REAL ESTATE in the Baltimore metropolitan area is booming. Month over month existing home sales have increased since July 1997. What factors are contributing to the increased sales? How long can this real estate boom continue? What could happen to slow it?
P. Wesley Foster Jr.
President and owner, Long & Foster Real Estate Inc.
There are two reasons for the good resale home activity. Number one, there is the lowest unemployment in 30 years. People know they are going to keep their jobs, so they are able to make a big purchase. The second thing is the low interest rates for mortgages. You put those two together and you have a dynamic real estate market. There has also been pent-up demand. People have not been buying because they were not job secure and interest rates were not low, so they had been waiting to buy.
But the boom is already ending. It's already slowing down, because interest rates have crept up and because we have serviced a huge amount of the pent-up demand. Right now our main problem is we can't find enough houses to sell, and that's another problem contributing to the slowing of the market.
We know this cannot go on forever; this is a cyclical business that does boom and bust. I think the market will grow by about 10 percent less than what we've been running right now, which is not bad because we've had two of the best years ever. What could really knock it down would be high interest rates and unemployment. If people start worrying about their jobs, they stop buying houses.
Robert Van Order
Chief economist, Freddie Mac
The real estate market has been extremely strong everywhere. One reason is the underlying strength of the economy. Job growth has been strong, and people have been confident to make purchases. Also, interest rates have been low. They are up to almost 8 percent, but that is still low.
I see a slowing down in the market, but I don't see a recession. We'll see mortgage applications start to fall off and we'll see sales fall off, but they are falling off from record years. I don't think we'll see recession levels unless interest rates go up.
The rise in rates also had some effect. A year ago, a lot of people refinanced and got 6.5 percent mortgages. Those people will be reluctant to trade up if they have to go to 8 percent.
I think sales have been running at rates that cannot be sustained. For the most part, home sales are governed by the increase in population, but we've been seeing them running higher than the population growth warrants.
D. R. Grempler
President, Coldwell Banker Grempler Realty Inc.
Sales are still very strong. I'm hoping that they won't decline. But it's dependent on good economic times. If economic times turn bad in Maryland again, the economic boom will dry up. Maryland has some economic problems it needs to work on. It's not competitive with its neighbors as far as its tax structure and everything else go. Because it's not competitive, it has a hard time attracting new businesses and new industry that would lead to more home sales.
For the coming year, I see a good housing market equal to or better than last year. It's slowed down a little bit recently, but [at Coldwell Banker Grempler Realty] year-to-date sales are ahead of last year. I think this area can sustain this growth. It can't do it forever. It probably won't do it forever, but I wish it would. But it could if Maryland could attract new industry and business and continue to grow.
Gilbert D. Marsiglia
President and owner, Gilbert D. Marsiglia & Co.
The market is still pretty good. We are probably seeing a little bit of a slow up, but that may have to do more with the time of the year, because sales start to slow a little in the last quarter. The little bump up in the interest rates has slowed things a little bit, too, but not appreciably.
I think we will see the market fairly steady compared to last year, at least through the balance of the year, as long as interest rates stay where they are. There is also the possibility you may see the rates come down toward the end of the year because of supply and demand as less people are buying. As long as inflation doesn't take over and consumer confidence stays high, I think we'll see a steady market. I don't know if we'll see a better market than we've been in for the last 12 or 18 months, because we've been in one of the best markets we've ever been in, but I think we will see a market as good as we've been in.
If inflation goes up, then we will probably see the rates start to creep up. That may, in effect, hurt consumer confidence and it would cause consumers to lose buying power. The main thing that is going to hurt, though, is inflation. That's the big thing.