An article on Page 1A in Thursday's editions about a rise in sales of Baltimore-area homes priced under $250,000 was based on a study by Delta Associates that used faulty comparisons. See today's (5/13/08) Business section for details.
The slump driving down home sales across the metro area isn't deterring buyers of less expensive houses.
Nearly 20 percent more properties priced from $120,000 to $249,999 sold in the first three months of the year than in the same period in 2007, according to a report released yesterday by Metropolitan Regional Information Systems. That comes as sales in all pricier categories, particularly $500,000 and over, continued to fall sharply.
The report, prepared for the multiple listing service by real estate research firm Delta Associates, is a potent reminder that price matters. Homes affordable to first-time buyers are getting contracts faster because those buyers don't have property of their own to sell first. The $120,000 to $249,999 category, which accounted for one-fifth of sales in the early part of last year, swelled to more than a third of the market in the first quarter.
It helps that some first-time buyers have decided to make the jump no matter where they think the market is headed. Perhaps more importantly, more properties are available for under $250,000, thanks to dropping prices, said Cathy Werner, president of the Greater Baltimore Board of Realtors.
"Last year, the year before, there was nothing for a buyer to buy in that range," said Werner, broker-owner of ReMax American Dream, which has offices in Baltimore and Harford counties. "In Canton at one point ... you couldn't buy a shell for $200,000. Now you're buying renovated, updated homes in the $225 to $230 [thousand] range."
Joseph Brzuchalski can attest to the drawing power of a price tag below $250,000. The interior designer originally put his house in Baltimore's Lauraville neighborhood on the market for more than $300,000 last summer, to no avail. When he tried again just before Easter with an asking price of $199,900, "it was a frenzy."
"I had a bidding war," said Brzuchalski, 42, who ended up getting $220,000. "Forty-five minutes after it was on the market, I had somebody knocking on the door."
He suffered a bit of reverse sticker shock when his agents suggested the $199,900 price to attract attention. "But the market, I know, had changed," he said. "I paid $89 [thousand] and sold it for $220, so I was happy."
Sales jumped 40 percent - to almost 400 homes - in the lowest price range Delta Associates tracked, $120,000 to $159,999. The $160,000 to $199,999 and $200,000 to $249,999 price ranges each saw sales increase 14 percent compared with the first three months of last year.
At the same time, sales of homes priced in the $400,000s dropped 32 percent. Sales of homes priced at a half-million dollars or more were cut almost in half, from 857 to 474.
Continued credit tightening has made it harder - or more expensive - than it was during the housing boom for a variety of would-be buyers to get mortgages, from people with no down payment to those needing jumbo loans for pricey properties. But loans insured by the Federal Housing Administration still allow as little as 3 percent down, which keeps the door open for first-timers, mortgage brokers say.
Daraius Irani, director of applied economics at RESI, Towson University's consulting arm, said real estate agents' "great time to buy" mantra makes more sense for people in the market for starter homes than it does for the move-up crowd.
"Some home prices got so over-speculated and overvalued, there's nothing but movement down for them," said Irani, referring to the $500,000-plus market. "Below the $250 [thousand] mark, it's hard for prices to soften up too much more."
Irani and Werner were on a panel about the housing market yesterday, part of a real estate broker event in Columbia put on by MRIS to mark the release of its report.
Gregory Leisch, founder and chief executive of Delta Associates, said in an interview before the event that the less-expensive parts of the region appear to be holding up best.
"We think the city and the northern suburbs have better traction than the southern suburbs," he said. "There is more inventory and less demand in the southern suburbs for singles and towns."
The good news for the market as a whole, he said, is that recent price drops mean sellers are bending to match buyers' expectations.
"That's important, because if buyers and sellers are not seeing eye to eye, the market isn't going to move," Leisch said.
The number of unsold homes on the market remains high - nearly four times more than in the early part of 2005 - but Leisch said it has at least fallen since last summer.
He expects that the Baltimore metro area housing market will improve by next year, with the weaker new condo market taking a turn for the better by 2010.
"Gross sales are holding up pretty well, but they're just being battered by contract cancellations as buildings are being delivered," Leisch said of condo builders.