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June 2, 2010

A big price cut -- potentially -- on 11 HarborView homes

HarborView's developer is hitting the reset button on the Pier Homes.

Eleven of the luxury waterfront townhouses in Baltimore will be auctioned off June 28 with minimum bids 55 percent to 75 percent below the most recent asking prices. Accelerated Marketing Partners, which is handling the auction, says the minimum bids are the reserve prices -- meaning the developer will accept them if no one bids any higher.

The unit with the highest recent asking price -- nearly $2 million -- is tagged with a minimum bid of $665,000. The lowest minimum bid is $329,000 for a unit with an asking price of $1.2 million.

Of the 88 townhomes, 44 have sold and two are under contract. That leaves a lot still to sell. The goal of the auction is to drum up interest and get buyers to break up the logjam -- one that exists across the high-end market.

"In declining markets or markets that are reasonably uncertain, there tends to be a disconnect," said Jon Gollinger, co-founder of the Boston-based Accelerated Marketing Partners. "The only one who can cause traction on prices is the consumer." 

Read more in today's story, including the impact this has on other sellers and homeowners.

In Gollinger's mind, the decision to slash prices and let buyers bid them up from there (if the builder is lucky) is no more complicated than Economics 101. "Let the market determine value," he says. "These 11 units are going to set a value."

There's no buyer's premium added on to the price, for the auction-savvy among you who were wondering. Gollinger says some of the units are fully completed inside, and the rest are close to complete with some finishes for buyers to choose, included in the purchase price.

The units themselves range from about 3,000 to 3,700 square feet, most with water views.

At an auction Gollinger's firm handled in Boston, buyers picked up 14 units during the event "and the market responded by knocking off a quick 20 more after the auction," he says.

Kenneth Wenhold, director of the Mid-Atlantic region for Metrostudy, a real estate market-research firm, says the Baltimore price cut sounds big enough to get buyers' attention. "It'll make it very difficult to sell against them," he added, a problem for other builders.

The rough state the high-end housing market is in nationwide can't only be attributed to the lousy luck of projects conceived when everything was zooming and delivered when sales dried up, he says. Developers started luxury projects during the housing boom with little thought "to where these buyers were going to come from."

What he's saying is that asking prices were too high even for the bubble. "These things really were doomed from the get-go," Wenhold says. As prices come down significantly, though, the potential buyer pool widens.

Gollinger says the new minimum prices for the Pier Homes are below the cost of replacement. The developer and investment team decided against hanging on in hopes of getting more at some later date.

"With the kind of ... disconnect between the buyers and sellers that's occurring in Baltimore right now, to wait it out doesn't make sense," he says. "These guys are making a decision to capitulate now. In general, I think it's always the better way to go."

Posted by Jamie Smith Hopkins at 12:01 AM | | Comments (12)
Categories: For sale


If shootings in the city continue...they won't be auctioning but giving those townhomes away....

Nobody is getting shot near these town homes, I don't think that will be much of a problem.

As far as the auction is concerned:
They are burning through the areas inventory. Obviously its not at the prices they expected, but the fact that they are hopefully going to get sold means that it is one more house off the market and another tax receipt for the city. Once we run out of heavy condo inventory, prices will go up.

If they really wanted to set a fair market value for these homes, there would not be a reserve set. Of course, they can only stand to lose so much money so I am not surprised.

MD- The City gets their property tax no matter what. If it is not sold, I am pretty sure the builder has to pay the taxes. If the builder does not pay the taxes, the unpaid taxes would be auctioned off at the tax sale, no?


Good article and post today. I think I even sensed an opinion of the market in there.

Wow the only question I have is are these Luxury homes even worth purchasing for the Buy & Hold type investor as I don't see how within the next 5 years those "Original" prices of Luxury waterfront homes will be back to that level at all. Any opinions on that fellow readers?

Really, John? I don't think I have an opinion. (Honestly!)

Congrats to the developer for acting as a price taker, not a price setter. This is how markets clear. There's only so many Ravens/O's players, top Hopkins surgeons, and top Legg/T.Rowe managers to buy these things. Many of those people want a house with grass on 4 sides for 7 figures.

when is the auction and who is the auctioneer?

Both answers are in the blog post, Lindsay: June 28 and Accelerated Marketing Partners.

Related to the story about the luxuary real estate market, there are three homes on North Rose St which sold for 1.8 million dollars in April. Just seems high for homes in that section of Patterson Park.

Seems like a good deal, but the taxes probably take these houses out of the realm of possibility for most people. If they are assessed at the asking value, you have to add on $10,000-$20000 a year in taxes . That's a monthly payment for a lot of people.

Jman makes a good point. I looked at the Pier Homes last Summer and was really impressed, but the City's .0227 tax rate is what dissuaded me. I, like many others, I suspect, am just unwilling to ante up $20K+/year in taxes to move into the City, which is a shame-Balto. needs an influx of folks who will ad pricey homes to the tax rolls and spend money in town, but it's a tough sell . . .

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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.
Baltimore Sun articles by Jamie

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