In what could mark the crest of a sizzling two-year real estate boom, housing sales in the Baltimore area recorded their fourth consecutive month of double-digit price increases and rose nearly 14 percent in volume last month compared with a year earlier, according to industry figures released yesterday.
Since the housing deals that produced those numbers were sealed, mortgage interest rates have moved sharply higher. And while there is still substantial demand for houses, and a tight inventory of available properties, some agents and many economists expect the white-hot market to cool in the coming months.
"There is going to be a time when it's going to change," said Creig Northrop, a real estate agent with Long & Foster Co. who sells homes in Howard County. "And maybe that was the window of time. What happens with the rates going up is that people can't buy as much."
July enjoyed a convergence of positive factors pushing real estate. Real estate agents said the spring and summer months traditionally are the busiest time of the year as homebuyers hope to move before the school year starts. Those buying habits, coupled with the lowest interest rates in at least four decades and a small inventory of homes for sale, have pumped sales, agents said.
The average price for an existing home in Baltimore City and the five surrounding counties reached $225,172 last month - 18.15 percent more than in July 2002, according to figures by Metropolitan Regional Information Systems Inc., the Rockville listing service used by brokers and agents. The number of homes sold totaled 3,982, up 13.84 percent from a year earlier.
Real estate agents said in recent weeks they have been fielding more calls from buyers concerned about rising interest rates but they have not seen a drop in demand. Indeed, pending contracts, which offer a gauge of sales to come, were up 13.5 percent compared with July 2002. The average home sold in 44 days - it took two weeks longer a year ago.
Several agents said they expect sales to remain healthy even if they don't match sales records of the past two years. And they point to a limited inventory of houses for sale as proof of the demand. Last month, 6,986 houses were listed for sale - a 5.57 percent decrease from a year ago.
"We will continue to grow," said Cindy Ariosa, president-elect of the Greater Baltimore Board of Realtors. "We are one of the basic necessities of life. There's always going to be the need for housing. Rates are still very attractive and I think the economy and everyone is on our side to keep the rates attractive."
Thirty-year mortgage interest rates hit 5.21 percent in June, the lowest in the four decades that mortgage giant Freddie Mac has been tracking the numbers. Those figures have risen steadily ever since as investors bet that other segments of the economy will prosper.
Reports released yesterday on consumer spending and retail sales showed strength but stocks struggled after a five-day rally. The bond market, which helps set mortgage rates, continued to suffer. This activity emerged despite word from the Federal Reserve early this week that it does not expect to raise short-term interest rates anytime soon.
The national average for a 30-year mortgage dropped to 6 percent this week, down from 6.37 percent a week earlier, the Mortgage Bankers Association of America said yesterday. Despite the decline, the group said mortgage loan applications fell 16.1 percent from a week earlier. As interest rates have spiked, the two-year surge of refinancings has stalled.
Record real estate sales have helped prop up the economy during the past two years while other areas of commerce have slowed. As interest rates fell, home prices rose steadily, allowing homeowners to refinance their existing loans for lower monthly payments and use their money for other things. Home sales also have prospered as the low rates helped many first-time buyers enter the market.
Many would-be buyers have expressed concern about the rising rates but said they will keep shopping.
That's the case with Katrina Brownson of Baltimore, who hopes to buy her first home with her husband, Robert, and their four children before the end of the year. Brownson said she checks interest rates each Monday on the Internet and has watched them steadily climb during the past few weeks.
In the Baltimore area, existing home sales rose by double digits in every jurisdiction except Carroll County, where 274 homes sold was 7 percent more than for the period a year earlier. Average sales prices rose by double digits in every jurisdiction.
In a separate report yesterday, the National Association of Realtors said home prices in each of the 126 metropolitan areas it tracks rose during the second quarter of the year.
That was the first time that has happened since the group started the survey in 1982.
Forty areas experienced double-digit increases, including Baltimore, which recorded a 16 percent increase to a median price of $204,200, compared with the second quarter of 2002.