I put my townhome for sale in Baltimore County for Sale in May ($220K) and had 5 showing the first weekend. The second person that saw it put a full price offer in and we accepted.

I think one of the biggest things we had to our advantage was that we bought in January 2004 so we we able to price it very competitively. At the same time that we had our house for sale there was a short sale priced at $199K 10 house down from us which is still for sale. I think the fact that our house was upgraded and showed well put us in a great position. That's the biggest difference between the "old" market and today's market. Before you were able to sell you house for the same or more then the one accross the street regardless of the upgrades/condition. and now buyers want it all unless it's severly discounted.

I enjoyed the article about the under $250k homes. My question is the condition of those homes.

I moved to this area 2 years ago so I'm not that familiar with the local trends. I live and work in Howard County, and when I looked last year at homes in the low end of the market (around $300k), I was shocked by the condition of the homes. They needed a lot of work just to bring them up to acceptable condition. In Howard County, I'm guessing that those are the same homes priced at $250k this year. In which case I don't think they are that great of a deal.

But I haven't travelled into Baltimore too often. So in Baltimore, what is the condition of those $250k homes?

Hi, jfg -- you're getting at the problem that buyer Zack Blum notes in the story: "There's a lot more stuff that's been dropping into the realm of affordability. But they're not going to be perfect. The ones in the best shape, you have to pounce on, because you don't get a second chance."

I wish there were a way to quantify whether there are more poor-condition homes in some areas than others, or -- for that matter -- how many of the homes under $250,000 are in good shape. (It's telling, though, that a significant percentage of those listings are foreclosures and short sales. Especially in pricey Howard County.)

Anyone out there have personal experiences to share?

jfg - Howard County especially the Colombia area have some of the highest and most inflated prices in MD. My House was in a nice Balt. Co. suburb (Perry Hall) with good schools and amenities (Parks/Shopping). Really if you are working in baltimore you should look elsewhere eben the Harford County (Bel Air)

I'm with you, jfg. We moved to Baltimore in October 2005, and initially seriously considered purchasing a home. One of the biggest factors that kept us from buying at that time was the condition of homes in the $300-450 price range. We decided not to buy for a variety of reasons--not just condition--but we noticed things going unrepaired/un-upgraded here that weren't going unrepaired in other U.S. housing markets. I'm not talking about cosmetic things (kitchens, countertops, flooring) but relatively serious things like plumbing, roofing, HVAC, structural issues. In other urban markets, sellers seemed to take my own personal dealbreaker/maker issues a lot more seriously. I am pretty unforgiving if someone is asking a high price for a property that needs major work. Which obviously takes me completely out of the "buy a rowhouse shell and make it your own!" market.

I absolutely believe that there are good properties to purchase in Baltimore, but it comes down to the same house-hunting rules here as everywhere else--know what you are willing to work on if you purchase a property, and what you are not willing to work on. I know that this is probably less-than-helpful.

We've noticed more houses are going on the market at a reasonable price. Several months ago, there were still a ton of houses listed at prices that were frankly absurd; then you'd see them drop in price by 10% every few months -- which really only reminds potential buyers how over-priced the home was in the first place.

And if you'll forgive the somewhat shameless self-promotion -- our blog runs a weekly round-up of real estate listings that have caught our eye. They're all in the city, and the vast majority are priced under $250k.

Urban Discoveries Blog

Urban Discoveries, somewhat shameless shelf-promotion is perfectly fine as long as it comes paired with a real comment. And yours does, so you're good to go. :-)

I'm curious about the comment in the story that someone earning $71K per year can "comfortably afford" a $250K home.

Mortgage calculators are misleading. In addition to the mortgage (principal plus interest), there are property taxes, homeowner's insurance premiums to pay. Wouldn't a $250K home in Baltimore City end up in monthly payments of 50% plus of a $71K income? Isn't that how the country ended up in the housing crisis that it's in -- people spending way more than they should on their homes?

Plus, remember, energy costs are ever-increasing, as are food costs, gasoline, etc.

I just don't see how that equals out to "comfortably afford."

Hi, Jay -- I'd hoped to have a box accompanying the story with an explanation of how I calculated affordability, but alas -- no dice. So, here's what I took into account:

Economists say that once you're spending more than a third of your pre-tax income on housing, you're forking out too much. You're better off sticking with no more than 28 percent.

But that includes property taxes, hazard insurance, mortgage insurance, etc. I wanted a calculation considering just principal and interest, so I asked a Freddie Mac economist what figure he'd recommend. His suggestion: 25 percent.

I wanted to see how much income someone would need to spend no more than that on a $250,000 house -- and not someone putting down 10 or 20 percent, either, but someone making the 3.5 percent minimum down payment on an FHA-insured mortgage.

With a 5.5 percent interest rate, you'll spend $1,370 a month on principal and interest for a $250,000 house. And that's 25 percent of pre-tax income for someone making about $65,000.

Not everyone has the same opinion about what's comfortably affordable. But that matches up with lenders' opinions on the subject, and they're not nearly as free with their money as they used to be.

Look in Hampden- most houses here are under that. The stock does vary in regards to condition, but many people have renovated and updated homes around here. That price range is one of the reasons the market is doing better here than elsewhere.

I agree with Jay. My alarm bell went off at the "comfortably afford" paragraph as well. Where did this calculation come from? If it came from the real estate agents sourced earlier in the story, I'd say the whole statement is inaccurate.

If fact, that is a bit of a peeve I have had during the last 18 months looking at real estate. I personally believe it is inappropriate for agents to engage in conversations to bump the budget I give them. The most frustrating is when agents start using time-share like sales lines like, "Because of XYZ, your PITI would lower $X/month and give you $ABCk more buying power."

I know how much debt I want to carry. I don't need someone who isn't a banker attempting to pile more on top of me.

Nick T., see my comment above (the long one) for an explanation of how I calculated affordability. Reasonable people can disagree, but this was no slapdash figure, I promise you.

The paragraph about Vicki Walsh made me chuckle. When you wrote
"The Severn house she moved into this month cost her $340,000. The seller covered her closing costs, and on top of that paid for discount points on her mortgage so she ended up with a super-low 4 percent rate. Her monthly payment is $1,800"

It immediately made me think of the housing-bubble era ads by LowerMyBills.com with the ever-dancing woman: "$340,000 mortgage for only $1,800 a month!"

That this buying mentality persists convinces me (among many other things) that now is definitely not the time to buy.

Jamie - thanks for the explanation. Your comment was not up when I began typing up my little rant.

To follow-up with an open question, why do most of the mortgage (affordability) calculators only compare principle and interest to gross income? Taxes (and lesser extent insurance) both seem like pretty critical components when you are determining what you can afford each month. After all, it does no good to have a 300K mortgage to can afford if you can't handle the taxes along with it.

Just wondering.

Oh dear, John -- there's nothing worse for a housing reporter than to be compared to a housing-bubble add. (And the dancing-woman one to boot.)

Keep in mind I'm not telling people to buy (or not to buy, for that matter) -- I'm offering up real-life examples to try to shed light on what's happening. So we've got Ms. Walsh with her unusually low interest rate, thanks to seller concessions -- the average is closer to 5.5 percent. And we've also got Mr. Blum, who's finding that his price range is full of short sales and foreclosures.

Both of them are telling us something about the buying and selling experience nowadays. One piece of the larger puzzle, at least.

"Comfortably afford" is a very subjective term, but I would like to point something out related to my previous thoughts about these $250k homes.

I understand spending no more that 28% of pre-tax income on housing, but given the conditions of the homes we're talking about you might want to go less than that. From what I can tell, most of these home are old and have problems. You're looking at a lot money going to maintenance.

It doesn't look like people accounted for this in the last housing run up. The conditions of the homes I saw were similar to what Laura described above(structural problems). The previous owners stretched so far just to get into the house, they just couldn't afford to maintain the thing, and a small problem grew into a bigger a more serious problem.

So while the monthly payments look attractive on the surface, I still don't think they are low enough when accounting for the total cost of living in those houses. Buying into a money pit in a falling market is not an attractive proposition.

Now if the home is in great condition, that's a different story.

jfg, you make a great point: Condition really does matter when you're deciding what you can afford.

I wish there were some way I could have taken that into account in my affordability calculation. Alas, I've seen no analysis along the lines of "the average home in this price range needs X dollars in fix-up work."

Limiting what you spend to 25 percent of your pre-tax income should allow you a cushion to do general maintenance. But there's no question that you wouldn't want to spend as much on a house that needs a lot of expensive work.

Nick T., I think the reason most mortgage affordability calculators don't include anything but principal and interest is because property taxes (and to a lesser extent insurance) vary so much across the country. Heck, the tax rate varies a lot across the Baltimore region.

In any case, that's why I used a lower affordability threshold -- 25 percent rather than 28 percent (or even 33 percent) of pre-tax income.

Howard County is pricey because you can commute to two major employment centers and still stay sane. When you have one person working in Baltimore and the other in Greenbelt, we'll live in Columbia, thanks.

@jfg: Two years ago, the market was much different. Now, we have a contract in on a townhouse well below $250K that needs two kitchen appliances, a little carpet, and some paint. Granted, it's a short sale (with only one bank involved, thankfully), but we're not in a rush, there is a negotiator assigned, and they have appraised the house.

A couple of comments:

First on affordability. Take your example and add on $500+ every month for escrow. When I bought my rowhouse in 2008, the initial escrow payments were less than $200/month. Then at my one-year anniversary the mortgage company said "oops! we didn't calculate things properly" and tacked on another $300/month. I'm paying $1,400/month on a $149,000 mortgage.

Second, the Fells Point 4 bedroom for $179,000 that you mention in your story. I am willing to bet my escrow payment that the place is not livable. You would be hard pressed to find any house or condo in Fells Point that you could move in to at that price point.

Hi, Bruce -- sorry to hear about the escrow problem. That really ought to have been calculated properly, though you're far from the first person to get hit with that sort of "oops!"

About the Fells Point place: The listing says the home has been "restored," and the photos make it appear to be in move-in condition. No idea whether that accurately reflects reality, though.

My experience with the homes below 300K in AA and HW is that they're either in a very bad location (a freeway next door, high crime, low-flying airplanes, etc.) or in a very bad condition. If it's neither then such home would be gone very, very fast.

Condition? REGARDLESS of price anything being sold as "move in ready" should pass a thorough home inspection and not REQUIRE one single damned thing to be done.

Not a stove or carpet or even paint... let alone the more fundamental items like structural or foundation or major fixtures.

For those properties that need work the listing should be clear on the point and the price should reflect it.

Is that a simple enough standard to use?

Personally I'm not afraid of some work and would actually prefer to have the price discount rather than cheap "get it sold" quality work. Some buyers don't. Just beware of the sizzle hiding the steak.

Good advice, MrRational!

"First-time buyers who can comfortably afford more than $200,000 are finding more homes falling into their price range, too. What used to be $300,000 is now in the low- to mid- $200s, said Lucido, the Howard County Realtor. What used to be $400,000 is now $300,000 to $325,000, he said."

From what I've seen in BAL, so far, what used to be $400K is closer to $360K. Furthermore, these price points are complicated by seller's hanging onto high hopes for 2008 prices.

Right now we are looking at a townhome in a North Baltimore neighborhood wherein the the 2008 prices were $375-$385K.

The new home for sale there? $367K.

We could almost pay that, but we feel the place needs a new kitchen and CAC (I work out of the home.) Opps, 1-2-3 -- at the asking price with our upgrades, the home pretty much ratchets right back to $400K.

What startled me about the home sales in the neighborhood were how they pole vaulted from about $280K in 2003-04 to costing $400K+ in 05-06.

If we take the bubble out of this equation, just what should we pay now? Just a 25% correction suggests $320K. Well, we're not there yet.

smithbaltimore - In my opinion you should be paying anything more then 04-early 05 prices after that the market went haywire. With the work maybe less. There are still alot of people that CAN'T afford to price there homes at market prices causing excess inventory. I just bought a home in the burbs that was built in 04 that sold for 470K. Since then the owners put in a stone patio/landscaping, fence and finished the basement and I just paid $480 for it and I some my house for about what prices were in 05 after I spent the past 5 year upgrading everything.

I bought in Cecil County. More house for the money compared to nearly any county. 45 minute drive to Baltimore on most days...not so bad to save a bundle. Plenty of homes for sale up here. Come on up!

Rob - I'm glad you found a house you like in Cecil.

Personally, I have yet to determine the quantifiable 'opportunity cost' (not gas) to permanently adding 1-2 hours a day onto my workday via commuting. (I've done both long and short commutes)

Right now I'm within a 15 minute walk from my office (2 minute drive). Previously I was commuting from Sparks to Annapolis everyday and I don't think I could go back to that - not even for twice the house...

On the other hand, my sister in LA has a 90-120 minute commute EACH WAY because she wanted to live away from the epicenter and is truly happy with her decision. (She has been doing the commute for 2 years)

But anyway, the point is that commute and distance from points of interest are an x-factor that I've never really been able to come to terms with during my house hunting. Does anyone have a distance to $'s ratio they use?

What a lot of buyers do not understand is that along with the declining value of used homes lot prices have also dropped making construction of a new home much more affordable.Why deal with a short sale or forclosure when you can have the same thing NEW Now my shameless promotion www.rjsherron.com