WASHINGTON – Property values and mortgage costs throughout Maryland rose in 2005, according to U.S. Census Bureau data released to the public today, but rents fell, signaling the beginning of the end of the housing boom.
“What they don’t capture is the changes since then, which is that things are cooling,” said Gerrit Knaap, executive director of the National Center for Smart Growth based at the University of Maryland. “I wouldn’t explode this to the end of the world. This is normal housing-market-cycle stuff.”
In 2005, at the pinnacle of a flourishing market that drove housing costs up, the median value of housing units that were mortgaged or owned outright, not rented or provided free of charge, was $280,200. The median, or the point at which half the values are higher and half are lower, rose 18 percent from 2004 after adjusting for inflation.
That jump caused mortgage costs in Maryland, combined with other monthly costs of living like insurance, utilities and fuels, to increase 7.4 percent over 2004 with inflation adjustments, to reach a median of $1,561.
The numbers are consistent with a national housing boom that started with the new millennium, but stringent controlled-growth policies throughout Maryland further fueled the increase in property values, experts said.
“It’s a combination of very strong demand and supply not being able to meet that demand,” said Maryland Department of Planning economist Mark Goldstein.
Although the census increased its sampling sizes from 2004 to 2005, which can affect accuracy, the numbers reflect the dynamics of the state’s housing market, which has seen an increase in value of nearly 70 percent since 2000, Goldstein said.
The market has begun to slow nationwide because of recent increases in federal interest rates, causing failed speculation that Goldstein blamed for the 13.7 percent decline in median rent between 2004 and 2005. The 2005 median cost of renting a home, apartment or condo in Maryland, including utilities and fuels, was $891 monthly.
“A lot of homes were bought up in this speculative fever,” Goldstein said, adding that when no one bought the homes, they were often rented out.
Maryland’s housing costs were particularly high compared to other states in 2005. The state ranked seventh in owned or mortgaged property values, in a statistical tie with Rhode Island and Connecticut. It tied with New Hampshire for the 10th-highest mortgage cost and had the fifth-highest rent.
That’s no different from previous years and not particularly disturbing, Goldstein said.
“Relatively speaking, especially for homeowners, we’re really not out of line at all,” he said. “The prices are high, but the incomes are high.”
Montgomery County, which enjoys proximity to Washington and a large, high-income technology sector, had the highest property, mortgage and rent costs in the state in 2005, with the median value of an owned or mortgaged property at $466,100.
Francis DeSouza, a real estate agent who owns property in Gaithersburg and Germantown, also had a house custom-built in Olney in 2000 for $350,000. Now, he says, its appraised value is $900,000.
“As a Montgomery County resident, this is the greatest county you could be in if you could afford it,” DeSouza said. “The taxes are high, the properties are high, the mortgages are high, and if you’re not making enough to compensate for that, yeah, you’re biting off more than you can chew.”
At the other end of the spectrum, Allegany County trailed the rest of the state in housing costs. The county’s median owned- or mortgaged-property value was $83,600, making it the only county in Maryland not to break the $100,000 median mark.
Property values in Allegany County have been low since its manufacturing industry failed decades ago, but it has seen a comeback in recent years, said Marty O’Toole, a 61-year-old broker for Century 21 Potomac West who has lived in the Cumberland area his whole life. He sold his own three-bedroom house in Cumberland for $130,000 last year.
“It’s still a blessing in that people still can afford housing up here and people can still invest up here and we don’t have to drive to work every day in bumper-to-bumper traffic,” O’Toole said. “When I drive down to Annapolis, I go down Route 32 and I look over and see signs that say, ‘We start low-600s’ and I go, ‘Oh my goodness.'”