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

If you’ve noticed that the rental market seems to be tightening, you’re right on the money.

In a survey taken by the National Multi Housing Council (as reported in The Real Estate Professional, a trade magazine), the owners of the nation’s largest apartment buildings are confirming that occupancy rates remain high and that the number of tenants moving out to become homeowners is very low. More than 80% reported a significant decrease in the number of renters leaving to purchase their own home.

But the number of tenants moving from investor-owned properties into larger professionally managed buildings has increased, most likely because of rising foreclosure rates on investor-owned buildings.

Obviously, for the housing market, this isn’t good news. New homeowners coming into the market are the ones that allow current homeowners to sell and move up, setting off the domino chain reaction into bigger and more expensive houses. Government policy makers who are looking for ways to shore up housing need to take a look at this statistic and work on encouraging the renters to take the leap.

You have to wonder if the American public has truly entered a post-reality era… maybe all the fake reality shows on television have finally had their mind numbing effects, proving to anyone who was paying attention that reality isn’t and it is all based on your attitude.

That’s about the only conclusion you can draw from the result of a recent poll by Harris Interactive, commissioned by our old friends at Zillow.com. They got answers from 1,361 homeowners across the country, and (as reported in a recent Wall Street Journal) a whopping 62% of the respondents thought that the value of their home had actually increased in the previous 12 months.

That’s right. INCREASED.

Never mind that Zillow’s own terribly flawed and unreliable data (see one of our previous posts) shows that 77% of all homes in the US depreciated in value over the same time period. The poll was conducted between June 30 and July 2, 2008, so maybe people’s brains were just overheated from hot summer weather. But 56% of the respondents also said that they would be spending money to improve their “more valuable” properties over the next six months.

The “can’t happen to me” psychosis gets even deeper when you probe the public attitude toward the foreclosure crisis. Even though 90% of the respondents knew that foreclosures were occurring in their local market and 80% felt that the rate of foreclosures would remain steady over the next six months… a full 48% of them opposed government efforts to assist such homeowners to stay in their homes.

What should those of us in the industry make out of such “Twilight Zone” attitudes? We will have to try harder to educate potential Sellers, and perhaps take them on preview tours of the competition to fight the idea that their property is the “best in the neighborhood.” Like addicts coming off of a pretty good high, homeowners still aren’t ready to go “cold turkey” and realize that real estate investments sometimes go down. Including their own. We can either support their addiction and continue to list properties at unrealistic prices, or be the ones to stage an intervention and tell them the truth.

I think our Code of Ethics compels us to be the truthteller.

There are some morsels of good news, even encouraging trends, in the current housing downturn. As the inventory of unsold Mini-Mansions on tiny lots that used to be cornfields grows, and major builders tighten their belts and lower profit forecasts, there is emerging a trend toward smaller, community style, energy efficient homes. No, this is not the Disney-esque Plantation, Florida model of community where Stepford wives patrol the sidewalks with big smiles.

A recent Wall Street Journal article reported the success of two developers in the Pacific Northwest who have taken to designing 1,000 square foot cottages, on small town-size lots. Over the last ten years, these pioneers have made a good deal of money building about fifty Craftsman-style cottages, ranging anywhere between 800-1,500 square feet. Think 1920s-style “bungalow courtyards.” These homes, all within a comfortable commuting distance to Seattle, were built in various communities and surrounding a “commons” shared by all the residents.

They can’t build them fast enough.

Who is buying these? Certainly NOT first time homebuyers, since they are significantly more expensive per square foot than the usual tract mansion. In many cases, they are refugees from the modern American suburb, willing to downsize significantly to be able to buy into a real community, where people interact with their neighbors and they can lessen their carbon footprint. Not to mention lowering their energy usage and utility bills.

Builders in other parts of the country are taking notice. Boston and Indianapolis are on track to get similar developments in the coming months, as the children of the baby boom start to look for new ways to organize society and step back from the expansive post-WWII style of suburbs that chew up forest and farmland at ridiculous rates, cause an expansion of utilities and infrastructure that become expensive to maintain and use, and cost time and money in commuting longer distances.

If this disruption in the housing market and the concurrent rise in energy prices can have the effect of making dramatic changes in the way America houses its population, then perhaps some of the pain will have been worthwhile.

We’ve been told for years that our society has become too statistic based, and that the business-governmental apparatus that collects information on all of us is too large, too intrusive and overly bureaucratic. And in some aspects of life, I think that’s absolutely true. So its a total shock when you come across situations where we are completely incapable of getting a clear picture of what is going on. Certainly the current scare about the source of the salmonella outbreak is one of these cases. Two months into it, we have no clue about the source of the little nasties, and an entire agricultural industry is in shambles because of early — incorrect, we think (?) — guesses.

You’ll be surprised to know that this applies to the foreclosure crisis. An article in today’s Wall Street Journal (Friday, July 18, 2008) reports that there are many contradictory statistics about the “Mortgage Mess.” Three major companies publish data on mortgage foreclosures, but the way that they collect it and the frequency with which they take their surveys has a major effect on how the data is interpreted. There is NO federal regulator charged with regulating mortgage brokers and originations; no one collecting the data for the government, so the Congress’ Joint Economic Committee (you know, the committee drafting legislation on the issue!) is reliant upon these three companies and their confusing information.

In the words of the Journal’s reporter, Carl Bialik, “All the data providers agree that foreclosures have been increasing, but details matter in deciding which kinds of loans, in which places, are at highest risk.” The track record of some of these companies’ press releases is shoddy. Again, quoting from Mr. Bialik, “Last July, the system” employed by the best known of the companies, RealtyTrac, “stumbled in Georgia, counting some properties multiple times. The company had said filings rose 75%, but revised that figure to 14%.” Oops.

What do you bet that this sharp downward revision to 14% didn’t get the same screaming above-the-fold headline that the original shocking 75% figure did?

The companies also do not agree on where the mortgage hot spots are. Several states appear on all three companies’ “top five” lists, although their ranking varies. But other states pop up on some and not others. The state of Colorado, for instance, regularly appears at or near the top of RealtyTrac’s recent rankings, but squarely in the middle of the pack on the other two company’s rankings. The Mortgage Bankers Association complies its lists quarterly, so by the time its information is released the data is old news. RealtyTrac, by comparison, races its monthly data out in 8 or 9 days — perhaps the reason it can be so dramatically revised. The third company involved is First American CoreLogic, which doesn’t race its data out and doesn’t issue press releases.

Let’s hope that cool, competent analysis of accurate data results in the best legislation possible to deal with our impending foreclosure crisis.

Pshheft. Who am I kidding?!

The current uproar of recriminations over the supposed financial instability of FannieMae and FreddieMac — the two pillars of America’s residential mortgage industry — is designed to obscure the growing problems in the private banks and lending institutions who have made a colossal mess out of our financial system. Its so much easier to take issue with the way the Federal Government has organized the semi-public institutions. And its so unpleasant for business-oriented Republican politicians to admit that the lack of regulation and public oversight in the financial markets has AGAIN led do a massive failure. This one may just dwarf the financial mess that the LAST Bush presidency created.

The fact is that human nature tends to excess. When you can make a gazillion dollars by bending time-honored and respected lending rules, why not bend them a little further and make a billion gazillion dollars, eh? Government in a democratic society is supposed to rein in the excess and even out the greed of human nature. When “small government” Republicans get in power, they throw rules to the wind and pray to the gods of the free market to take care of it. This is the result.

We can at least hope that new rules will be written that will be even more effective than the last. Perhaps that’s too optimistic, but I will always tend toward the healthy balance of rule, regulation and invention. Because my living, my career, my livelihood depends upon this mess getting sorted out and put right, as soon as possible. So does the economic stability of millions of similar middle-class Americans who just want to make sure that they can have access to their deposits and qualify for a mortgage. Its not that much to ask of a government.

One of the issues that will be growing in importance over the next years will be the cost of commuting. In the past, its not been something that most buyers considered as a major concern, but $4 or even $5 gasoline will add significantly to a monthly expenditure and will have to be taken into consideration when a family is moving up or out.

I haven’t seen anyone really talk about the potential for a radical re-shaping of American society and the physical landscape, but imagine an America where the fringe suburbs de-populate as people are forced by their pocketbook to move back closer into the cities that provide their basic employment and social infrastructure. The homebuilders will either see the changes and adjust to rebuilding older city neighborhoods, or focus only on the upper-income segment who can still afford to commute in their Hummers and Expeditions to their gated, golf-oriented communities. In this scenario, a city like Baltimore with significant opportunity for redevelopment inside the city limits can truly prosper, but only with a significant investment in public transportation.

This is also an opportunity to plug a function of charmcityrealestate.com — a cost of commuting calculator that helps factor commuting cost into the purchase decision between two properties. I invite you to play with it, see how it works, and how surprising the comparison now is when driving is factored in. Welcome to a new America.

During the Real Estate Boom of a few years ago, we were constantly bewildered by the consumer’s fixation on the APR of a loan. Seasoned real estate professionals were constantly trying to educate our customers and clients on the fact that the overall interest rate was not the only factor to consider when getting a loan. Given what’s taken place in the last couple of years, with these incredibly low rate loans adjusting into the stratosphere, I wish that more people had taken the advice seriously.

Consumers now are making a similar mistake. This time, they are focusing solely on the price of real estate. Buyers are sitting on the sidelines waiting for the prices to fall, and those that are braving the market are ruthlessly low-bidding on properties that are well-priced just to see how desperate the owners are for a deal — while interest rates have begun to rise.

Those consumers who think that by focusing on the price of the property they are guaranteeing an affordable purchase need to think again. Most experts expect interest rates to continue to rise to the end of the year, and it does not take much interest rate movement to wipe out the perceived savings gained from lowballing a seller. Once again, real estate professionals have to educate their prospects on the dangers of waiting too long. Let’s hope we do a better job this time.

An article in the May 29th edition of the Baltimore SUN updates local real estate devotees to a danger that I first blogged about nearly two years ago, i.e., that the Baltimore metro area was in line for WAAAAAY too many condo projects to be healthy for this marketplace. The SUN article focuses on two developments in particular as having a large number of cancelled contracts, or difficulty in settling: The ultra-high-end Ritz Carlton on the Inner Harbor and 414 Water Street just a few blocks from the water in downtown.

Fortunately, since my original blog post, several condo projects have been postponed, cancelled, or converted into rental developments with a higher retail component than originally conceived. But we have more on the drawing board, such as the other ultra-high-end Four Seasons slated to go up in Harbor East.

I hate to parrot ‘common wisdom,’ because it usually smells of a lack of imagination, but when it comes to the Baltimore condo market there is a basic truth behind it. Baltimore is not, has never been, and may not be for quite some time… a condo town. Our housing market is *still* the most affordable of any northeastern city. Condominiums will still be attractive to the empty nester market (probably the main draw of the aforementioned ultra-high-end developments) for some time to come. But in other cities one of the main draws to condos is as an entry point to home ownership for younger buyers who can’t afford either a single family detached or townhouse dwelling. Baltimore is one of the few cities I’ve known of where there have been condominiums on the market with asking prices higher than the surrounding housing stock. Talk about being ‘upside down’ in a home… and then paying condo fees on top of it!

Real estate developers sometimes have wacky ideas about what makes sense. This is a prime… or should I say ‘sub-prime’ … example of it. Condo over-developments have done great damage to the health of the housing markets in many cities, and if City Hall doesn’t take some action to cut down on speculative development here, it could delay the recovery of our own.

We would be pleased to help you find your dream home.
Contact Wayne Curtis to make an appointment today.

Several items have come up recently, both in my practice and in the news, regarding the way that clients use the advice their Realtor provides to them in the performance of their agency obligations. The general point of these stories and situations lies in one major question: whose decision is it to buy a property? And how do clients use the advice they receive?

A few weeks ago I was showing properties to a young woman who had come to me through a recommendation. She was looking at listings in a part of town that has a lot of renovation activity, and that she knew had some “rough edges” but was in the process of being “gentrified,” for lack of a better word. She found a property that she liked very much in a location that was further from the real frontier of the neighborhood than many we had viewed. She asked me the question I expected: “Is this area safe?”

I explained to her that this was a question I really couldn’t answer for her. I would never substitute my perception of safety, being male and at 6′ and well over 200 pounds, for hers. Nor would I want her to do so. I gave her what is my standard advice: I provide on this website a link to the Baltimore Police Department’s crime statistic page, where she could look up the various types of crime stats for a radius around that address. I also encouraged her to visit the area at various times of day when she would conceivably be leaving, coming home, or having guests over, and to get her own impressions as to whether she felt safe living her life there.

Obviously, that wasn’t what she wanted to hear. My impression at this time is that I lost her business.

Then, my manager puts a copy of a recent Baltimore Business Journal article in my mailbox at the office, talking about how buyers are now starting to sue their agents because of the advice they gave a few years ago to buy a house at an inflated price, or to buy more house than they were able to afford, etc. My mind went back to this young woman, because it has always been my policy never to forget two very important principles, first: Its not my money. I’m not the one who is going to have to budget for the mortgage payment, and I’m not the one who will be eating peanut butter and jelly if something goes awry. Second: Its not my home. I’m not going to have to put up with the nuisance that is associated with any given neighborhood… and there can be many different types. Parking, traffic, nuisance crime, taxes… everyone has a different irritation threshold.

Real estate agents should never assume they can make decisions for a buyer, whether that means telling a person that an area is safe, perfect for them, or that a particular mortgage is a wise decision. My job is to help that buyer become educated to the point where they can make that decision for themselves. Otherwise, I think that court cases are inevitable, and probably richly deserved.