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September 30, 2010

Ground-rent registration rush

The state's estimate of ground rents: about 115,000.

The number of ground-rent registrations processed as of Wednesday morning: about 70,000.

Ground rents still to be processed because they were brought in or mailed right before the deadline: No one knows how many yet -- but the assessment office was so flooded by last-minute applicants that it had to reassign some staffers to help out.

Any ground rents that weren't in assessors' hands or postmarked by Wednesday officially cease to exist, and the owners can no longer collect. (A lawsuit is challenging that rule, so the future of unregistered ground rents could change.)

Some ground rents, of course, have ceased to exist since the state's 2007 estimate for another reason -- the owner of the home bought it in order to also own the land.

Wondering if there's ground rent on a particular property? It could take several months for all the applications to be processed, but as they are, the state is linking the applications to the property look-up page. Type in the address you're interested in and see if there's a "ground rent registration" link near the top right corner.

Posted by Jamie Smith Hopkins at 12:01 AM | | Comments (0)
Categories: Ground rent

September 29, 2010

Last day to register a ground rent in Maryland

Got ground rent? State law says it will disappear in a puff of smoke if it isn't registered today in person or by mail (meaning postmarked Sept. 29).

That's part of the raft of legislative change ushered in after a Baltimore Sun investigation in 2006, which found that a few ground rent owners were using the Colonial system to seize hundreds of homes over unpaid bills.

One of the changes is the registry. The idea is to make it easier for people to keep track of who owns the land under their homes and how to reach them, since ground-rent holders don't always send bills. Some who inherited ground rents have no idea what the things are, for instance.

But ground-rent owners, especially those with more than a few of the items, say it takes time and money to collect the information required. One is suing, arguing that the law -- register or lose the ground rent -- is unconstitutional. So the fate of unregistered ground rents is uncertain until that case is concluded.

More in today's story, and I'll be working on a longer piece about ground rent for Thursday.

Posted by Jamie Smith Hopkins at 12:01 AM | | Comments (9)
Categories: Ground rent

September 28, 2010

Apartment market might be stabilizing

It's been a pretty good couple of years to be a tenant. Annual rent increases, about 5 percent in the Baltimore metro area right before the recession hit, fell to practically nothing by some measures (and into negative territory by others) as job losses and doubling up caused vacancies to mount.

But a summer survey by suggests that the balance of power has stopped shifting toward renters. Just over 40 percent of rental property owners say their vacancy rates are dropping, the site says.

Thirty-six percent are offering a free month of rent or more as an incentive, but that's down significantly from the 65 percent doing the same last year. Sixty-three percent with properties in the Northeast and 50 percent in the Southeast thought rents would rise in the next 12 months.

Red Capital Group, a multifamily financier, said in a separate report that demand for apartments in the Baltimore metro area -- which was falling in the first quarter -- rose in the second.

For all the landlord optimism, they're seeing a trend that normally bodes ill:

Tenants' financial situations -- as measured by their credit scores -- continues to worsen, said. Just over half of survey respondents said prospective renters' creditworthiness declined this year, which is really something considering that it comes on top of widespread deterioration last year.

I wonder how many of those applicants are former homeowners whose credit scores were dented by short sales, foreclosures or strategic default.

These have been unusual times for the apartment market, like everything else in this economy.

When home sales are falling, you might expect good times for landlords because people have to live somewhere. But high unemployment has chipped away at the number of people who can afford to live on their own, and it's made the employed more anxious about their situations -- redefining what "live somewhere" means to folks. Pairing up with roommates. Staying home with parents. You name it.

That means job growth is the key to turnaround. Employers in Maryland were adding jobs this spring, but some of those gains disappeared in the summer.

Renters and landlords: What trends are you seeing out there?

Posted by Jamie Smith Hopkins at 7:00 AM | | Comments (8)
Categories: Renting

September 27, 2010

Got a credit score under 620? Good luck getting a loan, Zillow says

If your credit score is under 620, don't expect to get a mortgage until your financial situation improves.

Zillow, the real estate site that also runs a "mortgage marketplace," says few would-be homebuyers with a score in that subprime category get even one loan quote in response to their requests. That's true "even if they offered a relatively high down payment of 15 to 25 percent," the company says.

Nearly three in 10 Americans fall into that under-620 group, Zillow says.

It analyzed 25,000 loan quotes and purchase requests made on the mortgage marketplace in the first half of September.

Here's how quoted rates varied for people with higher credit scores:


Credit Score

Percent of Americans in this category

Non- FHA Average Annual Percentage Rate (APR)



















Source: Zillow


The options for the under-620 crowd were seemingly endless during the peak years of the housing bubble. Now, nada?

The Federal Housing Administration, which insures loans, doesn't actually bar lenders from offering FHA mortgages to people with low scores. (It did announce in January that it would be requiring a 580 score if you're putting down 3.5 percent, and higher down payments mandated for those with lower scores.) But I've frequently heard industry folks say that FHA lenders use 620 as a cutoff even so because they see it as a less risky strategy.

Have you seen any options for under-620 borrowers out there these days?

Should there be?

If you're hoping to increase your credit score, here's a post I wrote about how they work and a companion piece about upping them.

September 26, 2010

A reader question about second mortgages

Olynn, a reader who moved to Baltimore for work, is stuck with a house in Michigan because it's more than halfway underwater. Olynn, who's renting that house out and leasing a place here to live in, has a question:

"How open are lenders to a second mortgage? I have excellent credit and minimal debts."

It's been a while since I've talked to mortgage folks about this issue. I'm guessing it's pretty tough these days, but perhaps someone with day-to-day knowledge on the topic could weigh in?

Posted by Jamie Smith Hopkins at 8:40 PM | | Comments (4)
Categories: Mortgages

September 24, 2010

Homeowner association rules

The idea that a home is your best investment might have taken a beating these past few years, but one factor still driving renters to buy is the image of painting, hanging pictures, keeping pets and generally doing whatever they want to the place without someone else telling them no.

If you're buying into one of the many neighborhoods with a homeowner association, though, keep in mind that what you do to the exterior can become a community affair.

Rules vary from association to association. Some changes require permission. Some are simply banned.

My hometown of Columbia is the subject of frequent teasing about its strict rules, known as covenants. (Back when she was covering the planned community, colleague Laura Vozzella once wrote about the effect those covenants had on a "beautiful yard" award in Kings Contrivance: Organizers realized that all the nominees had run afoul of the rules by not getting permission for their minor improvements. A baby swing hung from a tree, for instance.)

So a Columbia village seemed like a good place to start when I went looking for a primer on what new homeowners should know to avoid ending up with a violation notice.

Debbie E. Nix, covenant advisor at the Village of Harper's Choice, thinks the belief that the covenants are "overly restrictive" is a misunderstanding.

"The covenants allow for a wide range of different types of changes that people want to make to their homes," she said. "They just should be aware that there's a process and they should submit to the architectural committee before they make changes to the outside of their house. ... A change in style, color or material is the general rule."

So: Repainting a beige door light blue? Yup. Putting on an addition? Definitely. Landscaping the yard? Yes.

But the village's philosophy is to find a way to OK requests, not to toss them out, Nix said.

"Over 97 percent of our applications are approved -- either approved as submitted or approved with provisions or as amended," she said. 

You'll get a copy of the rules for your particular homeowners' association when you go to settlement, but you can also find some online. That's true of the Columbia covenants, which vary somewhat from village to village.

Before you make an offer on a home in a neighborhood with an association, you might also want to ask the sellers if they're in violation of any rules. (That does has to be disclosed at settlement, so you should find out eventually, said Wendy Tzuker, village manager for Harper's Choice.)

What if you want to make a change and your homeowners' association says no?

"It pretty much depends on how stringent the governing documents are," said Raymond D. Burke, an attorney with Ober Kaler in Baltimore who focuses on condo association law. "Usually that's a case-by-case basis."

First step: See if there's an appeals process within the association. If you get another "no way" and don't want to give up, you could hire an attorney to argue your case -- either to the association or in court. (Some associations require arbitration rather than court.)

Homeowners' associations are entitled to make judgments about what's allowed and what isn't, but "you do have recourse if their judgment is arbitrary and capricious," Burke said.

"They're required to at least be reasonable," he said. "But it often is not economically sensible to pursue a claim just because of the cost that would be involved in doing so."

Court is a recourse not only for homeowners who want to do something their association isn't allowing, but also for homeowners who want to put a stop to something a neighbor is doing that their association is allowing.

Burke recalls one Baltimore County case in which a homeowner went to court to try to get rid of a neighbor's trees -- and won.

Posted by Jamie Smith Hopkins at 7:00 AM | | Comments (10)
Categories: Neighborhood and neighbors

September 23, 2010

A property-tax reminder for new buyers

A colleague of mine had an unfortunate new-homeowner surprise this summer: She got her first full fiscal year property-tax bill, and the monthly cost is a lot higher than she expected based on the taxes she paid for part of the last fiscal year.

She's hardly the first to be caught off guard, thanks to the state's complex Homestead tax credit.

I did a post recently that explains how you can calculate your property-tax bill in advance to avoid a shock come July 1. But here are more details on how the Homestead credit works, since it seems to be a frequent point of confusion.

The Homestead credit is really a cap: It limits the annual increase in owner-occupants' taxable assessments, thus limiting the increase in your property-tax bill as long as rates don't change. The Homestead ceiling ranges across the state. It's 4 percent in Baltimore and Baltimore County, for instance, which means you can't see more than a 4 percent increase in the portion of your assessment you're taxed on in any one year.

There are four exceptions to the rule, the state assessors say. The cap lifts for a year if the previous assessment was "clearly erroneous," if you successfully request a zoning change that increases the property value, if you make a substantial change to the property (rehab it, for instance) or -- and this is the one that comes into play for new buyers -- if the property transfers to new ownership.

If you buy a home in, say, November, the property taxes you pay for the remainder of that fiscal year are based on the previous owner's liability. That means you "inherit" their Homestead credit temporarily. Then the next fiscal year rolls around July 1, the Homestead cap comes off and your bill is calculated off the total assessed value figure for that year.

Which could mean a much higher bill than the previous guy paid. It all depends on how long he or she owned the place and how much values changed during that time. (Even with falling prices, there are plenty of homeowners paying on less than their property's current assessed value.) For one Wonk reader, the increase was 74 percent.

When will your Homestead credit kick in? The second July 1 you're in the property.

I hope everyone who comes into contact with soon-to-be buyers makes sure they understand how this works. For some folks, a couple hundred dollars extra a month in unexpected property taxes can make the difference between a comfortable budget and a tight one.

UPDATE -- a few more reminders:

1. Don't forget to apply for the Homestead tax credit. You used to get it automatically, but now the state wants to make sure you're not collecting it on more than one property.

2. If you're buying a newly constructed home or a rehab that had been vacant in the city, don't forget to apply for the new-construction tax credit. It cuts your property-tax bill in half the first year.

3. Remember that you can appeal your property-tax assessment after you buy -- and any year, in fact -- if you think it doesn't reflect market value.

September 22, 2010

How much are home sellers dropping their prices?

With the ongoing tug-of-war between home buyers and sellers, lots of people are curious to know how much homeowners have to drop their prices to get a contract.

Here's the answer for those in the Baltimore region who sold in August: almost 9 percent on average. (That's the difference between asking $323,000 and getting less than $295,000.)

So says Metropolitan Regional Information Systems, which runs the multiple-listing service used to buy and sell homes in this part of the country.

Now, I was under the impression that this list price vs. sales price statistic looked at the last asking price, which means it wouldn't capture any and all of the price drops along the way to the final figure. But I asked  MRIS recently -- you know what They say about assuming -- and learned that the company compares the original and final asking price before using the higher of the two.

In this sort of market, that almost always means the original figure.

What if a home is pulled off the market for, say, three months and put back on at a lower price? Then which figure matters when it sells? That I don't know. (Oh, the questions that occur to me after hours.)

Buyers think some homes are closer to the right price than others, which probably explains why 31 percent of properties were on the market for a month or less while 24 percent sat for four months or more.

Posted by Jamie Smith Hopkins at 7:00 AM | | Comments (9)
Categories: For sale, Housing stats

Home-purchase help

Homebuyers: Are you aware that a variety of state and local programs offer closing cost and down payment help?

Personal finance columnist Eileen Ambrose offers details -- who's offering, whether the money is a no-interest loan or a grant, and what you have to do -- in this story.

September 21, 2010

Homeowners more optimistic about their values than agents

Think your home's value rose or at least stayed even in the last year? You have that in common with nearly 40 percent of Marylanders polled by HomeGain.

Less than 25 percent of the Maryland real estate agents the site surveyed, however, said the same of their clients' home values.

Agents surveyed by HomeGain were also more pessimistic about where the market is headed. Forty percent expect prices will fall over the next six months, compared with 28 percent of homeowners. 

Agents have complained pretty much from the start of the housing bust that sellers aren't realistic about their property values, though that doesn't apply to everyone. Some homeowners pick asking prices that get them contracts toot sweet, while others languish on the market for months -- even years -- with no offers.

HomeGain's poll surveyed 2,600 homeowners and 1,100 agents nationwide. That's a pretty typical survey size, though of course the numbers in Maryland were low -- 79 homeowners and 38 agents.

Maryland has a fairly high share of optimistic agents and homeowners: The state ranked 10th for the percentage of agents and homeowners who think prices will increase in the near-term (10 percent and 15 percent, respectively).

It's no easy feat to predict exactly where prices will head. Think of how much debate you'll find over what a home should be priced at now.

Maryland agents polled by HomeGain said half their seller clients think their homes are worth at least 10 percent more than they -- the agents -- believe is the market value. Meanwhile, 40 percent of their buyer clients think homes on the market are at least 10 percent overpriced, even though many agents talk their sellers into asking for less than they wanted.

Not a new gulf, for sure. And it probably won't disappear anytime soon.

Posted by Jamie Smith Hopkins at 7:00 AM | | Comments (6)
Categories: For sale, Housing stats, Survey says ...

September 20, 2010

Report: Low level of 'distressed' home sales in Baltimore area

The Baltimore region's share of short sales and foreclosures might seem high to us local folks, but those "distressed" home sales pale in comparison to most of the nation's largest metro areas.

That's according to real estate information firm CoreLogic, which ranks the Baltimore metro area third lowest among the top 25 regions. The company says 18 percent of sales here in June were short sales or bank-owned properties, compared with about 60 percent in Las Vegas and Riverside, Calif. (ranked first and second, respectively).

Nassau, N.Y. is the lowest among the major markets, with just 5 percent of its home sales in June qualifying as "distressed."

June was a tricky month, with buyers settling to beat what was then the homebuyer tax credit deadline. CoreLogic says the government incentive gave a boost to non-distress sales, so it expects the share of short sales and bank-owned transactions will rise in the tax-credit-less future.

"With the high level of negative equity, pending price declines and weak labor and income, non-distressed sales will remain weak well into 2011," the company says in its report.

In a separate CoreLogic analysis, I noticed a double-take-inducing trend in July: Prices in a variety of states fell faster excluding distressed sales than including them. Which is the exact opposite of what you'd expect.

Prices held up better with distressed sales included in nearly a third of the country.

In Arizona, a prime bubble-to-bust state, prices for all single-family sales dropped 3.1 percent in July but fell 5.6 percent counting only the non-distress deals, CoreLogic says.

And Michigan, whew -- down 1.1 percent for all and 6.7 percent for non-distress. 

It wasn't just the poster children for the housing bust and/or recession. Consider Maine, up 4.5 percent for all sale prices but flat after excluding distress transactions.

Maryland was more typical, down 3.3 percent with all sales added in but flat once the distress sales were factored out.

What's up with the double-take states? The regular homeowner crowd there is dropping prices more rapidly than the banks, I suppose. (Presumably not to the point that their properties are cheaper than short sales and foreclosures.)

Or can you think of other reasons?

Posted by Jamie Smith Hopkins at 7:00 AM | | Comments (3)
Categories: The foreclosure mess

September 18, 2010

Underwater borrowers, and what to do about it

If you're underwater, you probably can't refinance without bringing cash -- potentially a lot of it -- to the table. And you might be paying a lot more for your mortgage than it would cost to rent something similar, one of the reasons some Americans are walking away and letting their bank foreclose.

Some of you folks took two polls here this week on topics related to that trend: Would it be a good idea for the government to help underwater borrowers refinance into lower rates? And is it acceptable or not for people to walk away from their mortgages?

The government-help proposal comes from financial publisher HSH Associates. If a home is worth $150,000 but the mortgage balance is $180,000, for instance, refinancing into a $150,000 mortgage would create a $30,000 "value gap." HSH suggests that Uncle Sam promise to cover any loss the lender would see if the homeowners end up selling before rising values or payments have made up that gap.

Two-thirds of readers who took the poll gave the idea a thumbs up. Most said it would help them refinance. The rest of the supporters said they wouldn't need it personally but think it would help others and/or the housing market.

Of those who said no thanks, most are against it because they're tired of government bailouts. "No" wasn't strong enough for one voter:

"Sickens me that this is even imagined," the reader said in a write-in vote.

Also this week, I noted that the Pew Research Center polled Americans about whether it's acceptable to walk away from a mortgage. So I put the same question to you.

As a group, you're a lot more sympathetic to walking than the U.S. as a whole.

The "yes" and "no" votes were equally split at 30 percent each. The most popular answer? "It depends on the situation," with 38 percent.

That's two-thirds saying it's OK at least in some cases, compared with just over one third of Americans who said the same in the Pew poll.

A few folks who took the Wonk survey wrote in their own answers:

"Not only is it acceptable, in many cases it is recommended."

"Yes, and we plan to do it."

"NEVER -- YOU bought it YOU PAY for it."

Definitely a heated subject.
Posted by Jamie Smith Hopkins at 7:00 AM | | Comments (9)
Categories: Walking away / strategic default

September 17, 2010

Repaying homebuyer tax credits

If you're among the more than 950,000 Americans who claimed the 2008 homebuyer tax credit, you're on the hook to begin paying it back next year. It's really a no-interest loan. Only in 2009 did it morph into the $8,000 incentive buyers can keep.

But the Treasury Inspector General for Tax Administration is warning that some who claimed the credit for 2009 purchases could wrongly get repayment notices because the IRS has the date incorrectly listed as 2008 in its records. Other '09 purchases were recorded by the IRS with no date.

The treasury inspector found about 60,000 such examples when it audited the IRS. (Insert your audit jokes here.)

Meanwhile, about 9,100 tax-credit claims worth more than $30 million involve buyers who purchased in 2008 but were "incorrectly recorded as 2009 or the year was not recorded," the audit report says.

The IRS agreed that these were problems and promised to verify purchase information with property records, the audit report said.

Oh, and remember some of the tax-credit shenanigans the inspectors found in earlier checks, such as people claiming the credit on homes they clearly didn't purchase because they were in preschool or prison? Add to that list the recently or not-so-recently deceased.

The inspectors found more than 1,300 instances of 2008-version credits claimed in the names of taxpayers who had died days, months or even more than a year before the home was supposedly purchased. Grand total: $10 million. These were not joint returns, in case you're wondering.

"Although the purchase may have been in progress at time of the death, the taxpayer would not have occupied the property as a primary residence and, therefore, would not have qualified for the Credit," the inspectors wrote.  

The IRS caught 528 of those from-the-beyond claims -- $4 million worth -- but had allowed the rest. It promised audits.

A reminder for you 2008 credit folks: You'll have to repay the money in 15 equal annual installments -- $500 a year, if you took the full $7,500. The first payment is due with your taxes on April 15.

September 16, 2010

Walking away from mortgage OK, some say

People who decide to stop paying on an underwater mortgage and let the lender foreclose are the target of a lot of heated debate, but they might have more support out there than they think.

Just over a third of Americans polled by the Pew Research Center say "walking away" from a mortgage is an acceptable practice, at least in certain situations. Nineteen percent say it's OK, period, and 17 percent more say it depends on the circumstances, Pew said Wednesday.

The group surveyed 2,967 adults, both homeowners and renters.

A survey released in April by financier Fannie Mae, meanwhile, said all but 12 percent of respondents called it unacceptable to walk away from an underwater mortgage. (Fannie Mae, naturally, is in the anti-walk camp.)

Both economic research and the Pew survey find that just over 20 percent of borrowers -- about one in five -- are underwater, meaning they owe more than their homes are worth.

"Not surprisingly, how people fared financially during the Great Recession is linked to their views on walking away from a mortgage," Pew editor Rich Morin wrote in a piece about the poll.

Those who say the value of their home fell during the recession were more likely to consider walking "acceptable" than those who think their values haven't dropped -- 20 percent vs. 14 percent.

"Nearly one-in-four adults (24%) who say their families are just able to pay their monthly bills or can't meet expenses say it's okay to stop paying a mortgage, compared with 14% of those who say they 'live comfortably,'" Morin added in his piece. "But homeowners who say their homes are worth less than what they owe are not more tolerant of the practice than those who would break even or make money on a sale (18% vs.17%)."

Renters can comfortably tsk-tsk without fear that they'll be faced with a walk-or-not decision of their own in the near future. But as it happens, 25 percent of tenants told Pew that it's acceptable to walk on a mortgage -- more than the share of underwater borrowers.

What's your take? Here, have a poll:

Posted by Jamie Smith Hopkins at 7:00 AM | | Comments (11)
Categories: The foreclosure mess, Underwater

September 15, 2010

Price cuts on Baltimore homes for sale: $44 million

Here's a just-reduced sign for Baltimore's housing market: "$44 million off!"

That the collective cut real estate site Trulia calculated on city homes for sale as of Sept. 1. Any home with an asking-price reduction over the past year -- except foreclosures -- added to the grand total.

Baltimore was ninth among large cities for its share of homes with asking-price cuts, at 34 percent. That's par for the course for the city, which has been in the top 10 for a while now.

The average asking-price reduction among Baltimore would-be sellers was 12 percent. Market statistics show that the average homeowner who sells is getting less than he or she was asking for, too. So there are a lot of people out there settling for a significantly lower price than they originally thought they could get.

Some buyers say they will always offer less than sellers are asking. (Wonk reader elweedz, for instance, commented yesterday: "I think 80% of asking would be the MOST I would pay.") I wonder how many homeowners put their properties on the market with this sort of buyer philosophy in mind, thinking, "Well, I'll have to take a cut regardless, so I'll start at 110 percent."

It's a game of chicken that can leave a lot of sellers frustrated ("why isn't anyone looking at my home?") and a lot of buyers annoyed ("why are all the homes so darn overpriced?").

Unless you're the sort of buyer who gets a kick out of negotiating, of course.

Buyers, what should sellers do to make the experience better?

And sellers, what should buyers do?
Posted by Jamie Smith Hopkins at 7:00 AM | | Comments (8)
Categories: For sale, Housing stats

September 14, 2010

As fewer buy homes, more are trying to sell

Falling home sales aren't good news for would-be sellers. When the number of would-be sellers is rising at the same time, that's even worse.

This is the story in the Baltimore area, points out Kenneth Wenhold, Mid-Atlantic regional director for Metrostudy, a homebuilding market researcher. As sales fell 16 percent in August, homes listed for sale rose about 8 percent.

In raw numbers: About 330 fewer homes changed hands compared with a year earlier in the metro area, but 1,550 more homes were for sale. (Grand total on the market in August: 20,200.)

"Baltimore ... is sliding backwards," Wenhold wrote in an analysis of the resale market. "Listings grew throughout the summer, a time when they typically decline. ... All of the positive gains and trends which were established in 2009 are now gone, replaced with negative trend lines which continue to deepen." 

It would take 10.5 months to find buyers for all the homes on the market if sales continue at the average pace of the past year. That average includes a lot of homebuyer-tax-credit months, and most of those credit-fueled deals have already closed.

The D.C. area is -- probably not surprisingly -- better off. 

Northern Virginia has 5.6 months of supply, around the number that economists say represents a "balanced" market where neither buyers nor sellers have the upper hand. Home sales didn't fall as far in August as they did in the Baltimore metro area, and new listings didn't rise as fast.

D.C. and the Maryland counties around D.C. have a 7.4-month supply, so the balance of power isn't tipped as far toward buyers there as it is here. (It ranges a lot -- D.C. has less supply than Northern Virginia, for instance.) Sales fell about 9 percent -- less than the Baltimore area -- and the number of homes for sale didn't budge.

In the D.C. area, "contracts have already showed improvements and have begun to stabilize," Wenhold wrote in his analysis.

The Baltimore metro area's housing market has been worse for sellers at earlier points. The last time we saw listings increase at least 8 percent -- as they did in August -- was back in 2008, when sales were falling much faster than they are now. And we had a higher months' supply figure in part of 2009, before the homebuyer tax credit induced folks to snap up some of those homes for sale.

But the market's been heading the wrong direction for those in favor of buyer-seller balance.

"Ultimately we need the number of new listings to go down, as it has every fall with the exceptions of 2005 and 2006, not up," Wenhold wrote. "As long as listings increase, resale inventories in the Baltimore region will never recede to allow the market to recover."

Posted by Jamie Smith Hopkins at 7:00 AM | | Comments (14)
Categories: For sale, Housing stats

September 13, 2010

An underwater mortgage proposal

HSH Associates, a financial publisher, created waves last week when it proposed a new loan-help program -- not for homeowners facing foreclosure, but for people who are paying on time and can't refinance into a lower interest rate because they're underwater.

"If a borrower did not cause a decline in his or her home's value, has been meeting his or her obligations without fail and is now, outrageously, being asked to pick up part of the tab for failed homeowners, he or she ought to get some subsidized benefit for doing the right thing," the firm wrote. "If it works, there would be a declining cost to the taxpayer over time, with the actual cost of 'assistance' possibly falling to zero."

The details:

Offering as an example a homeowner who owes $180,000 on a home now worth $150,000, HSH suggests a deal between the lender and the government. If the borrower sells before either rising home prices or mortgage payments have made up all of the $30,000 gap between the amount owed before the refinancing and the amount owed afterward, the government would pay the lender the difference. HSH calls this the "value gap refinance" plan:

To produce incentives to participate, and to help ensure fair return, the same market rate for the refinance mortgage should be applied to the value gap contract, so the investor would receive just as much as any fully refinanced loan amount would bring ($180,000 per our example). This interest cost could be borne by the borrower, just as the mortgage interest cost would be.

As time goes on, and home prices eventually recover, the amount of the value gap contract would diminish. ...

In exchange for the ability to refinance to a new mortgage with a lower face amount and a present-market interest rate, the borrower gives up rights to future appreciation -- but not forever. Any price appreciation would be committed to the value gap until such time as the value of the home once again exceeds the value of the original mortgage (per the example above, $180,000). The borrower would not be responsible for any shortfall, but only for interest payments on the amount of the shortfall.

More details, along with a tweaked version of the idea, are here. (The tweaked version, called the "shared obligation" plan, would have borrowers pay a "fee" in the form of an interest rate a half-percentage point above market rate to reduce the gap more quickly.)

Why have a program of this sort? HSH's argument: "A value-gap coverage program provides borrowers with a more compelling reason to remain in their homes -- a disincentive to walking away. It also alleviates the stressful short-sale process, leaving borrowers free to sell their homes at a value their markets will support. It can also allow for greater mobility ... the kind of mobility that may allow a homeowner to pick up stakes and pursue a better job in another locale. The change in a homeowner's cash flow can also provide meaningful budgetary relief, which in turn could support some additional consumer spending beyond simple necessities, providing a lift to the economy."

Fortune's senior editor-at-large, Allan Sloan, gave it a thumbs up. (The headline of his piece: "A reward for responsible homeowners.")

HSH posted a variety of comments from readers here, most of the "please yes" variety.

Underwater homeowners aren't the only unbailed-out folks out there, of course, and some of the others have had it.

"And what about folks like me who bought a home, lived within a tight budget, purchased what I could afford instead of pie in the sky dream homes, and then paid off the home in 7 years time. Where's my damn reward?" one Fortune reader wrote in the comments. "You know what my reward is so far??? Property taxes going UP. ... All I get is more hands in my pocket taking more money, to cover everyone else who made bad decisions in their life. I feel like Atlas supporting everyone."

What do you think of the HSH proposal, folks? Here, have a poll:

Posted by Jamie Smith Hopkins at 7:00 AM | | Comments (10)
Categories: Underwater

September 11, 2010

August home sales: more tidbits

If you put great stock in average home prices, you probably think August was a good month for Baltimore County sellers and a dreadful one for those in Baltimore City.

The average price jumped almost 6 percent in the county compared with a year earlier and plummeted 25 percent -- from $180,000 to $135,000 -- in the city, according to sales figures from Metropolitan Regional Information Systems.

Of course, you probably don't put great stock in average prices if you're a regular here. We've chatted before about the apples-to-oranges problem that average (and median) presents when you're comparing the homes that sold this year to the potentially very different ones that sold last year.

Average prices have been pulled down in the city by high levels of investors buying lower-priced foreclosures, thus the big drop. (The median price fell even farther in August -- 44 percent.)

Suburban communities not seeing that trend have a different sort of skew factor at work: A lot of first-time buyers were purchasing starter homes a year ago, but odds are pretty good that their numbers slumped after June, which had been the deadline to close on a deal and qualify for the first-time homebuyer tax credit. (It's been extended to Sept. 30, but everyone who could close by June did.)

Just something to think about.

On another price note: Cindy Ariosa, who manages the Baltimore and southern Pennsylvania region for Long & Foster, says one of her agents represented a buyer who closed on a $6-million-dollar home in Baltimore County last week. Far afield from a starter place.

You can read the August home sale story here.

Posted by Jamie Smith Hopkins at 12:01 AM | | Comments (0)
Categories: Housing stats

September 10, 2010

August home sales in the Baltimore metro area

Home sales dropped 16 percent in the Baltimore metro area last month, compared with a year earlier. That's the second month in a row that buying activity slumped.

It won't be the last, because the number of contracts signed in August -- most of which will show up as sales in a month or two -- was down about the same amount. We've had four straight months of falling contract numbers.

Here's the breaking-news story about August home sales. I'll have a fuller version later.

Posted by Jamie Smith Hopkins at 9:48 AM | | Comments (3)
Categories: Housing stats

Declines in pending home sales -- and some increases

While we're waiting for August home sale numbers, have one more bite from the July apple.

The number of contracts signed that month, deals that will turn into settlements if all goes well, slumped precipitously in most of Maryland. A dozen counties and Baltimore City saw double-digit declines, including a 38 percent drop in Dorchester (from 34 contracts a year ago to 21 in July) and a 26 percent decrease in Carroll (from 161 a year ago to 119).

Cue the "we told you so" from economists, who predicted that buyers would rush to sign contracts in time to qualify for the federal homebuyer tax credit, leaving sales to drop off afterward.

But buyers in four counties actually picked up the pace in July compared with a year earlier. Here's where:

1. Wicomico County: 70 contracts signed in July, up 27 percent from a year earlier. (Yes -- 27 percent. Not a typo.)

2. Worcester County: 163 contracts signed in July, up 23 percent from a year earlier. (Also not a typo.)

3. Garrett County: 33 contracts signed in July, up 6 percent from a year earlier. 

4. Cecil County: 82 contracts signed in July, up 1 percent from a year earlier. 

(The numbers, from Metropolitan Regional Information Systems and the Coastal Association of Realtors, were compiled by the Maryland Association of Realtors and number-crunched by your friendly neighborhood wonk.)

So why are these four seeing more buying activity? Your guess is as good as mine. But here's a bit about them:

Cecil is east of Harford, and agents say it's seeing some of the BRAC effect. Garrett, in Western Maryland, is home to Deep Creek Lake. Maryland's other main vacation spot, Ocean City, is in Worcester. And Wicomico is Worcester's next-door neighbor.

September 9, 2010

Zillow: 13% of Baltimore-area homes selling at a loss

Thirteen percent of homeowners who sold in the Baltimore metro area in July let the property go for less money than they paid for it, real estate information site says.

The trend peaked in early 2009 with 15 percent of homeowners selling at a loss. But three years ago, the sales-at-a-loss share was less than half as large as it is now.

In the "could be worse" category: 26 percent -- just over a quarter -- of U.S. homeowners sold at a loss in July, according to Zillow.

These figures don't include foreclosures or resales of foreclosed properties, Zillow says. That would obviously increase the loss number quite a bit. (The analysis also doesn't take into account the transaction costs of selling -- just the price the homeowners accepted from the buyer vs. what they paid to the previous seller.)

Zillow doesn't mention short sales one way or another, but I'm guessing that's a big piece of the story. These homes sell for less than the amount due on the mortgage, with bank approval. It's the lender rather than the borrower shouldering the loss, unless the lender decides to seek a deficiency judgment for the difference. (Either way, the borrower leaves with damaged credit, so there is a financial hit involved.)

By Zillow's calculation, some communities are seeing a lot more sales at a loss than others.

In Baltimore, for instance, 19 percent of home sales in July were losses. At the other extreme is Arnold in Anne Arundel County, where 3 percent of homes sold at a loss, Zillow says.

Ellicott City and Columbia might collectively be No. 2 on Money Magazine's "best places to live" list, but about 14 percent of July home sellers in both communities sold for less than their purchase prices.

Zillow's new report has a variety of other statistics, from its "Zestimate"-fueled home value index to list price per square foot. But what caught my eye was its calculation of the share of homes sold.

Four years ago, the Baltimore metro area had just finished a 12-month period during which 7.7 percent of all homes in the region had changed hands. That was higher even than the nation.

Fast-forward to August 2008. The 12-month tally had sunk to under 2 percent in the metro area, below the national average.

Now? About 3.7 percent of all homes in the Baltimore metro area changed hands in the past 12 months, Zillow says -- same as the U.S. overall.

Posted by Jamie Smith Hopkins at 7:00 AM | | Comments (16)
Categories: For sale, Housing market experiences, Housing stats

September 8, 2010

Homebuyer tax credits claimed so far: $23.5 billion

About 3.3 million Americans have claimed federal homebuyer tax credits so far -- $23.5 billion in all, including the 2008 incentive that must be paid back.

In Maryland, about 57,000 buyers have claimed $410 million in credits. That accounts for practically half the 120,000 homes sold through the multiple-listing service in Maryland from April 2008 -- when the program kicked off -- through July. (This assumes, of course, that each claim accounts for one home. There are legal and illegal reasons why it might not be one-to-one.)

The credit statistics, released by the U.S. Government Accountability Office, are a tally of claims made through the beginning of July. So it's not the grand total yet, but it offers an intriguing snapshot of the credit's popularity and cost.

For instance: There might be a whole lot more homeowners than prospective first-time buyers, but many more first-timers got the $8,000 incentive than repeat buyers opting for the $6,500 credit. About 200,000 Americans claimed the smaller credit since it was made available in November, compared with about 400,000 who got the first-time buyer credit during the same period.

It was even more stark a difference in Maryland, the GAO says.

More than 8,300 Marylanders have claimed the first-time buyer credit under the new rules instituted in November. Repeat buyers? About 2,700. (Not all repeat buyers qualify. You had to be moving from a home you owned for at least five years of the past eight.) 

That's about $80 million in claimed credits between the two groups.

By comparison, about 18,600 Marylanders claimed $127 million in credits for purchases made between April and December 2008, when the program was a no-interest loan of up to $7,500. Unless a lot of claims are waiting to be processed by the IRS or a bunch of homeowners plan to make their claims with their tax returns next year, that means the "loan" credit -- widely considered a non-starter -- was used by more buyers than the credit in its final iteration.

The January through November 2009 version -- up to $8,000 that didn't have to be paid back, available to first-timers but not repeat buyers -- was claimed by 27,000 Marylanders for a total of $203 million.

Was it worth the cost in foregone revenue? Do you think there ought to be a fourth sequel?

The way that HUD Secretary Shaun Donovan answered a CNN journalist's question a week and a half ago made some buyers think another credit could be in the offing, primarily because he didn't say "absolutely not." I checked in with HUD yesterday, looking for more clarity. A spokesman said there was no news to report about the credit.

The Treasury Department, meanwhile, pointed me to White House Press Secretary Robert Gibbs' answer last week to a similar question. "While I have not seen, obviously, a final list, ... I think bringing that back is not on -- is not as high on the list as many other things are," he said.

Not that this exactly clears this up, I know. 

UPDATE -- HUD had this to add today about the chatter over a homebuyer tax credit part four:

"As White House Press Secretary Robert Gibbs said, that's not at the top of anyone's list right now," said HUD spokesman Lemar C. Wooley. "We will continue to be watching the housing market very closely. Our focus will be to ensure that we are implementing our existing programs successfully, but we'll continue to share new ideas on additional steps we can take to help the housing market improve."

September 7, 2010

Where to move? Two-city couple tries to decide

Beth Green and fiancé Pete Jenior have a housing dilemma -- one that many folks in this region have faced.

She works in Washington. He works in Baltimore. Where should they live?

D.C. is off their list -- not only for price reasons, but because Jenior works longer hours than Green.

"He can't have a really long commute because he'd never be around," said Green, 29, an attorney. "So the two options are, I have a long commute or we live in the middle."

They'd really like to hear from people who have been there, done that. What upsides and downsides do you see for a D.C./Baltimore couple living in Baltimore or its southern suburbs?

For Green and Jenior, 27, it's not just about commute. They like city life -- he lives in Federal Hill and she's in Ridgely's Delight. But they're thinking of starting a family during the five years or so they plan to live in the home they buy, and they wonder if they'd be better off in the suburbs.

It's another oft-tread subject in the "where should we live" discussions that people around the region have every day, so I figured some of you would have thoughts to share.

Green and Jenior, who hope to settle next summer, are looking for a home that's $300,000 or less.

One way they considered the two options -- Baltimore or 'burbs -- was cost. For instance, Jenior walks to work, so a move out of the city would add $150 a month in parking to their bills. But the city's property tax rate is so much higher than, for instance, Anne Arundel's, that it's "kind of a wash," she says.

They're looking seriously at Locust Point in the city, which strikes them as a good neighborhood for a young couple on the verge of having kids. They're also looking at Savage in Howard County, which has a MARC train stop.

"It's just like a nice little community, and Savage Mill is so cute and historic," she said. Also: "It's got the Howard County schools."

The other consideration: Green's commute. Right now, she drives from Baltimore to Greenbelt and takes the Metro in. That's an hour and 15 minutes to D.C. and an half and a half back home. "It's grueling," she said. 

"There's a part of us, because we're both in our 20s, that wants to stay in the city," she said. But, she added, "My long commute is kind of impeding my quality of life. So it's like, do you want to be young in the city and have me tired all the time, or [in] the suburbs, and kind of out of the younger crowd and move already into the young-family mode? So we're sort of conflicted. It's a tough call."

Advice? Suggestions?

The Baltimore vs. 'burbs debate can get ugly, so just for the record, this isn't meant to be a debate about what's "best." Merely what worked (or didn't work) for you, and why. Most decisions about where to live involve trade-offs.

Posted by Jamie Smith Hopkins at 7:00 AM | | Comments (29)
Categories: From home to work, Moving

September 5, 2010

Walking away from home and mortgage

Many homeowners behind on their mortgages stopped paying because they simply didn't have the money. A growing number, though -- one in eight, by some counts -- defaulted on purpose.

They're generally far underwater on their mortgages and want their lenders to foreclose because they want out. When stories started popping up several years ago, they were all anecdotal because no one was attempting to count. Now researchers are finding that these walkaway borrowers are pretty numerous -- and debate is raging about whether it's a reasonable reaction to a difficult situation or a selfish move that damages neighborhoods.

I thought you all would like to get to know a walker. What triggers such a decision? What is life like afterward?

Wallace Farmer, who left his home in Baltimore this summer, agreed to share his experience. He's part of the community of commenters here, so some of you already know a bit of his story.

Boiling a complicated situation down, he came to the city five years ago with plans of living as an urban pioneer and owning one rental on the side as a long-term investment. He left with savings shot, credit ruined and not one or even two but rather three mortgages defaulted.

How he ended up with two investment properties when he only intended to have one, and why he cut ties with a home he loved, is a boom-and-bust tale. You'll find the story here.

Posted by Jamie Smith Hopkins at 8:24 AM | | Comments (19)
Categories: Mortgages, The foreclosure mess, Underwater

September 3, 2010

A small property tax increase in Md.

In a year when property-tax collections rose in all but a few states, Maryland had the smallest of the increases, according to a new study.

The Tax Foundation analysis, which compares fiscal 2008 with 2007, says property tax paid per capita in Maryland inched up about half a percent -- less than $10. Per-capita tax collection dropped in Michigan, South Carolina, Texas and Vermont, but increased everywhere else -- with double-digit jumps in D.C., Florida, Indiana and New Mexico. 

You'd hardly know the country was well into a severe housing slump at the time, judging by tax collection, the group says.

"Home values dropped by almost 16 percent from 2007 to 2008, yet property owners in most states paid more in 2008 than they had the year before," Kail Padgitt, one of the report's authors, said in a statement. "There are two explanations for this: First, administratively, it's relatively easy for localities to raise property tax rates to compensate for declining property values. Secondly, lagged or incorrect property assessments meant revenues continued to increase despite a drop in market value."

I'm scratching my head over Maryland's tiny reported increase, because the state's once-every-three-years assessment cycle kept assessed values from falling as quickly as the market did. And though the Homestead tax credit did cap increases for homeowners in 2008 as in all years, it still allows annual increases of at least 4 percent in most of the state.

Of course, the Tax Foundation's ranking is calculated per capita. The state gained 15,000 people between the beginning of the 2007 fiscal year and fiscal 2008. 

The foundation, which relied on Census Bureau data, shows Maryland's per-capita tax collection at $1,171, which is 29th overall. First: D.C., at $2,938.

D.C.'s rate of 85 cents per $100 in assessed value is lower than many parts of Maryland, but its home prices are higher.
Posted by Jamie Smith Hopkins at 7:00 AM | | Comments (8)
Categories: Property taxes

September 2, 2010

City resident gets bizarre bill for property registration

Alex Koblansky was surprised when he opened his mail last weekend and discovered that the city of Baltimore wanted him to pay $25 to register a property he didn't own. With an address that doesn't exist.

The city requires registration of non-owner-occupied homes, but Koblansky occupies the only one he owns, a Federal Hill home he purchased in May. So he could be pretty certain the bill was a mistake -- especially since the address apparently in need of registration was "1800 L Dham St."

He walked to the city's housing agency on Monday to try to get the problem resolved, but 10 or 15 people were ahead of him and he couldn't wait that long. He noticed others with the same registration form and wondered if they had bills for phantom properties, too.

"I am assuming people are going to tend to just pay this bill versus go through the hassle of getting the right answer," he said.

Cheron Porter, a spokeswoman for Baltimore Housing, the city's housing agency, checked out Koblansky's bill. "It was a mistake -- clearly," she said. "We apologize for any confusion and we'll be sending that gentleman a letter, a correction.”

She said she's not aware of others with the same problem. But anyone with a problematic registration bill can email, she said.

“When you're doing something that's automated and goes to 50,000 people, inevitably there will be some mistakes," she said.

It wasn't Koblansky's first wrong bill from the city. He was one of the thousands of recent home buyers who received notices this summer from the tax collectors telling them -- in error -- that they were overdue on property taxes for the last fiscal year.

"That was a fun day," he said.

Posted by Jamie Smith Hopkins at 7:00 AM | | Comments (15)
Categories: Costs of ownership

September 1, 2010

The federal spending effect on Md.

Why is Maryland's jobs picture better than most other states? A certain city to the south of us is a big part of the reason.

A new Census Bureau report offers a reminder of just how key federal spending is here. Federal funds earmarked for contracting work in Maryland last fiscal year topped $34 billion -- a 35 percent increase from a year earlier.

If we're a company town at all, that company is Uncle Sam Inc.

Jobs are a variable in the housing-market equation, so it makes sense to pay attention to the federal effect if you're trying to figure out what will happen to home sales.

On the one hand, there's BRAC -- the base realignment and closure effort -- bringing jobs to the area. And not just the jobs relocating from out of state. "Four military bases in Maryland are all getting hundreds of millions of dollars in construction spending," said Richard P. Clinch, director of economic research at the University of Baltimore's Jacob France Institute.

On the other hand, there's the sky-high budget deficit putting a cap on future growth. The Department of Defense, a major source of contracting dollars in Maryland, is promising to tighten its belt.

Clinch has long warned that the federal government can't continue spending at the pace it has, and that Maryland will feel the effects when that change comes. We might be getting to that point.

Do you think BRAC will outweigh any slowdowns or cuts to federal spending in Maryland?

Posted by Jamie Smith Hopkins at 7:00 AM | | Comments (7)
Categories: The economy
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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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