Home sales in metropolitan Baltimore took a predictable turn in August, declining after a period in which the number of contract signings had dropped off sharply.
A 3 percent decrease in settlements for the month signaled a slowdown in a housing market that until recently had made steady gains this year, the Greater Baltimore Board of Realtors said yesterday.
Sales fell from 1,912 in August 1993 to 1,853 last month as buyers pulled back in the face of rising interest rates.
A decline in actual sales had been foreshadowed by contract signings, which began to taper off in April and May, then plunged 13 percent in June and 18 percent in July.
"There had been a big rush early in the year, so a lot of people looking to buy a home have already done it," said Michael Funk, assistant director of the University of Baltimore's Regional Economic Studies Program. "Now we're in a period where [higher] interest rates are starting to exclude some buyers."
After reaching 25-year lows, mortgage rates have risen steadily since the start of the year. The interest rate for a 30-year, fixed-rate mortgage has risen from below 7 percent in August 1993 to 8.57 percent last week. Economists have predicted that rates will be between 9 percent and 10 percent by the end of the year.
"We're seeing the market cool off, which is to be expected," Mr. Funk said. And with the Board of Realtors reporting an 18 percent drop in the number of contracts for new and existing homes signed in August, that falloff should continue.
"I wouldn't expect any big gains until next spring," Mr. Funk said.
But the slower pace won't necessarily mean a full about-face for a market that has been strengthening for 1 1/2 years, nor should it dampen sales of goods related to buying a home, Mr. Funk said.
"There's a big ripple effect that surrounds home sales," he said. "But given that there have been a good number of sales this year, I don't think we'll see a big impact in a negative way on the economy."
Sales in August declined everywhere throughout the region except in Baltimore, where they rose 13 percent, and in Carroll County, where they rose 1 percent.
David McIlvaine, a real estate agent with ERA Caton Realty Co. in Ellicott City, said sales in Howard County -- off 11 percent -- dropped in part because a shortage of first-time buyers has stymied home owners who want to buy larger houses.
Many sellers today prefer to wait for a sales contract on their house before buying, rather than entering into a sales contract contingent upon the sale of their home, he said.
"We have seen a slowdown in the showings on our properties," Mr. McIlvaine said. "It is a function of the interest rates, but interest rates have held steady now for about six weeks. Traditionally, when the rates go up there's a reluctance to get into the market, but people are starting to accept this level."
The average price of a home in the region increased slightly in August to $135,299, the board said.