Home cost in Maryland up 20.5% in 1Q of year, 6th-highest rate in U.S.

Even with a slowing housing market, home prices in Maryland are among the fastest rising in the nation, the Federal Deposit Insurance Corp. said yesterday.

Only four states and the District of Columbia topped Maryland's home price increase of 20.5 percent in the first three months of the year, compared with the same period last year. That pace isn't far off what Maryland saw last year, likely the peak of the boom, and was way ahead of the national gain of 12.5 percent.

Still, it seems to be a last hurrah. Sales in Maryland have been falling and unsold inventories rising sharply, the FDIC said in a quarterly report on the economic and financial health of the states.

Expect price gains to decelerate here and nationwide after the last few "abnormally strong" years, said Kathy R. Kalser, a regional manager for the FDIC's division of insurance and research.

"Home prices tend to lag sales, so first you're going to see houses being on the market longer," she said. "It may be a while before the sellers actually drop their price."

Many of the 10 states posting the biggest increases are coastal, though the No. 1 - at nearly 33 percent - was Arizona. It was followed by Florida (26.6 percent), Hawaii (25 percent), Oregon (21 percent) and the District of Columbia (20.8 percent). Idaho, Washington, California and Virginia rounded out the list behind Maryland with increases of about 18 percent to 20 percent.

The FDIC made its comparisons with data from the Office of Federal Housing Enterprise Oversight, which reports changes in median home prices but not the prices themselves.

The Maryland Association of Realtors said the median sales price in the state was nearly $300,000 in March, the end of the first quarter.

Mark Zandi, chief economist of Moody's Economy.com, said he thinks prices have risen so swiftly in Maryland that they will flatten or even decline slightly in the next few years.

"It's not going to be off to the races again anytime in the near future," he said. "The effective price is probably already flat to down. Sellers are having to put money into the homes to find a buyer, and that's not showing up in the transaction price."

Hagerstown is a perfect example of the softening market.

Prices there increased 24 percent, the biggest jump in the state, according to the FDIC's first-quarter numbers. But the Western Maryland community is no longer a seller's dream and hasn't been since last fall, said Frannie Parks, a Realtor with Advantage Realty in Hagerstown.

"We're seeing a very, very, very slow market, listings sitting on the market probably 60 days or more," said Parks, who's worked in the industry for 16 years. "It's going to force sellers to reconsider the lofty prices they thought they could get. ... I think probably they're going to have to sell [for] less than what their neighbors got a year ago, because what their neighbors got was ridiculous."

Pricing makes a difference. Homes for less than $250,000 are still going quickly, she said.

Hagerstown has boomed in recent years as a bedroom community for the Washington metro area, and to some extent Baltimore. But Parks is seeing fewer buyers coming from that corridor, and she thinks high gas prices might be to blame.

Kalser, with the FDIC, said Maryland's economy is "very strong" and shouldn't be badly hit by a slowdown in the housing market. The two are intertwined to a certain extent, however. And job growth in the construction industry, which includes housing, is slowing, she noted.

"It's still strong; it's just not as strong as it was," Kalser said.

But employers have said in recent months that it's not for lack of trying. The home improvement industry, for instance, reports worsening worker shortages.

"Our business is booming, and we are in desperate need of qualified workers," said Andrew Snyder, president and owner of Snyder Home Services, an Owings Mills company that does specialty bath and kitchen work. He employs about 250 in Maryland, Washington and Virginia and would hire at least 10 field workers right now if he could. "It's going to become a crisis in our industry. ... We don't see a lot of new, young people coming into the trades like they used to."

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By Jamie Smith Hopkins
Sun reporter

jamie.smith.hopkins@baltsun.com

Copyright 2006, Sun-Sentinel Co. & South Florida Interactive Inc.