In a climate of higher mortgage interest rates and slow job growth, metropolitan Baltimore's housing market toppled during the second half of last year, dragging down the year's home sales totals for the first time since 1991.
In December, the number of home sales fell to 1,173, plummeting 34 percent compared with the same month in the previous year. It was the sharpest slide since July, when sales began falling.
The December figures, released yesterday by the Greater Baltimore Board of Realtors, pulled year-end sales totals down 3 percent, to 17,422, compared with 18,546 in 1993. As late as October, year-to-date home sales for the region were running ahead from the previous year.
At first, home sales last year posted monthly gains. But they weakened as a previous burst of mortgage refinancing dried up and more and more home buyers were shut out of the market by job worries and higher mortgage rates. Rates on 30-year, fixed-rate mortgages had climbed steadily after bottoming out at 6.83 percent in October 1993, reaching 9.40 percent last week.
"It seemed busy until mid-year, then by September, everything stopped," said David Meltzer, mortgage officer with Provident Mortgage Corp. "Resales aren't going. There aren't jobs developing fast enough to put people in starter homes to fuel the move-up market."
The fallout of an earlier mortgage refinance boom also hurt sales, as many buyers took lower rates on existing mortgages and cashed in on their home equity to consolidate debt.
"I call buyers I worked with several years ago who might be making a move, and they say they just refinanced and don't want a loan with a higher rate," said Mary Marinelli, an agent with Long & Foster Real Estate Inc. in Abingdon. "I get the same amount of listings, but they're not selling. They're sitting there."
Last year "was a transitional" one, said Wesley Foster, president of Long & Foster. "The mortgage market transitioned from low rates and high volume to increasing rates and lower volume."
The Federal Reserve raised short-term rates six times in 1994 to ward off inflation and is expected to continue doing so. Although analysts predict long-term mortgage rates will stabilize by late spring, rates are expected to hover at about 9.5 percent, or slightly higher, for most of the year.
Although they should remain stable, rates still will be higher than they were for much of 1994. Nothing is likely to shake Baltimore's housing market out of the doldrums for at least another year since Maryland's economy is not expected to strengthen significantly in 1995, industry analysts and economists say.
"For much of the country, the rise in rates has been offset by economic growth," said David W. Berson, chief economist for the Federal National Mortgage Association. Growth boosted sales of single-family homes in many regions, making the total sold nationally the second highest ever, at 3.97 million.
"Growth [in Maryland] was stronger this [past] year, but not much. Maryland is in the bottom five in employment growth, and higher mortgage rates have a negative impact unless they can be offset," Mr. Berson said.
For the housing industry, the slump will continue to mean mergers, consolidations and layoffs in real estate and mortgage offices throughout the region.
"It's going to be harder and harder to make money in mortgages," said Keith T. Gumbinger, analyst with HSH Associates, a New Jersey firm that tracks Baltimore-region mortgage rates. "Mortgage originations have been fairly slow for the past six months and will decline as '95 continues. You're going to have small folks go out of business quietly, as they have for the past few months. It's not expected to get a lot better as the year goes on."
During the past year, real estate companies cut expenses, agents worked longer hours -- making fewer sales -- and many loan officers looked for new jobs.