The number of homes sold in the Baltimore area last month plummeted 17 percent from August 2006 - the largest drop in volume this year, statistics released yesterday showed.
Average prices remained flat in Baltimore and the five surrounding counties. The price of an average home, $323,134 last month, was down $81 from a year earlier, according to data from Metropolitan Regional Information Systems Inc., the Realtors database of property listings for Maryland.
With the slowdown in the housing market stretching well into its second year, the inventory of unsold homes swelled to a record 20,265 listings in metropolitan Baltimore. It took longer to sell a home, with the average time on the market reaching 84 days, a 44 percent jump over the previous August.
"Buyers are moving much slower," said Leslie Thomas- Vitek, an agent with ReMax Advanced in Marriottsville. "We have to try to talk to the sellers a lot and keep an eye on the competition and encourage them to reduce the price and not wait too long to do that."
The slowdown has followed a four-year period in which buyers, nationally and in the Baltimore region, took advantage of low mortgage rates and easy credit to snap up properties in bidding wars that drove up values at double-digit rates. But when the home prices stopped rising, investors raced to unload properties, and inventory began to climb.
Prices have fallen by as much as 15 percent to 20 percent in parts of the country where speculators were most active, though prices have mostly stayed flat or risen slowly in the Baltimore area.
More recently, problems with mortgages for subprime borrowers, or those with weak credit, have caused lenders to tighten standards.
One lender that has strengthened credit guidelines, Countrywide Financial Corp., announced Friday that it plans to slash up to 12,000 jobs, or 20 percent of its work force, because of expectations that it will be making fewer new mortgages.
And American Home Mortgage Investment Corp., the nation's 10th-biggest home lender, filed for bankruptcy-law protection last month. It laid off several hundred employees in Maryland and thousands more across the country.
Slower sales in the Baltimore area have come partly as a result of the credit crisis, said John McClain, a senior fellow at the Center for Regional Analysis at George Mason University.
"Companies are getting stricter for qualifications on mortgages because of what's happening in the subprime mortgages," McClain said. "Some people might have been able to afford a house and get a mortgage three months ago, but the mortgage companies are getting more particular, and pending sales have been canceled because of this."
In August, 2,868 homes sold in Baltimore and the five surrounding counties, compared with 3,460 homes sold in August 2006. The number of homes sold fell in all jurisdictions, as much as 23 percent in Baltimore City and Howard County and more than 20 percent in Anne Arundel.
"The values are holding up, but the units [sold] seem to be dropping from prior months," said William L. Yerman, president of the Greater Baltimore Board of Realtors. "Sellers are not adjusting their prices quickly enough or aggressively enough, and that's what's causing buyers to wait it out."
Many sellers, especially those who bought during the boom years when home values soared, are still counting on pre-slowdown prices, real estate agents said. The properties that settled in August sold for just under 95 percent of their asking price on average.
Average prices rose, compared with August a year ago, in Howard, by nearly 2 percent, Baltimore County by 3 percent, and Baltimore City by 2.5 percent. But prices fell in the rest of the region, by as much as 5 percent in Anne Arundel.
"The sellers need to adjust to a more normal market," Yerman said. "There are plenty of buyers in the market if the house is priced right."
Cindy Ariosa, a regional vice president for Long & Foster in Baltimore, said agents have begun re-evaluating the pricing of their listings much more often than in the past, checking the prices of comparable homes on the market every couple of weeks, instead of every month or so.
"Sellers are starting to hear the message that prices are shifting," Ariosa said. "The buyers are coming in low [on offers] and asking for closing costs help."
Sharon Welsh and her husband have been trying since the end of June to sell their eight-year-old, four-bedroom Colonial home in Ellicott City, so they can relocate to Florida. The sellers have reduced their asking price from $749,000 to $739,900, made some minor upgrades and held open houses. Yet no offers have come in.
"We thought with the amount of folks coming through, we'd have at least one or two offers, but there are a lot of homes in our area for sale right now," Welsh said. "We'll continue to advertise and have open houses and wait for the market to take a turn. I'm sure it will eventually. Hopefully sooner rather than later."
Buyers are often waiting for their own homes to sell first.
Buyers are also facing a radically shifting lending market. Lenders have curtailed or stopped offering the more exotic and flexible loans in light of problems in the market for subprime loans.
"Buyers are going to have to do more prep work and be more ready and save some money like you used to have to buy a home," Thomas-Vitek said. "In the last couple of years, you could decide and a month later be at closing with no money out of your pocket. It will go back to having more prepared buyers."
Despite August's weak home sales, September is already looking more promising, agents said.
"We have more buyers out right now, and some who have great credit ratings, and they know they are in the driver's seat," Ariosa said. "There is plenty of product and plenty of low rates."