Rising mortgage rates took a toll on the housing market last month, causing a sharp drop in the number of home sale contract signings in metropolitan Baltimore.
Contract signings are considered a harbinger of the industry's health. They provide an early indication of what final home sales will be because actual closings trail by about two months.
The number of contracts for new and existing homes plunged 18 percent in July compared with the same period last year, the Greater Baltimore Board of Realtors said yesterday.
The number of contracts has declined each of the past four months, but July marked the first time in a year that final monthly sales fell below the previous year's levels as well.
"While July is typically slow, you normally don't see that big of a drop off," said Patrick Kane, vice president of Coldwell 'u Banker/Grempler Realty. "To the average homebuyer, all they know is rates were lower two months ago than they are now."
After reaching 25-year lows, mortgage rates have risen steadily in the last several months. For instance, the interest rate for a 30-year, fixed-rate mortgage has risen from below 7 percent last August to 8.5 percent yesterday. And most economists believe rates will rise to at least 9 percent by the end of the year.
The number of contract signings fell by as much as 36 percent in Carroll County but as little as 3 percent in Baltimore City, the board said.
"What you're finally seeing is the rise in interest rates slowing down people who were buying quickly before," said Nancy C. Hubble, president of the Realtors' board. "Interest rates have made a difference. They were so wonderful, that everyone was just jumping in.
"We're still selling to relocation people, but the people waiting to buy, who want to move up or downsize, they're not going to do it this time of year," said Ms. Hubble, a broker with W.H.C. Wilson & Co.
She said the downturn would continue through the summer.
The number of home sales as measured by actual closings in July declined 2 percent, from 1,827 to 1,778. For the year, however, sales are still up 9 percent over the same period last year.
The average price of a home at closing in the region decreased by 1 percent in July, to $133,935, the board said.
The number of homes listed for sale has been off this summer as well, down 5 percent in June and 4 percent last month, the Realtors' organization said.
Some homeowners who took equity out of their property when they refinanced during the past couple years haven't found it worthwhile to sell their homes now as rates rise, agents said.
But buying and selling will pick up again once rates begin to stabilize, Mr. Kane said.
"We've always seen that any change that continues to happen affects business," he said. "Once things settle down, and it stays steady, people get in and say they don't have to worry about rates going up or down."