Charm City Baltimore Real Estate: Baltimore, Maryland Real Estate & Homes

The holiday spirit has ebbed away, and the outdoor lights are down (well, except at my neighbor’s house). Its time to take a look forward at the year to come. For the record, I do believe that the housing market will begin to recover this year — but there are even greater issues in play that will affect the home buyer and home seller for years to come. One of those is a brewing controversy over data mining and the internet.

The world wide web revolutionized real estate over the last decade. Lots of people, even those not interested in purchasing a home, love to surf home listing sites to see what their neighbor is asking for their home, or find evidence for appealing their tax assessment, or just to spend a spring afternoon visiting a few open houses. We take it for granted now that many websites will have home listings, virtual tours, value estimates, etc. That may not last much longer.

Here’s why: when the real estate business started, each broker controlled their own listings. If you were searching for a home, you would have to either rely on the yard signs you saw, or visit all your neighborhood real estate offices and ask to see their listing book. This meant you would sit down with a real estate salesperson and literally page through a book to become educated on what properties were available for purchase.

The Multiple Listing Services (MLS) in communities around the nation developed as a way to make it easier for home buyers and home sellers to get together. Each real estate broker who joined the MLS agreed to cooperate with other brokers in the region to show and sell each others’ listings. In exchange, they also agreed to split their commissions on cooperative sales. While this agreement made it easier to become educated on what was available, the public still did not have easy access to MLS listings. You would still have to go to one broker’s office and sit down with a Realtor, but that salesperson could show you 99% of what was for sale in the area. So, you saved time and trouble.

This is essentially what buyers had to do at the dawn of the internet age, although the listing book had been computerized. You and the Realtor would sit down at the computer or go over listing printouts from the MLS. This control over listing data reflected the fact that it is the essential business resource for our industry. Our listing information is the only “product” we make. We then provide the “service” of assisting home buyers and home sellers to negotiate and create a transaction that transfers property from one owner to another.

With the growth of the Web, MLS organizations and individual brokers took this business asset — the listing information — and put it online to make it easier still for buyers and sellers to become educated on what property was for sale. Through agreements with the MLS, other websites bought the right to display this information, too, and so you had the birth of Trulia, Zillow, and dozens of other sites that simply re-posted listing information. They were not brokers and did not create any new listings, so they added other services and trinkets to lure you to their site over their competition’s website. Like many other internet-based businesses, these websites were constantly looking for that special method to earn money: to draw traffic that advertisers would pay for, or to become so influential that the real estate industry itself would have to pay attention.

Here’s where the problems begin. More and more of these websites have found interesting ways to manipulate the listing data, and some have begun displaying this information in ways that makes it unclear who the original listing broker is. Others have begun enrolling potential buyers and selling those names back to Realtors, or gotten broker’s licenses and started asking for a percentage of the commissions from successful transactions where they referred the buyer. Brokers began to wake up to the fact that they have, to a great degree, lost control of their most basic business resource.

There is a growing movement among some brokers to reclaim this control, by once again restricting access to their listing data. If this trend continues and gains momentum, many of these third-party websites will disappear, and others may not be able to display all the properties available for sale in a particular region. Instead of visiting several broker offices, as buyers in the past needed to do, in the future they might have to visit a couple of different websites to be able to find all of the homes for sale. The problem of inaccurate listing data will grow, which can be very frustrating to potential buyers.

As always, a professional Realtor is your best guide as this marketplace changes and evolves.

Walk around any weekend festival in Baltimore this summer and you will overhear conversations that sound as if they first took place on the National Mall. Is Baltimore being invaded by outsiders? Not exactly… but over the last decade many Washingtonians decided that Baltimore was a better place to set down roots and call home. These ex-Washingtonians considered Baltimore an attractive alternative because it was affordable, had a great quality of life, and reasonable commute times. Today, even after years of housing distress in both cities, those factors still hold true. As Washington home prices have begun creeping higher again, Baltimore still offers home ownership to many people who are priced out of the District.

I asked two past clients to share with me how they feel about their decision to buy in Baltimore. Each couple has lived in Baltimore for over five years, and has one partner who makes the commute to DC.

Nick and Tim bought a renovated rowhouse in Fells Point, one of Baltimore’s Inner Harbor neighborhoods. “When we moved here six years ago, our intention was to be within walking distance of coffee shops, restaurants and entertainment. We were attracted to the city’s vitality,” writes Nick.

Ten years ago, Martin and his partner bought and renovated an 1840s townhouse in the mid-town neighborhood of Mount Vernon. He agrees with Nick about the quality of life: “A lot of my favorite things to do are within a 10-minute walk from home: The Walters Art Museum, the Sunday farmer’s market, and restaurants serving Indian, Nepali, French, Thai, Italian, Mexican, and American food.” Martin is also an avid cyclist. “It is very easy to get to northern Baltimore County where the roads and scenery are fantastic for bicycling!”

Was downtown DC an option? “We simply could never have afforded a place like this in DC,” Nick responds. “The cost of homes in Baltimore is probably one-third that of DC.” Martin concurs. “We certainly wouldn’t be able to maintain the same standard of living in DC. Who knows where we’d end up if we had to relocate; probably not in DC at all.”

What about the commute? Martin commutes daily to Washington. “My house is a 10-minute walk from Penn Station, so the Baltimore side of the commute is pretty easy. From Union Station I take the Metro and then walk another 10 minutes to my office.” But, this cyclist has taken advantage of another option, “This April I have started riding my bike to work: Mondays and Thursdays I ride from Baltimore to DC and take the MARC back, and on Tuesdays and Fridays I take MARC down and bike back to Baltimore at the end of the day. Wednesday is a rest day. Believe it or not, the bike route is pretty nice. Although it takes longer, I get my workout in so that I don’t have to go to the gym over lunch or on the weekends.”

“Tim works for the DC Fire Department, but he has an unusual schedule. He doesn’t have a Monday through Friday commute,” writes Nick, who drives about twenty minutes to his job in Anne Arundel County. “The beauty of city living is that once you get home, you seldom drive.”

When DC-based friends visit, what do they think of Baltimore? “When our friends visit and we show them ‘our Baltimore,’ they’re pleasantly surprised,” Nick says. “They admit they had the wrong impression and usually go away liking the city. In fact, sometimes they’ll call us and ask, ‘What was the name of that restaurant?’ or ‘Where was that museum?’ so they can bring their friends to enjoy Baltimore as well.”

“People who visit us from DC,” Martin begins, “are usually surprised by how unlike DC Baltimore is. Baltimore is the older city; it’s less transient; it has a commercial and industrial vibe which DC never did have. A lot of visitors say Baltimore feels more ‘real’ than DC.”

So, if you are a DC resident visiting Baltimore on a sunny Saturday, be prepared for pleasant surprises. We’ll welcome you with open arms! Enjoy our hospitality and get to know our city. You might want to start calling it ‘home,’ hon.

Recent poll results on the attitude of younger Americans toward real estate and home ownership have raised questions as to exactly what the role of real estate is and will be in the future. Is owning your own home an investment and source of wealth, or is it a ‘ball and chain’ that locks you to a locale and saps money that — if invested in stocks — would appreciate faster than real estate?

This question seems to outline the two most common opinions emerging in the generation of potential homeowners now between the ages of 21 and 35, where most of our first-time homebuyers tend to be. Here are the primary arguments laid out on both sides of that question.

Ball and Chain
If you’ve been watching the housing market in the last few years, you certainly can see where someone would come up with this notion. Many people feel locked into their current home, current city, even current state because they can’t sell their home to move to a new job or a better performing region of the country. Some homeowners are paying mortgages that were based on a sale price substantially higher than the house is currently worth. There are even economists who are predicting that with the economy evolving into a digital one, it will be more important than ever for the workforce to remain fluid, easily relocatable, and that buying property that can’t be loaded onto a truck and moved (like a house) doesn’t make sense in the future.

There is no doubt that the effects of the Great Recession are still felt most sharply in the housing sector. Most experts agree that it will take another year or two for the excesses of the housing bubble to work through the system and for the housing market to begin to resemble a “normal” market that responds in the ways that it has in less troubled times. Certainly, these are fresh reminders that there is no such thing as a “safe” investment, and that every one has to learn to live with a certain amount of risk.

Source of Wealth
The data over time gives a great deal of support to the idea that owning a home is one of the greatest sources of wealth, and wealth building, in the United States. The National Association of Realtors did a study on Housing Wealth Effects in 2004, which looked at the difference between household wealth for owners and renters in the period between 1984 and 1999. Since this does not include the period of the housing bubble, its results can be seen as closer to the average return you might expect over normal times. The study concluded that “a typical renter household in 1984 had accumulated $42,000 in net wealth by 1999, but a typical owner household in 1984 had accumulated $167,000 over the same period. Marital status, age, race and ethnicity, initial wealth and household income … accounted for only $20,000 of the net $125,000 accumulated wealth difference.”

That $105,000 difference is, almost without exception, due to home equity from both paying down the balance of the mortgage and the appreciation of the value of the property over time. The Case-Schiller Index of home prices shows that from 1987 to 2009 the price of existing homes increased by an average of 3.4% annually. This period includes the bubble, but also the crash from 2007-2009. Since most bank accounts yield considerably less in annual interest, that figure doesn’t look too bad as a way to grow your money. Yale University’s Robert Shiller has calculated that, in the period from 1950 to 2009, the S&P 500 yielded a real price change of 3.3% annually — surprisingly close to the appreciation in housing.

There’s one more point in housing’s favor: with government-backed mortgage insurance programs, the opportunity to invest in a home is much more open to people of average means. Few bankers are going to lend the average person $100,000 to invest in the stock market. But, average people purchase homes every day by taking out FHA mortgages that require only 3.5% downpayment. These programs open up long term investing through real estate to working and middle-class Americans in ways that don’t exist for the stock market. Its not a get-rich-quick scheme, but studies have proven that it works.

Housing’s Future
This will continue to work for a new generation of homeowners, but only if Congress allows Fannie Mae, Freddie Mac and the Federal Housing Administration to continue to offer the type of government-backed mortgages and mortgage insurance that have made home-buying money available to people of average means with good credit. Without that support, the 3.5% mortgage downpayment programs will surely disappear. Mortgages will most likely be available only to borrowers who have between 10-20% of the purchase price in their savings, because private lenders will be unwilling to take the risk of underwriting 96.5% of the purchase price without government support. By making home ownership less available, a generation of workers will have the greatest avenue of building private wealth cut off from them. What will that America be like?

This spacious, fully-renovated 3br townhouse boasts amenities rarely found except in new construction, such as lots of closet space, large fully tiled two-head shower, and a two room Master bedroom suite with attached Master bath. Add to that the touches Baltimore residents have come to expect, such as a whirlpool tub, granite and stainless steel kitchen, roof deck with great views, beautiful wood floors and exposed brick, and you have a fantastic value that is a home run in anybody’s ballpark. Then, add in a large fenced backyard garden and the convenient location — walkable to Patterson Park; Fells Point shops, restaurants, nightlife, and Johns Hopkins Medical Campus, and …. why are you still reading this? You need to make an appointment to see this gorgeous house today!

Bedrooms: 3
Baths: 2.5

Price Improved to $300,000!

This property has a WalkScore ranking of 86 (Very Walkable).
Click here for more information and the location of local resources.

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For the last few years, there’s been a real decision for consumers, especially younger consumers who might never have owned a home before, as to whether it made economic sense to buy a home. Home prices have generally fallen all over the country since 2006 or 2007, depending on your region, and many buyers decided that the possibility of buying a house as it was losing value was too scary from their perspective. Some consumers who were homeowners and had to move for their job sold their home and rented in their new city.

The Rent vs. Buy contest is now beginning to tilt back toward the Buy side in many areas. Trulia, the well-known real estate website, publishes a Rent vs. Buy Index every three months. On that list, they rank the fifty largest metro areas in the country, based on a ratio comparing the costs of home ownership with the average cost to rent. In their First Quarter 2011 Index, thirty-six of the fifty regions qualified for the “Much Less Expensive to Buy than to Rent” classification, including Baltimore (#11) and Washington (#13).

Renting a home in this region has gotten comparatively more expensive in the last few years as vacancy rates have declined and landlords have enjoyed stiff competition for their properties. But there are also several reasons why now may be the best time in many years to consider purchasing a home.

1. Prices in the greater Baltimore-Washington region have begun to stabilize. Especially on the Washington DC end of the region, as prices in the District have actually increased 8% in the last two years. One of the biggest advantages Baltimore had in the last decade was its affordability when compared to Washington. If prices have begun to rise in DC, Baltimore will once again start to look like the bargain it still is (even with much publicized commuter rail problems between the two cities).

2. Interest rates have started to rise, and are about .5% higher than at their low point last fall. We’ve been hearing about how interest rates have tumbled to low points not seen in fifty years, and while they continued to fall or held steady, there was no motivation to buy. In fact, many buyers watched falling home prices and decided to wait, no matter what the interest rates were doing. But now, with prices starting to stabilize and interest rates actually rising again, we may be at the most affordable point in the cycle.

3. Interest rates are predicted to be yet another 1% higher by the end of 2011. For an idea of what that might mean to a potential buyer, I used one of my own current listings and calculated the principal and interest payment that would be available today to a qualified buyer, and then did the same calculation adding 1% to the interest rate. With everything else staying the same, the mortgage payment went up by about 5%. On a $1,500 a month payment at today’s rate, that means the buyer will pay another $900 every year just on principal and interest on their loan.

To me, that says it may be time to get off the rent bandwagon and start looking to cash in on the bargains that the housing crisis has created.

Most homebuyers are interested in technologies that will save energy and reduce the monthly utility bills. Reducing energy consumption is also a primary goal of “green” technologies, and there are many ways to reduce the amount of energy you use without having a major impact on your lifestyle.

Owners of existing homes, however, are sometimes reluctant to research this subject because the flashy, high profile technologies, like solar panels, are expensive to implement and inconvenient to try to retrofit into older homes.

Reducing energy consumption is essential, however, both for the long term good of the planet, for assisting stretched household budgets, and — and this may be a surprise — for making your home competitive when you are trying to sell it. Replacing appliances and windows will raise the value of your property considerably, and on top of your monthly savings on energy, will reduce the cost of the improvement by resulting in a higher sales price. How? Most buyers in this market will research the monthly energy costs the current owner is paying, and this information is readily available with a simple phone call to your utility.

So, here are a few suggestions for ways that you can reduce your energy bills, and in the process, update and make your homes more attractive to new owners when that time comes.

1. The first way is the easiest and the cheapest. In fact, you’ll save money from the very first day: Take advantage of utility deregulation in Maryland. Finally, more than a decade after it was enacted, utility deregulation has resulted in real competition for most Maryland utility ratepayers. Check your current bill, and you’ll see a “rate to compare,” which is the amount your electrical supplier is charging for electricity.

Be aware of the fact that your electrical supplier is now separated from the company that delivers the power to your home. The delivery company will remain your local utility. You will receive your bill from them, as always, and call them if there is a power outage.

Make sure that your new supplier beats that “rate to compare”, doesn’t make you sign a long-term contract, doesn’t charge you to switch (or to leave), and doesn’t lock you into a particular rate. Rates go up dramatically in the summer, and come back down in winter. Its in the consumer’s interest to let that rate float, not be locked in at an inflated price. The supplier that I’ve recommended, who meets all of those criteria, and who offers the additional bonus of buying green wind-generated power, is Viridian. You can research this company, and switch your supplier if you wish, all online at www.viridian.com/charmcity. A list of all the companies that are currently licensed by the Public Service Commission is available at http://webapp.psc.state.md.us/Intranet/SupplierInfo/searchSupplier_E.cfm.

2. Pay attention to those Energy Star labels when you are replacing appliances, especially refrigerators, washers and dryers, and water heaters. According to the US Department of Energy, these appliances are accountable for about 20% of your home’s energy consumption. Older appliances, pre-1990 vintage, can consume double the energy of their new replacements. And until the end of 2010, there’s a Federal tax credit of up to $1,500 for the purchase of energy efficient products, like the new line of tankless water heaters, which are on average 24-34% more energy efficient than conventional storage tank water heaters.

3. Are your windows old and falling apart? Replacing them with more efficient models can save up to 25% of your winter heating bills and 15% of your summer cooling expense. Properly installed, modern windows are also a huge selling point for a new owner, and they can make your life a lot more comfortable.

The US Department of Energy maintains a website which outlines these type of improvements, their relative benefits, and — if you’re not ready to do any of these types of replacements — can offer ideas for inexpensive alternatives, all of which will reduce your energy bottom line and reduce our usage of fossil fuels. You can access that website at http://www1.eere.energy.gov/consumer/tips/index.html.

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2010 has been a challenge to the real estate market, not only because of the mortgage foreclosure crisis, the up-and-down recession, and the crisis in consumer confidence. Its also had some of the most extreme weather we’ve seen in a generation. How is that a challenge to the market?

Well, think about it… when the area was blanketed by back-to-back blizzards and many city streets were nearly impassable for two weeks, who could go out and show property? There are still damaged gutters and dormers scattered throughout the city’s neighborhoods. If the winter wasn’t bad enough, we’ve now had 40+ days this summer where the afternoon temperatures reached 90 degrees or more — many of them over 100 degrees. People stay inside when the heat is that oppressive and don’t go out and look at property.

Its a shame that buyers are letting the summer pass them by. Prices in the Baltimore area are still declining in many neighborhoods, and according to June statistics, Baltimore was one of only two major metro areas where prices had not stabilized or even started back up. Also, mortgage rates have declined to the lowest level that we’ve seen since 1971, when records were first kept on that statistic. So with prices declining and mortgage money cheap, why aren’t more buyers scooping up bargains?

Knowing the Score
A report came out this month that gave one possible reason. The economic troubles that we’ve been experiencing in this country have lowered significantly the average credit score. FICO, Inc., the company that calculates your credit score by combining data from the three large credit monitoring companies, announced that now 25.5% of consumers have a credit score of 599 or below. Before the recession, that figure generally averaged about 15%. That means that the great terms and historically low rates we’ve been seeing on the news are now unavailable to over a quarter of the population. Some analysts expect that before we truly recover from this recession that figure will rise to nearly one-third.

This is the segment of the population that, in the past, had to rely primarily on sub-prime mortgages to be able to get into the housing market. That area of lending has pretty much dried up in the last couple of years. Wells Fargo, currently the nation’s largest mortgage lender, made news this month by completely shutting down its sub-prime lending division and laying off over 3,000 employees. But although sub-prime now has a bad smell attached to it, remember that was primarily because of the way that Wall Street and large financial institutions had cut up, combined and re-packaged sub-prime mortgages into investment securities that weren’t at all clear on the level of risk they carried. Sub-prime lending had existed as a viable, profitable product for years before this recent mess started.

It doesn’t make sense that the housing market will ever regain robust health while we are content to tell 25-30% of the population that they are not able to own a home. If you are thinking of buying your own home, its important that you find out what your FICO score is, and how that will affect your status as a borrower. There are steps you can take to mend a low credit score, and a qualified mortgage officer or any of the local homebuyer counseling agencies can help you get started down that road.

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The internet has certainly revolutionized the way that people shop for real estate. It has also made it much more likely that inaccurate, out-of-date, and even fraudulent information makes it into your inbox. Here’s a primer for the homebuyer in the Internet age.

The MLS
Before the Internet was born, listings were literally kept in a book — available at each real estate office — containing the listings that office’s agents were presenting to the public. Searching for a home meant a lot of driving around looking for signs, visiting offices to look at the listing books, and a reliance upon the agent knowing what was available that met your criteria.

Once the Internet was widely available, the real estate industry was one of the earliest players and multiple listing services quickly got their member brokers to agree to make everyone’s listings available to the general public. Brokers also wanted to make the MLS available on their own websites, and so an Internet Data Exchange agreement let the number of sites who carried listing data multiply quickly. National search sites, such as REMAX.com and Realtor.com, started to bring together listing data from all across the country. Others came up with the idea to offer computerized property evaluation services, and another group of sites let customers who had visited certain properties blog about their impressions of it, so that the next buyers who came along could read about the property’s weaknesses and strengths without stepping foot inside it themselves. The modern Internet is bulging at its virtual seams with real estate related data of all kinds.

Buyer Beware
The problem is that some of that information is garbage. While many sites are great at importing new data, old data sits around long after its useful. Buyers I work with will often come to me with questions about a property they found on one website, but not on another. When I investigate on the MLS directly, I’ll find that the property isn’t actually for sale. Sometimes it was withdrawn, or the listing expired, months ago. In one recent case, the property had been sold two years earlier!

Another major source of inaccurate information are the property evaluation websites. Several recent studies have found large margins of error in these computerized estimates of value. On the largest of these sites, their zesty evaluations were routinely off by over 7%, and you had a one in eleven chance that your estimate would be off by a whopping 25% or more. Now, if your house is worth $200,000, a 7% routine error equals $14,000!

The newest trend in real estate sites are the blogging sites where, in theory, you learn details about properties that the bloggers have visited. However, there are no methods to prove that these visits actually took place, or that the blogger might not actually be the seller of a competing property down the block who went online to trash the competition.

The Solution
The best way to make sure you do not use wrong information in your home search is to ask your real estate professional for the sites that offer data of the highest integrity. In my practice, the sites I recommend are all ones that I know import information on a daily basis directly from our MLS and routinely remove listings that are sold, withdrawn and expired, such as the two largest national sites I’ve mentioned above, Realtor.com and REMAX.com. If you’re looking primarily for local data, then the best site is HomesDatabase.com.

A new service from our local MLS offers even better data, however. Many local real estate agents have subscribed to Listingbook, which taps directly into the very same MLS data that agents themselves use. I’ve been making this available to my buyers for about six months, with great satisfaction. Data is refreshed every 15 minutes, and the interface is intuitive and flexible. You’ll find many links here on www.charmcityrealestate.com that will allow you to open your own search using Listingbook. (Including that one!)

Home buyers, especially first time buyers, need to break away from the confusion of the daily news cycle about real estate. Here’s a longer range view.

For a transcript of this podcast, please email me at .

Real estate news is saturating the business media lately, because so many people realize that the health of the real estate market is crucial to the nation’s economic recovery. The problem is the news can be confusing. One day you hear that foreclosure activity was down (which is good) but still much higher than one year ago (which is bad). The next day you hear that pending sales for last month were down (which is bad) but much better than one year ago (which is good). So, what do these confusing news reports do to your attitude if you are thinking about taking advantage of the $8,000 tax credit and buying a home this spring? Are you choosing to focus on the good news or the bad news?

Well, here are four items that are not getting a lot of coverage. Taken together, these four facts should leave no doubt in your mind that this is possibly the best time to buy real estate in at least a generation.

1. Prices are down, and in many areas are still falling — although more slowly than last year. If you’re a buyer of real estate in this market, you are definitely seeing lots of inventory and you’re seeing it at lower prices than you are accustomed to. The fact that the rate of decline is slowing means we’re near or at the bottom, and in some areas prices are actually stabilizing and beginning to make very small advances. Generally speaking, your dollar buys you more house now than at any time in the last five years, and it might not get any better than this.

2. Interest rates are at historic lows. The cost of borrowing the money you need to buy your home is incredibly affordable right now. And the fact that we can actually say both of these things at the same time is itself historic. In the last fifty years we’ve had many periods of time where either prices were low or rates were low, but its nearly unheard of to be able to say both at the same time. So, not only does your dollar buy more house, the interest you’ll pay on that dollar is very cheap by historical standards.

So, we have these two incredible opportunities existing — three, counting the $8,000 tax credit available until the end of April. But, I hear you ask, “How can we be sure that this situation won’t go on for awhile?” That’s where the last two of my four facts come into play.

3. Interest rates won’t stay this low for long. Most economists agree that when the economy starts to gain real steam, fear of inflation and the national debt will force the Federal Reserve to increase its interest rates to banks, who will then pass that increase along to consumers. We could be looking at substantial increases over time, which will leave you kicking yourself for not acting while the cost of borrowing money was so low.

4. Statistics point to a potential housing shortage in a few years. There are a couple of things at work here. First, new home builders have cut way back on their building to “ride out” the recession. It will take awhile for them to get construction back underway and lay out and design new housing developments once they see buyers coming back to their model homes. Second, there is a new wave of homeowners beginning to search: the “echo boomers,” or the children of the Baby Boom generation. This generation is estimated to be 50% larger than the original Baby Boom itself, and they are now roughly in the 18-31 age range: prime first-time homebuying years. Basic supply and demand will rule the day: housing will be in short supply and prices will rise.

There you have four very good reasons to step back from the day to day news cycle and take a long view about home ownership. So, what can I do for you today?