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

3435 Guilford Terrace offers an enlarged footprint including a kitchen extension and ground floor laundry room. A spacious Master Suite on the third floor includes a full bath and a dressing area with walk-in closet. The second floor deck overlooks a professionally landscaped backyard and patio. Built in 1918, beautiful details abound in the Arts and Crafts style: inlaid wood floors, decorative trim in the entry foyer and around door frames, and skylights over the baths and the stairwell. Modern touches include ceiling fans, built-in bookshelves, and Hunter Douglas shades.

Oakenshawe also affords the perfect city location. Within walking distance to the Waverly Farmer’s Market, The Johns Hopkins University’s Homewood Campus, the Baltimore Museum of Art and a thriving business district on Saint Paul Street. Oakenshawe is convenient to downtown Baltimore and Penn Station.

Under Contract
Bedrooms: 4
Baths: 2.5

This property has a WalkScore ranking of 86 (Very Walkable).
This property has a TransitScore ranking of 56 (Good Transit).
Click here for more information and the location of local resources.

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If you have been sitting on the real estate sidelines reading your online blogs or news websites, certainly you have seen stories about it. And if you have been out there trying to find a house to buy, you have experienced it first-hand.

The market has gone nuts.

Just six months ago, internet real estate company Redfin polled real estate agents and only 54% said it was a good time to sell, while fully 75% said it was a good time to buy. Just about any Realtor you asked asked would have been encouraging you to get into the market to buy: Mortgage rates are low, low, low! Prices are low, low low! No better time to buy!

Starting last year, investors did begin shopping for properties for renovation, and that boosted the market a bit. But average first time homebuyers were not looking for a property that needed a huge investment of time and money to make it ready to move in. They sat on their hands.

Finally — just in the last three months — Buyers started coming out in droves, looking for “nice” houses in good condition, in a good location. The problem is, there aren’t enough of those “nice” houses currently for sale! We have an inventory problem, which means that there are multiple buyers pursuing each “nice” house that comes to market, bringing back memories of the housing boom all over again.

In another Redfin poll taken recently, 82% of agents now say its a good time to sell, but only 57% now said it was a good time to buy.

Why aren’t Sellers stepping up to the plate and listing their homes? Well, everything that property owners have been hearing about the market for the last five years has been absolutely terrifying. Prices were dropping, dropping, dropping! Nobody is buying! The price of your house is so low you won’t even be able to pay off your mortgage with the proceeds of the sale! If you are able to sell, it’s a terribly long process and you’ll spend months on the market and have to give back thousands of dollars to cover the Buyer’s closing costs!

News like that was not going to get anyone to rush in to their local real estate office and offer their home for sale.

Two things have to happen for the market to settle back into a normal routine. First, Sellers have to get the message that if they own a well-maintained, attractive home in a decent location, and they price the property appropriately, they will be able to sell now without too many problems.

Second, Buyers have to realize this is no longer a market where the Buyer reigns supreme. The days of the rock bottom bargain may be gone. Buyers no longer have the leverage over the Sellers that they have enjoyed for the last few years. Negotiate to a reasonable price, and then say ‘yes!’

Nearly everyone is aware by now that the recent recession and financial crisis began in the real estate and banking sectors. As a result, these businesses have been greatly altered and more heavily regulated by both state and federal agencies. The process of financing a real estate purchase has changed compared to ten years ago. Technology and internet business has continued to evolve and change the way real estate brokers do business, too.

So, if you plan on selling a home this year, or if you plan on buying a new home — or both — here is a brief overview of the changes in the industry from what you may have experienced in the past, or what you have heard from others:

1. There are fewer Realtors in business. The massive influx of new, inexperienced agents chasing “easy money” that took place during the boom has reversed. The number of real estate agents currently in the business is down significantly from the peak. In most cases, the most experienced people have survived because they had developed skills for assisting buyers and sellers in all kinds of economic conditions. This shrinking of the professional work force has also meant that many of the large real estate brokerages have closed some of their offices, and in their place a different broker may have opened a branch office, or a new ‘mom-and-pop’ company may have started up. For a buyer, its still the skill of the individual agent that has the biggest impact on your transaction, but if you are looking to sell a home, the size and reach of the broker you choose may have an impact on how broad an audience your listing will reach.

2. Expenses have increased. Inflation has not gone away, so while prices were going down on homes, everything else was getting more expensive. Flat-fee commissions have gone up, the price of signs, ads, etc. has increased, as have the expenses of just running a business. The seller still provides the cash that makes the transaction work, from paying agent commissions to the growing need for subsidies to buyers to pay closing costs.

3. The market has stabilized. 2012 will go down as the year that most marketplaces began to grow again. Inventory of unsold homes has been absorbed and many buyers are out there waiting for the right home to be listed. However, that doesn’t mean that prices will start to zoom upward. The equity that sellers had in 2004 has shrunk significantly, so be sure to have a reasonable expectation for your bottom line. Buyers need to realize that homes in good condition that are priced well may actually sell at list price. Trying to drive a “hard bargain” may get you a firm “no, thanks.”

4. Technology has continued to put more information in the public’s hands. Whether buying or selling, today’s consumer has unprecedented access to listing information, community information, and tax information, which means that the average buyer does a great deal more research on their own than ever before. However, some of that information is outdated, wrong, or even intentionally fraudulent. They are contacting a Realtor later in the process than ever before and not getting the quality consumer education they did in years past.

5. Loan originators are more heavily regulated. While there were definite abuses during the boom years, the pendulum may have swung too far to the other extreme at this point in the recovery. Mortgage lenders are pickier and require more documentation than ever before. More loan programs are requiring time-consuming mortgage counseling. Bottom line: expect more paperwork, multiple requests for updated versions of the same documentation you provided last month, and the deals that used to close in four weeks now will almost certainly need six.

6. Appraisers are more isolated from the transaction. Some of the new regulation involves separating appraisers from lenders and agents who might apply pressure to have the property valued at a certain level, if for no other reason than to help the sale close. More properties are not appraising at the contract price, and its harder to appeal a value that does not meet the sale price.

The housing market is healing, but its a work in progress. Prices overall are still the most reasonable they have been in years, and mortgage interest rates are still at historic lows. If you are considering a real estate transaction, contact a professional and let us help you avoid the pitfalls of the new marketplace.

When the voting returns came in on election night 2012, it became certain that same sex couples would soon have the ability to get legally married in Maryland. With that status, most everyone assumed, would come the same assortment of privileges and protections that define the institution of civil marriage, including the ability to buy and hold property on the same preferred terms accorded to opposite sex couples. We are now at the point where the marriage ceremonies are beginning to take place, but it turns out that it may not be true that the basket full of other legal goodies will automatically follow.

At least, not yet.

First, what are these “preferred terms” that apply to real estate? Under Maryland law only married couples can hold property as “Tenants by the Entirety,” a quaint legalism that offers better protection against outside seizure than the generally available Joint Tenants or Tenants in Common. In the past, most same sex couples were counseled to buy property together as Joint Tenants, because it offered the right of survivorship if one of the partners were to die before the other, and the property would transfer to the partner by operation of law automatically. That unmarried couple also needed to make sure they had a Domestic Partnership Affidavit to avoid Maryland’s 10% inheritance tax.

Tenants by the Entirety (“T by E”), by comparison, offers not just the survivorship of a Joint Tenancy, but also further protection against one of the partners’ creditors, according to Mark F. Scurti, an attorney with PK Law, PA. whose practice concentrates in same-sex family and estate law. A creditor of one of the partner’s could not attach or seize his or her assets to satisfy the debt as the property is “marital property” and protected under Maryland law,  the only exception being taxes owed to the IRS. “T by E” was created as a way to protect the marital home and the security of the family unit, while still allowing only assets held by one of the partners to be a risk to creditors.??Scurti states assuredly that same sex couples married in other states have been able to hold Maryland property as Tenants by the Entirety since May of 2012, when a case he handled with Michele Zavos, Port v. Cowan was decided by the Maryland Court of Appeals.  His firm has drafting and filing such deeds throughout Maryland ever since.

Other legal professionals disagree. F. Michael Grace, the corporate counsel for Sage Title, one of Maryland’s largest title companies — the entities that conduct most real estate closings in Maryland and that write and file the most deeds — believes that “the jury is still out” on whether same sex couples married in Maryland or elsewhere “can avail themselves of the best joint tenancy that is up until now been traditionally for a married male and female.” Grace believes that further action by the legislature is required in order for the extra protection of “T by E” to become available to same sex married couples who own property in the state.

Some of the sponsors of the Marriage Equality Act in the Maryland legislature are equally perplexed. Delegate Luke Clippinger (D-46-Baltimore), when contacted for comment, was unaware of the issue and went himself to the Office of the Attorney General (OAG) for clarification. “I’ve learned,” he wrote, “that the OAG is in the process of analyzing all of the aspects of State law that are impacted by the passage of Question 6. I am told that the issue of Tenancy by the Entirety is high on that list. Once the OAG completes its review, they will present the results to Members of the General Assembly, and we will examine their findings and determine the best course of action.”

Del. Maggie McIntosh’s office (D-43-Baltimore) went in a different direction for clarification. Her District Manager, Matt Stegman, said that the Delegate and House Speaker Busch were “aware of this issue and several others related to property and tax rights for married same-sex couples. Currently they are looking into it and determining if the necessary changes can be made administratively, or if they must be done through legislation.”

State Senator Richard Madaleno’s office (D-18-Montgomery County) was contacted, but did not respond to the inquiry before the print deadline for this article.

So, while there will be many happy gay and lesbian couples taking their vows and beginning married life in Maryland in these early weeks of January, it may be many more months before they, their lawyers and accountants, Maryland court judges, and government bureaucrats can really say for sure just what protections and privileges they have gained by exercising their new right to be married. Same sex marriage in Maryland appears to be less of an accomplished event and more of an ongoing evolution than anyone was willing to admit last November.

Refinancing? Taking out a home equity line?

Both of these are fantastic ways of capitalizing on today’s very low interest rates, and the fact that major banks are beginning to loosen the credit strings a little bit. But, as a consumer, one of the things to which you need to pay close attention is that these loans actually die when they are paid off. Otherwise they can rise from the dead, like a bad Halloween movie character, to wreak havoc on your future happiness! <Insert evil laugh here.>

I recently represented a Seller who had refinanced more than ten years ago. When it came time to sit down at the settlement table to sell this house, the title company confirmed that the old loan, which he thought had been paid off more than ten years earlier, had never been recorded as paid.

This is probably more common than you would think. This client had let the new lender pay for the costs of refinancing – like most people would – and the title company they used had neglected to follow through on recording the payoff of the first loan. So, it should be easy to go back to that lender and that title company and get proof of the payoff, right?

Wrong. In the intervening decade the housing crash had taken place. Both the lender and the title company were no longer in business. A new lender had bought out the old one, but they had moved all these old files into “deep storage” and they said it would take two months to retrieve the file. The house was supposed to change hands in two weeks. Obviously, this was a nightmare to rival any Halloween scary tale!

Likewise, most home equity lines do not go away when the balance is zero. The line of credit remains open, even if unused. That often shows up as a lien on the property that has to be satisfied before the property can change hands. This also can be an unwelcome surprise right before settlement.

So, when you sit down to refinance your loan or write that last check to pay off the home equity loan, think about these zombie stories and take care to 1. Ask the title company to send you confirmation that the loan payoff has been recorded, and keep on them until they do, or 2. Write a letter to the bank to accompany the equity line payoff and ask them to close the loan. Follow up with them to make sure it gets done.

If you plan on selling your home and have also refinanced in the pre-housing crash days, it wouldn’t hurt to be pro-active and follow up with the title company who conducted the refinance and make sure that the old loan payoff was recorded.

This way, no old loan zombie will ever rise up on a dark and stormy night to threaten your future happiness!

As we head into spring, there’s some great news brewing in the housing market. But, don’t take my word for it, here’s what other news sources have to say.

First, the RE/MAX National Housing Report for March put it best:  “For the first time in 18 months, home prices in February rose higher… Prices in the 53 cities surveyed by the RE/MAX National Housing Report rose by 1.1% over February 2011. Home sales were even higher, up 8.7% from one year ago. With a positive sales trend of 8 straight months above the previous year, it’s looking like 2012 will witness a very strong home-selling season.”

That should be enough reason to set off some fireworks. But, there’s more. The Huffington Post uploaded an article on the housing market in early April under the headline, “Renting a Home Costs 15 Percent More Than Buying One.” That turns common wisdom on its head, since historically renting a home has been as much as 10 percent cheaper than owning one.

Not anymore. Because of very low vacancy rates — at a ten year low — rental rates have skyrocketed. In fact, a recent report by the National Low Income Housing Coalition found that it would take a minimum wage worker 100 hours of work per week just to afford rent. Even the average American renter, making a little over $14 per hour, needs a 29 percent raise to be able to afford an average apartment and have enough money left over for other expenses. Ready to ask your boss for a 29% raise?

With mortgage rates still very low for qualified buyers, its clearly time to buy. The website rentorbuybaltimore.com recently compared the costs of buying a $200,000 home against renting a $2,000 per month apartment — not uncommon these days in the harbor neighborhoods. The results, according to a New York Times calculator, showed that after just two years buying was better than renting. After five years, buying that home saved nearly $64,000 over renting.

Buyers are returning to the Baltimore area home market in droves this spring. There are even multiple offers coming in on desirable homes. If you were waiting for signs that the housing crash was over, then this is your time.

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.

As 2011 winds down, there are only a few things we can know for sure. One of those things is that the real estate market will continue to be a major topic of concern and conversation in 2012. With a growth in consumer confidence in November, continued low interest rates, and a slight increase in activity in the market this December, there is more than a glimmer of hope that the new year will finally (finally!) bring some welcome relief to housing which will aid the economic recovery.

So, with that hope in mind, here are a series of questions you might ask yourself this New Year’s Eve to help you decide if 2012 is the year that you should buy a home.

How long do you anticipate being in Baltimore?

The average American homeowner stays in their home 5-7 years. If you think that because of your job, education, or family life that you will not be in the region for a minimum of 3 years, then perhaps renting makes more sense for you. If, however, you don’t foresee a relocation within that timeframe, then you should definitely consider buying over renting.

Where do you want to live?

If you love the popular neighborhoods within walking distance to the Inner Harbor, Fells Point, O’Donnell Square, the Can Company, or other regional attractions, then you will be paying top dollar to rent. Of the 41 rental apartments listed in those areas on October 31, the average rent was $2,000 per month.  Most landlords will require that you provide a first and last month’s rent, pet deposit (if you own a small pet), fees for the Realtor® and for your credit report(s). You could easily be writing checks for more than $4,500 just to secure that prime rental you want. A $2,000 monthly rent means you will also be paying your landlord $24,000 without having any equity, and no housing-related tax deductions on your Federal income tax return.

What life changes may happen during that time: will you marry? Have children?

Nobody has a crystal ball, but most first-time buyers are considering the purchase for specific reasons. Perhaps they feel that they have reached a point in their lives where they want to start a family. Some may be far from settling down in the marital sense, but have had a landlord raise the rent every year and want some kind of security in their home. There are too many motivations to list, so what is the impulse in your life that is making you consider this move? Most likely you anticipate a change in lifestyle that will impact your daily routine for a few years. How much living space will that require? What other amenities would you want? Can you see that new life taking place in a home that someone else owns?

How long have you been in your job, and do you feel secure in it?

One of the most common reasons that first-time buyers have been hesitating to enter the housing market is uncertainty over the depth of the economic downturn, and whether their job is secure. Certainly if you work for a new start-up company, or if you have only been in your job a few months, this economy might not be too kind to your source of income. Buying a home might not make sense.
But in this region, there are a fair number of institutions and agencies of government — state, local and Federal — that provide stable, secure employment year after year. If you are in that situation, then you are in a prime position to capitalize on this most affordable housing market.

Do you believe that home prices in this region have stabilized?

Statistics for the Baltimore-Washington metro areas say “yes, they have.” It appears that we have hit a rough bottom that will bounce around a bit, but there isn’t any significant price depreciation at this time. Our inventory of homes for sale is decreasing, and the number of transactions are beginning to slowly increase. With supply falling and demand beginning to move up, basic economics would argue that we should start to see some modest price increases by this time next year. Mortgages are hovering at historic lows, in the 4% range. Add that to the mix, and it would seem that the most affordable time to jump into the housing market is now.

If home prices stabilized but did not increase over the next three years, would you be comfortable with the investment?

Whether you invest in stocks, pork bellies, or real estate, most professionals encourage the individual investor to take a long term view and not be too concerned about daily results. In real estate, while there is no market indicator to follow, there can be press releases every few days with contradictory results based on different locations. The importance of each bit of data can be confusing. Past long term performance of real estate as an investment indicates you should see a small rise in your home’s value over that period. But even if prices stay level, by making your monthly mortgage payments you will have been building equity in the property and you will have been reaping tax benefits from being a homeowner. You will not have been stuffing your money into someone else’s bank account! There are several online calculators to help you compare the economic advantage of buying over renting. I link to a particularly good one at www.rentorbuybaltimore.com.

Did you know that home ownership has been the largest source of individual wealth in American history?

Its true, and there have been many studies that quantified it over time. Buying a home is the largest monetary transaction that most people ever experience, and its the growth in equity in their home that provides the average American’s greatest source of personal net worth. As we move through the 21st Century, with retirement programs in jeopardy, home ownership and that source of wealth will become even more important in determining a retiree’s quality of life after leaving their jobs.

Would having professional assistance make you feel more comfortable in going through this evaluation process?

While most people buy and sell homes only a few times in their lives, professional Realtors® guide their clients through many such transactions every year. We can help you avoid some of the most common pitfalls, and represent your interests through the intense negotiations that can sometimes take place to deal with important issues. We can also recommend ethical, competent professionals to build a team — mortgage officers, title officers, home inspectors, and more — to make sure you have the best people working on your behalf.

However you decide to proceed in 2012, I hope you have a wonderful year and that its the first of many.

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?