Md. housing market continues to defy recession and fallout from Sept.

Daily Record, The (Baltimore), Dec 4, 2001 by Daily Record Staff Business Writer

The value of residential real estate is on the rise as the local housing market continues to defy the pressures of a recession and fallout from the Sept. 11 terrorist attacks. Moreover, mortgage lenders and real estate executives predict the local housing market should soar though 2002, which will extend one of the industry's most prosperous eras.

According to the latest report by the Office of Federal Housing Enterprise Oversight, U.S. home prices increased 8.4 percent from the third quarter of 2000 through the third quarter of this year. Housing in Washington was tops in the nation with a one-year appreciation of 16.21 percent, while Maryland ranks 14th at 9.6 percent.

Gene M. Lugat, president of the Maryland Mortgage Bankers Association Inc., said the proliferation of government jobs has given Maryland's housing market a significant boost and helped the state withstand some of the strains facing the national economy. Lugat said interest rates also are driving the local housing market, and the mortgage industry expects to do $2 trillion worth of business in 2001 -- a 25 percent increase over previous record years in the late 1990s.

"The housing market in Maryland is doing better than other parts of the country because of the state's diversified economy, and the lower interest rates also are helping," Lugat said. "Real estate really has been the strongest leg of the U.S. economy."

The Office of Federal Housing Enterprise Oversight reported that homes in Maryland appreciated 2.9 percent in this year's third quarter. Over the last five years Maryland homes appreciated 28.4 percent, and 171.9 percent since 1980, according to the report.

Even with the increase in overall home prices, sales around the state remain brisk. According to the latest research by Metropolitan Regional Information Systems Inc., home sales in the Baltimore metropolitan jumped 7.7 percent in October compared to last year, and almost tripled the 2.7 percent increase in September.

California also continues to have strong housing appreciation, despite a downturn in the state's economy with the fall of the technology sector. The Southern Bay area, which includes the Silicon Valley, experienced virtually no growth in the third quarter, but the Northern Bay area continued to grow at above average rates and has one of the strongest housing markets in the nation.

Lugat said Silicon Valley benefited from the technology boom of the late 1990s, where the value of houses in that area soared. However, Lugat said even though those same houses are declining in value because of massive layoffs in the technology sector, they are only going back to the levels of 1999, which are still high by industry standards.

American consumers are still spending money through the economic downturn, which is helping to drive the growth of home sales. The Commerce Department reported yesterday that personal spending rose by an all-time high of 2.9 percent in October.

Patrick T. Welsh, president of the Greater Baltimore Board of Realtors, said Maryland does not have enough inventory to meet demand for houses. Welsh said lower interest rates are driving the housing market, and he does not expect the recession to have that great an impact on sales.

"The housing market is going to be one thing that can pull this nation out of a recession," Welsh said. "For the last three or four years, we have been pulling numbers that we never thought were possible."

Welsh said home sales might be down a bit in December compared to last year, but only because 2000 was the strongest year on record for residential real estate. Welsh anticipates 2002 will be another strong year for residential real estate, and does not see any significant declines in the foreseeable future.

"There have been no slowdowns at all," Welsh said. "Since Sept. 11, we have even seen some increases."