A solid year for Baltimore's home market
2012 was marked by rising prices but shrinking inventory
Re/Max Branch Manager Wayne Curtis (left) greets real estate agent Jenell Forman during the opening of a Re/Max Advantage Realty office. (Karl Merton Ferron, Baltimore Sun / February 20, 2013)
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"This was the first time we were ready to even think about buying," said Tim Shirah, who with his wife, Michele Shirah, submitted a $395,000 bid and beat a handful of other offers for the new home. They wanted to stop "throwing money away on rent," he said.
For the Shirahs, the time was right. They had money from their wedding to put more than 20 percent down and interest rates were at extraordinary lows. But there weren't many homes on the market that they liked, so when they found something that was appealing — even if it was just a hole in the ground — they acted quickly.
Their story sums up home buying in greater Baltimore last year: Shrinking inventory meets increasing demand, so prices rise, leading to a more stable market than the one that wobbled along after the bust.
Average sale prices were up in just more than half of the Baltimore region's ZIP codes compared with 2011, according to a Baltimore Sun analysis of two years of individual home sales records from Metropolitan Regional Information Systems Inc., a multiple-listing service, and its data arm, RealEstate Business Intelligence LLC. Prices were flat in another 11 percent of the ZIP codes, the analysis showed.
That's a significant improvement from a year earlier. At the end of 2011, average sale prices were up from 2010 for just one in five of the metro region's ZIPs.
ZIP codes were included in the analysis only if there were at least five home sales each year. Because the sales used in the analysis are from the multiple-listing service, they primarily include homes sold through a real estate agency and do not encompass most homes sold by owner or at auction.
"It's stabilizing and then some," said Jonathan Hill, RBI's president. All of the numbers that real estate professionals look at improved last year, he said.
The median sales price for the whole region increased 4.5 percent. The median number of days a home spent on the market fell nearly everywhere in the region, dropping by more than 20 days from 2011's rate to a median of about eight weeks. Sales prices inched closer to list prices, with the sales-to-list price ratio breaking 91 percent. (It was 88.2 percent in 2011.)
And more homes sold were selling. More than 25,000 homes sold in Baltimore and its five neighboring counties — Anne Arundel, Baltimore, Carroll, Harford and Howard — last year. That's up 9 percent from 2011, according to RBI's numbers.
"That shows the market is in recovery mode," Hill said. "It's a slow and steady path back."
Other than January, every month of 2012 showed year-over-year growth in the number of homes sold, said Ryan Price, a research associate at George Mason University's Center for Regional Analysis. In contrast, only seven months of 2011 had larger sales volumes than the same month in 2010, he said.
"It was a pretty volatile 2011 in terms of sales. … 2012's been a lot more consistent," Price said. "That illustrates the presence of strength in demand in the 2012 market."
The numbers support what builders, agents and homeowners are seeing on the ground throughout the Baltimore region.
"Demand's definitely improved," said Lou Baker, CEO and co-owner of Goodier Baker LLC, a residential construction and development company.
When Goodier Baker acquired 22 lots last April at Worthington Green, a Baltimore County development where new homes start above $1 million, it expected to sell four within a year, he said. Now at least eight will be sold in that time, Baker said.
ReMax Advantage Realty, a brokerage with offices throughout Central Maryland, saw sales increase by about a third last year — to about $1 billion, said Wayne Curtis, the branch manager of the firm's Inner Harbor office, which opened last week. It is the group's first Baltimore office and they chose to launch it, in part, because of last year's improving returns, he said.
"Howard County in particular was very strong last year," Curtis said.
Howard had a 17 percent yearly increase in the number of homes sold, according to the Sun's analysis. It was the largest county-level increase in the region. Only Harford County had fewer sales in 2012 than 2011, but the decline was slight at 2 percent.
Although there was significant economic uncertainty last year, many potential buyers just got to a point where they were no longer willing to wait to buy a home, Curtis said. "There was pent-up demand," particularly among young people, that is continuing this year, he said.
Despite robust demand and waning supply, there was an institutional check — appraisals — that kept prices from increasing too much, Curtis said. During the housing boom several years ago, appraisers often did not hesitate to accept a price well above a home's value. That's not happening now, Curtis said.
About half of the region's ZIP codes that showed a gain in average sales price of 10 percent or more last year were in Baltimore, where the average sales price can swing more because many homes are priced relatively low, according to The Sun's analysis. In areas where homes are worth more, gains were modest last year.
"I came in right around the appraised value, so I don't know if I got much of a deal," said Robert Karrs, a client of Curtis' who bought a home a few blocks east of Patterson Park at the end of May, the height of the selling season. He got his rowhouse for about $250,000.
Like the Shirahs, Karrs was a first-time buyer and tired of renting, which he said was getting more expensive. Plus, interest rates — he got a mortgage for under 4 percent — were too good to pass up, he said.
Average home prices in neighborhoods all around Patterson Park increased significantly last year. In Highlandtown, where about 70 homes sold in 2012, the average sale price jumped 21 percent from 2011, to just under $140,000, according to The Sun's analysis.
In Canton, a favorite neighborhood for young professionals, the average sale price rose 17 percent — to $276,000. More than 450 homes sold in Canton last year, an increase of 130 units.
Redfin agent Lynn Ikle already misses 2012's increased sales volume, like the one Canton experienced. She negotiated the sale of 82 homes throughout greater Baltimore in 2012, she said. Inventory has just been too tight this year for that sales velocity.
"Last year was really good because we had great [interest] rates and we had normal inventory," she said.
The Baltimore region started out last year with over 12,000 active listings, enough supply to last more than 9 months, according to RBI. It ended 2012 with about 9,500 listings, RBI said. That supply would last less than five months —shifting what had been a buyer's market to one favoring sellers— because of increased demand.
"I have so many buyers that if they could find the right house, they'd be under contract," said Ikle, who is seeing many first-time buyers. However, not many potential move-up buyers, she said, are listing their homes and looking for new ones.
Beth Dixon and her husband, Bob Berkebile, in their 30s and with a growing family, were able to move into a larger home last year in Phoenix, northeast of the Loch Raven Reservoir in Baltimore County. They were in a situation many young families are not: They didn't owe anything on their former Parkville home.
"We ended up buying a house that on the surface looked very dated," Dixon said. But at $325,000, they feel like they got a steal for the home, which sits on two acres and didn't take much work to spruce up, she said.
They closed on the house, which appraised for over $400,000 and was originally listed for $440,000, last March, Dixon said. The average sale price in 2012 in the Phoenix ZIP code slipped 3 percent annually, to $526,000, according to the Sun's analysis.
Most current homeowners are not in the position of Dixon and Berkebile, so the supply-and-demand problem is worsening, experts say.
While more first-time buyers are entering the market, too few people are letting go of their homes. The reasons are many, observers said. They don't feel they have enough equity to move up. They're worried about the economy. Or they don't want to put a for-sale sign out because there's nothing on the market they want to move into — a problem that compounds itself.
The buyers are out there, but "sellers just aren't responding," said George Mason's Price.
As 2013 progresses, the industry will wait to see if sellers emerge this spring and whether home building will pick up enough to help alleviate the inventory problem, he said. Both of those factors will be influenced by what happens in the next few weeks in Washington, Price said.
"The biggest story of the year is the inventory shrinking," he said. "It's historic lows. We're seeing the lowest inventories, in some cases, in a decade."