March 2015
Feb. numbers show major spike upward Settlements, contracts go far beyond total last year
Housing affordability jumps in Maryland State association reports huge improvement in last quarter of calendar year
Housing affordability surged for first-time Maryland homebuyers in the fourth quarter, the Maryland Association of Realtors reported in February. The index jumped from 77.2 percent in the third quarter to 83 percent in the fourth quarter of the regular calendar year. This means that first-time homebuyers in Maryland had 83 percent of the income necessary to purchase a typical starter home. “We ended 2014 on a very positive note in terms of affordability,” said association President Janice Kirkner. She noted that starter home prices declined almost $15,000 in the last three months of the year, the major factor in the jump in affordability. The index has never reached 100
percent in the eight years that MAR has calculated it. The “Housing Affordability Index” was converted in 2007 to a quarterly calculation by Sage Policy Group Inc., the association’s economic consultants. The firm recalculated the data for the conversion, which, by making the calculation quarterly, allows tracking long-term housing affordability in Maryland in a more macro way by accommodating some of the minor changes that can occur in a monthly figure. Sage has also revised the 2011 and 2012 data based on more recent data regarding median and personal income. With the first quarter of 2014, Sage has made a further revision to the index by adding the property tax to the monthly principal, mortgage interest, and mortgage insurance payment. The weighted average of 2013-14
property tax rates for the state, 23 counties and municipalities and Baltimore City is included as well as the monthly principal and mortgage rate, and mortgage insurance. The median household income figure used in the index calculation has also been revised, because of extensive updates from the U.S. Bureau of Census based on the data received from the recently completed American Community Surveys. The index is still based on the percentage of income the typical firsttime homebuyer must have to buy a typical starter home with a 5 percent down payment, based on a 25 percent qualifying ratio for monthly housing principal and interest to gross monthly income and assuming a 30year amortization at the effective mortgage rate plus a PMI premium. Monthly fluctuations in affordability can be because of changes in interest rates, other terms of financing and home prices.
February might get a bad review from most people who had to endure one of the coldest months in the resort area in years, but it won’t get a bad rap from the coastal Maryland real estate industry. Even as the temperatures plummeted, the number of sales and contracts recorded and reported in Worcester County by the Coastal Association of Realtors (CAR) far exceeded the totals posted this time last year. According to the association’s monthly business tally, the number of settlements in February went up by 25.27 percent over February 2014, which, as everyone knows, was much milder than this year’s edition. The breakdown for settlements as reported by CAR showed that 106 buyers and sellers completed their transactions in February 2015 as compared to 82 the year before. Showing an even greater increase – and boding well for the industry in the months ahead – was the number of signed sales contracts. The association’s statistics for the month showed an increase of 45.13 percent over last February, a solid indicator that sales activity will continue to be strong through spring. In this instance, 164 contracts were signed this February, while last year’s monthly total was 113. This also suggests a winning convergence of people looking to sell their properties and people looking to buy while the interest rates remain exceptionally low. Even though rates have crept upward in the past couple of months, they continue to remain well below the norm. As of March 8, the financial publisher Bankrate reported that the average rate on a 30-year fixed-rate mortgage was 4.02 percent, or about half of what it was 10 years ago. This goes along with what the National Association of Realtors found in its market analysis, which indicated that this and other factors have joined to improve buyer demand beginning in January. The Pending Home Sales Index a forward-looking indicator based on contract signings, climbed 1.7 percent to 104.2 in January from an upwardly revised 102.5 in December and is now See SALES page 6