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Home prices in metro region continue to soar

Baltimore-area home prices continued to soar last month, despite steadily climbing interest rates. In Howard County, the average sale price was 36 percent higher than in the same month last year.

Prices rose by at least 20 percent over last year in every jurisdiction in the region, with Howard's 36.28 percent jump -- to $367,547 -- the largest. Statistics detailing the rise were reported yesterday by Metropolitan Regional Information Systems Inc.

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Real estate experts said the area's strong economy, a limited supply of housing for sale and interest rates that are still low by historical standards have powered the market's strength.

Prices here have been rising at more than twice the national average, and some economists described Baltimore as the fourth most overpriced U.S. housing market.

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That definition is based on a comparison of growth in personal income in the region with growth in the average home sale price. Only Washington, D.C., Miami and Orange County, Calif., were more disproportionate, according to Economy.com, an economic research firm in West Chester, Pa.

There were 6,345 homes on the market in the Baltimore region last month -- 614 fewer than at the same time last year.

"We have a lot more people right now that want to buy than want to sell, and that hasn't changed," said Gilbert D. Marsiglia, president of the Maryland Association of Realtors.

The Baltimore housing market has been hot for three years, and May was the third consecutive month with an average price increase of at least 20 percent over last year.

Baltimore City posted the largest increase in sales volume last month, with 1,065 homes sold -- 25.59 percent more than in May last year. Brokers said Baltimore was becoming an attractive destination for homebuyers because of its large stock of relatively affordable real estate.

That housing stock and the growth of the economy make it appealing to young single professionals, Marsiglia said.

But he added that rising prices give homeowners who want to stay in the area little incentive to sell because they don't believe they can afford something comparable. People who are making money from their sales typically are not buying in the same area, Marsiglia said.

Mortgage interest rates are up about 1 percentage point from May last year -- about 6.3 percent compared with 5.2 percent for a 30-year, fixed-rate mortgage. Real estate agents say buyers continue to pursue housing with the expectation of higher rates in the future.

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Real estate experts predict that rates will rise closer to 7 percent by the end of this year. That likely will slow the market because some buyers won't be able to afford the higher borrowing costs combined with the rapid escalation in home prices.

The continued extraordinary growth in prices and sales in the Baltimore region reflects its proximity to the Washington metropolitan area, which has been one of the hottest real estate markets in the country.

Home prices in the Baltimore suburbs closest to Washington are still significantly lower than prices in the capital's close-in suburbs. That makes Baltimore attractive for prospective homeowners willing to trade a longer commute for more affordable housing.

Economists don't expect the rapid price escalation to continue.

"The best-case scenario, if economic conditions continue to rise like they are, house prices could stay flat until income catches up with house prices," said Celia Chen, director of housing economics with Economy.com.

It took an average of 47 days to sell a home in the Baltimore area last month -- four days fewer than this time last year.

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First-time buyer Ericka Wells, 27, sealed a deal on her Lauraville house last month. A full-time employee with the Baltimore Health Department and a part-time graduate student at Towson University, Wells was overwhelmed by the home-buying process.

"It seemed houses were going for a lot more than you would think, probably in reference to the interest rates," she said. "They were really low."

Susan Dackerman recently put her Wyman Park rowhouse up for sale at $282,000 -- more than twice what she said she paid five years ago.

Her agent held an open house yesterday.

"It seems like a great time to sell the house because the market is so hot, it really appears to be a seller's market at the moment. ... It appears to be right on the brink of changing," said Dackerman, who is moving to Ohio. "With the interest rates going up, I don't know whether the real estate market will keep up this pace."

Sun staff writer Emily Bregel contributed to this article.


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