A Washington Post article from 2006 about Maryland’s housing market provides a glimpse of how people viewed real estate before the subprime-loan crisis and 2008 recession. The author wrote about the robust housing market, highlighting house and townhouse prices in the suburban counties appreciating nearly 25 percent over the previous year. Median home sale prices were $337,350 with Howard, Montgomery, and Frederick counties ranking among the best performing. Condominium prices were also on the rise, increasing 35.5 percent over the previous year. The article closed with a grim hint of what was to come in just a few months. The article quoted a realtor who had concerns about buyers taking on too much debt: “You have to realize you are not going to have 25 percent appreciation forever.”
The state has come a long way in 12 years. The House Price Index (HPI) is a broad measure of home prices for single-family houses compiled by the U.S. Federal Housing Finance Agency. It shows what home values were like compared to other points in time. The HPI for Maryland hit its highest point in the second quarter of 2007. By the beginning of 2008, the official start of the Great Recession, it had only fallen 3.5 percent. Eighteen months later, it had dropped 18.3 percent, and it kept dropping. At its lowest point in the second quarter of 2011, the home price index was 25.3 percent below its peak.
Since then, however, the market has recovered nicely. The economic expansion, now entering its 11th year, has pumped new life in real estate. While not fully recovered from its highest point in 2007, the home price index is just 9.5 percent off its record high, a testament to how far the state’s real estate market has come. That being said, the state has lagged compared to the rest of the country. National HPI peaked around the same time as Maryland, but fell by 18.9 percent by the second quarter of 2011. It has since recovered and is 13.9 percent higher than its previous peak. It should be noted, however, that the national HPI is lower overall.
Data published by the Maryland REALTORs shows that the real estate market was down in September, the last month for which there is data. Home sales across the state were down 10.8 percent compared to the same time the previous year, with only three out of 24 jurisdictions showing positive growth. Moreover, none of those three counties had more than 100 sales in the month. The drop in overall home sales could be a result of the Federal Reserve’s recent interest rate hikes, a response to an economy that’s picked up steam in recent months. With 4.2 percent GDP growth in the second quarter of 2018, followed by a 3.5 percent growth in the next quarter, the Fed increased interest rates in September, with one more rate hike planned in December.
In late November, however, Fed Chairman Jerome Powell commented that the Fed’s key benchmark interest rate is near the neutral rate, the point at which the Fed would stop raising rates. Many market analysts had predicted the Fed would continue its rate increases into next year, with two or three more hikes in 2019.
Though home sales might have been down across the state, average and median home sale prices had increased on a year-over-year basis. Average home sale price in Maryland rose to $332,532, a 4.9 percent increase. The largest increase came in Talbot County, where the average home sale price rose by 64.9 percent. Caroline County (+14.7 percent) and Washington County (+10.1 percent) also saw significant increases. Median home sale prices rose 3.6 percent across the state. Caroline County and Washington County again saw some of the highest increases at 19.5 and 10.1 percent, respectively. Queen Anne’s County also saw significant improvement, rising 10.8 percent over the past 12 months. Anne Arundel County’s median sale price decreased 1.2 percent for the year, although average prices remain up 3.3 percent.
