Rising mortgage interest rates continued to batter the housing market in metropolitan Baltimore last month, as sales of existing homes took a 10 percent dive for the second consecutive month.
The number of homes in the sales pipeline also fell last month as contracts signed plunged 26 percent, indicating the downturn would likely continue for months. Sales contracts, which typically take two months to close, were down 27 percent in September.
"Fall is the second-busiest time of the year, and most agents and brokers look forward to it, but it's not happening now the way it normally is," said Henry A. Strohminger, an agent with Prudential Preferred Properties.
In all, sales of previously owned homes in the region fell to 1,407, compared with 1,572 last October, the Greater Baltimore Board of Realtors said yesterday. Home sales that reached settlement have been off slightly since July, and declined more sharply in September, figures for Baltimore City and Baltimore, Howard, Harford and Carroll counties show.
Mr. Strohminger said he has seen a sales decrease of about 20 percent compared to this time last year, noting that homes in the $100,000 price range in the city were selling best, usually to first-time buyers taking advantage of special financing made available through lenders and government programs.
"Until the shock of the higher rates subsides, it won't be busy," Mr. Strohminger said. "But rates are still good, and once people digest that, they'll be back."
Overall sales in the city increased, but they declined in each of the surrounding counties, figures showed.
Apparently responding to the higher rates, which lead to higher monthly payments, buyers migrated toward lower-priced homes last month. The Realtor board reported the average sales price of a home in the region fell 10 percent to $130,782, compared with last October.
Average interest rates on 30-year fixed loans have climbed from a low of 6.83 in October 1993 to a recent 9.13 percent in the Baltimore region.
Last year's low rates kicked off a flurry of refinancing among homeowners, one of the major factors affecting home sales this year, said Barbara J. Nock, vice president of the Realtors' board.
"They have maxed out their mortgage, leaving not as much equity to sell and move forward," she said.
She also noted that she and other agents see many buyers who qualify for homes based on income but are pushed out of the market because of little savings for down payments or high credit card debt.
Many of the buyers who sign sales contracts intending to get 30-year, fixed-rate mortgages are ending up with adjustable loans, which have lower introductory rates, by the time they reach the settlement table, said Douglas W. Poole, of O'Conor, Piper & Flynn in Hunt Valley.
But real estate agents held out hope that results of Tuesday's election would help restore consumer confidence and send more buyers their way.
"In previous years, downturns have occurred in the real estate market during a major election and have dissipated once the election is over," Ms. Nock said.