Although sales of existing homes in Maryland fell by 4.2 percent during the fourth quarter from a year ago, a new report concludes the price of a starter home is more affordable than it has been in years.
In last year’s fourth quarter, first-time homebuyers had almost 85 percent of the income they needed to purchase the average starter home costing about $191,000, according to the Maryland Association of Realtors. That’s the highest percentage since the group started calculating the index in 2005.
The index was almost 82 percent a year ago and 72 percent two years ago.
The rising index is due to historically low interest rates and declining home prices, Patricia A. Terrill, board president of the Maryland Association of Realtors, said in a statement. The typical monthly mortgage payment dipped to $951, a decrease of more than $100 from the fourth quarter of 2010.
“This change, increasing monthly disposable income, can be the difference between renting and buying a home for many Maryland families,” Terrill said.
But as home prices declined to an average of about $273,000 in December from $304,000 two years earlier, sales also dropped in most Maryland counties, according to figures from the association and Metropolitan Regional Information Systems. In Montgomery County, sales were down by 10.5 percent in December, 8.5 percent in Howard and 14 percent in Frederick County.
They rose by 1 percent in Prince George’s County and 3 percent in Anne Arundel County.
One factor that could have contributed to the sales decline late last year is the more stringent loan requirements that lenders are imposing on potential buyers, said Carlton Boujai, board president-elect of the Maryland Association of Realtors. He is an agent at Exit Realty Prosperity Group in Frederick.
“At one point, some lenders were giving people loans who should not have gotten loans,” Boujai said. “I’ve always used quality lenders myself and had qualified buyers. ... But the requirements have gone from loosey-goosey to tighty-righty.”
A high-quality lender can still get prospective buyers through the process and tell them and their agents early whether there are credit problems, he said.
“For the most part, I’ve not had any problems with the lenders I have used,” Boujai said.
Since December, the market has picked up, with the relatively warmer weather contributing, he said.
“January and February are usually weak sales months because of the weather,” Boujai said. “But I’ve seen activity greatly increase in January and so far in February. We still have a fragile market, however.”
Customers are looking for bargains, which are out there in abundance, he said.
“We do have to work a lot harder for the same amount of money than we did three to four years ago,” Boujai said.
Although many real estate agents in Maryland saw a slower fourth quarter, AJ Khetarpal, broker and CEO of Maxxum Realtors & Associates in Rockville, was not among those.
“We had a good last part of the year,” said Khetarpal, whose sales are made up of many short sales and foreclosures. Short sales are distressed sales in which the seller seeks less than what the home is worth and the lien holder agrees to accept that lower amount, which can prevent foreclosures.
Short sales still are taking a long time to move, he said. But financing has not been quite the issue as some thought with the stricter lending requirements, Khetarpal said.
“It really depends on the client,” he said.
Nationwide, existing home sales rose in the fourth quarter, according to the National Association of Realtors. Sales were at a seasonally adjusted 4.61 million units in December, up from 4.45 million a year earlier.
Virginia was among the states that experienced an increase in existing sales in the fourth quarter, by 1 percent from the 2010 fourth quarter, according to figures from the Virginia Association of Realtors.