The decline in home prices in the Baltimore metro area accelerated last month - the average fell below the 2005 figure - but the hemorrhaging in sales came to a near-halt.
The average sale price in Baltimore and its five surrounding counties dropped to about $296,000, according to numbers released yesterday by Rockville-based Metropolitan Regional Information Systems.
That's down nearly 6 percent from a year ago. And it's $7,500 less than sellers got in September 2005, at the height of the buying frenzy.
While that price drop was the largest since the housing slump began, the decline in home sales slowed markedly. Sales were off about 2 percent from a year earlier, compared with months of year-over-year declines around 30 percent. In two counties - Howard and Carroll - sales rose last month.
Economists caution against calling that a sign of improvement, though, because September 2007 was the first month that credit tightening sharply curtailed buying. That means sales are no longer being compared to pre-crunch days.
The number of homes changing hands in the metro area last month - 1,931 - was the smallest for a September since MRIS began tracking the region 10 years ago.
More troubling for sellers is the recent global economic instability and panicked selling on Wall Street.
"The financial market losses have been so huge, they will now feed into the broader economy's performance," said Anirban Basu, chief executive of Sage Policy Group, an economic and policy consulting firm in Baltimore. "That in turn feeds back into the housing market, which is at the root of all this chaos."
Basu believes the area's home values are down much more than sales figures suggest - perhaps 20 percent from their peak - because average prices are taking into account only what buyers want to purchase. "The homes that are selling are in some sense the better homes," he said.
More than 20,000 Baltimore-area properties were sitting unsold on the market last month, double the inventory of three years ago. Listing prices have plummeted. The typical seller was asking for 18 percent less than sellers two years earlier, according to real estate information site HousingTracker.net.
These drops - coming on the heels of boom years when many stretched to buy homes and others borrowed against their equity - mean an increasing number of people are underwater on their mortgages.
Moody's Economy.com estimates that nearly 10 percent of homeowners in the Baltimore metro area owe more than or exactly as much as their properties are worth. That's about 7,700 homes.
"There are areas of the country where ... there are many more homeowners underwater than Baltimore," said Mark Zandi, chief economist of Economy.com. "But all the indicators of affordability would suggest, and inventory would suggest, that prices need to fall more."
Basu believes the big drops in stock values could eventually convince people that it's safer to put their money into real estate instead. Just don't count on that until the latter part of next year, because the deteriorating economy will weigh on buyers in the near term, he said.
Real estate brokerage Coldwell Banker, hoping to rev up buyer interest now, kicked off a national 10-day "sales event" yesterday during which participating home sellers have agreed to lower their asking prices by as much as 10 percent. More than 300 sellers have signed on in the city and its suburbs, according to Coldwell Banker Residential Brokerage in Greater Baltimore.
Louren Reddick is one of them. He and a partner converted a Baltimore church into four condos, and he's hoping to get a buyer for the last one by dropping the asking price from $369,000 to about $332,000. The two-bedroom, 2 1/2 -bath property originally hit the market in January 2007. The promise of property taxes frozen for the next 10 years thanks to historic tax credits wasn't inducement enough.
"If I have to give 10 percent off to move a property, I'm prepared to do it," said Reddick, of Frenchman White Corp. "I'm basically selling it at cost. ... I think right now, you're getting the best prices you've seen in the last 10 years, maybe even longer."
Mary Lapides, his agent, said would-be buyers are looking at homes on the market but seem wary of pulling the trigger. She hopes the new sales campaign will make a difference. "If no one comes out of the woodwork to buy, then you know it's not the ... price of the house, but it's something deeper."
Event organizers believe price is the key. Agents nationwide have complained that homeowners are setting their asking prices too high, preventing sales.
Locally, agents see a split: Nearly 40 percent of the metro-area homes that sold last month were on the market for two months or less, while 35 percent sat for more than four months.
"It's the tale of two markets," said Brendan Cooke, an associate broker with Passport Realty in Baltimore. "The things that are well-priced and properly prepared and marketed are still selling relatively quickly."
Because buying typically slows down between Thanksgiving and New Year's Day, this is the time for sellers to act if their asking prices are too high, said Ross Mackesey, a vice president at Coldwell Banker in Baltimore.
"You're going to wait a while if you don't do something now," he said.
Average sale prices fell in all parts of the metro area last month except Howard County, which recorded a 3.3 percent increase. The drop was largest in Carroll County, down 17 percent to about $300,000. That's below the average of four years earlier and is $75,000 less than Carroll sellers got in September 2005.
Average prices in the rest of the metro area were at or below 2005 levels, with the exception of Baltimore. The city's $170,000 price last month was $8,600 less than sellers got two years earlier but $7,200 more than the average in 2005.
Sales rose in two counties, jumping 26 percent in Howard and 11 percent in Carroll. Sales fell elsewhere, with the biggest drop, 14 percent, in Anne Arundel.