Fragile Nest Eggs


These are uneasy times for homeowners. Rising interest rates, falling appraisals and a sluggish sales market bode poorly for the most important -- frequently the only -- investment in most people's lives. The days of rapidly rising home values are gone as the market for new and existing homes has flattened.

In Howard County, the priciest housing location in the Baltimore metropolitan area, sales have been in decline for seven months in a row, while the average assessment has barely inched up in years. In some areas, housing values have even declined.

Perhaps the most significant warning sign is the serious slowdown in the buy-up market -- those existing residents looking for larger or new homes to move into. Whereas selling a home became a huge moneymaker for people in the go-go '80s, many homeowners are now looking to break even at best. Since 1988, when appraisals peaked in Howard County, increasing 16 percent that year, the average assessment has spiraled in steady decline. This year, assessments increased 1 percent.

There are, of course, two ways of looking at assessments. The brighter side suggests that lower appraisals are reflected in lower property taxes. But that is only true as long as the tax rate remains the same. County officials will find themselves under increasing pressure to raise that rate to meet increasing demand for services.

The darker side of assessments is the effect they have on actual value. Although they are not intended to reflect a home's worth exactly, assessments are routinely used as a measure of fair market value.

All of this comes at a time when many of us have invested heavily in housing -- at the expense of all else. Americans' rate of savings is at an all-time low of just under 3 percent of annual salary. That compares with a 9 percent rate of savings from 1950 to 1970, and 5 percent during the 1980s. Less savings and declining home values add up to more consumer fear.

Officials don't expect things to change much in the near future, although sales agents are hopeful that spring will thaw the homebuying market (as they are almost every spring). No one, though, is predicting a return to the heydays of the 1980s. Of the various measures of consumer confidence, this one registers a weak pulse.

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