Home sales across the Baltimore metropolitan region showed their first gain in 16 months in January, a sign that buyers are returning to the market in advance of the crucial spring selling season.
The 2,156 units sold in Baltimore and the five surrounding counties last month marked a 3.75 percent increase from January 2006 and reversed months of double-digit declines, according to sales data released yesterday by Metropolitan Information Systems Inc., a Rockville firm that tracks homes sold through the multiple listing service. The last time year-over-year sales were positive was in September 2005.
Sellers were also able to get moderate increases in prices over a year earlier, with the average home price in the region posting its strongest advance since August.
Economists credited relatively low mortgage rates and the region's economic growth, which continues to generate jobs.
"I have become much more optimistic about the housing market in the past couple months," said Anirban Basu, chief executive officer of Baltimore-based Sage Policy Group Inc. "The pipeline of buyers is being replenished by ongoing availability of attractive mortgage rates and ongoing job growth in Maryland. The housing market has begun to improve many months before anticipated."
Mortgages rates have fluctuated in a narrow range in recent months and remain near historically low levels. In the Baltimore region, the average rate on a 30-year fixed-rate loan dipped to 6.43 percent this week, according to HSH Associates.
Sales in January rose in all five counties. In Baltimore City, they declined but at a much slower pace. The drop was the first measured in the single digits since November 2005. The city also saw by far the strongest price gain, posting the only double-digit increase in the region.
Another indication that the market might be coming back into balance: fewer homes for sale. About 14,800 homes were listed during January, about the same number as in December and significantly below the levels of preceding months. But listings remain substantially higher than they were during the height of the housing boom, when real estate agents often complained about tight supply.
Basu predicts that the spring market will be brisk, given those factors and still-ample inventory.
In fact, an uptick in mortgage rates might even boost business, he said: "When mortgage rates edge higher, people will get scared that their window of opportunity is closing, and so they'll jump off the fence."
Rakesh Shankar, a senior analyst at Moody's Economy.com who studies Maryland, believes recovery will take longer.
"Right now, our perspective is that the housing bust has not worked itself through the economy," he said. "Even though home sales have stabilized, inventories are still pretty high. We need to see more consecutive months of inventory decline before we start to be more optimistic about the housing market."
Shankar predicts that sales will remain flat in the months to come and then increase in 2008 and 2009, along with growth in new-home starts. Then market conditions will push home prices up, he said.
Matthew J. Canelos, 37, who closed on two investment properties in the Westport neighborhood of Baltimore last month, said he was convinced that it was a good time to buy after shopping for about six months.
He paid $85,000 each for the brick rowhouses within a couple of blocks of one another on Sidney Avenue - down from the $92,000 asking price. Already, comparable homes are listing for about $125,000, he said.
Canelos, general manager for a heavy equipment rental company who lives in a condo in Timonium, believes that the neighborhood, with its views of the Patapsco River and downtown and planned waterfront development, is on its way to becoming the next Canton.
Developer Patrick Turner has proposed an $800 million project with 2,000 units of new housing, shops, offices and a hotel on abandoned industrial land along the Middle Branch of the Patapsco River.
"In two or three years, I think this is really going to blossom," Canelos said. "It's got all the makings of a really good neighborhood. You could get in at a decent price and ride it up over the next couple years."
Frank Lanham, a real estate agent with the Fells Point office of Coldwell Banker who worked with Canelos, said he had expected the market to pick up even more last month.
"Usually, I see it pick up the second week of January," Lanham said. "But I see the market is still sluggish. I've seen some agents that have not had settlements for four months now."
In the past six months or so, Lanham said, agents have started to use the term "drama priced" - signaling price cuts of at least $30,000 - and have even splashed that term on for-sale signs.
That intrigues buyers, he said. Incentives such as help with closing costs, bonuses for agents and maybe a plasma screen TV or two also are still common, Lanham said.
Melvina Brown, an agent with Re/Max 100 in Howard County, sees signs of a warming market as buyers begin to sense a bottom.
"People are realizing that prices are not going to go way down - it's not going to be a bargain basement," she said.
Houses that closed in January are the result of contracts written in November and December, she said. But Brown doubts that the February sales numbers will be much different.
"It's still more of a buyers' market, but it's not a giveaway buyers' market," she said. "People are pricing their houses more realistically. That's helping them get the prices they want."