Low mortgage interest rates might have been a fluke in early 1994, real estate experts say, but a precipitous climb from the 7 percent range will no doubt leave Maryland's housing market smarting this year.
Sales of new and existing homes in the Baltimore region and statewide declined during the second half of 1994, and analysts predict more of the same.
Projections range from sales being even with last year to an actual decline of 5 percent.
Economists predict modest declines in housing sales, starts and mortgage originations nationally.
"I'm not as optimistic as I used to be," said Michael A. Funk, assistant director of the University of Baltimore's Regional Economic Studies Program.
"Housing sales peaked in the early part of the summer for the year, and we're seeing the down side of the housing cycle. I would not expect this next year to be better than last year."
J. Nicholas D'Ambrosia, president of the Maryland Association of Realtors, said that even though consumers reportedly are spending more, "with the rise in interest rates and the overall attitude -- people just don't have a real good feeling about the way things are going."
Industry experts offered predictions based upon several expectations:
* Interest rates -- a key factor driving home sales -- should rise modestly before stabilizing for much of the year.
"We do think interest rates will be somewhat higher earlier in the year," said Keith T. Gumbinger of HSH Associates, which tracks Baltimore-region mortgage rates.
He believes that rates on 30-year, fixed-rate loans will peak at around 9.5 percent before April.
"But then, we'll likely see soft fixed interest rates as the economy slows down a little bit, with the overall rate over 9 percent for the majority of the year."
* A burst of mortgage refinancing that began three years ago and tapered off last year has left fewer potential home buyers in a position to make a move.
Some chose to refinance rather than buy; others used their savings to purchase big-ticket goods.
* Rising interest rates have hurt the housing market in Maryland more than elsewhere.
"Maryland is one of the weakest states out there with respect to job growth and economic growth, and it's not likely that housing will be very strong," said Stanley F. Duobinis, director of forecasting for the National Association of Home Builders.
He noted that the state has lost jobs in government and subcontracting that spurred much of the growth in the 1980s.
Construction starts of single-family homes in Maryland are expected to fall to 24,600 this year from an estimated 27,200 in 1994, he said.
In the Baltimore region, sales of new homes were expected to fall for the first time in four years, by at least 15 percent, from 10,400 in 1993 to an estimated 8,600 to 8,800 in 1994, said Robert M. Lefenfeld, senior vice president of Legg Mason Realty Group.