The long decline in home prices all but ended in the Baltimore region during the first half of this year — a ray of hope for beleaguered homeowners who have seen all their equity wiped out.
The Baltimore region's $278,000 average sale price was down just a few hundred dollars from a year earlier, compared to a $30,000 dive that prices took on average during the first half of 2009. The recent stabilization came as buyers pushed home sales up 18 percent, according to a Baltimore Sun analysis of Metropolitan Regional Information Systems data.
But the reprieve from housing-market meltdown may be temporary or sporadic. The market got a major lift from a federal tax credit for first-time home buyers, a program that spurred sales but is no longer available to new buyers. And that boost did not ripple to all Baltimore-area communities.
More homes changed hands in nearly two-thirds of the metro area's suburban ZIP codes and city neighborhoods, but some areas saw big declines in home sales. And while a significant number posted price increases, average prices fell at least 5 percent in nearly half the region.
"There's still an immense fear among buyers about getting a bad deal," said David Orso, a real estate agent with Century 21 Associates in Annapolis. "The low interest rates are helping them pull the trigger, but they want to see every single property on the market … and they're making aggressive offers, which is disappointing to sellers."
Some economists contend that Baltimore-area prices appear to have nearly hit rock bottom, but it remains an uncertain and difficult-to-predict market. Simply measuring where prices stand now is tricky.
In many of the local communities where average prices increased, the uptick appears to be driven by buyers purchasing larger homes this year. The number of single-family houses changing hands in the metro area jumped by nearly 900 to 5,400 home sales in the first half of this year, compared with the same period a year ago. That's more than the increase in townhome and condo sales combined.
Jennifer O'Donnell, 30, is purchasing a three-bedroom house in Arnold for $250,000. That's less than the townhouses she was considering back in 2003, when the housing bubble hadn't even fully inflated yet. She said she's very glad she decided to hold off buying until now.
"I just couldn't justify spending $300,000 for a home that was attached to another home," said O'Donnell, an Anne Arundel County police officer. "Then, when [the market] hit the boom, it was half a million dollars for a townhouse. That's just ridiculous."
The house she's buying could use an update to its kitchen and bathrooms, but it has a big yard for her two dogs and a floor plan she loves. Best of all, "They had priced it to sell."
Home prices can't stage a genuine turnaround until demand is in balance with supply. That's why there's angst about how the market will fare without the popular home buyer tax credit, which enticed so many buyers that it helped the Baltimore area post sales gains last summer after three and a half years of declines.
The deadline to sign a contract and qualify for the $8,000 incentive was April 30, and most of those deals have already closed.
After the April deadline passed, contract-signing took a steep drop here and nationwide, prompting many economists to postulate that prospective homeowners looking to buy over the next few years simply did so earlier to get the tax break.
"The tax credit moved a lot of demand forward from 2011, 2012," said David Stiff, chief economist for Fiserv, a financial services provider that tracks housing trends across the country. "Most markets, especially those that had large bubbles, will probably flat-line for two or three years."
He expects that single-family home prices will fall in the Baltimore area — though only slightly — before stabilizing at the end of 2011. Moody's Economy.com has a similar forecast, though it expects the bottom to come early next year.
U.S. home prices have dropped about 30 percent since their peak a few years ago, Stiff said, which makes the Baltimore metro area's 18 percent decline seem almost modest by comparison.
"Baltimore's having a softer landing," he said. "On the way up, Baltimore appreciated faster than the U.S. as a whole but actually fared a bit better on the downside. I think that's probably because the labor market in Baltimore is better than the U.S."
The Sun's analysis of the local housing market used sales data from Metropolitan Regional Information Systems, a Rockville firm that runs the region's multiple-listing service. To cut down on statistical skewing, ZIP codes and Baltimore City neighborhoods were included in the year-over-year comparison only if they had at least five sales in each period.
Homes sales increased in about 70 percent of suburban ZIP codes and 60 percent of city neighborhoods. In addition to the tax-credit stimulus, interest rates have remained at or near historic lows.
First-time buyers — and investors looking for a steal — appear to be a driving force in the city. Seven of the 10 Baltimore neighborhoods with the biggest increases in homes sold during the first half of this year had average prices under $150,000.
Tops on the list: Belair-Edison in Northeast Baltimore, where 80 homes sold in the first half of this year, 28 more than in the same period last year. Average price: just under $73,000, down 14 percent.
The suburban community with the biggest jump in sales, by contrast, was the pricey 21042 ZIP code in Ellicott City, where the average buyer paid $525,000. About 210 homes sold there in the first half of this year, 87 more than in the same period last year. Prices rose on average by 9 percent.
Home sales revved up in almost all of Harford County's ZIP codes, too. Real estate agents attribute that to the military base realignment and closure effort, or BRAC, which is sending thousands of out-of-state federal workers and contractors to Aberdeen Proving Ground in Harford and Fort Meade in Anne Arundel County.
Most of the people relocating to APG are coming from New Jersey, and those moves are already under way. Sales in Belcamp, a Harford community just north of the base, more than doubled in the first half of this year.
Judy Isom, a real estate agent with Keller Williams Realty in Bel Air, said about 60 percent of her business is BRAC-related these days. Sandra Hopkins, an agent with RealEstate.com, is getting a lot of BRAC buyers in and around Harford County, too.
"Over the last probably four to five months, I've really seen it pick up," she said.
An exception is Edgewood, where sales dropped. The Harford community, which has struggled with gangs and gun violence, had 90 home sales this year. That's 16 fewer than in the first half of last year and far below a peak in the first half of 2005, when nearly 290 homes sold.
Home buying rebounded to near-peak levels in some neighborhoods. Sellers found takers for 180 homes in Baltimore's popular Canton neighborhood this year — the same number as the first half of 2006, though for a lot less money on average.
Overall, the Baltimore region is still in a slump. Buying fell off so dramatically after the boom that the recent pickup wasn't enough to get sales back to a normal level, let alone the go-go days.
Just over 11,000 homes changed hands in the metro area during the first half of the year. Between 2000 and 2007, January-through-June home sales never dropped below 14,000.
Unemployment and job insecurity are playing a big role. So is the drop in home values. One in every five homeowners with mortgages has little or no equity, according to estimates by real estate information firm CoreLogic — effectively trapping many who would otherwise be selling and then buying a new place.
Falling home prices have also contributed to the number of short sales and foreclosures, which remains historically high. Dan Grady, a real estate agent with ExecuHome Realty in White Marsh who specializes in short sales, said he's seeing more calls for help, not less.
"I think things are just starting to finally catch up with some people," he said, referring to ripple effects of the recession that began in December 2007. "We're two years into this. Those that had savings have exhausted them."
But Michael Hamby, a real estate agent with Champion Realty in Annapolis, said the market still seems to be improving — even compared with recent months when the federal tax credit was bringing in buyers.
"I'm working with more people today than I was during the tax credit," he said. "My listings are selling faster. I'm very excited about where we are."
Pamela Milby has been trying to sell the Baltimore County house that had belonged to her father, who died last year, and hopes the conflicting economic signals in the housing and job markets don't deter buyers.
She's asking $335,000 for the brick Colonial just outside White Marsh, which has three bedrooms and a two-car garage. Passers-by have taken more than 100 of her for-sale flyers, and several prospective buyers have toured the place since she advertised it a month ago. But interest, she says, isn't the same as a sale.
"They want to take advantage of the rates, but they're just nervous about taking that step because they don't know if they're going to have a job," Milby said of buyers. "I don't know what to think — I just want to sell."
jamie.smith.hopkins@baltsun.com
http://twitter.com/realestatewonk