Wanted: Your tax assessment stories
Got a property tax assessment story?
Whether it's good, bad, bizarre or humorous, I'd like to hear it. Recent is preferred, of course.
Drop me a line at jamie.smith.hopkins (at) baltsun (dot) com.
Got a property tax assessment story?
Whether it's good, bad, bizarre or humorous, I'd like to hear it. Recent is preferred, of course.
Drop me a line at jamie.smith.hopkins (at) baltsun (dot) com.
Dixon spokesman Sterling Clifford said the report has several scenarios for "reconfiguring the tax structure" -- not just property taxes but also income taxes and fees, because the goal is to change the property tax rate "and still continue to provide enough revenue for the operation of city government," he said.
Back in February, when Dixon announced that she would form the committee, this is what we reported:
She said she favors "substantial reduction" to the property tax rate and a change in the way the state values properties - she thinks commercial sites are underassessed - but she cautioned that major change shouldn't come immediately.
Every one-cent reduction in the property tax means the city forgoes nearly $2.4 million in revenue, according to Raymond S. Wacks, the city's budget director.
"Cutting it by 50 cents would be a major disaster for the city at this point, but you've got to put something in place to begin to change the structure," Dixon said.
Median prices in the country fell 3.3 percent to $210,200. But the NAR says that's at least partially due to a sharp slowdown in sales in expensive markets, skewing the overall price statistic downward.
How do we compare?As Metropolitan Regional Information Systems reported earlier this month, median prices in the Baltimore metro area fell 3.8 percent to $259,700, while sales dropped about 30 percent.
The average price was fairly steady in the Baltimore area, and that's what people tend to focus on around here. So why am I using median, you ask? Because that's what NAR uses. The advantage of median is that it's the point at which half the homes are cheaper and half more expensive.
The NAR also says U.S. home sales rose slightly -- about half a percent -- in November vs. October. But since those numbers are adjusted for seasonal variations and our local numbers aren't, there's no way to make an apples-to-apples comparison.
If you have a house, you have a property tax bill. Any day now, a third of Maryland property owners will be getting letters about a reassessment of the value that helps determine that tax.
You may have it in hand already, if your mail person is swift: The state Department of Assessments and Taxation sent the 728,185 notices out on Friday. The parts of the Baltimore area that are being reassessed this time 'round are northwestern Anne Arundel; the middle section of Baltimore City; the north and middle parts of Baltimore County; northeastern Carroll; the middle part of Harford; and both southern and western Howard. (You can find maps HERE.)
There's always some anger and frustration when new assessments hit, but the odds of furious screams are much higher in this time of slumping sales and soft prices. Why, you might wonder loudly, doesn't your new assessment reflect the fact that prices are stagnant or in some cases falling?
Because it's a three-year assessment cycle. Individual cases will vary, but average sales prices in the Baltimore metro area are up 20 percent since November 2004 -- at least as measured by Metropolitan Regional Information Systems, keeper of the multiple list.
Of course, the assessors say residential values increased 96 percent in the middle section of Baltimore City over those years, and -- while there's no quick way to track the same areas by sales -- MRIS says prices in the city overall jumped 35 percent. So it doesn't hurt to check out your home's reported value to see if it makes sense to you. If you think you've been overassessed, you can appeal.
The key is to show why your house is worth less than the state says it is, not to argue that the taxes are ridiculous. (That's an argument for the elected officials in your jurisdiction, the ones responsible for tax rates.)
You'll want to arm yourself with information about sales of comparable homes -- or assessments of comparable homes, should the state put a different value on your property than your neighbors'. The state will give you assessment worksheets for similar homes for a dollar each, and the assessment worksheet for your home for free, said C. John Sullivan, director of the assessment department.
You can do your own research at the state's website, too: Go HERE for the handy property search page, where you can look at recent sales or pull up records on individual properties.
Go HERE for more information about the appeal process.
One thing to keep in mind: If you're an owner-occupier, your tax increase is capped by the homestead credit. (Depending on where you live in Maryland, the increase in the amount of assessed value you're taxed on is limited to anywhere from 2 percent to 10 percent. Click HERE for a list.) If you've been in your home for many years, the value you're actually paying your taxes on is probably lower than your total assessed value -- possibly quite a bit lower. So you could win an appeal but see no difference in your tax bill.
Speaking of the homestead credit, remember that this is the first time you'll have to apply for it. Those who are being reassessed should get an application with the assessment notice. All those homeowners who are not being reassessed yet will get the application when it's their turn in the three-year cycle.
The deadline to apply isn't exactly a tight one.
"We don't want people to panic over this," said Sullivan, whose staff will check applicants to make sure they're not getting the credit on more than one home. "They have until 2012."
Even through the grimmest headlines of 2007, there were a number of positive underlying economic forces propping up real estate and keeping it from a true bust. If those forces continue, they should help cut the time needed for the correction cycle to bottom out and the historically inevitable recovery cycle to begin.
Take mortgage rates. Had the cost of money been significantly higher in 2006 and 2007, does anyone doubt that the delinquencies and foreclosures stemming from the toxic vintages of subprime loans would have been much worse? But the 30-year fixed rates that hovered in the low 6 percent range for much of the year -- even in the high 5s for a couple of weeks -- allowed many borrowers to refinance into alternatives such as FHA or conventional Fannie Mae/Freddie Mac loans. The recently announced national loan modification and rate-freeze effort should keep at least some -- no one knows how many -- struggling subprime homeowners out of foreclosure in the new year.
Steady, moderate national growth of new jobs, economic expansion and low inflation also helped the national housing market in 2007 and could do the same in 2008. By the way, despite all the scary statistics, sales of existing and new homes in 2007 totaled an estimated 6.5 million, which would make it the fifth largest sales year in American real estate history.
Another fact that often got lost amid the bad headlines in 2007 and offers reason for hope for a better 2008: Vast swaths of the country never experienced the excesses of the boom years, and have not endured the pains of the crunch under way in the most volatile markets.
One of the interesting things about Live Baltimore is that it's acted as a one-stop shop for information about the city's head-spinningly numerous neighborhoods, and not just the few that an outsider might have heard of.
Before Live Baltimore, there were groups trying to lure just about everyone to the city -- including businesses, tourists, developers and day-trippers -- but only grassroots efforts were being made to attract homeowners. ...
"Our primary focus is to concentrate on making the city of Baltimore a preferred living destination," said Anna Custer, executive director of the Live Baltimore Home Center. "From the beginning, it's been about the residents of our city wanting to see a better Baltimore, wanting more people in on it and trying to encourage ways for the city to grow."
Structured investment vehicles sold commercial paper - some backed by subprime mortgages - that lost value as investors feared the debt would be affected by rising home-loan defaults.Structured investment vehicles, the story notes, "were popular investments for money funds looking to increase yields" -- including ones at Legg. The company says it has moved $1.1 billion into two foreign money market funds to avoid losses.
"These actions are further evidence of our continuing support of our liquidity products in light of current unprecedented market conditions," said Chairman and Chief Executive Officer Raymond A. "Chip" Mason in a statement.
Leopold said the current fees on single-family homes ($4,904), townhouses ($3,385) and most condominiums ($2,492) "do not capture the full freight of the cost developers should pay" to offset the impact that projects place on roads, schools and other county services.Homebuilders worry a big increase would mean fewer sales.
A report prepared for the county in September shows that the impact of a single-family home on roads and schools is $21,056; for a townhouse, $17,279; and most condominiums, $12,135. The administration's bill is also expected to factor in impacts on police and fire services.
Hanley Wood Market Intelligence expects that new home sales in Anne Arundel this year will be up 12 percent from last year -- a much better performance than the national average -- but down nearly 40 percent from the annual average during the boom, McGowan reports.
In a further indication of the languishing housing market, about 4,000 existing homes are listed for sale in the county -- quadruple the number this time last year, Anne Arundel budget director John Hammond said in a budget briefing last week to state lawmakers.
"I think you can classify what we are seeing in the housing market as a crash," said Mark Zandi, chief economist at Moody's Economy.com. "Sales and home prices are in a free fall. The downturn is intensifying."
Carson reports that Baltimore saw the biggest jump, a 25 percent average annual increase -- "more than four times Montgomery County's 5.4 percent annual growth in expensive communities such as Potomac and Chevy Chase."
Most of the Baltimore metropolitan-area counties were closer to the statewide average of 11.1 percent growth per year for three years. That's significantly lower than last year's average annual increase of 18.7 percent, or the peak 20.1 percent jump at the end of 2005. State assessors examine one-third of each jurisdiction's properties each year, then phase in the increases.
Howard County's increase was 8.1 percent for the rural third covered by these notices, while Baltimore County's central section -- from the city line to Pennsylvania -- showed a 10.9 percent increase. Northwestern Anne Arundel's values were up 11.6 percent, while Harford's central region was up 12.9 percent and Carroll County's northeastern third rose an average 12.5 percent.
Monday's How-to post will focus on assessments and appeals. 'Tis the season.
Click HERE for an Excel file that shows ZIP codes in the Baltimore metro area, ranked by change in average price in November 2007 vs. November 2006.
Click HERE to see the ZIP codes ranked by change in sales.
Click HERE to see an alphabetized list.
You really only need one, of course: Once it's open, you can sort it whichever way you'd like.
Just remember that I've only included those ZIP codes with at least five sales in November 2007 and at least five sales in November 2006. That's my attempt to toss out the apples-and-watermelons comparisons that are much more likely when an area sees only a handful of sales (you can imagine the price skewing if a couple mansions sold in one month and a couple condos sold in the other).
Even so, there's almost certainly other examples of skewing. Keep that in mind, especially for ZIP codes showing huge swings, positive or negative.
The statistics are crunched from home sales data provided by Metropolitan Regional Information Systems. You can look up results of individual ZIP codes -- including days on market, which I don't have access to -- by going HERE. MRIS says the home sales database it provides me is newer and therefore more accurate than its look-up page, which should be why the two don't always agree.
If you've been following along at home, you know that the Baltimore metro area's housing market had slightly lower average prices last month and a big drop in sales. But if real estate is really about location, location, location, wouldn't it be useful to know what happened at a more local level?
I thought so, which is why I've just crunched the numbers that way. If you focus on the 87 ZIP codes in the metro area that had at least five sales last month and at least five sales in November 2006, according to data from Metropolitan Regional Information Systems, here's what you'll see:
... where sales fell: 82 percent
... where sales remained flat: 7 percent
ZIP codes where average prices rose: 43 percent
... where prices fell: 55 percent
... where prices remained flat: 2 percent
ZIP codes with at least 10 percent gains in average price: 23 percent
ZIP codes with at least 10 percent losses in average price: 34 percent
Number of the 10 most expensive ZIP codes that saw average prices fall: 1
Number of the 10 least expensive ZIP codes that saw average prices fall: 8
Most expensive ZIP code in November: 21029 (Clarksville), at about $825,000 -- prices rose 2 percent
Least expensive ZIP code in November: 21205 (Baltimore, near Johns Hopkins Hospital), at about $56,000 -- prices dropped 12 percent
Check back tomorrow, when I'll put up files that will let you do your own comparing and contrasting.
Right now that's anything above $417,000, the largest amount that mortgage financiers Freddie Mac and Fannie Mae will purchase. The homebuilders want to push the $417,000 "conforming" loan limit to $600,000 because the typical Bay Area home is so pricey. Jumbo loans, which have always come with a higher interest rate than conforming loans, have been even more expensive since the credit crunch hit this summer.
What does this have to do with us? The Mortgage Bankers Association told me that about 11 percent of loan applications in Maryland are for jumbo mortgages. Only seven states and the District of Columbia have higher shares.
The paper quotes Philip Wise, "former real estate executive and longtime visionary of Dallas Habitat."
"We can now acquire raw land, prepared lots and possibly finished homes from builders, investors and lenders cheaper than any time in the previous seven or eight years," says Mr. Wise, formerly an investment manager for Crow Holdings and a past owner of Dallas Infomart. "We'd like to double Habitat production in the big cities in the next four years."
Associated Press photo
Is a housing downturn the best time to get your foot in the door?
If you follow the stock-market advice to buy when everyone's selling, today's conditions look pretty favorable. That's what the National Association of Realtors and the National Association of Home Builders keep saying.
But wait -- if you believe the forecasts of economists who expect significant price declines in the near future, you'd want to hold off 'til things get worse for sellers and better for you.
Oh, and if you're extremely nervous about buying in a neighborhood only to end up living near foreclosed or otherwise vacant homes, you might think it best to sit tight until prices, sales and the economy at large are again rising merrily.
Got all that?
Apologies if you were expecting a straight answer. There doesn't seem to be one, and there are enough opinions out there already -- you don't need mine. Instead, let me offer you a way to do your own forecasting.
If you saw my Sunday story, you know I ran numbers through a "rent vs. own" calculator to give everyone an idea of when you're better off renting and when you're better off buying, and under what circumstances. I encourage you all to do the same with numbers tailored to fit you and your expectations.
Pick a rent vs. own calculator. I used E-LOAN's, which you can find HERE, because it allows you to plug in all sorts of numbers. You've got plenty of choices, though, including one at Ginnie Mae and another on the Baltimore Sun site.
Decide which ways you're average. E-LOAN only asks you for a few figures and supplies the rest, but you can go in and change most everything to suit you. Here are the figures I used:
--Monthly rental payment of $1,030, the Baltimore metro area average, according to M/PF YieldStar, an apartment market research firm. (That's the overall average regardless of size, but it also happens to be very close to the average for a two-bedroom. The other size averages are as follows: $750 for an efficiency, $925 for a one-bedroom and $1,250 for a three-bedroom.)
--Annual rent increases of 3.5 percent. That's what M/PF YieldStar says is common in this area, though your results may vary. (The year-over-year increase is actually quite a bit less at the moment, the company says.)
--Home purchase price of $308,000, the average for units sold in November, according to Metropolitan Regional Information Systems. If you know where you want to live, you can see the averages for local jurisdictions HERE or for ZIP codes HERE.
--Down payment of 5 percent, or $15,400. Mortgage brokers who work with first-time buyers assure me that this is still typical in today's lending climate.
--Interest rate of 6 percent. That's just a hair above what Northstar Mortgage in Ellicott City was quoting a week ago, though of course it could go up or down in the coming months. Freddie Mac keeps national averages HERE.
--Number of years you plan to be in the home: I put in every year from 1 to 30 (yes, that did take a long while, especially since I kept refining my numbers and had to start all over again), but you don't have to go through all that. Pick a year, or pick several to compare and contrast.
--Home values increasing 0 percent for the first five years and 4 percent a year thereafter. Why? I didn't want to be as optimistic as the optimists or as pessimistic as the pessimists. Four percent is the annual average increase for the metro area between 1979 and 1999, according to the National Association of Realtors.
Unfortunately, I have yet to see a rent/own calculator that will let you plug in a varying appreciation rate. So for each of the first five years, I put in "0." After that, I needed an average annual percentage increase that took into account those five years of zilch. Here's the formula: increase=(1.04^(1 - 5/N))-1. "N" is the year, so it's 5/6 for Year Six, 5/7 for Year Seven, etc.
Excel will handle it for you quite nicely if you paste it, not including the word "increase," into a cell. (Either set the cell for percentage or multiply it by 100.) The "1.04" refers to the 4 percent rate, so feel free to change to suit your needs. Yeah, this is the wonkiest Wonk post yet, but you can do it. Breathe in, breathe out. (And thanks to Mr. Wonk for the math assist.)
--Closing costs of 2.4 percent to buy the home. That's what it would cost you to buy that $308,000 house in Baltimore County, not including anything you're prepaying, like property taxes, according to Northstar Mortgage's calculations. (It's actually 2.5 percent of the loan and 2.4 percent of the home value.) If you think you can get a government grant or a motivated seller to cover your costs, you can gleefully enter "0" here.
--Property taxes of 1.1 percent. This is about average for the Baltimore suburbs, says the Greater Baltimore Board of Realtors. The city's rate is a much higher 2.4 percent. Both figures include the state's share of property taxes. You can see the county-by-county breakdown HERE.
--Annual home maintenance of 1 percent. "Are you crazy?" you say. "I'm not spending $3,100 a year in maintenance!" Well, real estate companies and economists say you should budget for it. My condo fees alone, which cover things like landscaping, are more than half that.
--Cost of selling. I set this at zero because I wanted to know when, just living in your home, you're doing better financially than renting. If you want to include the not inconsiderable costs of selling, you might enter 6.25 percent to account for closing costs and Realtor fees. I ran that figure past several people in the industry, but keep in mind it can really vary. You can choose from agents charging a wide range of fees or go it on your own.
--Income tax rate of 25 percent. That's the marginal tax rate for a married couple earning $85,000, the average household income in the metro area. You can figure out your rate HERE (scroll down a bit). This is important because it determines the usefulness of your tax deduction for mortgage costs.
--Savings/investment rate of 0 percent. In other words, I assumed that the renter would take the $22,800 not needed for a down payment and closing costs and save it by sticking it under the mattress. This was my way of dealing with the fact that while some people would invest the heck out of that money, others would spend it. Moody's Economy.com suggests that 4 percent a year is reasonable to plug in for a risk-free investment.
--Monthly renter insurance of $30. This was E-LOAN's suggestion, and I stuck with it, since it doesn't give you the option of adjusting the homeowner insurance rate.
So: What are your numbers? I'd be interested to hear what you get as the crossover year -- the point at which owning makes more financial sense than renting.
By the way, this story grew out of a question from a Wonk reader. Thanks very much to her, and keep those ideas and questions coming, guys.
The value of credit card accounts at least 30 days late jumped 26 percent to $17.3 billion in October from a year earlier at 17 large credit card trusts examined by the AP. That represented more than 4 percent of the total outstanding principal balances owed to the trusts on credit cards that were issued by banks such as Bank of America and Capital One and for retailers like Home Depot and Wal-Mart.
At the same time, defaults — when lenders essentially give up hope of ever being repaid and write off the debt — rose 18 percent to almost $961 million in October, according to filings made by the trusts with the Securities and Exchange Commission.
... Experts say these signs of the deterioration of finances of many households are partly a byproduct of the subprime mortgage crisis and could spell more trouble ahead for an already sputtering economy.
According to The Sun's calculations, it could take more than nine years to come out ahead of renting if you buy the average-priced house in the metro area. And that's with all those fat tax deductions for mortgage interest.
If you want to sell and still come out ahead, tack on another 18 months or so for Realtors' fees and closing costs that can easily run $20,000 on the average house. And it's an extra year on top of that if you consider that, as a renter, you could probably earn at least 4 percent a year in interest on the money you didn't need to use for settlement and a down payment.
Remember, a change in the housing market -- for better or worse -- will change the results. As one economist points out, nine-plus years is such a long time to come out ahead that something will have to give.
First thing tomorrow I'll put up all the details you'd need to do your own calculations. Average is all well and good, but nothing beats specific.
In San Bernardino County near Los Angeles, tens of thousands of owners of the 860,000 homes will have their assessments lowered in the coming year, said Bill Postmus, the assessor, rivaling the numbers during the California real estate crash of the 1990s.The Times notes that in states that cap property tax increases -- Maryland is an example -- "the market value of single family homes almost always exceeds the assessed tax values, except in a major downturn."
“You should see more of this activity,” said Chris Hoene, director of policy and research at the National League of Cities. “It is mostly in areas most likely to be seeing some decline, like Southern California, Florida, and big cities in the Midwest,” rapid growth areas that are now seeing the other side of the curve.
However, even in California, if a home buyer made his purchase during a market top in the last several years, he might be in the position of qualifying for lower assessed values. For instance, in Santa Clara County, where pricey Palo Alto and San Jose are located, 17,758 properties were reassessed downward for the 2007-2008 tax period, compared with the same period from 2000 to 2001, when the number was closer to 300.
Maryland reassesses individual properties every three years rather than annually. We'll hear about the average change in values later this week.
Bad news: We won't know for at least another month whether it's a statistical hiccup.
The estimates are frequently revised, sometimes significantly, said Robert A. Dye, senior economist with PNC Financial Services Group. ...
"We need to see several months of increase in order to have more confidence," Dye said. "There's no way to tell ... whether this is going to stick or not."
Ah, the joy of surveys.
On Monday, I'll have a How-to that lays out the numbers you'll need to do your own calculations. Why rely on other people's opinions when you can be your own forecaster?
That's the housing boom's doing, of course. Old news. But here's something interesting from a housing expert quoted in the story:
John McIlwain, a senior fellow with the Urban Land Institute, expects increasing affordability challenges. Notwithstanding the current slump in home sales, he said, "long-term trends are for more people moving in than housing will get built."
"That's going to put pressure on prices, " he said.
I mention this mainly to point out a fun fact: Today, I really got to put interactivity to use. The column, which this time is a redo of the How-to about mortgage points, includes feedback from you smart readers.
So do speak up, whether it's to point out a problem or add a thought.
The developer built around her. And now, just off Martin Luther King Jr. Boulevard, Dixon's little rowhouse rubs elbows with a six-story, 220,000- square-foot biotech building that is home to cutting-edge genome research - an incongruous juxtaposition of Baltimore's past and future.
If nothing else, you'll want to see the photograph.
Only a third of buyers in the first half of the year who opted for the higher-rate loans -- meant for people with less than perfect credit -- fit that description, according to a survey just released by the Mortgage Bankers Association.
Meanwhile, 64 percent of all new subprime loans were to refinance an existing loan, not to buy a house. That's up from 55 percent during the second half of last year.
Of all new subprime loans, just under 70 percent were adjustable-rate. That might seem worrisomely high, considering that subprime ARMs are a key part of the reason the credit industry is in turmoil and the government is brokering rate-freeze deals, but take heart: It was 75 percent in the second half of last year.
Check out this Google Maps mashup with home sales data from Metropolitan Regional Information Systems: It lets you see where the sales are -- whether all sales or, say, everything priced above $1 million.
It's a heat map, which means the areas with the most sales are brightest.
Baltimoresun.com web developer Stephen Mekosh made it. I'd be interested to know if you see other nifty housing-related web tools.
Housing starts took a similar drop, while the government estimated the decrease in homes completed last month at nearly 29 percent.
Here's a graph worked up by economist Charles W. McMillion of MBG Information Services in Washington:
An examination of regulatory decisions shows that the Federal Reserve and other agencies waited until it was too late before trying to tame the industry’s excesses. Both the Fed and the Bush administration placed a higher priority on promoting “financial innovation” and what President Bush has called the “ownership society.”
On top of that, many Fed officials counted on the housing boom to prop up the economy after the stock market collapsed in 2000.
There's an interesting timeline here.
The wait list is nearly twice as long as it was four years ago.
The problem is being fueled by rising rents and home prices still inflated by the real estate boom, as well as increased costs for utilities and gasoline, housing officials say.
But affordable-housing advocates also say the county government's aggressive push in recent years to redevelop some of the county's oldest neighborhoods - leading to the destruction of thousands of low-priced housing units with few requirements to replace them - has been a significant factor.
Last I checked, there was also a large waiting list in Baltimore.
If you're talking mortgages and not pencils, it's an upfront fee to get a lower interest rate. The more discount points you pay for, the lower the rate -- but don't assume it's always worth it.
Allison Vail with LendingTree, the online company that connects borrowers with lenders, says you need to figure out if time is on your side.
She notes that paying for one discount point typically means coughing up money equal to one percent of the amount you're borrowing in return for a quarter percentage point off the rate.
Here's the example she offered:
Say you're borrowing $100,000. (Yes, yes, I know most homes around here are a lot more expensive -- stay with me here.) If you get a 30-year fixed-rate mortgage with a 7 percent interest rate, you're paying $665 a month in principal and interest.
If you buy two points, your interest rate drops to 6.5 percent. That means payments of $632 a month.
A $33 savings every month: Better than nothing, right? Right -- as long as you're planning on staying for at least five years. Otherwise, you won't break even on the $2,000 upfront cost of the points. (It's actually five years and a few weeks -- 2,000 divided by 33 equals 60.6 months -- but you get the idea.)
"So if you plan on being there for a long time, that's great, because you're going to have an interest rate savings over the life of the loan," Vail said. "But if you plan on leaving, discount points may not be a good option. ... A little bit of looking into the crystal ball, I guess."
It worked out for Vail, who's had her loan for about five years and is now in the black on the two points she bought.
"Don't be scared to ask your loan officer to figure out your break-even point," she said. "Have them lay it all out so you can see the scale."
The Fed is considering:
--barring lenders from penalizing subprime borrowers — those with spotty credit or low incomes — who pay their loans off early.
--forcing lenders to make sure that borrowers, especially subprime borrowers, set aside money to pay for taxes and insurance.
--restricting loans that do not require proof of a borrower's income.
--examining lenders' failure, in some cases, to consider a borrower's ability to repay a home loan.
--improving financial disclosure so people better understand the terms and conditions of their mortgages and get this information when it is most useful.
--curtailing abuses in mortgage advertising.
The next session: Thursday, Dec. 20 at 7 p.m. at Roots of Mankind, 4273 Branch Ave. Suite 205 in Temple Hills (www.romkind.org). Click HERE for a list of later workshops, organized by the Coalition for Homeownership Preservation in Prince George's County.
And click HERE for a list of HUD-approved housing counselors across the state, if you're looking for something closer to you or just want a one-on-one conversation with a counselor.
The best time to get help is when you think you're going to be in trouble but before you actually get there. Counselors can talk to your lender and try to negotiate, for instance, temporary modification of your loan -- but they need time.
As Carson reports, "a little-noticed change in Maryland's property tax laws has converted this protection from an automatic benefit to one that each homeowner must apply for -- although most homeowners will have five years to file the paperwork."
The new law is intended to identify ineligible property owners who are illegally taking advantage of the caps, but critics say it is an overreaction that could put homeowners at risk of higher taxes.The General Assembly passed the law after hearing about people getting the tax break for rental property.
Failure to apply for the tax credit, which is limited to a taxpayer's primary residence, can be costly. Maryland's Homestead Tax Credit law puts a 10 percent limit on the amount of a home's increased value that can be taxed each year, and many jurisdictions have lower ceilings.
Here's the deal: If you already own a house, you'll get a notice to apply with your next assessment letter. A third of homeowners will get letters within the next 30 days; everyone else will get them a year from now or two years from now, since the reassessment cycle is a three-year one.
The story notes that people have "until Dec. 31, 2012, to apply, except for those who buy homes after Dec. 31, who must apply within 180 days of the purchase."
Source: S&P's Capital IQ
It's nearly impossible to read the key, I know: The blue line represents the S&P 500, the brown line is the major homebuilders and the red line is the S&P 500 Homebuilding Sub-Industry Index (which includes all homebuilders in the S&P). The chart shows the past 12 months.
Yes: nearly five dozen.
It's not unusual to find big Baltimore homes chopped up into multiple apartment units, but this seems to take the cake. Riger, not surprisingly, redid the place:
What he has now is a home with 35 rooms and eight bathrooms.
The mind still boggles. Never let it be said that the city is nothing but modest rowhouses.
The Chicago Tribune reports that in "a joint move with European central banks to ease the grip of a dangerous credit crunch, the Federal Reserve unveiled a new plan yesterday to pump billions of dollars into tightfisted U.S. banks so they will be more willing to lend to people, businesses and each other."
The Fed says it will lend $40 billion this month.
So -- why YouTube? Freddie Mac spokesman Brad German said a quarter of borrowers who are behind on their mortgages say they go to the Internet first to look for information and help. He said the company wants to get "some viral distribution" -- people pointing it out to friends and relatives.
"It made sense for us to post this on the Internet in hopes of alerting more borrowers to the potential pitfalls of foreclosure rescue artists," he said. "This is, as you can imagine, a very vulnerable time for borrowers who are finding themselves in jams."
The direct link is youtube.com/avoidfraud -- though I have yet to get the page to load, so let me know if you can actually watch it. (EDIT on 12/14: I tried again, and now it's loading.)
At freddiemac.com/avoidfraud, the company has information beyond the video highlights.
All told, it's planning to take a noncash charge of $77 million on residential land for sale in Columbia and three other planned communities in Howard and Prince George's County.
These rates remain high because many of these loans are tied to the London interbank offered rate, or Libor, and not to more conventional interest-rate benchmarks such as Treasurys or banks' prime rate.
Libor, which is an interest rate banks charge on loans to each other, normally tracks the federal-funds rate closely. But continuing worries over the credit crisis have kept Libor unusually high -- partly because banks are reluctant to lend to one another -- even as other short-term interest rates have fallen in recent months.
Check your financing fine print -- it should say what your rate tracks.
Thanks to The Real Estate Bloggers for noticing this tale of woe.
The site lists prices back to April of 2006, and at that point the median price was just under $345,000.
The good news? Like Metropolitan Regional Information Systems' November numbers, the HousingTracker figures show the inventory of unsold homes falling. The HousingTracker numbers suggest the inventory is back to June levels.
The "federal funds rate" is what banks charge each other for loans, so it affects what the rest of us pay for financing of all sorts.
In its press release this afternoon, the Fed said:
"Incoming information suggests that economic growth is slowing, reflecting the intensification of the housing correction and some softening in business and consumer spending. Moreover, strains in financial markets have increased in recent weeks. Today’s action, combined with the policy actions taken earlier, should help promote moderate growth over time."
The Wall Street Journal reports that a "large minority of economists had projected a half-point cut in the federal funds rate."
Wells Fargo predicts that the Fed will lower the rate to 4 percent in January.
One of Maryland's largest military base expansions is slated to come under congressional scrutiny this week, as civilian employees at Fort Monmouth press their fight to spare the 90-year-old base in New Jersey and keep its high-tech defense jobs from moving to Aberdeen Proving Ground in Harford County.
The House Armed Services Committee has scheduled a hearing tomorrow to review the 2005 congressional decision to close 22 military installations nationwide, including Fort Monmouth, while expanding others, including Aberdeen Proving Ground and Fort Meade in Anne Arundel County.
Maryland officials say they believe they will prevail.
Wheeler notes that "Fort Monmouth's work force makes up more than half of the 9,400 defense jobs and embedded contractors being transferred to Aberdeen, and nearly a third of the direct military job gains projected statewide."
The string of declines - volume fell 31.74 percent in October and 29.72 percent in September - is the most severe recorded by Metropolitan Regional Information Systems, which began tracking sales through the multiple-listing service in 1999. The region's biggest decline was in Anne Arundel County, where sales skidded nearly 42 percent.
The average sales price in Baltimore and the five surrounding counties notched down a fraction of a percentage point, to $308,477 from $309,753 a year earlier. It was the region's first drop in average value since August and only the third monthly price decline this year. Despite slower sales and the credit crisis, prices in the region have held up.
Some have argued in past months that the steep drop in sales is caused at least in part by the fairly stable prices, though there's so much at work in the market that it's difficult to prove cause and effect.
"There are some buyers - not as many as there were two years ago. But for the most part, people have just stepped back and are waiting - it's unclear what they're waiting for," said Jane Rowley, a real estate agent with Coldwell Banker in Federal Hill. "There's that expectation that [prices] are going to go down, or have gone down, and that sellers will accept very low bids. That's not actually what's happening."
On a more positive note for people trying to sell: The number of unsold homes has stopped rising -- it's down nearly 1,000 from October. (But, as Mirabella notes in her story, at 19,500 listings, "inventory levels are nearly double that of two years ago.")
Metropolitan Regional Information Systems just put up the November price and sales numbers for the Baltimore metro area. I'm on deadline for another story, but here's the quick news:
Average prices for homes sold in November: down about half a percent from a year earlier.
Median prices: down nearly 4 percent.
Home sales: down about 30 percent.
One thing is up, though -- the number of days on the market for the homes that sold. The average was 105 days, compared with 75 last November.
As recently as the middle of November, UBS had predicted a profit for the fourth quarter despite ongoing speculation about its subprime holdings.
"Conditions in the U.S mortgage and housing markets have continued to deteriorate, and we have updated our loss assumptions to the levels implied by the current distressed market for mortgage securities," the company's chief executive, Marcel Rohner, said in a statement.
Associated Press photo
One of the many challenges in a housing slump: How do you figure out what's a fair price when the market keeps changing?
Pat Hiban of the Pat Hiban Real Estate Group (with Keller Williams Select Realtors in Ellicott City, and try getting all that out in one breath) says his recommendation to sellers is -- first off -- to decide "whether you are a have-to seller or a want-to seller." That's not for pricing purposes, by the way: That's to suggest to the want-to folks that maybe they really don't want to sell.
For the have-to's -- or the especially determined want-to's -- Hiban says his strategy is straight-forward.
"You want to price it less than the active competition," he said. "Forget about comparables -- we're not even using comparables anymore, because comparables are the past."
("Comparables," for those of you scratching your heads, refers to comparable sales in recent months.)
"That's how you sell," Hiban said. "The people that get it are the ones that are successful. The people that don't get it are the ones that sit on the market. You're only worth as much as your competition."
It doesn't matter what situation the sellers of your competition are in, by the way. He frequently hears from prospective sellers that they think their house is worth $50,000 more than an identical one down the street "because they're desperate, and I'm not."
"You might as well say they're realistic," Hiban said. "You're still competing."
He suggests looking at the three most competitive active listings you'll be going up against. If there are no real differences between your house and theirs, undercut them on price, he said. If you've got something they don't -- say, a finished basement -- then go with the same price.
By the way, Hiban suspects it will be harder to sell next spring because a bunch of homeowners are going off the market now with the intention of trying again during what is traditionally a big time for buying. "We're telling people it could be worth less [then] because you're going to have more competition," he said.
And what if you're a buyer trying to decide whether these are good values? Oy vey. With the dueling predictions on prices (which are all over the board, from "great time to buy!" to "watch 'em plummet to 2003 levels"), getting a consensus opinion is tough these days.
Want to offer your own opinion? Comment away.
A. The Best House Ever
B. A steal of a deal
C. An architectural crime against humanity.
Yeah, you wouldn't think "C," but The New York Times has a funny -- and educational -- story today about sellers doing just that. One Edina, Minn. homeowner is marketing his property at the website worsthouseinedina.com. (It actually appears quite nice from the outside, but as his site notes, "Months on the market: 10. Offers received: 0.")
From the Times story:
Instead of highlighting a home’s attractive features, some sellers are going straight to the bad news, advertising houses as being ugly, having sinkholes or even smelling bad, with the thought that sellers who are forthcoming about a property’s flaws may find buyers eager for a deal.She said the wording worked. “I got a lot of calls,” she told the Times.
In Columbia, Mo., Erin Blaise, an agent with Re/Max Boone Realty, applied this tactic when she was trying to sell a two-bedroom home that had fallen into disrepair when renters had lived there. Her client, she said, did not want to clean up or improve the property. So she advertised the home this way: “It’s not pretty. It’s not clean. It doesn’t even smell good. But it’s really cheap.”
Through creative financing, BUILD will leverage its $10 million into $120 million to be used in Oliver and East Baltimore. The group says scores of homes will be built every year for the next decade, adding homeowners who will care for their property and reducing the vacancy and drug activity that have overtaken a once-middle-class community.
Last week, demolition was completed on a half-dozen vacant homes on East Preston Street, across from Memorial Baptist Church. In February, ground will be broken on the new homes that will rise on that land. The new homes will sell for about $139,000, and rehabbed homes for about $99,000.
That might work all right in a recovery, but on the downside of an economic cycle, the "adjustment potentially will hypothesize lots of phantom job creation." And right now, a whopping 80 percent of the reported job growth is coming from that model, the blog says:
That explains the stability in construction and finance jobs in the monthly data. ... In October 2007, the BLS data on job creation has ballooned up to 80% imagined, and a mere 20% measured. That is not a formula for accuracy or precision.
To quote the poet Homer: Doh.
Potential buyers face higher prices for a house than they would if the market were just allowed to work. This is a direct harm to millions of people, especially young families with limited income.
Is it illegal for the government to manipulate markets to benefit one class over another?
Next up for discussion: pricing.
Nothing like trying to decide what's the right number -- as a seller or buyer -- in this sort of market.
And why, you ask, would one want to see a graphic about CDOs, animated or otherwise? Because, as Sun columnist and blogger Jay Hancock notes, they "have much to do with why Wall Street firms are losing billions on mortgage investments."
Overnight, potential buyers could no longer borrow money to do deals, bringing the commercial property market in Boston and across the country to a standstill.This comes after years of strong commercial property sales, both there and nationwide.
"It's not completely dead, but it's been knocked on its bottom," said Rob Griffin, president of Cushman & Wakefield of Massachusetts Inc., a commercial brokerage. "It's certainly been chaos since August."
How does that compare? It's the worst November-to-November performance since Nov. 1990-1991, when employers were facing both a housing downturn and a recession. (Residential construction companies cut about 75,000 jobs then.)
On the upside, the current-day job loss is smaller than the layoffs during the early part of the 2001 recession. So far at least.
By the way, the monthly number I used is seasonally adjusted but the annual one is not, since there's no need to introduce the possibility of statistical error in the name of better monthly comparisons if you're looking year over year. In other words (to the tune of all the adults in the Charlie Brown specials): Wonk WONK wonk wonk wonk wonk.
The rate freeze, generally for five years, would be limited to certain subprime borrowers with hardly any equity in their houses who can't refinance but who can afford their current payments. President Bush, who billed it as the industry's plan, said the major lenders that have signed on to the voluntary initiative also expect to help refinance subprime borrowers who are in better financial shape, either with FHA loans or other mortgages.
Bush said the two-pronged plan, which would use no taxpayer money, could help up to 1.2 million homeowners. But some economists believe the number is likely to be much lower. Moody's Economy.com puts it at 500,000 - half helped by the rate freeze and half by the refinancing.
Also in the story: Interesting new research by The Reinvestment Fund (on behalf of the Baltimore Homeownership Preservation Coalition) about the mortgage landscape in Maryland -- from the share of subprime loans in affluent Montgomery County to the fact that some pockets of the state are seeing very high delinquency rates.
My inbox is overflowing with statements. Here's a taste:
John Berlau, director of the Competitive Enterprise Institute's Center for Entrepreneurship: "Like all so-called five-year plans, the five-year interest rate freeze by its design would pretty much have only negative effects and worsen the credit slowdown. While apparently no taxpayer dollars are directly involved (at least not yet), by pressuring the rewrite of millions of mortgage contracts, the Paulson plan could have even greater costs on the economy as well as future aspiring homeowners than even a direct taxpayer bailout. The credit market depends on the sanctity of contracts for everything from the financing of mortgages to new small businesses. But if regulators can negate contracts anytime there is a problem, much of this credit could dry up."
Senate Majority Leader Harry Reid: "I came to the floor to say positive things about the President’s actions to help as many as 200,000 people. That’s what their efforts today – he and Secretary Paulson’s efforts today – will help: about 200,000 people. That’s about 10 percent of the people in real trouble. Is that enough? Of course it’s not enough, but it’s a step in the right direction."
Congressman Elijah E. Cummings of Maryland: “The President’s plan will help only one small group of the millions of families who are in danger of losing their homes, leaving the remaining 80 percent of people—many of whom are minorities—literally out in the cold. We need to enact a permanent solution that will help everyone who is struggling through this crisis—not just a five year plan assisting a select few."
Sen. Hillary Clinton: "I have announced a comprehensive plan that will actually end the foreclosure crisis. My plan imposes an immediate moratorium on foreclosures; an automatic, across-the-board rate freeze; and the requirement that servicers and lenders provide status reports on how many mortgages they are converting from designed-to-fail to designed-to-work. The foreclosure moratorium ensures that families will not lose their homes while servicers put the systems in place to implement the rate freeze as well as the large-scale modification of loans."
Federal Deposit Insurance Corporation Chairman Sheila C. Bair: "In many cases, it will make sense to extend the modification for a longer period and that is allowed by today's agreement. Investors benefit by receiving a steady stream of income rather than incurring the greater losses from foreclosing on a home. Communities and neighborhoods benefit by allowing people to maintain stakes and a vested interest in the areas where they live."
Edward L. Yingling, president and chief executive of the American Bankers Association: "We appreciate the Bush administration for its efforts in bringing together private sector players to develop a mechanism to modify mortgage loans to certain ‘at risk’ borrowers. The plan appropriately focuses on those who are current in their financial obligations but will be unable to meet reset-rate payments. Doing this will not only reduce foreclosure risks and help families in need, it will also add substantial stability to a portion of the mortgage market that has been in disarray."
Steve Bartlett, president and chief executive of The Financial Services Roundtable: "One word to the business community who are rightly concerned about their contracts: this agreement is built on existing contracts and abrogates no one’s contractual rights."
The American Securitization Forum has a document -- called “Streamlined Foreclosure and Loss Avoidance Framework for Securitized Subprime Adjustable Rate Mortgage Loans" -- that you can find linked to this webpage. Happy reading.
The Bush administration’s rescue plan impacts a limited number of homeowners and even those within the criteria will only have a temporary reprieve. Freezing interest rates temporarily is analogous to having a defective automobile with no brakes, and rather than fix the brakes, you are allowed to park it while making the payments and then drive it down the hill full speed.
In case you were about to head out to the Foreclosure Solutions Forum in Annapolis today: I've just gotten word that it's been postponed because of a water main break. Organizers -- the Baltimore Homeownership Preservation Coalition, the Coalition for Homeownership Preservation in Prince George's County and the Maryland Housing Counselors Network -- expect to reschedule next month.
The Baltimore group was to preview new foreclosure research at the forum today. Leaders are releasing it as planned, so I'll likely have a story about it.
The Bush administration has hammered out an agreement to freeze interest rates for certain subprime mortgages for five years to combat a soaring tide of foreclosures, congressional aides said Wednesday.
The aides, who spoke on condition of anonymity because the details have not yet been released, said the five-year moratorium represented a compromise between desires by banking regulators for a longer time frame of up to seven years and mortgage industry arguments that the freeze should last only one or two years.
Another person familiar with the matter said the rate-freeze plan would apply to borrowers with loans made at the start of 2005 through July 30 of this year with rates that are scheduled to rise between Jan. 1, 2008, and July 31, 2010.
At last count, there were 62 comments. For instance: "This is beyond enraging" and "What appears to have happened, and tragically, it happens all the time, is that Mr. Poku's delay in taking legal action cost him his house."
I am confident that we will find common ground next year and finalize the creation of a Land Bank that's responsible for, and capable of, efficiently acquiring, managing and selling abandoned properties, returning them to productive use. Too many Baltimore neighborhoods are plagued by problems associated with vacant, boarded-up properties. ...
And, finally, later this month, we will release the city's 10-year plan to end homelessness. ... This approach, called "Housing First," is founded on the premise that people stand the best chance of regaining self-confidence and control over their lives when they are living under their own roof.
Baby boomers were helping fuel Mexico's housing market. Some think they will again -- just not right now.
“There's a temporary downturn in sales,” said John McCarthy, chief executive of Mexico Leisure Real Estate Development Partners, “but I think the demographics are there. And once the psychological effect of the subprime crisis passes, the market will come back.”
That's for the median-priced house -- the one in the middle. The median was $299,500 as of yesterday, down from about $325,000 last December.
Owners of cheaper homes -- the ones priced at the 25th percentile -- are asking about 10 percent less than they were a year ago. So are owners of more expensive homes, HousingTracker's numbers suggest.
Scott C. Borison, attorney for homeowner Kwaku Atta Poku, wants him to be able to recoup his losses.
"You're asking us to do something we haven't done before," said Judge Dale R. Cathell, according to Carson's story. Cathell added later: "I don't mean to say there's not been a wrong done. How is it corrected? I just don't know how to do it."
Judge Irma S. Raker asked a question raised by many since Carson first reported on the predicament: "How could Mr. Atta Poku have avoided all this once this train started moving?"
Though administration officials have yet to agree on crucial details with mortgage lenders and the securities industry, a similar effort in California is likely to help about 12 percent of borrowers in the state with adjustable-rate subprime loans, according to estimates by Barclays Capital.
In case this number hasn't been hammered into your brain already, about 2 million homeowners with subprime mortgages are likely to see big hikes in their monthly payments "in the next year or so as their introductory teaser rates expire," the Times says.
It's not particularly up-to-date (it runs through June 30, 2006), but it's still a way to see if the agent you plan to do business with has done something bad.
Kwaku Atta Poku lost the townhouse after a refinancing.
Washington Mutual, which took and resold his house in 2005, said it "never received payment for the first mortgage, and Atta Poku was unable to prove it was paid off when he refinanced, partly because crucial financial documents were lost by the financial institutions involved in the transaction," Carson reports.
"The sentiment is so negative," said Mark Vitner, senior economist at Wachovia Corp. (WB) . "The housing industry isn't going to get better until financial services improve, and there's just too many homes out there in inventory."
Associated Press photo
Housing slumps aside, home buying is usually brisk in the spring and early fall, slowish in the summer and really slow this time of year, as buyers set aside visions of settlement tables for sugar plums. So does it make sense to try to time the market if you've got something to sell?
Inquiring minds, and a reader who needs to unload a Locust Point house in the next six months, want to know. I turned to Dave Wright with Coldwell Banker Residential Brokerage in Annapolis, a Realtor since 1976.
His opinion: If you need to sell now -- or know you'll need to in the foreseeable future -- then put it on the market now. "It's the same as the stock market," he said. "You can't time it."
Though sellers often want to wait if Christmas is approaching, he said, "people truly looking this time of year -- November, December -- are people who have a need to buy. So you're generally dealing with a lot less curiosity seekers and tire-kickers."
Another consideration: The average home that sold in the Baltimore metro area in October was on the market 103 days, up from 70 a year ago, according to Metropolitan Regional Information Systems. (In 21230, the ZIP code that includes Locust Point, it was 137 days -- four-and-a-half months.) Should you have a deadline to sell, you're more likely to run into trouble the longer you wait to get your house on the market.
Coincidentally -- we don't coordinate these things, believe it or not -- Andrea Siegel has a story in yesterday's real estate section about people trying to sell during the holidays. You can find the article here.
Pat Hiban of Keller Williams Select Realtors in Ellicott City will address next week's How-to issue -- what's a reasonable price in a slumping housing market? -- so as long as I had him on the phone, I asked him about timing. He basically agrees with Wright, with one exception: Once you hit the middle of December, he thinks you might as well wait until January to list your home.
If November and the beginning of December can be slow, those last few weeks of the year are glacial, he said.
Opinions? Arguments? Questions? I'm all ears.
The major thrust of the proposal would be to get lenders to extend the low, introductory rates offered on subprime mortgages for up to five years. These loans are usually offered to borrowers with weak credit histories.
An estimated 2 million of those initial teaser rates are scheduled to reset to much higher levels by the end of next year, pushing the payment on a typical mortgage from $1,200 per month to $1,550. The concern is that many homeowners will not be able to meet the higher payments, triggering hundreds of thousands of defaults.
The proposal doesn't call for the use of taxpayer money, AP adds. In theory, it means mortgage-backed-securities investors will take the hit -- though "they would still get more money than if the mortgage went into default," the story notes.
Those jitters add an X factor to today's real estate slump. They have sped up the downturn and could deepen it. Worst of all, they have created widespread uncertainty because, unlike the old days when bad mortgages festered in bank portfolios, the risks are now spread among investment firms, insurance companies, and others. No one knows how broad or deep the losses are.
"What it comes down to is, we have an information problem in the markets right now," says Joseph Mason, a finance expert at Drexel University in Philadelphia. "We don't know where all the exposures lie."
... in which we explore the idea of trying to time the market. (The housing market, of course.)
See you then.