel counties. "You don't have to ask that question anymore."
Even if a property doesn't sell right away, he said, homeowners are able to drop the price and still make a profit because of built-up equity.
Such home appreciation prompted John and Carrie Leach of Columbia to move up from a townhouse to a single-family home with a yard and a garage. They had been contemplating such a move to accommodate their growing family, including a 10-month-old daughter.
They bought their townhouse for $137,000 about three years ago. It will fetch about $289,900 - the listing price - when the sale closes next month. That appreciation, and concerns that the housing values will keep climbing, spurred the couple to buy a $440,000 single-family house in Columbia.
"Everyone said to stretch your limits now before [prices] get to be too much," said Carrie Leach, 28.
Holly Anderson, a 23-year-old who works in sales for CareFirst BlueCross BlueShield in Owings Mills, said she and her fiance, Richard Gue, had no option but to finance the entire cost of the Pasadena townhouse they expect to buy, even after trying to save for their first home for about a year and a half.
"It is unbelievable how fast these houses are appreciating," Anderson said.
They found themselves up against stiff competition. They bid on seven townhouses and were outbid each time. They quickly learned to drop contingencies such as home inspections and not to ask the seller to help with closing costs. They think they were outbid several times by investors offering cash.
"You can't compete against that," Anderson said.
Finally, the couple were advised to include an escalation clause, an amount over a competitor's offer that they would be willing to pay. They signed a contract on a $240,000 home and are to settle this month.
They are banking on increases in their earnings and are not too worried about taking on debt that amounts to the purchase price of the home.
"I hear it's pretty common these days, so it doesn't bother us so much," Anderson said.
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