Home sales in the Baltimore metropolitan area opened the year with a record 40 percent nose dive, falling to a new low as price declines swept through most of the region.
Just under 1,300 homes sold in January, the Metropolitan Regional Information Systems said yesterday. That's the fewest in any month since the Rockville multiple-listing service began tracking sales in 1999. Other signals of mounting distress:
Last month's sales figure is half the number of homes sold in January 2005, near the peak of the housing boom. The 40 percent drop follows four straight months of 30 percent declines.
Sales deteriorated considerably in every jurisdiction. In Harford County, they plunged more than 50 percent, the highest in the region.
The 2.6 percent decline in the average sale price - to $296,219 - was the most since the market began downshifting in late 2005 and stands as one of the biggest on record. Carroll County led the region with a price decline of nearly 8 percent.
"It's clear the market is weakening, and weakening substantially," said Mark Zandi, chief economist at Moody's Economy.com.
As the time to sell lengthens, the number of homes on the market has piled up. It rose to about 18,200 in January - which means it would take 14 months to sell all those homes at the current pace if no other properties were listed. That's twice as long as it was a year earlier.
Zandi expects that typical home prices in the metro area will fall 19 percent between early 2007 and early 2009, same as his prediction for the nation overall. "Baltimore has its problems, but they're not comparable to Florida or California," he added, referring to states hard-hit by rampant speculation, overbuilding and subprime lending.
Credit crunch blamed
John McClain, a senior fellow at the Center for Regional Analysis at George Mason University, blames the sales swoon on continuing fallout from the credit crunch that hit last summer.
Rapidly rising loan defaults sent investors running from the credit markets and have pummeled financial companies' revenue. For borrowers, the result has been tighter lending rules overall and greater expense for big mortgages.
Interest rates for "jumbo" loans of more than $417,000 are hovering about a percentage point above the rates for smaller "conforming" mortgages. The difference is usually just one-fifth of a percentage point.
"People may say, 'Well, I just think I'll wait until normal times return until I buy,' so they're staying on the sidelines," McClain said.
The economic stimulus package President Bush said he would sign this week should help because it includes mortgage provisions, McClain said.
It would temporarily increase the size of loans that mortgage financiers Fannie Mae and Freddie Mac can purchase, allowing more borrowers to qualify for conforming loans with better rates.
The bill also would temporarily raise the cap on mortgages insured by the Federal Housing Administration - probably in the neighborhood of $475,000 for the Baltimore metropolitan area.
The Department of Housing and Urban Development says the limits should be set in early March and borrowers will be able to take advantage of the higher limits then.
Helps high-cost areas
The National Association of Realtors, which has lobbied for higher caps, believes they will help in high-cost areas such as California and Washington. Zandi said it will do less for metropolitan Baltimore.
"I think it just helps on the margin," he said.
Average prices fell in every local jurisdiction last month except Baltimore City, up 1.5 percent, and Anne Arundel County, up a fraction of a percent. Carroll, which saw the biggest drop in average price, had a falloff in sales of 32 percent - the smallest decline in the region.
"Buyers are really skeptical," said Mary Zimmerman, an agent with Ron Zimmerman Realtor & Associates in Baltimore. "They're worried about the overall economy right now."
At least half the buyers making offers are coming in way under asking price, she said - "$50,000 below."
Kristi Lohmeyer, 27, who's looking at homes priced in the low- to mid-$200,000s in Harford County, thinks a lot of sellers haven't put in much effort. Most of the properties she's seen in the last few months had problems such as awful carpeting and needed a thorough cleaning.
Prices fall $10,000
She's seen asking prices fall about $10,000 since she started searching online last summer, and she's hoping for more. She and her fiance aren't keen to stretch themselves to the max for a mortgage - something first-time buyers often felt forced to do as prices in the region nearly doubled during the boom.
"We really want to see things come down more just so we can afford it," said Lohmeyer, a technical writer.
Sally Costello is happy to see falling prices, too. The Roland Park homeowner thinks it's finally the right time to buy a larger home after a year and a half of looking.
"I'm in real estate development, so I was not about to overpay," said Costello, a principal with Mayfair Development and Consulting in Baltimore.
Asking prices were ridiculously high until recently, she said. Now they're down about $50,000 for the Roland Park houses she and her husband are interested in.
"It's a significant savings," she said. "I'm hoping that our house has a still pretty good resale value because it's in a desirable location, but we may see some drop ourselves."