Area home sales took their biggest plunge in eight years last month, but home prices managed to eke out a gain, led by a double-digit advance in Howard County, data released yesterday showed.
Already sputtering sales slowed even more in October as consumers grappled with the fallout from the subprime loan crisis, economists said.
But the fact that average prices rose despite weakened demand likely reflects more higher-end homes selling in places such as Howard and the city, said Anirban Basu, chief executive officer of Baltimore-based Sage Policy Group.
"It is clear there is still some strength in the market for very high-priced housing," Basu said.
"Until recently, the financial markets have been performing well, and the affluent have found themselves becoming even more affluent. These people are less vulnerable to the subprime meltdown and general tightening of credit."
The number of homes sold in Baltimore and the five surrounding counties in October totaled 1,918, down 31.74 percent from a year earlier, according to Metropolitan Regional Information Systems Inc. It was the biggest year-to-year drop recorded since MRIS began tracking homes sold through the multiple listing service in 1999. Sales fell by 29 percent to nearly 35 percent in every jurisdiction except Carroll County.
The average home price in the region advanced 2.79 percent, to $315,765, compared with October 2006, MRIS reported.
"With sales prices appreciating, instead of going the other way, that's a positive sign for Baltimore," said Cathy Werner, president of the Greater Baltimore Board of Realtors and the broker/owner of RE/MAX American Dream. Compared with harder-hit areas of the country, "Maryland is without a doubt holding its own. Yes, numbers have dropped transaction-wise, yet we're not losing the value."
Prices will likely begin to fall in the coming months, Basu said.
"The active inventory of unsold homes is increasingly populated by difficult to distinguish housing product, and the only way that product will sell is for prices to decline," Basu said.
In Howard the average price jumped 10.08 percent - the most in 20 months and a sharp contrast to the marginal or even negative price changes posted most of this year. Baltimore was a close second in price gains, up 9.52 percent.
Only two counties - Baltimore and Harford - registered declines.
Housing inventory has remained bloated - with more than 20,000 active listings in the region last month - as the average time to sell a house has gotten longer and longer. Homes stayed on the market an average 103 days in October, a nearly 50 percent jump from average time on the market a year earlier.
"It's not that there's a big influx of additional listings, as some consumers suppose," said Daraius Irani, director of the applied economics group at RESI, Towson University's research and consulting arm. "The houses aren't selling as fast."
Agents are telling their selling clients to settle in for a long haul - up to half a year. Many buyers are unable to make a move until they sell their own home first. And tightened credit guidelines are keeping some buyers out of the market altogether.
"The loan market has really tightened up, and buyers have to be pretty clean to get a loan," said Melvina Brown, an agent with RE/MAX 100 in Ellicott City.
Buyers also are skittish of getting burned in a market decline, even as mortgage interest rates have come down, agents said.
"Buyers are hesitating to make any kind of decision," said Sonya Francis, a Coldwell Banker agent in Catonsville. "Buyers don't feel they should be paying the price the seller has listed. They're looking at a $400,000 house and saying it's only worth $350,000."
Sellers are resorting to slashing prices, remodeling rooms or offering help with closing costs, to stand out or beat the competition, agents said. Homes, on average, sold for nearly 93 percent of their asking price last month, the MRIS reported. During the height of the housing frenzy, sellers on average were getting above 98 percent of the listing price.
"Sellers are beginning to realize it's not 2005 anymore," said Brown. "I tell people they're not going to make the money you made in 2005, that's long gone. But, they are going to make money from their houses."
One seller came up with the idea of hanging a banner from a three-bedroom, remodeled rowhouse on Riverside Avenue in Federal Hill to advertise a limited-time-only price reduction. The house went on the market about three months ago for about $359,000 and has had a couple of price reductions, said Kevin Long, the listing agent, with Keller Williams Realty. The house is being offered for $299,999 - until Monday.
"With the market being slower, we're thinking outside the box," Long said. "We tried to put a deadline to spark interest."
And it has, he said, with the number of showings shooting up from one or two a week to seven in one week, enough of a change that Long now plans to drape banners across other homes he has listed.
John and Amy Cooney, architects who gutted and redesigned their Fells Point rowhouse with a custom oak staircase, a heated kitchen floor, glass block walls and a sky bridge to a carriage house, put the home on the market for $889,000 and got a contract last month, after just 13 days. But a month later, the buyers backed out of the contract.
"It's frustrating," said John Cooney, who will be relocating to Portland, Ore. "In a hot market three years ago, you'd have three or four offers lined up. Luckily, we don't have a time frame and are not in a position that I have to sell it."