The number of homes for sale in the Baltimore metro region climbed to the highest level in nearly three years last month, but closed sales failed to follow suit, a mismatch that reflects weakness in the housing market, analysts said.
Sales in Baltimore City and the five surrounding counties dipped in July, falling 2 percent to 2,945, according to a monthly report published Monday.
Meanwhile, the number of homes on the market rose 22.5 percent year-over-year, reaching 13,856 — more than any time since November 2011, according to the data provided by RealEstate Business Intelligence, a subsidiary of the MRIS multiple listing service.
"It's kind of a mismatch," said David Orso, an Anne Arundel-based real estate agent with the David Orso Group of Century 21 New Millenium. "The market still has indigestion. It just hasn't settled down yet."
The median sales price for the region fell 3.1 percent from last year, to $256,000, according to the RBI report.
Last year, stronger demand coupled with tight inventory helped lift home sales and prices in the area. Median prices rose 6 percent year-over-year in July 2013, as sales volume jumped nearly 30 percent.
Encouraged that the market may be recovering, sellers began listing their homes in greater numbers — new listings have shown year-over-year gains for 16 consecutive months. But buyer demand this year has remained weaker than many had hoped.
"Our expectation was just way overstated," said Brian Hill, 37, who listed his family's Annapolis home in February in order to move closer to his wife's job as a financial analyst in Baltimore.
The Hills already had waited a few years hoping for a market recovery. Despite well-attended open houses, they didn't close with a buyer until last month — after switching brokers and agreeing to take about $25,000 less than the initial asking price.
"It just wasn't where we needed it to be and we finally felt as though early this spring it was," said Hill, who worked with Orso on the sale. "We had expected a much quicker sale at a price at or closer to what we were listing for."
Buyers — especially those looking to own for the first time — remain cautious, constrained by economic concerns and tighter credit requirements, said Dave Wright, of the Wright Team, an associate broker for Champion Realty, whose practice focuses on Anne Arundel County. As options increase, they also feel little pressure to make offers, he said.
The median days on market for the region was 34 days last month, eight more days than July 2013, though still below the 10-year average of 44 days, according to the RBI report.
"Buyers have gotten a lot pickier," Wright said. "There's very little sense of urgency in the market."
Increasing inventory also places less upward pressure on prices, said Corey Hart, a senior product manager for RBI.
In Anne Arundel County, the median sales price rose less than 1 percent to $325,000. Prices also rose in Howard County — also up less than one percent to $418,000 — and Carroll County — up 3.5 percent to $295,000.
Median prices dropped less than 1 percent to $227,750 in Baltimore County, 5.1 percent to $232,316 in Harford County and 9.1 percent to $135,000 in Baltimore City.
"It's still a balanced market, but that's giving buyers more choices, which can lead to a flattening out of prices," Hart said.
The RBI report held some bright spots: Pending sales, for example, jumped 9.6 percent year-over-year to 3,422 last month.
But foreclosures also played a greater role last month, accounting for 11.5 percent of the region's sales, versus 8.5 percent in July 2013, according to RBI. Short sales, in contrast, declined, leaving distressed properties with a similar share of the market as last year.
About two thirds of the region's 340 foreclosure sales occurred in Baltimore City or Baltimore County.
The share of loans in foreclosure in Maryland — 3.24 percent or roughly 36,000 — was the ninth highest in the nation at the end of the second quarter, according to a recent national survey by the Mortgage Bankers' Association. Maryland also had the second highest number of foreclosure starts, with 0.68 percent of loans, or roughly 7,600, entering forclosure in the quarter, behind only New Jersey.
Housing officials have said reform of Maryland's foreclosure process created a backlog of bad loans that now are being processed. In Baltimore-Towson, the share of loans in foreclosure was 2.48 percent, down slightly from a year ago. The rate of foreclosure starts, 0.68 percent, was unchanged.
Economist Daraius Irani, director of Towson University's Regional Economic Studies Institute, said he expects to see the housing market improve slowly, as the economy grows stronger. But sellers shouldn't expect to see the kind of price appreciation that occurred before the bust.
"The challenge really is to get yourself out of the mindset of the pre-recession housing prices growth," Irani said. "Last year was artificial because of the shortage in inventory. … This year is a reaction to that. Next year, it's probably going to oscillate up and down until a nice equilibrium is realized, but I don't think you're going to see a hot, hot market."