Metrostudy: Baltimore housing market 'tightening up'
Supply, for those of you scratching your heads, refers to how long it would take at the current pace of sales to find buyers for everything on the market. Economists usually say a housing market is balanced between buyers and sellers when supply is around six months. So we're still on the high side of supply, but an improvement, if you're rooting for equilibrium.
Howard County's already there, Wenhold said, "and Baltimore County is just a month or two away."
"Between now and spring we should see additional supplies burned off, with the result being prices that firm up," he predicted.
The new-home inventory is nine months, but that's being pushed up by struggling high-rise condo projects, Wenhold said. "Just looking at the single family and townhome components the inventory is 5.9 months, which is pretty low," he said, calling 7.5 to 8.5 months typical for new homes.
Also, "closings were up on a year over year basis, the first increase in new home sales in five years," he said.
How much of that is about temporary government support -- the home buyer tax credits and Fed-supported low interest rates -- and how much is a sign of permanent improvement? I guess we'll have to wait and see. (Or wait and debate.)
If this is recovery, though, Washington is farther along. Metrostudy calls the metro area "among the best-performing in the nation." Its supply of resale listings? At 5.6 months. That's slightly in favor of sellers, if six months is equilibrium.
"Across the country, other markets are struggling with a huge excess of housing inventory, which is driving prices down," Metrostudy said in an analysis this week. "Markets such as Miami, Las Vegas, Orlando, San Diego and Chicago have more than twice the level of inventory typically seen in healthy housing markets. Washington, D.C. is an exception to this trend."
OK, I can hear you thinking, but why should Baltimore residents care? The usual reason: When two cities are so close together, they can't help but have some effect on each other. It's not always the effect people might expect, of course -- but in case this turns out to be an "as Washington goes, so goes Baltimore" situation, we might as well pay some attention to our neighbor to the south.
For his part, Wenhold says the Baltimore area looks good relative to the rest of the country, and he said proximity to D.C. "is a big help."
What's your take on the two markets?
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Comments
The question(s) I have (which we'll have to wait and see for an answer) are how much of the inventory reduction is due to: 1) sellers realizing they are underwater and can't afford to sell, but can afford to remain in their homes, 2) sellers being convinced to "wait until spring" at which point we see a flood of new inventory, 3) demand being pulled forward to take advantage of the tax credit and historically low interest rates.
If I was making a wager, I'd bet we have another leg down coming this year, probably beginning in April after the tax credit and Fed MBS buyback programs end.
Posted by: Steve | January 29, 2010 12:00 PM
Washington exists in a bubble and always will. It doesn't have a real economy and can't really be used as much of an indicator. It's all about the government.
Posted by: Nate | January 29, 2010 2:26 PM
Nate, I certainly agree that Washington can't be used as an indicator for, say, Miami. But there is some government-effect slopover that reaches Baltimore.
Posted by: Jamie Smith Hopkins | January 29, 2010 2:40 PM
Baltimore and Washington are two very different housing markets, so it is somewhat difficult to correlate, even when it comes to case-shiller indices.
We did a research study on it @ Hopkins during my real estate masters...different supply, different employment characteristics (as mentioned above)...
Posted by: FrankieSez | January 30, 2010 4:04 PM
Nate/ Jamie:
Especially when you consider Howard and Anne Arundel Counties. Many of these residents are relient on the Washington economic engine. Too much to be considered only Baltimore IMO.
Posted by: Smirkman | January 30, 2010 6:22 PM