Is Real Estate Rebounding In Annapolis Maryland?
This morning on MSN Real Estate I read and article about the 8 signs of a real estate rebound (read the full article here). It got me to thinking about what is happening here in Annapolis Maryland – are we on the rebound yet.
The first sign is an improvement in pending home sales. In March 2010 (the most recent data available for the Anne Arundel County area) the number of homes under contract was 645, a 58.1% increase over February 2010 when there were 408 homes under contract. Year-over-year, March was up 34.4% from 2009. This may be a promising sign – but – this could also be a result of the homebuyers tax credit. So while I expect that pending sales will be up again in April for Anne Arundel County, there could be a significant drop in May after the tax credit deadline passes.
The second sign is an improvement in housing starts. In February 2010 (the most recent data available on for the Anne Arundel County area) the number of building permits issued was 74, a 38.8% decrease over January 2010 when there were 121 permits issued. Year-over-year, February was up 131.3% from 2009. While building permits are just that – permits – they are an indication that local area builders are “pulling permits” to break ground.
The third sign is new and existing home sales. In March 2010 there were 387 homes sold in Anne Arundel County, a 56.7% increase over 247 homes sold in February 2010. Year-over-year, March was up 9.9% from 2009 when there were 352 homes sold. It should be noted that in January 2009 we hit an all-time low point with only 205 homes sold. Contrast that with 1,093 homes sold in June 2005!!!
The forth sign is the inventory of homes. While the simple principles of supply and demand applies, when the inventory of homes available for sale is greater than the demand, price will fall. In March there were 3,781 active listings in Anne Arundel County, a 10.6% increase over February when there were 3,420 active listings. Year-over-year, March was down 6.7% from this time last year when there were 4,052 homes on the market. At the peak of the seller’s market in January 2005 there were only 952 active listings in the county. In June 2008 after the market shifted to a buyer’s market there were 4,729 active listings.
The fifth sign is housing affordability. The housing affordability was 88.5 for Anne Arundel County in March 2010 up 9.1% from February 2010 and up 14.5% from March 2009. Contrast that with an affordability index of 56.5 in May of 2006 when the average price of those homes sold in the county reached $443,396 (by the way the avearge sale price in March 2010 was $339,069). Looking back at January 2001, the affordability index was at 106.8 and the average home sold for $194,481 in the county.
The sixth sign is mortgage applications. While information is probably available at the county level, I don’t have access to this information at this level of detail. A good proxy is the number of pending sales (see the first sign, above) because last month 89% of the homes sold used some type of financing and 11% of the homes sold were paid for with cash. Contrast that with March of 2009 when 6% of the homes sold were paid for with cash – which is more typical of local activity. Why the uptick in cash transactions? I’m not sure. I might have expected the contrary given current market conditions and the push by first-time home buyers taking advantage of the homebuyer tax credit.
The seventh sign is mortgage interest rates. The national average monthly contract mortgage rate – a composite rate combining many products together – has been relatively stable. In March 2010, the rate was 4.6% up 10.1% from February 2010 but down only 0.1% from this time last year. Rates have been extremely favorable for sometime. Low rates coupled with high asking prices still makes homes barely affordable for most families.
The eight sign is real estate mutual funds. According to the MSN article, real estate mutual funds were returning 9.4% in the first quarter of 2010. Investing in a REIT with Vanguard, Fidelity Investments or T. Rowe Price could prove rewarding.
In conclusion … mixed signals at best. While it looks like the real estate market is turning around, the eight signs outlined above for our Anne Arundel County are giving mixed signs bordering on slightly optimistic. Caution should be exercised since it’s not yet known what the impact of the homebuyer tax credit will be and what might happen once that incentive is removed. Unclear is how many home sales might have been pulled into the first few months of the year that might otherwise have happened in during the second quarter. I remain cautiously optimistic and expect conditions to continue to be mixed for the next 12 to 18 months.
Stephen Howell and Rocky (his lab-mix from the SPCA of Anne Arundel County in Annapolis) now live in Winter’s Chase at Riva Trace in Annapolis, Maryland. He works in the Annapolis real estate market. His website lets people search the Washington and Baltimore metropolitan area MLS. Buyers can also search for waterfront homes along the Chesapeake Bay. His website has current real estate data on Annapolis, Anne Arundel County, and Maryland.