Maryland home sales plummet: How rising interest rates and high costs are squeezing market

A new report from the Maryland Association of Realtors shows that housing prices have gone up in the state from April of last year, but the total number of units sold have gone down, leading local real estate agents to handicap what the future holds and potential buyers to consider whether they really want that new home.

In April 2022, over 8,000 units were sold statewide. A year later, that number dropped nearly 34% to under 5,500 homes. Only two of the state’s 24 jurisdictions recorded year-over-year growth in home sales: Dorchester and Queen Anne’s counties both on the Eastern Shore.

Additionally, the average of price of a home has also increased from April of last year. The 2022 price of $464,078 rose 1.7% to $467,986 this year. The median home price increased about twice that difference during the same period, from $390,000 in April 2022 to $396,500 in 2023.

“With this persistent pattern of the Federal Reserve raising interest rates, there’s a lot of reluctance right now to move,” said Suzanne McCoskey, an associate professor of economics at Frostburg State University.

The Federal Reserve has raised interest rates seven times in recent years in an attempt to cool inflation. McCoskey said the rate increases keep people in their homes as opposed to moving, and risking having to pay a higher mortgage rate.

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Salisbury market and the state: a comparison

Michael Weisner, president of Weisner Real Estate based in Salisbury, provided another potential reason for the increase in housing prices — a rise in construction costs.

“The cost of construction and renovation has gone up significantly in the last three years,” said Weisner, whose grandfather started the company in 1938. “Labor and materials have skyrocketed, and that forces up the price of housing across the board.”

In Wicomico County, where Salisbury is the county seat, the average price of a home was $282,299 in April of this year, compared to $277,377 in April of last year. There were under 100 listings in the county compared to 123 a year ago. The Lower Shore counties of Somerset and Worcester also saw prices rise and listings dip, too.

“Salisbury’s very similar with the rest of the state,” Weisner said. “The units sold is down, and the number of listings is down as well.”

Statewide, there were over 10,000 listings in April of last year. This year, only a little more than 6,500 listings were made.

Weisner said rental properties continue to come on the market in Salisbury. The city, which is home to Salisbury University, has one of the highest rates of renters in the state. Hagerstown and Laurel also have rates of renters, above 50%, according to U.S. Census data.

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'Demand for housing remains high in Washington County,' Realtor says

In Western Maryland’s Washington County, the squeeze for a home still stays post-pandemic, according to Molly King, president of the Hagerstown-headquartered Pen-Mar Realtors.

“Demand for housing remains high in Washington County,” King said. “Overall, we’ve seen sales drop this past month, when compared year-over-year.”

In April 2022, nearly 200 homes were sold in the state’s third-most western jurisdiction. This year, only 103. There are about 50 fewer listed homes in Washington County in April of this year as compared to last.

“About 30% of all (Washington County) properties listed are new construction,” said King, a realtor with Coldwell Banker Innovations. “Demand for both used and new build housing inventory remain high.”

The price of a home remains high too, with Washington County being only one of three counties with a double-digit rate of increase in median sales price, year-over-year. The median price of $279,900 rose to $315,000 in April, a 12.5% change. Kent and Queen Anne’s counties, on the Eastern Shore, were the only other jurisdictions with a greater rate jump in median sales.

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A racial gap in the rates of home ownership

While home prices remain steady, so too does a racial gap in homeownership and home values. A December report prepared for the Maryland Department of Housing and Community Development showed nearly 79% of white households as homeowners, while only 55% of Hispanic households and about 53% of Black households owned a home.

McCoskey, the Frostburg professor of economics, also sees a “generational gap” between older individuals and younger ones like her students when it comes to homeownership. The younger generation, she said, feels priced out of and struggles to gain access to the market that has been one of the most important sources of wealth for American families over the years.

Perhaps even more concerning, a Brookings Institution report showed that homes of similar quality in neighborhoods with similar amenities are worth 23% less ($48,000 per home, on average, nationwide) in majority Black neighborhoods, compared to a neighborhood with very few or no Black residents.

In the Salisbury-area, that difference was calculated by Brookings to be an 11% difference between homes in majority Black neighborhoods and those that are not, equating to a $17,236 difference in value.

The issue of sustainability, McCoskey said, might be one that helps correct the demand, creating a housing market in the future where homeownership is available for more people.

“When markets struggle, this is the time that economists think innovation will happen,” she said.

Dwight A. Weingarten is an investigative reporter, covering the Maryland State House and state issues. He can be reached at dweingarten@gannett.com or on Twitter at @DwightWeingart2.

This article originally appeared on The Herald-Mail: Maryland home sales plunge on rising interest rates, higher costs