With the 2018 spring real estate season underway, prevailing market conditions in the Baltimore area are cause for excitement. Interest rates are rising, but still low. The economy is strong, and Maryland has been steadily adding jobs, with the highest growth in the Baltimore metro area of Baltimore-Columbia-Towson, according to the Maryland Department of Labor.
House prices are steadily rising too. Median prices in the Baltimore Metro area rose 6.5 percent in February over last year’s prices, with Baltimore City showing close to an 11 percent increase. Like it or not, rising prices are an indication of a healthy real estate market, with inflation likely to drive prices even higher in the future.
The problem, of which buyers are well aware, is inventory. Baby boomers, unsure of their next move, are holding onto their homes, and this winter, housing inventory in the Baltimore area hit lows not seen since 2005. “Sales volume is typically lowest in January, said Redfin senior economist Taylor Marr, “so that in itself is not a cause for concern.” Sure enough, April saw new listings up 16 percent since last month (although still down from last year) in anticipation of warmer weather and the end of the school year. By the end of the year, Zillow predicts home builders will be starting new construction in quantities that will start to close the gap.
Local experts agree. It’s time to get in the game.
“Houses are coming on the market, and if they are realistically priced, they are moving,” says Whit Harvey, President of the Whit Harvey Group at Coldwell Banker, with over 40 years of experience in the Baltimore market. “By any standard, this is a very active market.”
Dorsey Campbell, head of the Dorsey Campbell Group at Cummings & Co. Realtors, is even more upbeat. “The spring market is hot. As hot as we’ve ever seen it. Buyers are excited.”
A recent market category called “Coming Soon” is helping to fuel that excitement, says Michael Yerman of the YGL Team of Berkshire Hathaway. “It works for both the buyer and the seller,” Yerman says. “The seller wants to move, but may not be quite ready. The buyer worries that someone may get in first. The realtor is not allowed to show it until a certain date, and we get lots of calls about it until it goes on the market, which is encouraging to the seller.”
According to Dorsey Campbell, “a lot of houses are selling without ever going on the market.” It’s especially true at the high end, where an “unlisted” sale conveys a certain cachet and bypasses the inconvenience of open houses. “It’s a way for a seller to test the market, says Campbell, “ and with the right house, it can work.”
Both of these strategies take advantage of the fact that buyers now have more information than ever before, thanks to real estate websites and reporting that show photos and listing details. For Noah Mumaw, founding partner of Monument Sotheby’s International Realty “when you show a house these days, the first showing is already the second showing, because the buyers are so well informed.”
Buyers confirmed the observation at recent Open Houses, where several said they had been looking since last fall. “I know exactly what the comparables are,” said a house hunter in Towson. “You have to because you need to be ready to move on a house that fits your budget.”
One thing all the experts agree on is that to optimize the selling price, which in this market can mean bids well over the asking price, a house must “be done” – meaning it is fully modernized and move-in ready. “An 80’s or 90’s kitchen just won’t do it, especially for the younger market,” says Whit Harvey. “Millenials are moving up and out from Canton and Federal Hill. They are used to new interiors, and they don’t have time for renovations.”
Noah Mumaw points out that “there is unquestionably a premium for houses that are turn-key. Sellers who are willing to work with us will do better.” To facilitate that, his company and many realtors keep a stable of painters, landscapers and building contractors on hand to provide services and staging where they are required. An experienced realtor will be able to pinpoint what improvements are needed to maximize the selling price, and their connection to the contractors often gets results faster and cheaper than sellers can get on their own.
Harvey offers a piece of advice for first-time buyers: “Avoid the starter home.” Meaning that, if you possibly can, buy a house you’d be happy to live in for awhile. “Not everyone can do it,” says Harvey, “but with prices heading north, it is a good financial move.”
One area of uncertainty in the market has been the new federal tax laws passed late last year, which changed the deductions for mortgage interest, state income, and property taxes while raising the standard deduction. Widely viewed as making home ownership less appealing, there was initial concern that the new laws would cause a drop in home prices, with first-time buyers, in particular, choosing to wait until they are sure they can afford the extra cost or moving to areas with lower taxes.
So far, realtors in the Baltimore area are unperturbed. “I’m not seeing it,” says Cindy Conklin of Berkshire Hathaway’s Conklin Merbler team, referring to a tax-driven slowdown in real estate transactions. “We’re having a great year. [The new tax law] may be part of the conversation, and it may change the price limit slightly, but for my clients, off-street parking is a more important issue.” Dorsey Campbell concurs. “The tax stuff is not concrete yet. People are not convinced it is going to have an impact.”
Charlotte and Andrew Chudy, attending an Open House last week in Homeland, recently bought in Guilford. The new tax plan was not of concern for them. “It really only affects loans over $750,000, and we were not in that category,” said Andrew.
Schools were a factor in their decision, and the fact that their home was within the catchment area for the Roland Park public schools made it “way more attractive.”
Unlike many young working couples, the Chudys were looking for a house where there was work to be done. “The houses we looked at in perfect condition were grossly overpriced,” said Charlotte. “We figured there was at least a $125K premium for that, and we’d rather spend that money ourselves, and do it the way we wanted.”
Do they think their willingness to be flexible helped to close the deal? “Oh definitely.”
Many factors play into a home purchase, and they will be slightly different for every buyer. But as Ross Mackesey, former president of the Baltimore Board of Realtors observes, “the biggest driver of the market is inventory.” On that subject he is optimistic. “People who bought at the height of the market in 2006 don’t have to sell. But now that prices have rebounded, the stock market is booming, and people are getting bonuses again, they are starting to put their houses on the market. It’s a great time to profit as a home seller.”
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