Sue Miller easily recalled the office meeting 14 years ago -- right after she began work as an agent with Hill & Co., the little real estate brokerage in Cross Keys known for its handling of expensive homes.
"It's amazing. I can remember [a fellow agent] saying it just won't be so long before you see somebody buying a million-dollar house in Baltimore," Miller said. "At that time I had just sold a house, and it got a lot of attention because it was the most expensive house sold in Baltimore City, it was like $500,000. and now look -- there is $2 million, $3 million -- and that's in 14 years."
That's right, take a good look. Just as the combination of a still-rising stock market, low mortgage rates and high consumer confidence turned 1998 into the best year of the decade for first-time buyers, it also resulted in a rebound for luxury sales in Baltimore.
In 1998, the number of existing homes that sold for between $500,000 and $1 million almost doubled over 1997, as did the number sold for more than $1.5 million, according to statistics compiled by the Metropolitan Regional Information System, the multiple-list system used by Realtors.
The reverse, however, was true for homes selling for $1 million to $1.5 million. But Realtors who specialize in the high-end market attribute that to a simple reason: The turnaround that began in the summer of 1997 quickly began to diminish the number of quality luxury homes on the Baltimore market.
"Each year there seems to be more buyers for these properties," said Tim Rogers, president of Hill & Co., whose firm had a hand in two of the six $2 million transactions last year in Baltimore. "Right now there are really very few super nice things on the market. I think there are more and more people with money, and fewer and fewer nice properties."
It seems the definition of a luxury home in the Baltimore market has evolved over the last two years.
"A half-million-dollar house today is not truly a luxury-type home in Baltimore County," said Marc Witman, an associate broker with Long & Foster Real Estate Inc. and president of the Greater Baltimore Board of Realtors. "As a jest, sometimes to my buyers, I say, 'A half-million dollars doesn't buy what it used to.'
"There was a time when I thought you'd buy a half-million-dollar house, it would be the castle on the hill. Well, a half-million-dollar house isn't the castle on the hill anymore. A half-million-dollar house is the four-bedroom, two-story, 2 1/2-bath Colonial with a couple-car garage in a subdivision."
Karen Bisbee, a vice president of O'Conor, Piper & Flynn ERA who with her mother, Nancy Hubble, combined for $30 million in sales last year, is well aware of the changes in the tide that swept the market last year.
"The pool of buyers [for these homes] has doubled in the last two years. My list has doubled," Bisbee said. "Part of the problem is not that the pool has doubled, the pool of houses has evaporated. It's going to cause a problem; it is driving prices up. It is absolutely driving prices up because there isn't a darn thing to sell people. So sellers can be cocky, and they can be aggressive in their pricing and bold in their opinions of value, and they can get away with it, and the market supports it.
"I remember six or seven years ago there were 43 properties over a million dollars on the market in Baltimore, and that was a heck of a lot of money. Based on the statistics at the time, that was a six-year consumption to absorb all that property.
"Now, these good properties come on the market, and they sell in 30 to 40 days max. Some of them sell the day they go on the market, the week they go on the market. There is no delay. People are delighted to have the opportunity to buy these places, there are so few of them."
The people who are making the purchase are not necessarily the stereotypical older mid-50s couple whose ship has come in. It wasn't uncommon last year for agents to be working with younger couples -- in their 30s and 40s -- who through entrepreneurial success and Wall Street savvy had a million-dollar-home on their wish list.
"Everything has changed, in my opinion," said Michael Yerman, of Long & Foster's Greenspring office in Baltimore County. "You have new buyers who have stepped into a bigger home quicker than we did it. I am a child of the 1950s, so when we moved into a bigger home, you were established, you were in your 40s and then you made that giant leap into a big family home. But I think people are doing it at younger ages, people in their late 20s or early 30s."
Bisbee said she had a "couple of twenty-somethings" on her buyers' list, and another eight younger than 40 who are searching for their executive home. And those buyers -- like those in lower price brackets -- have been able to capitalize on mortgage rates, the lowest in a generation, that consistently dipped below 7 percent.
"Interest rates are at such a remarkable low, [buyers] are able to secure a mortgage that is substantially higher than the mortgage on the previous home and not change their mortgage payment," she said, noting a couple who sold their $700,000 Baltimore County home to buy a million-dollar property, and their new $650,000 mortgage only raised their monthly payment by $42. "It enabled the deal to close," Bisbee said.
Even if luxury buyers have the wherewithal to make a substantial down payment on a new home, they are refraining, according to some Realtors.
"Most of them do go for the large mortgages to get the deduction. Plus, they don't want to put all their money into it, they can do better in the stock market," said Rogers of Hill & Co.
So the biggest issue this year for agents and buyers is finding a house to treasure.
Sold older homes
"You go to Guilford, Homeland and Roland Park, those neighborhoods that got battered in the early '90s, and now people are recognizing that these older homes with slate roofs and brick all the way around and plaster walls can't be replicated unless you have a lot of money," Yerman said. "You can't go out and buy a house like that in the hinterlands; they don't exist, and to re-create it is almost impossible."
Sometimes well-to-do, land-loving couples get a slap of reality when they get a yearning for Anne Arundel waterfront.
"You get a lot of those people who come and look," said Patricia Savani, a principal of Champion Realty in Anne Arundel County. "What happens is, if I am living in a $400,000 house anywhere else -- Howard County, Baltimore County, even Montgomery County -- I have a nice house. I have a lot of square-footage. I have a lot of beautiful furniture.
"Then they come down here, and they say 'I want to look at something in the $600,000 to $700,000 range on the water.' Often times they can't even begin to get what they are already living in. There is a real culture shock, and that really weeds out the water-front buyer from the water-access, water-privileged or water-view buyer."
Still, Anne Arundel, with its variety of water views, commanded the most sales of homes priced higher than $500,000 in the Baltimore metropolitan area, with 169. But it wasn't until last year that many of those properties began to move off the market.
"Back in 1994-95, there were tons. They were everywhere, but no one was buying them. People were not as confident three years ago as they are today," Savani said. "We had [waterfront homes] on the market for 24 to 36 months, but '98 was the year when many of those got sold; [the year] cleaned out a lot of property."
Yet the luxury home buyer of 1999 is not of the same personality as a similar buyer a decade ago, the last time there was a boom in the high-end market, Savani said.
"Even though we have more buyers than there is inventory to satisfy them, there is a difference in the buyer from 1989, when we got into that frenzy [when a home] was $740,000 and now it is $825,000 and someone would come in and buy a house for a million. We'd say, 'Have we all gone crazy?' Well, that's not happening. The frenzy to pay whatever just to buy it -- hopefully most of the people learned their lesson in the early '90s, and they are not doing it anymore."
Bisbee and Yerman have also noticed a change in what the luxury home buyer is seeking.
"The flavor or the dialogue that you hear from the $200,000 customer is just a scaled-down version of the dialogue of what you hear from the $2 million customer," Bisbee said. "In the late 1980s, you had people buying and building 'glory' houses or 'ego' houses, and I am finding in the late 1990s there has been a return to family life."
Said Yerman: "The opulence is gone. They don't need the great big portico. They want creature comforts. They want to show a movie in a theater room, they want to lift weights in an exercise room, they want good computer space, they want a gathering place for their family, and they are putting money into those things.
"We have changed, and I think it is for the good. So people who are in the marketplace who are trying to buy these properties that want a bigger, greater house want them for the right reasons."
Pub Date: 2/28/99