Just 18%?? I would think something like another 15-25% off current value would be healthy for the market and promote buyers. Yes unemployment is through the roof. However people that have jobs and have had jobs that don't own a home probably won't enter the market because home prices currently do not reflect the current job market and the overall quality of Baltimore.

How can anyone justify premium prices in a city with rampant crime, high unemployment, mind blowing taxes, and a joke of city government????

Just the other day I saw everyone's taxes hard at work. 4 cops and 11 medics plus 1 fire truck all parked on Broadway in fells point to help 1 drunken bum. Are you freaking kidding me!?!?

Crackdown on crime. There's no other way. I'd gladly pay more in taxes to keep those thugs in prison for life.

I know a lot of people read "Baltimore metro area" and think "Baltimore City," so just to be clear: The metro area is the city, Anne Arundel, Baltimore Co., Carroll, Harford and Howard (and Queen Anne's County, too, if you're talking about the federal definition).

I was looking through the tax records of the 1400 Lancaster building in Harbor East and of the last two sales, one went from $763,400 in 2007 to $375,000 in 2010. The other went from $604,000 in 2005 to $345,000 in 2010. Either way, it looks like condo units in the building have lost between 40-50% of their value.

This is synopsis of where we need to be, IMHO, to get the market moving.

Bad areas - 50 bucks a square foot
Nice areas - 90 bucks a square foot
Really really nice areas - 100 bucks a square foot

I know "beauty is in the eye of the beholder", however I am using the collective definition of bad vs, nice vs. really nice - that is, how a large group of individual would categorize a home.

We are nowhere near these numbers

@ Darwin

How do you expect us to ever come close to achieving those levels when hard construction costs alone exceed your $50/sf floor for bad areas? If a piece of perfectly graded land with all of the utilities, roads and stormwater management were donated for free, you would still not be able to construct a home to code for that price, and that is without including impact fees, marketing costs, and profit.

The only way your scenario makes sense is if China stops building causing materials prices to plummet. I wouldn't hold your breath...

Ryan,
It's called deflation

I don't get your point Darwinrules. You come up with numbers suggesting that prices are off 40 percent. 50 dollars a square foot might be be overblown but I see both of you essentially in the same camp. In your case, I wouldn't use construction costs to measure the price of a house in the near term as we have been overbuilding in many areas of the US. Constructing a home in the near term is just a fruitless exercise. That is why there are so many construction jobs lost that will probably never come back until we work through the backlog of foreclosures. until then, who knows what lows we will hit... even 50 doesn't sound extraordinary to me. considering that every major economist worth his/her salt was not able to predict the unemployment rate ot 9.5 percent at this stage. You ain't seen nothin yet.

Darwin is pretty close in his synopsis. One variable he left out however is the cost of land. When these builders were putting up homes in droves by the thousands, the cost of land shot up way too high in value. Now, these builders are stuck with this overpriced value of land. What can they do?

They can do one of two things. First, they can take a loss by building on that land a home and sell it for much less than they originally projected. That would cut profits and most likely show a net loss on the project. Second, they could continue building on that overpriced land as if the bubble never burst. They can build their 3,000+ square foot home at a slight discount so they can make a small profit or barely break even. Instead of building them out all at once, they would have to build to suit. As in, build it until a buyer puts down a deposit so it could take a much longer time to sell the entire lot.

New home starts and permits are at all time lows. These builders would be much better off creating a new construction plan so they are able to recoup their costs, even if it is a at a slower pace. Instead of selling individual lots to build a single family home, they would be much better off building townhomes or condos so they can increase the number of units they can sell. The most expensive part of homebuilding is not the labor, but the land.

I am not sure exactly what the labor costs are, but these homebuilders would finish a home quicker than ever. A home could be built start to finish within two months!!!!! The quality of homes today are reflected in the cheap labor costs. The builders made enormous profits this way and they still do. CHEAP LABOR is the key. The land is where the main costs come from.

Why is it that they can't build small single family homes (900-1400 sq. feet) with minimal yard in the 200-250K price range? I'd much prefer a very small single family home over a condo or townhouse.

It is very hard to find a small affordable home in a decent area in Maryland. I ended up with a condo but would have much preferred a small house.

The Stock market has been rallying signaling a return to higher real estate prices. I know a local real estate agent and a local mortgage broker who both have told me that real estate is on the rise and is coming back real strong. They also said that they see people having no problems at on coming up with 20% down payments and being able to pay their mortgages unlike they could a few years back. People need to listen to the professionals and the stock market - they are good predictors!!

People need to listen to the "professionals" and the stock market - they are good predictors!!

Dwyer- BWAHAHAHA........Ok sure, you first. We're right behind you, promise.

The Elweedz Manifesto.

Home-sellers--I apologize for not coming to your party, I had a previous obligation to my own financial interest. While i recognize that I may miss out on the opportunity to purchase the home that you bought for $250,000 six years ago and have subsequently refi'd to $400,000 to pay off your credit cards/vacations/ bullship. I just dont feel that its my obligation to pick up that tab. I know this may come as a terrible shock. Certainly, any rational person should jump at the opp to purchase your used home with your choice of carpet/paint/kitchen scheme and "better than new" roof/windows/furnace on top of your refi-cashout debt reconfiguration.

So please, PLEASE, please understand my sincere remorse. I know someday i will be kicking myself for not jumping at the opp to pick a sweet $3,000/month X 30 years payment.

Jaded
You must have never looked at Cheswolde (21209). At the peak of the market, 3-4 bedroom cottages in this terrific area were selling for 265k. You can get a house in this area now for under 200k.

Nice article today.
http://www.baltimoresun.com/business/real-estate/bs-bz-july-home-sales-20100810,0,1754613.story

The numbers you used show a decline in sales compared from a year ago. Any way to compare the numbers month over month instead of year over year? Just curious to see what the numbers look like since the credit has ended. Thanks...

Thanks, Frank. That's the quick breaking-news version, so there will be something more complete up later today.

I generally stick to year-over-year comparisons because there's so much seasonality in homebuying. But I can understand why folks would be curious about what happened month-to-month this year. I'll try to blog about that tomorrow morning.