Newly married and looking for a house to grow into, Baltimore resident Jackson Houbolt and his wife began house hunting after their wedding last fall. Their excitement quickly gave way to frustration.
Their hearts were set on Howard County, but it has the highest median home price in the metro area, and the Houbolts found their bids crushed by competitors’. The first house they wanted sold for $100,000 over the asking price, well above their offer.
On another offer, they bid $75,000 over asking. But even that wasn’t enough. The seller didn’t consider it a serious offer, according to their real estate agent.
“We were pretty surprised overall at how difficult it was to have an offer accepted,” said Houbolt. “It was like, what do we have to do to get a house?”
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The Baltimore-area real estate market has tightened considerably over the last two years, with bidding wars now common. And arguably nowhere is it more competitive than Howard County, where the Houbolts eventually found a home. In March, the median sales price jumped 20% from the previous month. That means half the homes sold for more than $522,500, up from $435,000 the previous month, according to data from Bright MLS, the region’s multiple listing service.
Median home prices have increased more than 16% in the Baltimore metro area since March 2020, according to Bright MLS.
The rising prices have left behind those without the means to compete and forced them back into a more expensive rental market.
Real estate professionals and economists say low supply and high demand mean home sellers have the advantage. Consumers may have difficulty landing their dream homes this spring, said Craig Wolf, president of Maryland Realtors.
Even with frenzied prices, Wolf said, those who can afford to buy should do so now before prices climb higher and mortgage interest rates increase. But entry-level buyers and those seeking more affordable options may be shut out for now, especially in certain ZIP codes.
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“You pay more and accept less to get a house,” said Wolf. “The question is ‘What’s going to make it better?’ And there really isn’t an answer for that.”
While the coronavirus pandemic crippled some parts of the economy, others, such as real estate, flourished.
Many of those fortunate to keep their jobs were able to bank money normally spent on commuting, traveling and leisure activities while the nation largely shut down. The federal government sent out trillions in aid to juice the economy, while the Federal Reserve lowered interest rates and propped up financial markets.
Meanwhile, Americans started looking at their homes differently.
“I like to joke that everybody has realized they hate their houses,” said Jojo Olaseha, a real estate agent who specializes in Baltimore and Prince George’s counties and Baltimore City. “Whether they were looking for a new house or started renovating, accommodations changed and folks realized they needed more space.”
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Olaseha, who founded Jojo and Associates of Next Step Realty, said clients are clamoring for houses with offices, finished basements, decks and yards.
When buyers flooded the market in summer 2020, the supply couldn’t keep pace. Home prices soared, sales broke records and the competition was so fierce that the median number of days Baltimore metro area homes spent on the market plunged to single digits.
As of the latest figures, the median sales price for the metro area — which includes Baltimore City as well as Anne Arundel, Baltimore, Carroll, Howard and Harford counties — stood at $340,000, up nearly 8% from this same time last year and up more than 6% from the month before, according to Bright MLS.
Metro-area homes now are spending a median of just six days on the market, according to the data, but in Howard County the median is just five days. Anne Arundel (6), Carroll (5), Baltimore (6) and Harford (5) counties also had medians at or below six, while Baltimore City’s median, 13 days, is one-quarter what it was in March 2020.
In Howard County, there aren’t enough units, and there isn’t enough space, to meet demand, said Sarah Anderson, president of the county’s Realtors association.
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The county is doing all it can to encourage more development, Anderson said, but at the same time, officials have to preserve what’s known as “adequate public facilities,” which controls growth. “You’re not going to have a builder come in and put 70 new homes in a neighborhood if a school is already full,” she said.
Sales prices and activity dropped slightly over the winter, reflecting a return to seasonal buying habits. But the fight for homes remains stiff and is heating up as spring returns. Inventory is about one-sixth of what housing experts say is the benchmark for a balanced real estate market.
“You cannot negotiate down on a purchase price, because there are five other buyers behind you who will pay more,” Olaseha said.
If a client can’t afford to bid higher, Olaseha said they can still make offers; for example, she will ask them to bid on houses without decks and commit to building them later, or have them opt to take on some of the home’s smaller improvement projects instead of putting it on the seller.
While some buyers are waiving inspections before closing to seem more competitive, Olaseha doesn’t advise this.
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And for buyers who feel they can’t compete, Olaseha suggests waiting for the fall and winter, when buying activity tends to slow, to resume the search. She encouraged first-time homebuyers to make use of the state’s tax credit, which is worth a quarter of a percent of the sales price.
To clamp down on historic high inflation, the Federal Reserve will continue to raise mortgage interest rates, said Gay Cororaton, senior economist and director of housing and commercial research for the National Association of Realtors.
Cororaton called higher rates “necessary medicine” to cool the housing market, where prices have risen faster than wages. The average rate for a 30-year mortgage now stands above 5%, up from less than 3% during the pandemic.
Rising mortgage interest rates — which dropped to historic lows in 2020 and 2021 — may keep some homebuyers out of the market, according to some real estate economists.
“As we learn to live with these higher rates, it gives buyers more power than they had before because there will be fewer buyers,” said Elliot Eisenberg, a consulting economist for Bright MLS. Fewer buyers could mean fewer bidding wars leading to people paying more than asking price on available homes.
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At the same time, Eisenberg said, builders — still wary of new construction in the wake of the 2007 and 2008 recession — aren’t building close to the amount of new housing they should. Affordable-housing buyers will feel the impact of this the most, he said, especially as the costs of fuel, commodities, appliances and labor continue to surge.
Buyers do have options, said Eisenberg. Some parts of the state are more affordable than others; for example, the median sales price for a house in Baltimore City is $222,000, according to Bright MLS.
Annie Milli, executive director of Live Baltimore, the city’s marketing arm, said buyers have taken advantage of the city’s relative value and affordability since the start of the pandemic. In 2021, the city had its best year for housing in a decade, with more houses selling and with a purchase volume exceeding $2 billion, according to the organization.
“I get most excited about the number of neighborhoods that have had sales transactions; in more recent years, we’ve seen the spread of sales become greater,” she said. “Many of our surrounding counties have become very much out of reach, especially for folks earning entry-level salaries or who are single.”
At the state level, some Democratic lawmakers pushed for bills in this year’s session that they said would have returned power to buyers, including one bill that would have forced jurisdictions to adopt ordinances allowing accessory dwelling units in areas zoned for single-family housing. Another would have barred sellers’ agents from delivering “love letters,” or personalized messages, to clients from buyers, which some fear can violate fair-housing laws. But the proposals failed to advance.
“We don’t have the luxury to deny any tool in the toolbox to address that housing shortage here in Maryland,” said State Del. Lisa Belcastro, who sponsored the accessory dwelling unit bill in the House. She said the bill, which she hopes to reintroduce next year, would have given people more access to communities that may otherwise be out of reach.
Cororaton, of the National Association of Realtors, said buyers might finally feel some relief as interest rates rise and inflation recedes. But in all, she said, that could take about two years to be felt.
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