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Housing market appears to cool, but cause is uncertain

December 04, 2005|By DANIEL J. SERNOVITZ

daniels@herald-mail.com

WASHINGTON COUNTY - The red-hot seller's market in Washington County has begun to cool after more than two years of rapidly soaring housing prices, leading some industry experts to speculate about whether the market has begun to correct itself or whether other variables, including gasoline prices, interest rates and seasonal factors, have temporarily caused the market to slacken.

"The question that we don't really know is: What's the cause?" said Jack Castle, president of Hagerstown Trust. "It's so hard to say in Washington County because housing is so regional."

According to the Pen-Mar Regional Association of Realtors, home prices climbed steadily from the spring to a peak in September before settling down in October. Frannie Parks, president of the Realtors association, said that those figures reflect closing prices for houses that sold a month or two earlier, suggesting a late-summer climax.

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"It definitely has cooled off a bit, especially in the higher-end homes," Parks said. "Everything has just slowed down. Part of it is the time of year, and part of it is the market. I think it's not a sellers' market (anymore), and it's not a buyers' market. For certain homes, it's both."

The median price for a house sold in Washington County climbed from $224,000 in June and July to a September high of $240,000, then fell to $234,000 in October. Prices still are up considerably compared to last year, but Parks said the year-over-year increases spiked from 28 percent in June and July to nearly 42 percent in September before slowing to just under 31 percent in October.

Even with the recent downturn, segments of the market either have held steady or experienced only slight decreases.

Castle said there has been a more pronounced depression in higher-end homes than in starter homes, and new construction loans have continued at a steady pace.

He said it is difficult to compare the figures to previous years, mainly because the housing market during the past two years has been atypical and less vulnerable to seasonal fluctuations.

Taylor Oliver, president of Oliver Homes in Hagerstown, said he believes the market is catching up with itself and that prices have begun to settle down after a protracted period of inflated housing costs.

"I think, over the last two or three years, it has been at a very rapid pace, and now it has started to slow down to a more normal pace," Oliver said.

Oliver said an increasing number of residents have begun to look at new home construction because the asking price for existing homes has climbed to, and in some cases surpassed, the cost of building. At the same time, he said, rising gasoline prices have begun to factor into the buying decisions of residents considering making a move to Washington County from Baltimore or Washington, D.C.

Barb Spielman, housing adviser for the Hagerstown Home Store, said she has seen a softening in the market within recent months, although home prices still hover beyond the reach of many hopeful first-time home buyers. Spielman said she believes a combination of factors, including a seasonal downturn and climbing interest rates, are contributing to the lower housing prices.

"You can't have that kind of an increase, year after year. The market has to soften a little bit," Spielman said. "It's going to be better for first-time home buyers, but it's still going to be difficult."

Virginia Deibert, who recently sold her Picadilly Drive town house in Hagerstown, said she was surprised it took about three weeks to sell her property after the blistering pace of home sales in recent months. Deibert said she expects the market will become, at least moderately, more reasonably priced for such starter homes.

"I think it's going to start coming down, mainly because young couples can't afford the price of a starter home today," Deibert said.

Deibert sold her town house for slightly less than $200,000 in late October. The sale price for town houses in the same block has slowly climbed from the $70,000's in the 1980s and early 1990s to more than $100,000 starting in the fall of 2003.

Jeff Cline, a Realtor with Roger Fairbourn Real Estate in Hagerstown, said that while the market has slowed down in recent months, the demand for starter homes remains beyond the means of many Washington County residents.

"One of my concerns is for people in Washington County," Cline said. "If you're born here and you work here, you might not be able to afford a home here."

Cline said he anticipates prices will begin to climb again in the spring. He said home sales typically slow in late October or early November because few residents want to move during the holiday season or as colder weather sets in.

"I'm an optimist. I think it'll be strong here next year when spring comes," Cline said. "It's a correction - a slight correction - but I think it's seasonal."

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