BERLIN — Local sellers of real estate have a healthy sense of optimism for 2015 as figures from the Coastal Association of Realtors (CAR) reflect continued growth in the housing market in the Tri-County area.
Over the past two years, single family home sales in Somerset, Wicomico, and Worcester counties have increased by 28.6 percent. In the same period of time, single family home contracts, or pending sales, have increased by 35.5 percent. New listings of single family homes have increased by 25.1 percent.
“It is reassuring to see the local housing market get back on its feet, while local Realtors step up to the plate, ready to provide top notch service to local buyers and sellers,” said Sheila Dodson, executive director of CAR, adding that rock bottom mortgage interest rates have been an incredible boon for the industry over the past year.
Recent data released by Freddie Mac showed the 30-year fixed-rate average slid to 3.8 percent, which is the lowest level of the year. That’s down from 4.47 percent a year ago. The 30-year fixed rate has remained below four percent for all but two weeks since mid-October.
“We saw solid interest and activity throughout the summer months, and the recent drop in interest rates has created a welcome sense of urgency and affordability,” said Lauren Bunting, a Realtor with Bunting Realty in Berlin. “With the lower interest rates, buyers can up their purchase price and it opens them up to more options when looking for a new home.”
According to Lawrence Yun, chief economist of the National Association of Realtors, inflationary pressure may force the Federal Reserve System to raise short-term rates in the first half of 2015. Mortgage interest rates are projected to increase to slightly below five percent next year and reach six percent in 2016.
The average sales price of single family homes since 2012 is up in Worcester County by 0.7 percent and down in Wicomico and Somerset counties by 2 percent and 11.5 percent, respectively.
“The decreases in average sales prices have been attributed to an influx in the availability of distressed properties and other bargains,” said Vicki Harmon, president of the CAR board of directors. “As these properties are removed from the local market, we expect to see home prices increase steadily, which is great news for folks who have been waiting to sell their homes.”
An increase in interest rates and home prices is indicative of increased consumer confidence, derived from a steady decrease in unemployment numbers since the beginning of the recession in 2009. Maryland’s unemployment rate in November of this year was 5.6 percent, compared to 7.9 percent in November 2009.
“The impact of rising interest rates on affordability will be minimal as long as job creation keeps pace,” Yun said.
A decrease in the unemployment rate is encouraging news for the local commercial real estate industry, too, as companies are looking to grow and expand.
Wesley Cox, a commercial Realtor with Sperry Van Ness Miller in Salisbury and a member of the CAR board of directors, said while the industry is experiencing a slow paced recovery, the outlook for commercial real estate in the coming year is very positive.
“The industry is poised for broad growth in the coming year as performance and profitability continue to improve across most property types and markets,” Cox said. “Nationally, office, industrial, and retail vacancy is down while hotels and apartments are seeing higher occupancy which is consistent with what we’re seeing locally, and although demand for commercial real estate has increased, it is far less than what we experienced in the mid-2000s.”
Cox said the driver for commercial real estate in 2015 will be continuing to strengthen property fundamentals and access to available capital.
“We expect to see modest to moderate growth in property values however price appreciation will be limited across most property types as past property sales play a large role in valuation models coupled with rising interest rates,” he said. “Overall, the expanding economy combined with relatively little new supply coming on the market — which has a strong negative impact on land values — will give a boost to occupancy rates yielding increased operating returns.”
Impeding on the market’s growth over the next year will continue to be factors like student loan debt, tight credit standards, an increase in multi-generational households, and a culture of 20-somethings who do not aspire to asset accumulation like the last generation, according to Economist Anirban Basu, who was recently appointed to Gov.-elect Larry Hogan’s transition team.
At the 2014 Worcester County Economic Summit held in early December at the Ocean City Convention Center, Basu said the housing market is not booming, despite historically low mortgage interest rates.
“This can also be attributed to multifamily structures like apartments seeing more activity than single family homes,” Basu said. “However we do expect the market to rebound this year as that focus shifts from rentals to owner-occupied structures.”
— Mrs. Rayne is a publicist for the CAR.