Baltimore area home sellers struggled through a continuing housing slump in August, statistics released yesterday show, but the federal government's recent takeover of mortgage giants Freddie Mac and Fannie Mae offered hope that more favorable loan rates will coax buyers back into the market.
Benchmark 30-year mortgage rates dropped from a national average of 6.3 percent Friday to 6 percent yesterday, according to financial publisher HSH Associates, thanks to the weekend announcement of the takeover of Freddie and Fannie. That's a big drop in a short period of time - considering that rates were 6.5 percent a week earlier. For borrowers, a drop in rates of half a percentage point means nearly $100 a month savings on a $300,000 mortgage.
Though mortgage experts warned the rate improvement could be fleeting, real estate agents held out hope that lower rates would persuade hesitant buyers to make a move.
"I believe it will bring people into the market," said Kathleen Beadell, a sales associate with Long & Foster in Timonium.
As rates improved, the Metropolitan Regional Information Systems Inc. released Baltimore-area home sales statistics showing a continuing slide in total sales and prices last month. Home sales plunged 29 percent, while prices slid 1.7 percent, MRIS reported.
The average sales price slipped by more than $5,600 to $317,506, down from an average of $323,134 a year earlier.
Though the Baltimore area has seen relatively small average price declines compared with other parts of the country, many sellers are being forced to lower their prices.
Sellers in Fells Point and Canton who bought homes in the low $400,000 range three or four years ago are now pricing in the $350,000 range, said Dominic Cantalupo, associate broker at Champion Realty in Pasadena. Sellers of a home in Annapolis he listed four months ago initially asked $449,000, less than they paid for the home in 2005. The sellers have cut the price, first to $434,900 and yesterday to $419,900.
"It's a tough decision," Cantalupo said. "Do you sit and hold onto it? It depends on your level of urgency."
MRIS said the number of homes sold in Baltimore and five surrounding counties fell to 2,047 from 2,868 in August 2007. The drop in home sales has been steep, especially compared with the peak of the buying boom. More than twice as many homes were sold in the Baltimore metro area in August 2005 as were sold last month. At the pace of sales in metropolitan Baltimore in the past year, it would take 11 months to get contracts on all 20,700 homes on the market.
The drop in sales is steepest among pricier homes. Sales declined about 25 percent in the under-$250,000 price range but sank 40 percent for homes $800,000 and up.
Home sellers appear to be setting - or dropping - their asking prices to attract the first-time buyers who can only spend so much. The number of homes listed for sale under $250,000 rose more than 20 percent in the past year, while fewer people are trying to sell in higher price ranges.
The situation won't be easily reversed, even with the help of lower mortgage rates, economists said. The federal government took over Fannie and Freddie in hopes of shoring up housing and credit markets.
"What has plagued the housing market in Maryland and elsewhere is not related in any significant way to the level of mortgage rates," said Anirban Basu, chief executive officer of Sage Policy Group. "There is no reason to believe that lenders will become more willing to lend. Credit is not necessarily going to loosen because of this. What this means is the housing market won't deteriorate quite as fast."
Buyers, he said, are convinced that prices will still drop, and "as long as they are convinced that is possible, they will lack urgency."
And the lower mortgage rates might not last, said Keith T. Gumbinger, a vice president with HSH Associates.
"It's too soon to call it a permanent decline," he said.
Dean Baker, co-director of the Center for Economic and Policy Research, said he wouldn't bet that rates will be as low as 6 percent in a few months. People considering whether to refinance from a higher-rate loan should act quickly, he said.
The Fannie and Freddie takeover should also mean at least as much credit availability for buyers, if not more, he said.
But Baker doesn't believe home prices will rise any time soon. They increased too much in many places during the boom years and are likely to continue dropping, he said. He includes Baltimore on that list.
David J. Fisher Jr., an executive mortgage planner with 1st American Trust Mortgage Corp. in Columbia, said a number of borrowers have called this week to inquire about refinancing.
"Right now, the biggest thing preventing people from calling in is they think, 'Well, my value's down; I can't do anything,' " said Fisher, adding that homeowners should get an appraisal to know for sure.