Confidence in the economy and low interest rates contributed to the best January home sales the Baltimore area has seen in eight years, suggesting a strong start to the spring market, analysts and real estate agents said.
Showings at open houses this month exceeded agents' expectations, and a few reported something they haven't seen since the real estate crash of 2008: buyers signing agreements to automatically boost their offer if the seller gets a higher bid.
"We're going to have a great spring" said Ross Mackesey, president of the Greater Baltimore Board of Realtors. "I don't see anything on the horizon that's going to be a break in that."
Jonathan Hill, vice president of communications for Metropolitan Regional Information Systems, the country's largest real estate listing service, also said January was an early indicator for spring.
"January is kind of peeking out from under the snow," he said. "We expect this to continue for the next couple months for the strong selling season in the spring."
Numbers released Tuesday by RealEstate Business Intelligence, a subsidiary of MRIS, show January sales up by 18.4 percent compared with a year before. It was the best January sales volume since 2007, RBI reported.
New contracts rose 20.5 percent, the eighth straight month of increases and the highest since January 2006, RBI reported.
A separate report from the Greater Baltimore Board of Realtors, pulled four days later, showed new contracts up 40 percent in January.
The median sales price for the city and five surrounding counties was flat from a year before, but if so-called "distressed properties" — including foreclosures and short sales — are removed, the median rose 8.4 percent to $260,000, RBI reported.
Anirban Basu, chairman and CEO of the Sage Policy Group, a local consulting firm, said the last very good local market was in 2005, and "this is shaping up to be the best year for the housing market since that time."
Daraius Irani, chief economist of the Regional Economic Studies Institute, offered a less rosy perspective. While the country has seen 68 months of slow but steady growth and years of stock market advances, he worries that stocks are overdue for a correction, especially with trouble brewing in the European economy.
"I think it's going to be a decent spring for real estate," he said. But, he added, "I wouldn't break out the Champagne and start living the life like it's the peak of the market in 2006."
RBI's report on sales showed volume increases across the city and Baltimore, Anne Arundel, Howard, Carroll and Harford counties, with the highest jump of 38 percent in Harford, the lowest of 0.6 percent in Howard.
Mackesey noted that there was more snow in January 2014 than last month, so that may have helped January's numbers.
Median sales price results were more mixed, however, according to RBI. Howard led the way with a 13.6 percent jump, to $375,000 from $330,000, followed by Harford, up 9.3 percent to $225,000 and Anne Arundel, up 1.2 percent to $297,500. The median price in Carroll was flat at $272,000.
In Baltimore City and County the median price fell. While the county was off 3.7 percent to $187,750, the city plunged 31 percent, from $100,000 to $69,000, reflecting a large percentage of sales of distressed property, meaning short sales and properties owned by the lenders.
Of the city's 521 sales in January, 46 percent were distressed properties, compared with 32 percent for the metro area as a whole, according to the Realtors board.
Mackesey said that job growth in the Baltimore area appears to be boosting optimism.
"We often overlook consumer confidence," Mackesey said. "That has a lot of sway in the market. Buying a home is a really emotional experience. So confidence plays a pretty significant role."
He said several changes have been announced recently at the federal level that should make things a bit easier for borrowers, which also could boost the spring market.
The Federal Housing Administration announced early last month that it would reduce the mortgage insurance premium rate on loans the agency backs from 1.35 percent to 0.85 percent, which was expected to cut annual payments by $900. Also, the two federally chartered corporations that buy mortgages and sell them as securities, Fannie Mae and Freddie Mac, announced in the fall that they were decreasing the down payment required from five to three percent.
Also in the fall, Fannie Mae announced that it would grant relief to lenders by limiting the circumstances under which lenders would be compelled to buy back faulty loans.
Those federal changes registered in the Mortgage Bankers Association's index of credit availability, which jumped nearly 2 points to 117.8. For comparison, with lending standards most lax during the height of the housing bubble in 2006, the index nearly reached 900. The index hit a low of 90 in January 2009, indicating very tight credit.
"It is helping," said Lynn Fisher, vice president of research and economics for the Mortgage Bankers Association, of the recent changes. "Lenders have said that's a step in the right direction."
Bob Frazier, Baltimore area manager for Prosperity Home Mortgage, said so far loan standards have not eased in terms of required documents, debt load and credit score. Still, he said, he's been busy, and he figures that has to do with falling interest rates in early January, and concern that rates could rise later in the year.
The 30-year fixed rate is now about 3.75 percent, he said, down from over 4 percent in December.
Dave McIlvaine, an agent with Coldwell Banker in Ellicott City, said he could see a sign of a brisk market even before the numbers were released this week, as he sat for a couple of hours at an open house in Catonsville last Sunday. He figured two or three people would show up for the home selling for between $300,000 and $400,000, but he got a dozen.
"That's significant boots on the ground," he said.
Bob Brendel, an agent with Re/Max in Timonium, said an agent in his office saw 17 couples show up for a two-hour open house in Owings Mills last Sunday for a house in that same price range.
"That's unusual," he said. Even more unusual is he's seeing contracts with escalation clauses, or "escalators," meaning the prospective buyer agrees to go above their offer if the seller gets higher bids.
"It's been a number of years" since he's seen one of those, Brendel said.
Mackesey, a sales manager at the Long & Foster office in Lutherville-Timonium, said he's also seen them, a rare sight since the overheated market of 2005 and 2006.
At the very least, a sign of change, Brendel said.
"I am absolutely convinced the spring market has already started," he said.