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

No one has been more affected by the last few years of real estate devastation than my old friends, the Sellers. If its been more than five years since you’ve sold property, then you really need to forget much of what you thought you knew about the process. Its a new world out here. So as we approach the beginning of the Autumn selling season, here are four points that every Seller needs to take to heart.

1. You were never as rich as “they” said you were. Who are “they”? Appraisers, bankers, even the algorithm at Zillow… but its not their fault. In most cases (except probably Zillow) they were giving you valuations on your home based on what was current market price. Unfortunately, most property owners took this inflated value and carved it in stone under the heading of “Personal Net Worth” and — even to this day — are having a difficult time adjusting to the fact that those monumental numbers just are not true. But if you own a stock and you want to sell it, you ask the question, “What is Triple Y Corporation stock selling for today?” Not last year. Not in 2007. If you try to place a sell order on Triple Y that is based on what the stock sold for in 2007, your stock broker will laugh you out of the office.

Selling your home works exactly the same way. And just like the stock market, that valuation is different today than it was three months ago, as values have continued to go down in most markets. If you list your home for sale today, you need to think about what the value of it is TODAY, and kiss farewell to what you thought it was worth yesterday. You’ll also likely have to re-think the asking price if you should be on the market in two months, because the market may continue to decline.

2. You are selling a product and a lifestyle — not just a house. You need to find out what the competition looks like. Get your Realtor to take you through the properties that you’re going to compete with in the marketplace — certainly every one of your potential Buyers will have seen them, so you need to see them too. The Buyer doesn’t really care how you’ve lived in the house, they want to see how they might be able to live if they bought your house. By comparing your home to the competition, you get to see the competing visions that are out there, and you can craft your product presentation to outshine the rest. This is the basic philosophy of staging, and you can use it to varying degrees, but if you’re not actively trying to change the way you think about and look at your home and trying to see it through the eyes of the Buyers who tour it, your home will likely be one of those that sit on the market for awhile, with multiple price reductions, and a sales price much lower than you had hoped.

3.  Some of your competition isn’t trying to turn a profit. Now, this is a tough one to wrap your head around if you’re a Seller. Every individual Seller approaches a real estate transaction with visions of finally-realized equity with which they will fund something, whether its a bigger house purchase, a downsizing with money left over for a new toy or a beefed up IRA, or at the very least, a clean balance sheet with debts paid off. In this market a significant number — if not a majority — of your competitors have already given up on making a profit. These could be residents approved for a short sale, or banks and mortgage companies — even the government — selling foreclosures, or people who have been on the market so long that they are desperate just to get to that new job in another city. This is yet another argument for getting to know your competition, and if you can’t compete with their prices, then figure that out before you list and save yourself a lot of heartache.

4. Buyers don’t shop for homes the way they used to. The process that Buyers use to become educated on the market has been completely revolutionized in the last few years. The National Association of Realtors conducts a study every year that asks successful homebuyers questions about the process of buying their home. The results are important because they point out the most successful ways to market a home — and marketing a home is THE most important task that a listing agent performs. In just the last decade, the percentage of Buyers who found the home they purchased on the Internet has skyrocketed from 8% to 37%. Those who found it in print advertising, such as newspapers, has gone from 7% down to only 2%, and if you look just at those slick homebuyer magazines, the current number is below 1%. Even the trusty yard sign, which accounted for 15% of discoveries in 2001 has declined to just 11%.

So, what does this mean if you’re the Seller? It means that among the most important qualities you need to look for when selecting a listing agent is that agent’s comfort level with mobile technology and the Web, because that is where most homebuyers are hanging out, looking around, and eventually deciding on which homes to visit. And don’t doubt that you DO need an agent. If you combine the Buyers who found their homes on the Internet and those who found them through the recommendation of their agent, you account for 75% of successful home purchases in 2010.

That’s a chunk of the marketplace that you must be able to access if you wish to sell your home in 2011.

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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There are quite a few good signs that 2011 will be a better year for real estate, and the economy in general, than was 2010. If you’re one of the many potential buyers that are holding back, waiting for some positive signs that the worst is over, then I hope you’ll find what you’re looking for right here.

1. Improving employment picture. While the Baltimore and Maryland economies have fared better than the overall national picture, there have been some very encouraging signs nationally. For the last few weeks of December, initial jobless claims fell to levels not seen for several years, and the January employment report actually dropped the unemployment rate by a tenth of a point. Every prediction from economists has pointed to a slow, steady improvement through this year and these figures would confirm that is actually taking shape.

2. Consumer spending is increasing. The holiday shopping season was better than most retailers expected, and recent figures on the number of new automobiles being sold gives added strength to the fact that Americans are coming back to the marketplace and buying big ticket items. When consumer spending increases, businesses feel more comfortable adding inventory, placing orders, and restocking shelves, which has a positive ripple effect down the supply chain. Jobs result. Even sales of existing housing went up in December, and as an unscientific measure, my colleagues and I saw an increase in the number of people out looking, coming by open houses and setting up appointments with their agents.

3. Interest rates remain near historic lows. The cost of borrowing money is an important factor in determining how many people can afford to be in the housing market in the first place, and for the last few months mortgage interest rates have been cheap. Homeowners can refinance into 15 year mortgages for under 4%, while new 30 year mortgages have remained under 5%. As spring approaches, however, rates always tend to increase, so its not clear that these bargains will be available for much longer.

4. Housing prices have fallen dramatically. Along with the cheap cost of mortgage money, this increases the number of potential buyers who can qualify for a home purchase. With more buyers looking, and home sales beginning to pick up, its most likely that prices will stabilize and not fall much farther.

5. The Washington DC housing market has already stabilized and started to show price increases. Washington was one of only four metro areas in the country to show housing increasing in price in December. In the last decade, more and more homebuyers have been priced out of the DC market and have turned to Baltimore as a potential place to live. In fact, if the 2010 census shows that Baltimore has gained population (which many believe it will), that result can be attributed to the increase in Washington commuter traffic between the two cities.

So, if the DC market has improved and started to rise, can Baltimore be far behind?

This neighborhood — a little slice of Mt. Washington tucked in between Falls Road and Falls Run — is a hidden gem that the residents say is a great place to live. Turn onto this dead end street and you can see why! The tidy cottage style homes, each with their front porch, invite you to put up your feet and stay awhile. This three bedroom, two bath house has large, open main rooms, warm natural wood cabinets in the kitchen, and newly carpeted bedrooms. Shoot a round of pool in the basement recreation room or, on colder days, warm yourself in front of the wood stove. Easy access to Falls Road, Interstate 83 (JFX), and the Baltimore Beltway (I-695) makes this a great commuter’s home. The stores and cute shops of Mt. Washington Village are just a short distance away.

Bedrooms: 3
Bathrooms: 2

Available at $157,000!

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This property has a WalkScore ranking of 57 (Somewhat Walkable).
Click here for more information and the location of local resources.

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Everyone has read or heard of the problems in the housing market. But most of the news articles and commentary have focused solely on the single family home situation, whether townhouse or detached. The economic recession and foreclosures have created significant problems for condominium owners and buyers that have not been as widely publicized. So if you own a condo, or think you might like to, you should pay attention to these issues before you want to sell or buy.

Condominiums became popular as the price of owning a single family home grew, giving first-time buyers an option to become homeowners. Owning an apartment in a larger building, however, brings a secondary player into the process: the condominium association. The association is in charge of caring for the building itself, for the benefit of each individual unit owner. When a buyer goes to their bank to buy a condo, the bank not only has to approve the buyer for the loan, they also have to look at the condo association to make sure that its being well run, and is doing a good job of looking out for the property in which the bank will be investing the buyer’s mortgage.

For that reason, lenders and the Federal Housing Administration maintain lists of “approved” condominiums for which they will approve mortgage loans. The criteria for this approval are important, and should be examined by every condominium association Board of Directors and considered — along with their condo bylaws — as an important guideline for their operations. When your association falls off of these approved lists, it becomes much more difficult for your unit owners to sell their homes, which means prices fall and you have a group of unit owners who are not very pleased with your stewardship of their investments.

So, what are these criteria? Here are some of the items that can severely jeopardize your association’s ability to be approved:

• pending litigation against the condo association, or by the association against the builder/developer.
• 15% or more of the owners being delinquent on their condo fees, even by just one month.
• a high percentage of investor-owned units, or one entity owning more than 10% of the units.
The exact percentage varies, depending upon the type of loan or the lender, but in general terms
an association should keep a watchful eye on the number of investor-owners, and make sure that
the public record is correct as it classifies which units are owner-occupied and which ones are not.
• lack of a reserve fund equal to at least 10% of the annual budget.
• lack of necessary insurance coverage, both property and flood insurance.

If your condo association has issues with any one of these bullet points, it could mean that buyers will have a difficult time getting financing to move into your building, and that your current owners are unable to sell quickly and for the best value.

One other item for condo associations to consider: are your condo fees themselves becoming barriers to buyers? For instance, if a typical buyer interested in your building can afford a total monthly payment of $1,500 — including taxes, condo fees, insurance, principal and interest — they most likely can’t afford to purchase a unit and live in your building if the condo fee is $500 a month. Yet, I’ve seen the number of non-luxury condo buildings in the Baltimore area with condo fees far above $500 per month growing in number, squeezing out the buyers in need of financing that they rely upon to absorb units for sale. With those buyers no longer in the picture, your building now has to rely upon cash-rich buyers and investors as purchasers, prices have to fall to reduce the cost of financing, or the units may go unsold and your current owners move out and rent their property, becoming investor owners. If your condo association hasn’t submitted its subcontractor agreements or management contracts to competitive bidding in a few years, its time to do it. Saving money and lowering condo fees — while still maintaining and caring for the property — will be essential exercises for every condo trustee!

** Richard Pazornik of SunTrust Mortgage provided essential lender information for the writing of this article. He deserves my deepest thanks for sharing his expertise.

I recently asked Richard Pazornik of SunTrust, one of my recommended loan officers, to sit down and walk through a Question and Answer session with me so that we could fully explain the new 2010 housing credit for homebuyers. As you probably know, the initial tax credit from 2008 was beefed up in mid 2009 when Congress increased the amount of the credit and stopped requiring that it be paid back over time. That program was supposed to expire at the end of November, 2009.  But last Fall, the housing and mortgage industries pushed to have the credit extended.  For a while, Congress seemed to be willing to let the credit expire, which would have had a devastating impact on the housing market which was struggling to stand up again.

Fortunately, Congress and the President were eventually persuaded that extending the credit was in the best interest of the economic recovery.

W: So would you go over how the tax credit works?

R: For first-time homebuyers, which means someone who hasn’t owned a home in the last three years, you’ll get that same $8,000 tax credit if you sign a contract to buy a home before midnight April 30th, 2010 and you have to go to settlement before midnight June 30th, 2010.  Hopefully, we will be very busy those two days!

The new Tax Credit also sets a maximum income at $125,000 for a single person and $225,000 for a married couple.  Above those limits, the credit is phased out.

W: Now, Congress has expanded the credit to “move-up” buyers. What does that mean?

R: A “move up” buyer can now get a tax credit of $6,500, if they’ve lived in their home continuously for 5 of the last 8 years as their primary residence.
The same income limits and phase outs apply to move up buyers as applied to first-time homebuyers.

W: Can someone buy any house on the market?

R: They can buy any house as their primary home so long as it’s priced less than $800,000.  So here in Baltimore, this covers about 96% or more of all the homes listed in the Multiple Listing Service.

The government sweetened the deal by allowing taxpayers to go back and amend their prior year tax returns to claim the tax credit quicker and if your above the income limits in 2010, go back an look at your 2009 income, you might be better off!

W: What’s the difference between a Tax Credit and a Tax Deduction?

R: Well, a tax credit is a lot better than a tax deduction.  A credit is a dollar for dollar reduction of your tax bill and a tax deduction only saves you a portion of the amount based upon your actual tax rate.  Now, I wouldn’t turn either down, but I’d much rather have an $8,000 tax credit than an $8,000 tax deduction.  And here’s why, if you’re in a 20% tax bracket an $8,000 deduction would save you $1,600 in taxes but the $8,000 tax credit actually saves you $8,000 in taxes.   That’s why this credit is so good! But, there’s a warning I need to give.  If you sell the house within three years then you must repay the $8,000.

W: So, let’s say I’m a regular wage-earner who has taxes deducted from my pay. How would this tax credit work?

R: It means your tax bill is actually decreased by $8,000.  So for example, if you had $5,000 deducted from your salary for your Federal Income taxes and your tax bill computed to be $2,000, normally, you would’ve received a refund of $3,000.  But, if you sign a contract to buy a house before April 30, 2010 and it settles before June 30, 2010, when you file your taxes in April of 2011, you’ll not only receive the refund of $3,000, but you’ll also get an additional tax credit of $8,000 making your total refund $11,000.

W: That’s a nice piece of change! So what is your overall impression of this new program?

R: Overall, I’m thrilled that the Homebuyer Tax Credit was extended and expanded and here are the 3 keys to remember;

• Income, $125k single, or  $225k couple
• Home Price, $800000 or less, and
• Contract, signed by April 30, 2010 for settlement by June 30, 2010.

As we begin the last month of the year, I wanted to review where we stand in the real estate world, both nationally and in Maryland. 2010 will be a critical year for many of us, not only for those involved with property, but for the economy in general.

We’re certainly better off in this holiday season than we were a year ago. At the end of 2008 the country felt like a roller coaster car speeding down the tallest slope with no brake and nobody at the switch. Right now, 2009 looks like the turning point, with the economy beginning its long climb up the next hill, real estate stabilizing and just in need of a little push to get back on the track. But there are several issues looming for next year which will really determine how things go for the forseeable future. Here are a few lumps of coal for your stocking:

• A recent Washington Post article quoted a national survey by the Mortgage Bankers Association which found that more than 14 percent of borrowers were in trouble on their mortgage. That translates into 7.4 million households either currently delinquent or in the foreclosure process, the highest level this particular survey has ever recorded. That means we have not seen the peak of foreclosures — and with unemployment continuing to rise the numbers will only get worse.
• The Baltimore Sun, again using information from the Mortgage Bankers Association, reported that in Maryland roughly 10 percent of homeowners deemed good credit risks were in trouble with their mortgage. We’re not talking subprime mortgages here, the widely known source of the financial troubles, but prime borrowers. Again, blame rising unemployment which has destabilized the family budgets of people who have had a history of prudent financial management. In round numbers, this adds 77,000 homeowners to the list of those at least one month behind on their payments.
• Recent widely reported gains in regional home sales and a decrease in the housing inventory seems to be coming from short sales and foreclosures going under contract (and not necessarily going to settlement). From my anecdotal sources, traffic on regular owner-occupied listings — where a bank is not involved — is practically non-existent. This means that unless you’re in distress and buyers smell blood, they aren’t interested in seeing your listing. And, as we saw in the last item, there could be 77,000 more properties on that distressed list that we have to work through next spring.
• Most of our buyers, especially first time homebuyers,  in the last year have used FHA loans because they had the least stringent requirements for credit score and money down, and allowed more generous assistance from Sellers. So while the extension of the tax credits until the end of June, 2010 is a wonderful thing, it seems to be coming with a simultaneous tightening of credit from the FHA. The Washington Post reports that new FHA guidelines currently under development will raise the amount of money required from buyers — from 3.5% of the purchase price to 5% of purchase price — while cutting the allowed Seller contribution in half (from 6% to 3%). Not only will this shrink the pool of qualified buyers considerably, the FHA will also raise the capitalization required from lenders who issue FHA insured loans — a move that will most likely cut the number of loans available, if not the number of lenders who will consider issuing them.

Certainly the situation in residential real estate is worrysome as we head into the new year. But it might not be the most dangerous. Many experts are warning that the biggest problem looming on the horizon is in the commercial real estate market, as last week’s potential meltdown at Dubai World illustrated. While that particular sovereign wealth fund made European markets tremble, and we were told that the US market has little exposure to it, there are enough potential problems here at home to make us weak in the knees. Moody’s Investor Services reported last week that it expects the value of US commercial real estate to continue to fall well into 2011. This is on top of losses in this sector which have already totalled 42.9% since the peak in 2007. The total devaluation from the peak may well reach 55% before things begin to turn around.

The determining factor in these losses? Yep, you guessed it… unemployment. With fewer people working, office spaces and commercial spaces don’t need to be as big. Demand for office buildings drops, and fewer companies are growing and demanding more space from their landlords. Also, with more people encouraged to buy homes and get their tax credit, demand for multifamily rental units has also dropped, hurting landlords’ cash flow and making it more difficult for them to keep up on their mortgages.

Now, with all this coal in your stocking, remember you can’t really burn it anymore to lower your heating bills. Global warming, you know. Ho, ho, ho.

This is the time of year when people just sit inside during the dog days of a southern summer. High humidity, hot temperatures, and a city where not everything is air-conditioned all combine to slow down real estate activity. Even in good years, beach vacations and summer camps tend to slow down every business, and ours is no exception.

But this year is not so bad. That’s an incredibly good sign, given the market slump we’re coming out of. Federal homebuyer incentives are encouraging traffic through listings, and a wary sense of confidence that things are slowly getting better are having an overdue good effect. Cross your fingers that the fall market, which usually starts about Labor Day, will come roaring back.

I’d write more, but its just too hot.

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.