I cannot believe my eyes. A firm, John Burns Real Estate Consulting, shows Baltimore as the WORST region in the country for affordability. I have e-mailed them to inquire how they derive their numbers and am awaiting their reply. To see it with your own eyes, the link is below. After you open the page, click the link on the left labeled "Housing Cycle Barometer". I have been visiting your website for quite some time and have noticed many people writing about the absurd prices in the area. We were all right.

No one should buy a house around here until the sellers stop gouging us and return prices here back to normal.

I am so sick and tired of having the NAR quoted with the typical sunshine forecast. They make money only if we buy and their motivation could not be more obvious. Not one article quoting the NAR's prediction that the credit in the housing legislation just passed has to be PAID BACK. They're hoping no one will notice. They are shameful!

Here is the link: (don't forget to click the left link (housing cycle barometer).

http://www.realestateconsulting.com/Intelligence.aspx .

I wrote a post about that barometer early on in the blog's history. Here's the link: http://weblogs.baltimoresun.com/business/realestate/blog/2007/10/overpriced_1.html

The company told me then that the barometer measures whether a market is overpriced compared with its own history.

Hi Jamie,

Thanks for the link. I just read it. Baltimore has sunk even more. As I mentioned before, I believe it is because the other markets have started a return to normalcy. Not here though. Pehaps that is why we have such declining sales (not perhaps, it is).

Jamie, something that you left out of the NAR's report, which is a very relevant stat, is the months of inventory (Existing Inventory) on the market. June's update brought it back up to 11.1 months! This is huge!!!

To put it in perspective, market inventory hung around 4-5 months between 2001-2005 before jumping to 7 months in 2006 and between 8-10 months in 2007.

There are a MASSIVE amount of unsold/vacant home out there! Until the inventory stat drops to a historical level, we have got a long way to go.

Nick, I also didn't address prices -- I have too little time for anything but a quick-hit post, alas.

Fair enough, and my earlier comment was not intended as a dig at you. My apologies if it came across as such.

The main point was that this report confirms that we are nationally still in the middle of a correctional period in the housing market with no real sign of leveling off (yet).

No doubt home sales are slow. However, there are some bright sides to the story. The Baltimore region has a very low unemployment rate with more jobs on the way, prices have fallen with some terrific deals to be had. A lot of that "Huge" inventory is picked over junk or over priced. Rent prices are very high. The good houses at the right price do sell. There is nothing wrong with a market correction, it happens in free markets. But I am concerned that we will go too far in the other direction and over regulate and/or bailout speculators.

The other postive trend due to increased energy prices is renewed interest in city and mass transit oriented devlopment and more energy efficient homes. This is all taking place during the downturn, which it may not have if builders were still in heavy production mode. Taking breather and re-evaluating is good. Hopefully after this cycle we will see less farms and forests being leveled to build cheapy McMansions in outter suburbs.

It also important to keep in mind sellers are not the enemy. Many are just trying to break even or pay off the existing mortgage.

Also, many loan programs are being pushed out of the market. Interests rates seem to be on a slow steady track upward. If prices continue to fall but interest rates and affordable down payment loans become rare. We will see less homeownership and it might actually be more expensive.

Homeowners tend to invest in their communities, renters rarely do.
Home ownership is a great thing for a variety of reasons.

Also, I am surpised no one picked up on this the House just passed a bill (HR 5720) that would give first time homebuyers a $7500 tax credit if they buy between 6/30/08-6/30/09, this could be huge.

In every situation there are postives.

Dunn said, snarkily:

I am surpised no one picked up on this the House just passed a bill (HR 5720) that would give first time homebuyers a $7500 tax credit if they buy between 6/30/08-6/30/09, this could be huge.

Dunn, had you bothered to read the comments rather than just go off on the same rant we'ver heard from you for months (enough already), you would have seen this in the very first comment, by anon:

"Not one article quoting the NAR's prediction that the [$7,500] credit in the housing legislation just passed has to be PAID BACK."

Here is the bill Dunn referenced:

Refundable first-time home buyer credit. The bill would provide a refundable tax credit that
is equivalent to an interest-free loan equal to 10 percent of the purchase of a home (up to $7,500)
by first-time home buyers. The provision applies to homes purchased on or after April 9, 2008
and before July 1, 2009. Taxpayers receiving this tax credit would be required to repay any
amount received under this provision back to the government over 15 years in equal installments.
The credit begins to phase out for taxpayers with adjusted gross income in excess of $75,000
($150,000 in the case of a joint return).

Thanks for the comments, everyone. And Nick, I figured you probably didn't mean it as a dig -- I'm just so swamped that it's a miracle I managed to post anything today. Swamped or not, I always appreciate when commenters bring new information to the table.

John,

Dunn is a realtor in Baltimore, you can look it up.

I don't think he missed the point, I think he, like the rest of the NAR, is trying to avoid bringing it up.

Dunn: "It's also important to keep in mind sellers are not the enemy. Many are just trying to break even or pay off the existing mortgage."

Too true and I can sympathize with any financially strapped seller.

Sellers are not the enemy, everyone else at the closing table is.

Dunn,

No reasonable person will believe a blanket comment such as "sellers are the enemy. " But when the price at which the current owner purchased their house is public information and they are trying to get sell the house at a huge premium in this market then a problem arises. I would urge sellers to be reasonable about their initial offering price. It is clear that the market will fall farther and they cannot expect to get what sellers did during the era of real estate speculation (around 2006).

True, I am a Realtor in the City and specialize in just a few areas. I do happen to be postive about the community and area in which I live. I don't know what is happening in the 'burbs. I don't always agree with the NAR, but do support their actions to fight higher taxes on property owners. They are a powerful group an can get things done.

My point, which seemed to be missed, is that there are postives in every situation. Perhaps I do walk around with rose tinted glasses. I'm not sure what I said qualifies as a rant, though I have done that before. I apologize if you were offended.

Maryland has a better balanced economy when you compare it to Florida or Nevada; however, it has similar balance to a number of Californian cities (L.A., San Francisco.) If housing price correction follows the California model, expect minority neighborhood to be impacted most, followed by sizable drops in the high end housing market. Middle market housing prices will hold up as long as they have great public schools, and mostly middle age homeowners (unlikely to move). Neighborhoods with mostly elderly homeowners and great schools nearby will maintain price as long as there is slow generational change over. Location, location, location effects the speed of price change but substitution, substitution, substitution is an equally powerful economic force. Price changes are highly likely but speeds will vary depending on neighborhood schools and age demographics.

The $7,500 income tax credit does not directly make it easier for people to buy homes, so it is hard to tell the overall impact other than it will help off set retirement plan withdraw penalties for new home buyers. The housing bill will prevent an industry collapse, but the bill will not prevent a prolonged slow down, given the structual changes.

H your comment is far more intelligent than I could ever say. However, I am curious to hear your thoughts on cities and mass transit friendly areas. Baltimore City has great housing stock and neighborhoods that are relativly cheap - Think Homeland, Mt. Washington, Fed. Hill, Canton, Fells Point etc. These neighborhoods offer fine housing and great amenties and are bargain priced compared to most other East Coast cities, certainly when compared to the West Coast as you mentioned. In addition they have the top performing private schools. A cost analysis may very wel show that you can buy a better lifestyle in the city send you kids to a top ranked private school, pay the increased property taxes while paying less than a cheaply built McMansion in Howard County. A far less "greener lifestyle."

Perhaps everyone is right about the $7500 tax credit. In the city the Historic Tax Credit and Healthy Neighborhoods initiative have made little difference even though they make a huge difference, very few take advantage of. Not to mention Johns Hopkins gives away free tutition for any city kid who graduates from a public school and does well.

Dunn,

Do you find you save some of that lovely 6% commission by advertising here as opposed to paying for an ad in the newspaper?

Sadly, I do not believe the mass transit system in Baltimore City offers much of an advantage. Too many office parks though out the region have been designed and located to avoid mass transit, and too many businesses have left the city because of the high cost. The only way I see of reversing the trend is if the city substantially cut real estate taxes on business properties. Taxes on a business effectively get pasted along to customers and lower costs are a competitive advantage. Politically, I see little hope in changing the current business tax policy, and it’s too radical for the current leadership.

Yes, Baltimore has some of the best private schools in the area, but it cost around $20,000 per student. The average family has either 2 or 3 children which translate into $40K to $60K a year for up to 12 years. The simple math makes it highly unlikely energy prices will play a significant influence over buyers decision to location near private schools in Baltimore. The private schools in the area will help keep the neighborhoods stable.

My gut feeling is age demographics on the neighborhood level will dominate how prices change over the coming years. In terms of the neighborhoods you mentioned I see the greatest price pressure in the Federal Hill, Caton, and Fells Point neighborhoods, mostly because the homeowners tend to be professionals with careers that often force relocation. Homeowner stability effects pricing stability.

Anon-

Thank you. Would you like to sit down and have a beer/dinner together? I will buy!

In the city I see more children than ever from middle class families... Fantastic communities, and more people choosing to buy in the same area. Just attend a free movie night or concert. It used to be that as soon as a couple had a child they left. Now they are staying and moving up in the same neighborhood. Granted the people I speak of live creatively, entrepreneurs etc.

Does anyone here live in the city? If so, have they noticed all of the improvements, lower prices? I do not know about the 'burbs and will not speak about them. I can only say that if you want live in a great community south of North Ave., you have great possibilities. I'm the last person driving prices up. Out of the 500 Realtors serving this area, I'm the only one here.

Please let me know when you would like to meet. I will pay for it! If you can say this to my face I will buy you dinner anywhere: Ruth Chris, Pazo, Kalis Court, etc.

Why such negativity? I know "message board warriors" exist. But why allow your neurons to form negative pathways? Your negativity will form pathways that perpetuate. exercise more, eat well, stretch, live better etc...

If I'm snarky, whatever! I tried to induce positive, but my guess is you commute too much and don't love it... Life.

Dunn,

You're just clueless aren't you? Do you have any idea why people post here? It's because we've had it up to here with the nonsense that was created by you, the NAR, mortgage brokers and liar loans. You were so busy selling inflated properties to people who couldn't afford them, driving prices ever higher, patting yourself on the back at the wealth you creating for yourself and others like you, that you didn't see the rest of us backing out of the game. Now the tide has turned, we're in the game and telling you to back out. Why don't you find an honest profession; for example, you claim to be so passionate about the city, why don't you join the police force and help bring the crime rate down?

I'm heading out to a "wake" to mark the death of the business section, folks. (See the note in today's section for further details about the future of business news.) Any comments that come in, I'll post when I get back to a computer.

The Business section is dead huh? That sucks a lot :( Glad to see your column found another home in the Real Estate section.