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February 28, 2009

Poll: Mortgage tax deduction

The homeowners' mortgage-interest tax deduction is in the news this week because the Obama administration wants to reduce the amount that higher-income Americans can itemize. From The Wall Street Journal:

Households that currently pay income taxes at the 33% and 35% rates would only be able to claim deductions at the 28% rate. That means that for every $1,000 in deductions, a household in the top tax bracket would realize a tax savings of $280, down from the current $350. The proposal wouldn't take effect until 2011.

Supporters say it's a good idea because wealthier folks don't need subsidies to buy houses, while detractors -- including the National Association of Realtors -- say this would hurt the housing market at a time when it can't take more lumps.

I'm curious what you think about the mortgage deduction. Weigh in:

 

Posted by Jamie Smith Hopkins at 7:43 AM | | Comments (2)
Categories: Polls
        

February 27, 2009

Higher heating bills?

If your utility costs went up a lot recently, you're not alone. Baltimore Gas & Electric told state regulators yesterday that it has had 14,000 complaints about high bills.

BGE blames "colder weather, greater household consumption and, to a lesser extent, spikes in commodity costs for electricity and gas," Gus Sentementes reports today.

There's not much you can do about the weather or BGE's costs. That leaves consumption. And turning down the heat a notch isn't necessarily the best move: BGE notes that big-screen televisions and game consoles use a lot of electricity.

Have you done anything to change your consumption habits? Or, if you're thinking of buying, does a home's energy efficiency make a difference to you?

Posted by Jamie Smith Hopkins at 9:59 AM | | Comments (4)
Categories: Utility bills
        

February 24, 2009

Homeownership -- and its incentives -- debated

Richard Florida, best known for The Rise of the Creative Class, argues in a piece in The Atlantic that cities -- and renting -- are the wave of the future:
The housing bubble was the ultimate expression, and perhaps the last gasp, of an economic system some 80 years in the making, and now well past its “sell-by” date. The bubble encouraged massive, unsustainable growth in places where land was cheap and the real-estate economy dominant. It encouraged low-density sprawl, which is ill-fitted to a creative, postindustrial economy. And not least, it created a workforce too often stuck in place ...

The solution begins with the removal of homeownership from its long-privileged place at the center of the U.S. economy. Substantial incentives for homeownership (from tax breaks to artificially low mortgage-interest rates) distort demand, encouraging people to buy bigger houses than they otherwise would. That means less spending on medical technology, or software, or alternative energy—the sectors and products that could drive U.S. growth and exports in the coming years. Artificial demand for bigger houses also skews residential patterns, leading to excessive low-density suburban growth. The measures that prop up this demand should be eliminated.

If anything, our government policies should encourage renting, not buying.

As it happens, UMBC professor Thomas F. Schaller pokes the mortgage interest deduction in an opinion piece in The Baltimore Sun today:

Unlike rent subsidies for the poor or seniors, we tend not to call this form of redistribution "welfare." But in the broadest sense, it is a form of welfare that largely benefits middle- and upper-class Americans, including this columnist.

Crises always prompt rethinking about the way we do things. Are you doing anything differently? What if anything should the country change?

Posted by Jamie Smith Hopkins at 10:44 AM | | Comments (15)
        

What you said about home prices

As of 9 a.m. today, 77 percent of you declared falling home prices to be a good thing. Twenty-three percent of you say it's bad.

That might suggest that a lot of you are trying to buy a home, especially your first home.

But the other nugget I draw from this is -- in case it wasn't clear already -- you're not in lockstep on this issue. Seventy-seven percent may be a significant majority, but almost a quarter of folks is nothing to sneeze at. And both sides have cogent points to make, because some of you have made them here already.

If you wonder why I do my best to present information without saying "this is good" or "this is bad," well ... this is why. It's sometimes clear that something is good or bad for a particular group, like borrowers, but often the ripples are pretty complex. (And besides, I'm a reporter, not a columnist -- damn it, Jim -- and so I really need to stay away from opinionatin'.)

But that's OK. You get to bring your own opinions. And I'm always interested to hear them.

Posted by Jamie Smith Hopkins at 9:16 AM | | Comments (4)
Categories: Polls
        

February 23, 2009

Higher limits in Baltimore area for conforming loans

Remember the old $417,000 limit for "conforming" mortgages, those loans that Fannie Mae and Freddie Mac can buy? Yeah, the limit that was temporarily raised. Well, it's been temporarily raised again, this time as part of the stimulus package. These limits, which range across the country, are good through the end of the year.

In the Baltimore metro area -- the city plus Anne Arundel, Baltimore, Carroll, Harford, Howard and Queen Anne's counties -- you'll be in the conforming range with a loan as big as $560,000. (In the Washington metro area, the limit is $729,750 -- that's as high as it goes in the U.S.)

These limits mean that fewer buyers or refinancing homeowners will need "jumbo" mortgages, which have higher interest rates. The federal government says 250 counties have limits above $417,000.

You can see all the conforming limits at the Federal Housing Finance Agency. The limit in the early 1970s, the agency notes by way of comparison, was $33,000.

Posted by Jamie Smith Hopkins at 4:37 PM | | Comments (0)
Categories: Mortgages
        

February 22, 2009

Suburban Federal and the seeds of bank failure

Robert Little and Andrea Walker get beyond the press releases today to tell the story of Crofton-based Suburban Federal Savings Bank, seized by federal regulators after too many mortgages went bad.

They note that the bank "led a relatively benign existence" until 2004, when it opened satellite loan offices and said yes to mortgages that borrowers did not prove they could afford. They describe it as a case of pressure to keep up. The bank was losing out:

Competitors were loosening standards and reaping profits in the mortgage business as Suburban offered conservative loan products with uninspiring interest rates. ...

Management relented and started offering more innovative loan products with relaxed terms and little or no credit or documentation required. It also began making considerably larger loans, often to customers it didn't know, in areas where it did little or no banking business.

I wonder how many bank -- and financial institution -- failures would have been averted if the executives and directors could have stomached a decline in mortgage business at a time of loan frenzy.

Posted by Jamie Smith Hopkins at 6:15 AM | | Comments (0)
        

February 21, 2009

Poll: Are falling home prices bad or good?

Those of you who comment here are frequently offering your opinion about home prices. But some of you never comment. So take a few seconds, all of you, to let me know whether falling prices strike you as a good thing or a bad thing.

Yes, I realize it's a complex issue and you might think it's bad and good, but humor me here. Which of the two answers is more in line with your way of thinking?

The order of answers is randomized, so no, it's not an attempt to influence you.

Posted by Jamie Smith Hopkins at 9:39 AM | | Comments (7)
Categories: Polls
        

February 20, 2009

Factoid of the day

How many agents in the Baltimore FBI office are investigating mortgage fraud?

Twenty-five percent.

That's one of the interesting facts in this story, which notes that a new task force of state and federal officials is focusing its attention on high-mortgage-fraud areas in Maryland. According to the Associated Press:

The task force is attacking a spectrum of fraudulent acts, from phony home appraisals and loan documents to dubious foreclosure-prevention specialists who prey on those who've lost the equity in their home and need to rebuild credit.
Posted by Jamie Smith Hopkins at 6:16 PM | | Comments (3)
        

February 19, 2009

Dictionary of the times

TARP. LIBOR. GSE.

If you know what these stand for, you get extra wonk credit. If you don't, the Federal Reserve Bank of St. Louis has a glossary for you.

Its "financial crisis" words and phrases include "liar loan," "FICO credit score," "deposit insurance" and everything else you see bandied about by economists but not necessarily explained. There's also a financial crisis timeline and frequently asked questions like, "How does the current recession compare with the Great Depression?" (Short answer: "Most economists do not expect the current recession to rival the Great Depression in its severity, though some predict a rather severe recession by recent standards.")

(Back to the alphabet soup in the first paragraph: Troubled Asset Relief Program, London Interbank Offered Rate and government-sponsored enterprises. If you want explanations, you know where to click.)

Posted by Jamie Smith Hopkins at 7:58 AM | | Comments (2)
        

February 18, 2009

The latest foreclosure-prevention efforts

A flurry of foreclosure-related news:

Today President Obama unveiled a foreclosure-prevention plan slated to start March 4. His administration proposes incentives to lenders for modifying the loans of homeowners behind on their mortgages. People who aren't behind but own homes that have dropped in value could be eligible for refinancing with Fannie Mae or Freddie Mac, though only if their current loans are held or were securitized by Fannie or Freddie. (Some details -- like how much above current market value the loan amount can be -- are HERE.)

Expecting the announcement, several big mortgage holders said in recent days that they would stop foreclosing on homes until early to mid-March. Fannie Mae's announcement is here, Freddie Mac's is here, Citi's is here and PNC's is here.

Think this will help homeowners? What about the housing market?

Posted by Jamie Smith Hopkins at 3:29 PM | | Comments (15)
        

Maryland home sales in '08

Final home sale figures for the year are out, and it's official: 2008 was the first time average prices fell since MRIS began tracking the Baltimore metro housing market a decade earlier. (The drop: 3.5 percent.) It was also the year with the lowest recorded number of home sales -- 22,700, compared with 28,800 in 1998.

Carroll County had the largest drop in average price locally, down nearly 11 percent to $325,000. The rest: Anne Arundel, down 5.5 percent; Baltimore County, down 5.3 percent; Howard, down 3.8 percent; Harford, down 3.2 percent; and Baltimore City, down three-tenths of a percent.

Sales dropped the most in the city (33 percent) and the least in Howard (23 percent), within the metro area. But there were bigger and smaller decreases elsewhere in the state, as stats from the Maryland Association of Realtors show.

Sales dropped 44 percent in Somerset County -- just 83 homes changed hands there last year -- and 8 percent in Wicomico County. They're neighbors on the Eastern Shore; Salisbury, the largest Eastern Shore city, is in Wicomico.

Where were the biggest decreases in price? Well, it depends on whether you rely on average or median. The metro area showed similar drops with both measurements, but a few counties -- smaller ones -- had wildly different stats. Consider Kent, up 9 percent on average price and down 9 percent on median price. Or Dorchester, up 28 percent on average and down 2 percent on median.

Lest you think median is always to the negative, there's Wicomico, where average price dropped 7 percent but median price rose about half a percent.

Posted by Jamie Smith Hopkins at 7:52 AM | | Comments (4)
        

February 17, 2009

Maryland vs. Northern Virginia

Maryland and its neighbor to the south have been experiencing very different sorts of slumps thus far. Thomas A. Lawler of Lawler Economic & Housing Consulting, attributing it in part to differences in foreclosure law, offers some analysis at the Wall Street Journal's Developments blog:
Northern Virginia’s home price “correction” to date has been more severe than Maryland’s, but it’s now much closer to being over, and home sales are recovering and unsold inventories are dropping sharply. In Maryland, in contrast, reported home price drops have not as yet been as dramatic, but home sales continue to languish and unsold inventories remain bloated.

Thanks to Wonk reader Interesting for pointing this out.

Posted by Jamie Smith Hopkins at 2:13 PM | | Comments (5)
        

More answers to new-buyer-credit questions

Here's what Eileen Ambrose says about the $8,000 tax credit for first-time homebuyers:
Will those who qualify receive a check after they've filed their taxes?

This is the best kind of credit: a "refundable" one.

First, the credit will reduce your bottom line tax bill. If the credit is larger than your tax bill - or you don't owe any taxes - you will get any excess credit in the form of a refund.

She also answers questions about whether you can claim both the $7,500 and $8,000 credit (no), whether you can use the credit if you're buying into a retirement community and what "first-time homebuyer" actually means. (Not "never bought before," as it happens.)

Posted by Jamie Smith Hopkins at 6:51 AM | | Comments (4)
        

February 14, 2009

Tax credit for home buying

First-time home buyers are now eligible for an $8,000 tax credit -- that's the end result of the multibillion-dollar stimulus package passed yesterday. (Unless you're buying a home under $80,000. Then you'll get a credit worth 10 percent of the price.)

Eileen Ambrose, personal finance columnist and Consuming Interests blogger, says a tax expert she interviewed believes the credit applies to purchases made from Jan. 1 through November.

It's about half the amount bandied about earlier. But it's also different from the $7,500 credit that was already in effect, and not just because it's $500 more. This new credit for homebuyers does not have to be paid back to Uncle Sam unless you sell within three years.

Another "yes, but": The credit phases out if you're single and making more than $75,000, or married with a household income of more than $150,000.

You can read more about the stimulus package in the Sun today, including this graphic that shows how much is going to what. And our snazzy Consuming Interests blog is all over the topic, with a bunch of questions and answers in the comments there.

I wondered whether any local buyers will end up with less than the full $8,000 because their home purchases cost less than $80,000. It's possible -- 1,425 homes on the market last month in the metro area were priced at $79,999 or below, according to MRIS. (Of those, about 90 percent were in the city and the rest were in the 'burbs.)

I don't know how many of those homes are geared toward regular "I want to move in now" buyers as opposed to people intending to rehab for themselves or to resell. Any thoughts?

Posted by Jamie Smith Hopkins at 10:52 AM | | Comments (2)
        

February 13, 2009

Home sales and prices here vs. elsewhere

You can't know if your grass is greener (or browner) if you don't compare, and the National Association of Realtors' price-and-sales data dump yesterday offers that opportunity.

The median home sale price in the Baltimore metro area was down 5.5 percent in the final three months of 2008 vs. a year earlier, according to preliminary figures from the NAR. The U.S. drop, by contrast, was more than twice as large at almost 12.5 percent.

Prices in the D.C. metro area plummeted 26 percent -- which didn't even rank it in the top 10. The biggest drop: just over 50 percent in Cape Coral-Fort Myers, Fla.

The NAR tracks sales by state rather than metro area. Home sales in Maryland fell 15 percent, the trade group said. That's about middle of the pack. Six states had drops twice that large, while six others posted sales gains. (The gainers: Nevada, California, Arizona, Florida, Minnesota and Virginia.)

The Realtors association said a lot of the sales in the last three months of 2008 were "distressed." Foreclosures and short sales made up 45 percent of market activity, the NAR said.

Here's what NAR chief economist Lawrence Yun had to say about that in a press release:

“Once again, we see a pattern of strong sales gains, particularly in lower price homes, in areas with price declines resulting from foreclosures,” Yun said. “For example, in California and Florida, where distressed sales accounted for roughly two-third of all sales, the median price fell by much more as lower priced home sales far outpaced higher priced sales.”

Want to know more? Read the housing market story in the Sun today, see the NAR press release on sales and prices or wonk around with the stats.

Have something to say? Comment away.

Posted by Jamie Smith Hopkins at 8:37 AM | | Comments (1)
Categories: Number-crunching
        

February 12, 2009

Bay National's investor loans

There's a ripple impact from real estate investors sitting on homes that won't sell. Bay National Bank is feeling it.

The Baltimore bank says it's "operating under formal oversight by federal regulators as it tries to recover from losses on bad mortgage loans," Andrea Walker reports today. Here's why:

Bank executives said its problems stem from the collapse of the real estate market. Most of the losses came on loans given to investors who were purchasing homes, many around the Inner Harbor, and renovating them to sell. Many of the investors weren't able to sell the houses as values dropped.
Posted by Jamie Smith Hopkins at 8:15 AM | | Comments (3)
        

Oversupply in the suburbs

Christopher B. Leinberger, the developer and Brookings Institution fellow who wrote a magazine piece about suburban housing called -- ominously -- “The Next Slum?”, did a Q&A with the Infrastructurist blog this week that some of you might be interested to read. Here's a taste of what he said about low-density 'burbs:
About 50 percent of Americans actually do want that configuration. But if we’ve built 80 percent of our housing that way, that’s the definition of oversupply. The other 50 percent of Americans want walkable urban arrangements and yet that’s just 20 percent of the housing stock.

Asked by the Infrastructurist when he thought supply and demand would get back into balance, Leinberger said: "Upwards of 30 years."

He means overall supply, not just what's on the market. But that did get me curious about the number of homes on the market vs. sales in the various local jurisdictions. So I checked January figures from Metropolitan Regional Information Systems to see what was what.

The Baltimore-area county with the highest number of unsold homes last month -- 23 for every sold one -- was Carroll, which certainly does have a lot of the low-density developments Leinberger is talking about. On the other hand, Howard -- home to urbanish Columbia but also many McMansions -- was lowest, with 13 unsold homes per sale.

Baltimore County had 15 unsold homes per sale last month. Baltimore City, Anne Arundel and Harford all had about 19.

The thing is, all the 'burbs around here have some rural spots, some swaths of big-house-big-lot and some more urban places. What I really needed to look at was a truly exurban place. So I checked Queen Anne's, across the Bay Bridge.

Forty-four unsold homes for every home that sold last month.

January's never a big month for home sales, but: Ouch.

Leinberger does think suburbs can adapt. If you like them as is, what appeals to you? If you don't, what would you change? And do you agree or disagree with his argument?

Posted by Jamie Smith Hopkins at 8:05 AM | | Comments (2)
        

February 11, 2009

Homeowners on their homes' value

Most homeowners think their home values have dropped in the past year, but they're fairly optimistic about the near future, according to a new Zillow poll.

Across the U.S., 57 percent of homeowners say their values are down -- more than those who said as much the last time Zillow did this poll, but still fewer than the number Zillow says have actually lost value. By Zillow's reckoning, about three-quarters of homes are worth less now than they were a year ago.

Asked what they think their home values will do in the next six months, only 30 percent said "decrease." Forty-three percent think their values will stay put and the rest are counting on upward movement. (On the other hand, nearly half say values in their local market will decrease, which suggests an element of "I'm immune but you're not, neighbor.")

As Zillow puts it, "homeowners are going where no economist dares to tread today -- they're calling a bottom."

The Northeast, which includes Maryland, has (according to Zillow) a lower-than-average share of decreasing values in the past year -- 71 percent. Northeastern homeowners fare best on Zillow's "Misperception Index" in part because they're a little more likely than average to think their values have dropped (58 percent). They're just as optimistic as the country overall about the next six months.

Harris Interactive, which conducted the poll for Zillow last month, says it can't offer a margin of error estimate because the online survey didn't draw from a probability sample. (That's your daily recommended allowance of wonk.) Just under 2,300 people participated.

Posted by Jamie Smith Hopkins at 8:10 AM | | Comments (4)
        

February 10, 2009

January home sales in the Baltimore area

Home sales in the Baltimore metro area dropped 21 percent in January, which means 1,015 homes found buyers rather than the 1,288 of a year earlier.

Average prices dropped 10 percent, to about $266,000, according to the new numbers from multiple listing service Metropolitan Regional Information Systems. It was, Lorraine Mirabella reports in an online-only story this afternoon, "the biggest monthly drop in value in at least seven years."

The average seller got 12 percent less than his or her asking price.

On the upside for sellers, inventory is continuing to drop. There were about 17,600 homes on the market at the end of the month, compared with more than 18,000 in December and 20,000-plus earlier in '08.

On the downside, the unsold homes sitting on the market outnumbered sales 17 to 1 in January. But winter usually isn't a big home-buying season.

So you buyers and sellers out there: What are you seeing?

Posted by Jamie Smith Hopkins at 5:32 PM | | Comments (5)
        

February 9, 2009

Q&A: Enterprise Homes

Falling prices for homes and land are bad news for the people who own them. They're good news for buyers and affordable-housing developers.

But the tight credit situation — particularly for developers — is another matter. I talked to Chickie Grayson, president and chief executive of Enterprise Homes in Baltimore, about how the economic climate is affecting affordable-housing efforts. (Enterprise Homes is an arm of the nonprofit Enterprise Community Partners, founded by James Rouse of Columbia fame.)

Q. What has the housing downturn, credit crunch and recession meant for affordable housing?

Typically in a downturn, ... people who do housing, particularly people who do market-rate housing, kind of switch over to affordable housing because in a typical economic downturn, there are fewer people to purchase their products. There are many more people at the lower end of the scale. So there are always people who need affordable housing. That need is unending.

But that [switch] is not happening this time, and the reason is, everything that's happening is much more overwhelming than anything that's happened before. ... Up until September it was to some extent a market issue — people weren't purchasing homes — but with the economic downturn and the credit crunch, well, there's no money available either. That's a double whammy.

 

The real issue is, there's a lack of capital. The result of that lack of capital is there's fewer investors, and those investors that are investing in affordable housing, they require higher yields and they require more money in reserve. ... All that translates into less money available to actually build the product ...

But at the same time, there are many more opportunities. Because when the real estate industry was going strong, people were after any piece of land they could get, and it drove it up to the point that people doing affordable housing couldn't compete in that market. ... But now that we have this crisis going on, there's lots of land that's available.

Q. So, more land up for grabs but no money to buy it?

You have to compete for money, and that takes time.

Q. Is this like anything you've seen before?


No, never. Never. A lot of what I'm describing is the financing on the rental side, for rental affordable housing. But it's also on the homeownership side. ... It's difficult to get banks interested.

I have heard people say that in the early '90s, there was a similar kind of credit crunch for homeownership, for construction financing, but we were building affordable housing at that time — we did 300 units between 1990 and '92 and I couldn't have told you there was a problem. And that was very low- to moderate-income housing. The risks were very slim compared to market-rate housing. The market is always there for that low- to moderate-income buyer.

Which might lead somebody to ask, well, isn't that the [demographic with the] problem with foreclosures? ... And that's simply not true. It's the products that people used to lend for purchases of houses. So those subprime mortgages or interest-only mortgages really were the problem. All the stuff that we've done has all been fixed mortgages ... so people knew what their monthly payment was going to be. There is no problem there. ... People with low- to moderate-income who know what they can afford and who know what their costs are going to be are quite capable of being good homeowners.

Q. Are there foreclosed homes in Enterprise developments?

I'm sure some of them have gone into foreclosure; that's just the world. But I had looked in November ... at Sandtown-Winchester, where we built almost 600 units, and Heritage Crossing, where we built 185 units, ... and there were no foreclosures at that time. ... Sandtown, we started working there 20 years ago, so I'm sure there have been foreclosures, but not during this particular time.

Q. How many houses has Enterprise Homes built?

I think we're about 4,500. We were established in '85, but it's really since 1987, '88 when we actually started doing development. And right now, we have four projects that are under construction — so feeling very fortunate at this point. They're in Baltimore County, Howard County and Baltimore City.

Q. How did you pull together the financing for those projects?

Fortunately, three of them closed last May and June. And then one just closed last week — and it was difficult. There's no question about it. It went through a lot of iterations; it doesn't look anything like it did a year ago.

Q. You had to piece together financing from more parties?


Yes. ... Everybody pulled together to make it happen.

Q. Is there less need for "affordable housing" in the nonprofit-developer sense now that prices have been dropping?


I don't think so. They may be coming down, but still, people who make 50 percent of median income still need some help to make that happen. ... We're talking about the average price dropping from $350 [thousand] to $325 or just under $3. Well, some people can't afford that.

Q. What about affordable rentals?


There are people who need to rent homes more now than ever before as they're losing their homes. ... One of the [rental complexes] we're building has a waiting list of over 300.

Q. How many units does that project have?

Eighty-three. So I think the demand is really significant.

Q. What other trends are you seeing?

I think the trend you're going to see is that houses are going to be smaller and they're going to be greener. Everything we're doing now is meeting Green Communities criteria. It's the responsible thing for us to do, but it also will help people with their utility cost and make their homes more sustainable.

Posted by Jamie Smith Hopkins at 8:36 AM | | Comments (0)
Categories: Q&A
        

February 7, 2009

Poll: Fix the housing market

OK, you probably don't have the power to -- all by yourself -- fix the housing market. But chances are you have strong opinions about what it would take.

So weigh in. If you had one wish from a genie (a genie who would let you make only housing-related wishes), what would you do to help bring some stability back?

I've included, in no particular order, the answers I've heard from either you folks or economists. But feel free to write in your own wish if it's not there. (If you do, you might want to write it in a comment as well -- otherwise, no one can see it but me.)

UPDATE 2/10 at 6:30 p.m.: Fifty-three percent say faster-falling home values are what the housing-market doctor ordered. Eighteen percent say job gains. Thirteen percent opted for easier credit. "Fewer foreclosures" and "rising home values" got 6 percent and 5 percent of the vote, respectively.

The "other" answers, since you can't see them, are (exactly as written) "cheaper closing costs, lower realtor commissions," "A FREE MARKET!" and "personal responsibility for buyers."

Posted by Jamie Smith Hopkins at 3:57 PM | | Comments (5)
Categories: Polls
        

February 6, 2009

How new home sales fared in the Baltimore area

Sales of new homes fell 29 percent last year in the Baltimore metro area, according to Hanley Wood Market Intelligence, which gathers data for developers. That's on par with the drop in the resale market -- at least the preliminary resale figure, which could change.

The biggest hit was to new condos, with sales falling 45 percent. Townhouses and duplexes fared best, down 14 percent. Single-family-home sales dropped 33 percent.

These figures are net sales, which means they account for cancellations. That's important, since one in four buyers canceled last year -- up from one in five in '07.

All told, 2,852 new Baltimore-area homes found buyers last year, Hanley Wood says. Following the fed's definition, it includes Queen Anne's in the calculation as well as Anne Arundel, Baltimore City, Baltimore County, Carroll, Harford and Howard.

How do you think builders' offers compare with existing-home prices?

Posted by Jamie Smith Hopkins at 3:04 PM | | Comments (0)
        

February 5, 2009

Senate suggests tax breaks for ALL homebuyers

The Senate's economic stimulus bill now includes a tax break for any homebuyer, not just current renters. The proposed tax credit would be worth $15,000 for anyone buying a home for $150,000 or more. (Less than that, and the credit would be worth 10 percent of the home.)

All you readers keeping track of various "please for God's sake buy something" measures will recall that right now, there's a $7,500 tax break for first-time homebuyers only.

Estimated cost for the $15,000 credit: $19 billion, the AP says.

In other housing finance news, Lorraine Mirabella reports today that Struever Bros. Eccles & Rouse -- the Baltimore developer known for revitalization projects -- is being sued by contractors and lenders alleging unpaid debts:

In a statement e-mailed yesterday, the company's chief executive and president, C. William "Bill" Struever, blamed the financial troubles, in part, on the slumping economy. But Struever declined to address reasons for missed payments on the loans or to contractors. And he did not provide details about the company's options. ...

In December, Struever Bros. put one of its trophy properties and headquarters building, the Tide Point waterfront office park in Locust Point, on the market for $102 million in hopes of generating much-needed cash. The developer is seeking a joint venture partner or outright sale of the former Procter & Gamble factory, which Struever redeveloped between 1999 and 2001 and is now 100 percent leased to sports apparel maker Under Armour and 14 other tenants.

Posted by Jamie Smith Hopkins at 7:22 AM | | Comments (11)
        

February 4, 2009

Baltimore area home prices vs. incomes

A recurring issue, complaint or concern among Wonk commenters is the state of local home prices compared with local incomes. Do typical folks have the money to pay the typical prices? Would they have any money left over if so? And how much higher is the price vs. income ratio now than it was in the good ol' pre-bubble days?

All good questions. So, without further ado: a chart!

HomePricetoIncomeMedianBaltMetro1.jpg Above you see the median home sales price in the Baltimore metro area divided by the median household income. In 2000, the price ($128,000) was 2.4 times income (just under $53,000).

By the end of 2008, the price was $247,000 and the income (for '07, the most recent figure) was about $68,000 -- or 3.6. That's a lot higher than 2000, but significantly lower than 2006, which was 4.1.

I've often heard the rule of thumb that you shouldn't buy a house more than three times your income. The last time the median household could buy the median house and stick by that rule, it was 2003.

But wait, you say, that doesn't account for the impact of interest rates. Rates are awfully low now, after all. OK, have another chart -- this one showing the monthly mortgage payment for the median-priced home based on interest rates at the time:

MonthlyMortMedianPriceBaltMetro1.jpg

The 2008 figure -- about $1,300 -- is below 2005 payments. But it's still far above what the median householder would have been paying in '03. (EDIT: Completely forgot to note that these mortgage payments are calculated for people managing a 10 percent down payment. Thanks, Jelena!)

So what's the affordable amount? That's ultimately up to homebuyers -- though I'm sure you all have opinions, whether you're in the market or not.

(Data sources for the wonks: Interest rates from Freddie Mac, income from the Maryland State Data Center and home prices from MRIS.)

Posted by Jamie Smith Hopkins at 9:58 AM | | Comments (30)
        

February 3, 2009

Baltimore home values down to '05 levels, Zillow says

Home values in the Baltimore metro area dropped 10 percent last fall to levels last seen in early 2005, according to a newly released report from real estate information site Zillow.

Zillow is relying on its "Zestimates" of home values, which means these are estimates of the value of all homes, not just the recently sold. The company says U.S. home values dropped a bit more than ours -- 11.6 percent.

The more expensive the home, the bigger the drop, according to Zillow: The Baltimore area's "bottom tier" (around $150,000) lost about 6 percent in value, while the top tier dropped 13 percent.

By the numbers, according to Zillow:

--Nearly nine in 10 Baltimore-area homes lost value in the past 12 months

--About 14 percent of metro-area homeowners with mortgages owe more on those mortgages than their homes are worth

--About 8 percent of sales in '08 were foreclosure properties

--Grand total of local home value lost last year: $27 billion

On the up side, Zillow estimates that 96 percent of metro-area homes were worth more at the end of '08 than they were at the start of 2004. (The Baltimore area saw a big jump in values in '04.)

There's a significant margin of error in Zillow's individual Zestimates -- 10 percent plus or minus in the Baltimore area, according to the company. But it believes they're a very accurate measure when compiled together like this for overall statistics.

Posted by Jamie Smith Hopkins at 9:29 AM | | Comments (6)
        

February 2, 2009

Q&A: Ross Mackesey

Coldwell Banker vice president Ross Mackesey is a number-cruncher, which of course I mean as a compliment. From his Federal Hill office every month, he looks for trends across the region.  "The agents need to be educated as to what's going on," he says.

Q. So — what is going on with the local housing market? What's happening to values?

I'm trying to get to the bottom of it, what really is going on in the market. And what we have found: In those mature first-time buyer neighborhoods, [for instance] the old section of Mays Chapel, ... [townhomes] sell for under $250,000. The prices are very stable, if not going up a little bit.  In the same general vicinity, in the larger houses that Pulte built subsequent to those in Chapel Gate, ... those are also townhouses — much, much larger, and sell in the late 3's and early 4's — and they have come down in price, 4, 5, 6, 7, 8 percent. So that's just an example where you are side by side, two different buyers.

In our market, not many people start off buying a $400,000 house. So that does tell you that the part of the market that's working [is] those first-time buyers.

In Baltimore City, there's plenty of [investor] product. ... They have renovated those houses and we are selling them to those first-time buyers. So it's not as if we're getting listings that other first-time buyers were living in and they were going to move up. We're whittling away at the inventory.

Harford County's numbers show that BRAC is starting to work. ... Anything over $450,000 was just dormant in Harford County; we're starting to see a little movement in that $300 to $450, $300 to $500,000 price range. Which indicates to me that the people that are coming are the higher-ups.

So Harford County — it still has months to absorb; it's still over 10. But they actually sold more houses, one more house in December [than a year ago].

Q. Sales are up significantly in Northern Virginia. Why?


In Prince William County and Loudoun County, ... you had a lot of new home development and a lot of subprime buyers. They have a major foreclosure issue there. And that's why you're seeing the prices dramatically down. ... Everybody is losing value, but the foreclosures are really driving the market over there. Just as a company: We have probably four offices in that general vicinity — we're doing over 100 REO [bank-owned] properties a month. We're listing them. But we're selling a bunch of them, too. So that is really stimulating that market.

Q. Who's buying those foreclosures? First-timers? Investors?


Both. It's an affordable product.

Q. You point out that Harford County has more than 10 months of housing supply, meaning that at the current rate it would take that long for all the homes now on the market to sell. That's true of the Baltimore metro area as a whole. So what does a "normal" market look like?


A lot of people used to say that a market in equilibrium was six months. I have queried lots of people who put that out there, and they don't back it up. I believe a market is more than supply and demand — or, demand is influenced by more than the amount of inventory. I think that interest rates have a huge influence on demand, and the type of product. ...

You really have to break it down by the demographics of the buyer pools. I mean, right now in Baltimore City, if you want to buy a $170,000 house, you're not going to get people begging you to buy. If you are going to [get] an $800,000 house in Baltimore City, they'll beg you to buy it.

If you track the contingent contracts, in Baltimore City, we're down to only 6 percent of the contracts are contingent.

Q. What conclusion do you draw from buyers overwhelmingly opting for contracts that aren't contingent?


That it's the first-time buyer that doesn't have the baggage of a house to sell. Typically if you have a house to sell, and you put a contract in on a home, that's not as strong a contract as somebody without a house to sell. Therefore you typically pay a premium, and that supports pricing. ... If you bring me a cash deal, settle in 30 days, I'm going to sell it to you for less. I know that I have a deal.

Q. Average sales prices have stayed steadier in the city than the suburbs. Does it have anything to do with the types of homes selling?

I think that our market has been buying houses that have been rehabbed, and they're more valuable than they were before they were rehabbed. ... The higher end — the North Shores, and the Ritz and the HarborView, the Pier Homes, those types of properties — they've taken a beating.

Q. Is it, as the National Association of Realtors says, a great time to buy?

It really depends — houses are places to live. If you are moving up, then it's a good thing, particularly if you live in a first-time buyer type product, where the prices are fairly stable. ... Then you can get a benefit at the higher end. But then it begs the argument, where is the higher end going to settle out? We're comparing everything to what people were paying for those properties in 2005 and '6. Should we be doing that? What's a fair market value for that property going to be in a couple of years?  ...

It's a very individual thing, and that's why I'm at odds all the time with NAR, because it's very difficult to support some of the drivel that comes out of their mouth. I prefer to boil it down to talking to the individual and [understanding] their lifestyle and what makes them feel good.

I think that we convinced ourselves that there was a free lunch, and there isn't, there never has been. We were 'entitled' to a place to live that was an ATM machine and mysteriously kept spitting out money. I think that ... in most markets around here, in our region, we have paid the price. There [have] been the readjustments, and unfortunately, there are still a lot of foreclosures that are going to happen.

Q. What's happening to real estate agents in this sales environment?

Those people who are in this business as primary breadwinners, they rise to the top. And the — I hate to use the word part-timers in a derogatory sense, but those who just use it for funny money, somebody who does it because they pay for the family vacations with their one transaction a year, they're falling left and right. And we needed that, because everybody was getting a real estate license. The growth in licensees was incredible in the beginning of the decade. So there's a thinning process going on. ...

If you're active in this business, you have $1,500 in expenses a year. ... If you are sitting on the sideline not doing any business, then that becomes onerous.

Q. You know Federal Hill best. What's happening there?

Federal Hill, because it was the first of the city neighborhoods to get rehabbed, ... has less speculation than other neighborhoods; it is holding up fine.

The ZIP code, which goes well beyond Federal Hill, has taken somewhat of a beating. Because in times of growth and appreciation, both in Canton and in Federal Hill, Realtors pushed the neighborhood out. "Federal Hill south." ... So the core in Federal Hill has done much better than that periphery. Same thing happened in Canton. ...

We have too much to choose from. That's what inventory does. It allows you to be where you really want to be. You don't have to settle for something a couple blocks beyond the boundaries.

Q. Are buyers out there?

I just looked in our little microcosm here — we have probably three times as many appointments in the next three days as we've had in three months for a weekend. People are out there, wanting to look at houses. ... Whether or not people are going to pull the trigger is yet to be seen.

Posted by Jamie Smith Hopkins at 9:19 AM | | Comments (3)
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About Jamie Smith Hopkins
Jamie Smith Hopkins, a Baltimore Sun reporter since 1999, writes about the regional economy. Her reporting on the housing market has won national and local awards. Hopkins is a Columbia native and has lived in Maryland all her life, save for 10 months spent covering schools in Ames, Iowa.
She trained to become a wonk by spending large chunks of time as a geek and an insufferable know-it-all.
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