Realtors are ready to wave goodbye to 2007, a tough year that saw a collapse in the subprime mortgage market fuel a credit crisis and cool off a once-hot real estate market.
But experts said some of the factors for the change were in place last year, indicators in a market that?s seen many highs and lows.
“It?s cyclical. We had a downturn about 15 years ago, and we are having that occur again,” said Michael Anikeeff, chairman of Johns Hopkins University?s Edward St. John Department of Real Estate.
“We shouldn?t be surprised. In fact, I?m taking out my old papers form the early ?90s to look at what happensin the industry. It?s cyclical,” Anikeeff said.
Bill Cassidy, sales manager at Long and Foster Fells Point, placed the beginning of the downturn in August 2006.
“I just remember that month being very slow and some of us walking around saying, ?It?s vacation time. We?ll get back to normal in September,? ” he said. “And that never happened.”
In January, the average home sale price was $303,981, up 4.34 percent over the same month in 2006, in the region including Baltimore City and Anne Arundel, Baltimore, Carroll, Harford, and Howard counties, according to data gathered by Metropolitan Regional Information Systems Inc.
By November, the dollar volume sold in that same area was $583,638,467, down 31.06 percent from the year before, and the average home sale price was $308,477, down 0.41 percent from November 2006, according to the MRIS data.
“This has been building for some time; it?s the culmination of many poor decisions,” including home buyers taking out adjustable-rate mortgages, assuming they would sell within two or three years, while draining those homes of equity for other expenses, said Anirban Basu, president of Sage Policy Group.
Anikeeff said the annual TrendWatch report produced by his department about the local real estate market showed that more than half of the mortgages in the region were adjustable-rate loans. When rates rose to higher, more normal levels, so did interest on those mortgages.
“I think a lot of people were surprised to see that number,” Anikeeff said. “The rates were relatively low ? for people to go into a risky mortgage didn?t make sense to us. Why not lock it in when it?s at a good rate.”
Cathy Werner, president of the Greater Baltimore Board of Realtors and a Realtor with Re/Max American Dreams in Perry Hall, recalled a general downward trend from early in the year through what she called the most important development of2007.
“[It was] definitely in August when the mortgage situation occurred,” she said. “We had people ready to go to settlement that couldn?t settle.”
