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

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.

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 charmcityrealestate [at] verizon [dot] net.

While the market has been flooded with good news in the last few weeks, an end of the year reflection still shows we have lots of work to do in the new year.

For a transcript of this podcast, please email me at charmcityrealestate [at] verizon [dot] net.

The Baltimore-Washington marketplace was awash in good news, even before Fed Chair Bernanke declared the recession over!

For a transcript of this podcast, please email me at charmcityrealestate [at] verizon [dot] net.

First in the Mortgage Financing series of podcasts. In this edition, guest podcaster Richard Pazornik of SunTrust Mortgage talks about the loan application process, how to prepare for it, and what to expect.

For a transcript of this podcast, please email me at charmcityrealestate [at] verizon [dot] net.

Second in the Mortgage Financing series of podcasts. In this edition, guest podcaster Tom Latta of Prosperity Mortgage talks about the choice of loan product, downpayment options, and other sources for financial assistance.

For a transcript of this podcast, please email me at charmcityrealestate [at] verizon [dot] net.

Its been awhile, but in many markets in the United States it is once again a no-brainer to own a home. According to a recent article in the Wall Street Journal, the financial advantages of owning had been dwindling over the last few decades. Evaluated nationally, after tax mortgage payments have been averaging over 25% more than rental payments for nearly 26 years, according to a California real estate consultant firm. In 2006 some metro areas saw that grow to as much as 66% more. But, after the last few years of housing meltdown, average montly rent for the largest fifty metro areas was $1,045 while the after tax mortgage payment was $1,300, the narrowest gap (24%) since 2001. Some mortgage professionals have estimated that if mortgage interest rates fall to 4.5%, a number often seen as possible in the next few months, the gap will narrow even further to a 1998-era 14%.

A study by Moody’s Economy.com gives even better news. They have found eight markets around the country where home prices relative to rents are within 5% of historic levels, leading one of their economists to predict, “The bottom is coming into view.”

While we’ve heard that phrase before over the last few years, its nice to have a fresh reason to believe it might be true this time.

More and more real estate professionals are chiming in that they believe we are at or near the bottom of this housing downturn. Last week Standard & Poors’ economist Karl Case (he of the S&P/Case-Shiller Index of US Housing Prices infamy) noted cause for optimism. In a paper he presented before the Brookings Institution, he noted that of the 20 metropolitan areas covered by the Case-Shiller Index, nine have shown improvement in pricing in recent months. This gives him some hope that price stabilization is coming sooner rather than later (which is what his famous counterpart, Robert Shiller, is predicting).

Who is right in this battle of opinions can make a huge difference to the American economy. If Professor Case is correct and we are at or near the bottom, losses in mortgage foreclosures should stabilize somewhere around $500 billion. If prices come down another 10% that can boost the total losses in the mortgage fiasco to nearly $650 billion, which could have a significantly more serious effect on the national gross domestic product and the continued sick health of lending institutions. We need to hope that Professor Case got first billing for some substantial reason, and that he turns out to be correct.

Several publications have reported disturbing trends, which may offer some insight as to why the Fannie Mae and Freddie Mac bailout has now taken place. The Saturday, September 6 issues of both the Baltimore Sun and Wall Street Journal reported an increase in late payments and foreclosure proceedings for PRIME loans, not the sub-prime loans that started this crisis rolling. It is this weakening of the payment record of borrowers previously considered A-paper — strong, qualified loans — that is the most troubling development. It also gives a sense of why the government felt it important to reorganize the two GSEs now rather than later.

The Journal reported that the worst states in the nation continue to be Florida and California, along with Nevada and Ohio. Second tier problem states included Maine, Rhode Island, Michigan, Indiana, Illinois and Arizona. All of these states had rates of foreclosures above the national average of 2.75%. The Mortgage Bankers Association reported that nationwide,  among mortgages on one-four family homes, over 9% were at least 30 days overdue or in the foreclosure process, up from 6.25% a year earlier. It was also the highest level since the Association started collecting figures 39 years ago.

Maryland, while not among the most troubled states, still has growing issues. Among these same “strong” borrowers, while we are among the states at or below the 2.75% rate of loans in foreclosure, the rate goes up to 4.3% when you include those who were at least 30 days late in their payment, according to the Sun.

Maryland looks worse when you turn to look at the sub-prime loans. According to the figures complied by the Federal Reserve Bank of Richmond (whose district includes Maryland), 5.84% of owner-occupied homes have sub-prime loans. Of those households, a troubling 10.55% are either in foreclosure or have already been foreclosed upon, and those houses are now sitting on the market for sale. Within the state, Prince George’s County is identified by the Fed as having the worst foreclosure problem. Other secondary foreclosure clusters pop up in sections of Baltimore City.

Fortunately there are blurbs of good news. On September 9th’s edition of PBS’ Nightly Business Report, the CEO of Coldwell Banker Real Estate confirmed nationwide what I reported a few days ago from my own experience — activity in the last few weeks has picked up in real estate offices around the country. With the bailout of Fannie and Freddie expected to make mortgages more affordable and hopefully easier to obtain, at least for a few months, we should be able to work out of some of the excess inventory and stabilize home prices. Not a moment too soon.

Most Realtors I’m in contact with on a regular basis here in Baltimore are seeing some positive signs as we head into autumn. August has been the busiest month this year, perhaps in the last several years. The phone is ringing, buyers are beginning to come back to the marketplace, and a few are even writing contracts. August, even in good years, can be slow because of family vacations and of the heat — who wants to see houses when its 95 degrees with 80% humidity in Baltimore? But this year, that didn’t stop people.

And in mid-August, the large new-homebuilder — Toll Brothers, Inc. — publicly released statistics that were some of the most hopeful we’ve seen in two years. Their quarterly guidance talked about a declining rate of cancellations, and signs of “growing pent-up demand” from people who have delayed buying while the market was crashing and financial institutions were imploding. (Wall Street Journal, August 14)

We’re not out of the woods yet, as today’s continued bad news from Freddie and Fannie clearly remind us, but its nice to see both local and national signs that we *may* finally be bottoming out.