Price fluctuations in the Maryland housing market have prompted potential homebuyers to think twice before making a purchase, given the recent rise in average and median home costs. Maryland’s real estate market is experiencing a shift, according to a recent analysis by the Maryland Association of Realtors. The market has seen a significant increase in housing prices since April last year, while the number of units sold has shown a downward trend. This development has prompted real estate professionals to reassess their expectations of market trends and has sparked potential home buyers to reconsider their home-buying intentions.

A Sudden Twist in Sales Numbers

In April of 2022, the state of Maryland recorded over 8,000 housing unit sales. Fast forward a year, and that figure had plummeted by almost 34% to fewer than 5,500 homes. Surprisingly, only two out of the state’s 24 jurisdictions, Dorchester and Queen Anne’s counties, both located on the Eastern Shore, managed to record growth in home sales year-over-year.

The Unstoppable Rise of Home Prices

In addition, the home pricing trend in Maryland appears to be on an upward trajectory since April of the previous year. The average home price in 2022, which stood at $464,078, experienced a slight increase of 1.7% to reach $467,986 this year. Moreover, the median home price exhibited a sharper rise during the same period, going from $390,000 in April 2022 to $396,500 in 2023.

Interest Rates: A Key Player

According to Suzanne McCoskey, an associate professor of economics at Frostburg State University, the Federal Reserve’s continuous pattern of raising interest rates has instilled a sense of reluctance among homeowners to relocate, owing to the risk of higher mortgage rates. The Federal Reserve’s decision to raise interest rates seven times in recent years was a strategic move aimed at controlling inflation, but it has led many homeowners to remain in their current homes rather than face a potentially higher mortgage rate.

The Influence of Construction Costs on the Salisbury Market

Michael Weisner, the president of Salisbury-based Weisner Real Estate, offered another angle to explain the surge in housing prices. He attributed it to a marked increase in construction costs over the past three years. According to Weisner, soaring labor and material costs have forced a ripple effect of increasing housing prices across the board. In Wicomico County, where Salisbury serves as the county seat, the average home price increased from $277,377 in April of the previous year to $282,299 in April of this year. The number of listings in the county also fell from 123 to under 100. A similar trend was observed in the Lower Shore counties of Somerset and Worcester, where prices rose and listings decreased.

Housing Demand Remains Strong in Washington County

Despite the pandemic, the demand for housing in Washington County, Western Maryland, remains strong, says Molly King, president of the Hagerstown-headquartered Pen-Mar Realtors. The county, which saw nearly 200 homes sold in April 2022, reported only 103 sales a year later. The number of listed homes also saw a decrease of about 50 in the same time frame. Despite this, the demand for both new and used housing inventory continues to be high, and the median sales price has experienced a significant increase of 12.5%.

A Persistent Racial Divide in Home Ownership

The Maryland real estate market’s dynamics extend beyond pricing and sales trends to include disparities in homeownership across racial lines. A report from December revealed that about 79% of white households in Maryland own their homes, compared to just 55% of Hispanic households and 53% of Black households.

The Generation Gap: A New Dimension to Home Ownership

In addition to the racial divide, Professor McCoskey of Frostburg also identifies a generational gap in homeownership. Younger individuals, she notes, often feel excluded from the housing market, a traditionally significant source of wealth for American families, due to skyrocketing prices. The issue of sustainability, McCoskey concludes, could be a potential solution to balance the demand and supply in the housing market, leading to an environment where more people can achieve homeownership.