Housing prices accelerated in the Baltimore region at a record pace in 2004, with the average rising more than 17 percent - an upswing that was double the nation's.
Homes in the area sold for an average of nearly $248,000 last year, according to preliminary data, thanks to an extended real estate boom propelled by low interest rates and a local job market that barely took a hit during the recession.
The number of homes sold was the second-highest increase on record. Buyers purchased nearly 44,000 homes, up 13.1 percent over 2003.
Baltimore-area prices have been rising at an ever-faster pace since 2001, when they increased 3.6 percent. Prices rose 11.6 percent in 2002 and 15.3 percent in 2003.
Across the United States, home prices jumped about 8 percent last year, estimated David Lereah, chief economist for the National Association of Realtors. Almost half the metro areas the association surveys saw double-digit increases, but the Baltimore region's 17.1 percent jump was likely higher than most.
"That's a pretty healthy market," Lereah said.
There are signs that the wave might be cresting for this area, though.
Prices increased an average of just under 12 percent in December compared with the same month in 2003, a marked slowing from the frantic pace set during most of the year, according to numbers released yesterday by the Rockville-based Metropolitan Regional Information Systems Inc.
MRIS collects its data from Realtors, which means the numbers are mainly resales. They include all forms of housing, from condominiums to single-family homes.
Pricey Anne Arundel recorded the area's smallest increase in December - 9.5 percent. In Harford the average sale price rose 12.5 percent.
But prices jumped about 20 percent in December in Baltimore City, Baltimore County, Carroll and Howard.
The number of homes sold regionwide rose 11.1 percent to 3,730 last month, largely propelled by a big increase in the city. Realtors say supply hasn't been enough to keep up with demand.
"The inventory is so slim," said Melvina Brown, president of the Howard County Association of Realtors, who sees multiple contracts on houses even now, in the traditionally slow winter season. "I don't think it's going to slow, I really and truly don't."
It's become practically a parlor game to guess when home prices will stop increasing at this unusually high rate; some economists believe the nation is in a housing bubble that's poised for a pop.
Celia Chen, director of housing economics at Economy.com in West Chester, Pa., said the Baltimore region will likely have price appreciation around the national average this year - instead of far above - and could see periods of declines in 2006 and 2007.
"Price appreciation has been obviously very, very rapid in Baltimore," she said. "That is not sustainable at all. I think that the market is overpriced."
Lereah said he remains bullish about housing nationwide. He expects median home prices in the nation will rise 5 percent to 5.5 percent this year - a smaller increase than 2004, but still strong.
"It's going to slow, but it doesn't mean the boom is over," Lereah said. "There's no bubble bursting, let's put it that way."
Demographic changes that won't end soon are pushing prices up, he said: Baby boomers have hit their peak earning years, their children are now buying first homes and the increased flow of immigration is adding more people to the buying pool.
But mortgage rates are expected to rise to about 6.5 percent by the end of the year, which is why Lereah believes the market will ease off the accelerator a bit. For all of 2004, rates on benchmark 30-year mortgages averaged 5.84 percent, according to Freddie Mac, and often dipped lower.
Realtors say the low rates have been an important part of the boom.
"In a lot of cases, the purchasing of a home would be cheaper than the rent," said Henry A. Strohminger, president of the Greater Baltimore Board of Realtors.
He and other real estate agents say they've never seen a market as strong as this one. Prices rose faster last year than in any other since MRIS began tracking the region in 1998, according to a Sun analysis of preliminary numbers.
Excluding the city, where the average price is lower, regional prices rose 19.1 percent.
Howard County saw the biggest jump in prices last year - slightly more than 24 percent. The average home there sold for about $368,000, the highest in the region.
Sage Steele knows all about that. She and her husband paid $613,000 last summer to get a single-family house in Howard County's popular River Hill in a bidding war: The owner had listed it at $579,900.
When real estate agent David Nevitte told her she'd won, she exclaimed: "I'm thrilled, but I'm scared to death that we have to pay for it now."
"You just have to swallow it and look at it as an investment," said Steele, 32, an anchor and reporter for Comcast SportsNet who moved her family of four from Silver Spring.
Anne Arundel, the second-priciest jurisdiction in the region at an average of $335,342, increased just under 19 percent last year.
The average price increase was 19.4 percent in Baltimore County, 20.1 percent in Carroll and 15.7 percent in Harford in 2004.
But it was the long-beleaguered city that showed surprising strength - with prices increasing more than 19 percent even as the sales volume skyrocketed. The number of homes sold in the city jumped nearly 27 percent to 11,000, twice as much growth as the region as a whole.
Strohminger, a Long & Foster Realtor, said the popular neighborhoods - like Canton - are drawing people in, and the ripple effects are moving farther and farther out.
"Folks don't mind being on fringes, because those fringes are being expanded outwards," he said.
The price of new homes in the region has risen even faster than the resales, according to numbers from Hanley Wood Market Intelligence, which provides information on new construction. The average new home in the Baltimore region sold for about $380,000 between January and October last year, up 24 percent from the corresponding period in 2003.
Many real estate agents have seen a slowing from the frenzied pace of the spring and summer, but the market is still unusually busy, they say.
"Generally in December I am so slow, and we have not seen that at all," said Sally Byrne, a Realtor with Coldwell Banker Residential Brokerage at Cross Keys.
Adam Richardson was taken aback by the demand in Hampden, where he and wife Mandy were renting until recently. They lost out on a rowhouse in the community last fall even though they offered $12,000 more than the asking price. Somebody still outbid them.
"It was crazy," said Richardson, 27, a licensed practical nurse. "We felt really rushed - I mean, it's such a seller's market. ... I was just so anxious to get into a place."
He's glad that home didn't work out, though: They ended up buying a bigger rowhouse in Hampden for $180,000 - $10,000 less than they offered on the first one. They wrote the contract in September, settled last month and moved in on New Year's Day.
Richardson knows prices have risen fast. He'd prefer if they keep going.
"I'm hoping it doesn't top out," he said, "because I'd like to reap some of those benefits."