By Jamie Smith Hopkins, The Baltimore Sun
7:06 PM EST, December 12, 2011
A modest increase in average home prices in November is the first upturn for the Baltimore region in more than a year, but beleaguered homeowners shouldn't cheer just yet.
Though prices rose almost 1 percent on average compared with a year earlier, the median price — another common measure — fell 2.5 percent, according to numbers released Monday by Metropolitan Regional Information Systems.
The diverging price measures are one symptom of a still-rough housing market trying to battle back to normal. Another is that contracts are being canceled and settlements delayed, dampening sales.
Contract activity is usually a good indicator of where sales will be in a month or two, once the pending deals close. But a strong increase in buyers signing contracts this year has not yet turned into a big pickup in done deals.
Newly signed contracts in the Baltimore region have outnumbered sales by nearly 30 percent in an average month this year, up from about 5 percent in the last two years.
Vladimir Kats, associate broker with Kats & Associates at Keller Williams Realty Baltimore, can rattle off a list of reasons: Loans for would-be buyers failing to come through. Problems cropping up during the home inspection. And potential short-sale deals — which require a bank to approve a sale for less than the borrower owes — falling apart.
"We see buyers who get cold feet also — or jump on what they consider to be something better," Kats said.
Home sales in the region were basically flat in November, Metropolitan Regional Information Systems said. About 1,630 homes changed hands, four more than in November 2010. By contrast, newly signed contracts have been increasing at a double-digit pace in each of the past seven months and rose 15 percent in November.
That will be good news when and if it translates into sales.
"You're starting to see more people writing contracts," said Kenneth Wenhold, Mid-Atlantic regional director for Metrostudy, which analyzes the housing market for home builders. "The problem is getting them to the [settlement] table."
Sometimes it's just a matter of a delay. But in the new-home market, cancellations in the Baltimore area have spiked to about 20 percent after running at 12 percent to 13 percent for most of the year, Wenhold said. Most of the increase was driven by just a few builders, he said.
Cancellations are a problem nationwide. Real estate agents reporting at least one canceled contract doubled to 18 percent of those surveyed in August and September and then all but doubled again — to 33 percent — in October, according to the National Association of Realtors.
Real estate agents with spiked contracts had been running at about 9 percent to 10 percent of the monthly total before then, the trade group said.
The especially big upturn in October could have been caused by a change in financing rules that month, which bumped more buyers into "jumbo" loan territory, requiring large mortgages with higher interest rates.
Meanwhile, head winds for the housing market — tighter mortgage restrictions, foreclosures, falling prices and a muted economic recovery — are blowing in landlords' favor. With fewer people able or willing to buy, apartment vacancies have dropped, and renters have had to pay more.
The average monthly rent for all types of apartments in the Baltimore metro area was about $1,140 over the summer, up 3 percent compared with a year earlier and more than 10 percent higher than at the end of 2007, according to apartment data firm MPF Research.
That four-year increase is one of the biggest in the country, said Greg Willett, vice president of research at MPF Research.
"In most markets, typically, you're just barely ahead of where you were in late 2007," he said.
The Greenbelt-based Bozzuto Group is hoping to capitalize on the strong rental market. It will break ground Tuesday on a 281-unit apartment complex on the Fells Point waterfront, part of a mixed-use development called Union Wharf. Last month, Bozzuto started work on an apartment project in Crofton, and executives hope to begin construction on a complex in Odenton in February.
CEO Tom Bozzuto said his company, which also builds homes, hasn't soured on the for-sale market. But he's betting that people in their 20s won't be clamoring to buy.
"The notion that buying is a way to get rich quick has, at least, been tarnished," he said. "Owning a home makes a great deal of sense at certain points in your life. Renting gives you great flexibility and makes sense at other points in your life. People tend to forget that when you get into these silly bubbles."