Allegany County housing prices, worker pay, incompatible
May 19—CUMBERLAND — Allegany County's housing prices have far surpassed the pay scale for many local would-be buyers.
According to Maryland Realtors, from April 2023 compared to April 2022 the county saw 9.7% fewer housing units sold with the average sales price up by 19.4%.
Home sales across the state dropped by 33.8% year over year in April.
The primary reason for the rise in prices, despite the market activity slowdown, remains a lack of inventory.
"What we see from April's housing statistics is that, despite the economy and interest rates, homes remain a cornerstone of building generational wealth for homeowners," Maryland Realtors President Yolanda Muckle said recently via press release.
What Maryland needs, she said, is more multifamily housing of four to eight units, smaller-scale homes that are clustered around a common courtyard, accessory dwelling units, duplexes and triplexes.
"What's troubling is that at the point, when we are at a shortage of 122,000 housing units for Marylanders, some governments, like the Prince George's County Council, are looking to exacerbate this problem by considering a two-year moratorium on townhouse development," said Muckle.
"We are not going to solve this problem by focusing on single-family homes," she said. "Marylanders in every county in this state need options."
Interest rates bottomed then climbed
Maryland is an extremely diverse state, said Suzanne McCoskey, associate professor at Frostburg State University's economics department.
Housing is "the quintessential local kind of market," she said and added a real estate market is directly linked to economic conditions of its region.
"What you see that's happening in (Allegany County) is going to be very different from Montgomery County," McCoskey said.
Additionally, mortgage rates following the pandemic fell to record-breaking lows, she said.
"Usually that would spur a demand for owner-occupied housing," McCoskey said.
But rates were low for such a long time, "there was almost an exhaustion with borrowing," she said.
While those low interest rates increased the number of owner-occupied homes, today's higher rates mean there's little motivation for residents to sell their houses.
"The selling of previously built units is low, especially now as interest rates rise because that's going to really cost someone to go from a low finance mortgage to a higher finance mortgage," McCoskey said.
The 'game of chicken' impact
In slow markets such as Allegany County, "we're not seeing people sell housing but we're also not seeing the incentive for the construction of new housing," McCoskey said.
The building of more houses in theory would lower prices of existing homes and stabilize the real estate market.
But, with talk of possible recession, "there's also this fear about breaking ground on construction," McCoskey said.
Like that's not enough outside trouble circling local want-to-be homebuyers, the U.S. ability to pay its bills also factors into the scenario.
Hopefully, the debt ceiling debate "is a game of chicken" that will soon be under control, she said and added the consequences of not solving the issue are catastrophic.
"I think most economists just find it almost impossible that we won't reach a last-minute agreement to increase the debt ceiling," McCoskey said.
"Our inability as a government to get along right now is what international investors see as the biggest threat," McCoskey said.
Housing market views 'have tumbled'
The U.S. housing market has yet to emerge from a slump that started a little more than a year ago, when the average rate on a 30-year mortgage began to climb from ultra-low levels, according to The Associated Press.
Rising mortgage rates, on top of already high home prices, can add hundreds of dollars a month in costs for homebuyers.
"We have a very strange dynamic," Lawrence Yun, National Association of Realtors chief economist, told the AP of market conditions across the country. "Sales are down, even prices are down, yet multiple offers are happening on at least one-third of the properties (that) have been sold above their list price."
Gallup, an American company founded in 1935 and based in Washington, D.C., is known for its public opinion polls conducted worldwide.
According to the organization, it first asked Americans about their perceptions of the housing market in 1978, when 53% of people thought it was a good time to buy a house.
"The latest results are from Gallup's annual Economy and Personal Finance poll, conducted April 3-25," the organization's website stated Friday and added that 78% of folks say right now is a bad time to buy a house.
"In the past two years, as housing prices have soared and the Federal Reserve has raised interest rates to try to tame inflation, houses have become less affordable for many Americans, and views of the housing market have tumbled," according to Gallup.
'A very low median income'As local housing prices have increased, salaries for many area residents haven't.
Allegany County has some of Maryland's lowest labor force participation rates.
"We have a very low median income," McCoskey said and added that makes it tough to attract investors to build more housing in the area.
That means many potential buyers are outbid in their house purchase offers.
Prices may be creeping up on the supply side of the local real estate issue, but low pay wages will force a lot of local folks out of the housing market.
"Employers are not really willing to raise wages as much as they are to cut back service," she said. "A lot of businesses are just reducing their hours ... hiring fewer people."
The area's current need for more workers should result in higher pay wages that could catch up with local housing prices.
"But I don't really see that," McCoskey said. "The stagnant income issue is very real in Allegany County."
Teresa McMinn is a reporter for the Cumberland Times-News. She can be reached at 304-639-2371 or firstname.lastname@example.org.