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

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.

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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.

I hope that this message finds you recovered from the holiday rush (and your New Year celebrations!), and starting to survey the landscape of 2008.

There’s been a lot of media attention in the last six weeks to the state of the housing market and the economy in general. The messages have been mixed, at best, and confusing. So-called “experts” duel with each other over whether the housing market has reached a bottom, and whether we’re headed for a recession — or are already in one.

The Baltimore region, lets face it, has fared pretty well in comparison to many parts of the country. Maryland’s economy is strong, unemployment is below the national average, and jobs here are growing. Don’t let the national media scare you away from the market. We are still undervalued compared to other east coast cities, and especially to our nearest neighbors down in DC.

Ready for a prediction??

Well, from ‘down in the trenches’ its my opinion that we will see some stabilization in the local housing situation come spring. I think that we’re scraping along the bottom right now, mainly because January and February tend to be the slowest months in the calendar. There was a slight acceleration in the market before we went into the holiday period, and with interest rates still low and a good amount of inventory, the market will improve when the weather does. Selling a property will still take a little longer than in the past, and it will be even more important that the property shows itself well from the very start. Buyers will probably have to jump through a few more hoops with their lender of choice, simply because credit will be tighter — but it will still be available to qualified buyers. If you need advice about a particular property to sell, or on what lenders you should be considering and working with, please feel free to call or email.

New for ’08, and Coming Soon!!

Many of you have used my website — www.charmcityrealestate.com — as a resource for information and for keeping up with the housing inventory, either through a direct MLS search or an automatically emailed update of listings that match your interests. The site was designed six years ago, and has been updated regularly with new functionality — if you haven’t visited it recently, go to the main information page for Buying a Property and you’ll see a new calculator that helps a homebuyer factor in commuting costs when comparing two properties. If you’ve ever been in the situation where you were weighing a cheaper house with a longer commute versus a more expensive house with a shorter drive to work, you’ll think this new bit of technology is pretty useful.

With the increasing use of larger, flatpanel monitors and the passage of time, it just seemed like this slow period was the perfect time to raise the hood and begin an overhaul of the nuts and bolts. So, I’ll be keeping you updated on the timetable for the debut of a new CharmCityRealEstate web portal. We’re putting it on a different software platform and changing the way much of the site functions. The display will be wider to better fill most people’s monitors, and we’ll be adding video capabilities and moving my blog from its current third party site right into CCRE itself.

I hope to have the chance to speak with each of you personally very soon… and until then… all the best.

— Wayne

Our system of MLS’s is a wonder of businesspeople getting together to expand competition and serve the public, while also serving their own interests. Broker reciprocity is a wonderful idea that has created an enormous real estate industry which, because real estate agents are all independent contractors, also remains vibrant and competitive. So, you’d think that a Republican administration who loves big business would leave us alone, right?

Nah. Not so much.

The FTC has been trying to treat the MLS as a publicly-owned and regulated utility (which, as a stockholder of our local MLS, truly amazes me) by telling these organizations who can be members and trying to have their rules and regulations overturned in court. In October 2006 the government filed suit against a Detroit-area MLS because they had prohibited “exclusive agency” listings from appearing in the database. The current crop of discount brokers love to use these type of listings for a variety of reasons, but to try and get around legal jargon, these type of listings basically turn the MLS into a bulletin board for properties that are glorified “For Sale By Owner” properties. Most of these brokers want you to contact the owner directly to set up showings, and if a buyer contacts the owner directly, that owner has no obligation to pay any commission. Since buyers routinely surf housing sites that pull information directly from the MLS, the possibility that a buyer could contact a Seller directly and completely avoid the services of a real estate agent, or paying for those services, is fairly high.

Now, there are quite a few “FSBO” websites out there, so there really is no reason why the stockholders of the MLS should have to provide another opportunity for Sellers to evade paying for their services. Thank goodness a judge has finally had a chance to look this case over and basically agree with the real estate industry. Judge Stephen J. McGuire found that the government’s assertion that the MLS had tried to “unreasonably” restrain or “substantially” lessen competition had not been adequately proven, since discount real estate services still remained widely available in the region.

The story, in today’s version of the Wall Street Journal, is some good news in the middle of a bleak real estate outlook. The government will appeal the case, unfortunately, but a first round win is a sweet one, indeed.

Today’s Wall Street Journal gives us a glimmer of hope as far as existing home inventory is concerned. According to figures compiled by Zip Realty, inventory in eighteen metropolitan areas (including Washington and Baltimore) declined in November.

Washington had a significant 4% decline in housing inventory. Since its the heat from rising Washington prices that have made Baltimore’s cauldron boil over the last few years, this figure is at least as important as the fact that Baltimore’s inventory also declined by a smaller — but still larger than average — 2.6%. This is the second month in a row that monthly inventory figures have declined. While this is a normal trend for this time of year, its nice to know that there is SOMETHING about the current market that is returning to NORMAL.

Unfortunately, today’s Baltimore Sun contained information that is more worrying. The story has to do with a dispute between RealtyTrak and local auctioneers over the amount of increase in foreclosure auctions in the Baltimore marketplace. Local auctioneers (probably the more accurate source of information, in my opinion) estimate that foreclosure auctions have increased on the order of 48% in 2007 over 2006. RealtyTrak came up with the amazing figure of 344% increase for the same period.

As someone who routinely peruses the auction page of the Sun, I do not believe that the number of auction ads have increased by that order of magnitude. But 48% is still ominous, dangerous, and something that we hope does not continue as we head into the spring.

The last few months have been discouraging, to say the least, in the way that the economy and our government has responded to the sub-prime mortgage issue, and the spreading instability in other areas of credit and financing.

At first blush, the concept of preventing the re-setting of mortgage rates for a period of time could have the effect of reassuring financial markets and the consumer that the worst is over. I’ve felt for quite awhile that the main problem — at least in our market in Baltimore — is that the consumer was scared to jump in. Consumer confidence numbers have sagged to very low figures, even as rates stayed reasonable and the employment data remained strong.

But preventing these financial instruments from re-setting on schedule might also just kick the can down the road until the end of the freeze. (Might that be long enough to prevent the current Administration from bearing the political brunt of the resulting damage to the economy? I hate to be so much of a skeptic… and yet, nothing in Washington in the last 7 years have given me any reason to be charitable.)

The other result could very well be that the investment funds and institutions who bought into these financial vehicles because of the out-year prospect of increasing return on their investments might also be destabilized by the freeze of rates at their introductory levels. This could have the opposite of the intended effect, further increasing the uncertainty and moving the country into a full-fledged recession.

How nice it would have been if there had been some regulation of these investment practices at the start. Wall Street will always find a way around current regulation, it seems, to create some new product that blows up in people’s faces (after the traders have made their commissions, of course!).

It should be an interesting winter.

Syndicated real estate columnist Ken Harney had some good news in his column for Friday 8 June, at least for the established, full service brokers: the tough market is causing average commissions to rise for the first time in years. This in spite of the rise of the discount, “no service for no fee” brokerages in the last five years.

While the rise is not going to break many sellers’ piggy banks open — from 5 to 5.2% — it still reverses a trend that brought averages down from nearly 7% ten years ago. But it also seems to be presaging hard times for the new kids on the block: the cheapskate companies that specialized in sellers who didn’t want to pay for anything.

One agent quoted in Harney’s column, who is affiliated with an Assist-2-Sell franchise, stated “One of the biggest misconceptions consumers have is that you need to pay full price to get great service.”

Oh, really? Well, how about the old saying, “You get what you pay for.” I think that most consumers have seen ample evidence in every industry in this country of the rock-solid economic foundation of that principle.

Its true that thousands upon thousands of real estate agents just in Maryland alone have never sold real estate in a market where listing on the MRIS wouldn’t sell a house in days, if not hours. Forget about big advertising campaigns, targeted markets, direct mailings; many of these people have never really had to consider them. They were very fortunate.

They are also now having to refinance their mortgages because they have no business. And the listings they do have aren’t selling, because they never bothered to put certain tools in their kit that would let them weather the storm of a down market.

The bottom line, which shouldn’t be a surprise to anyone, is that in a down market it costs more to market a property. Agents need the promise of more money to front the credit for the marketing. Period. You really do get what you pay for.