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

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?

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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Ever since the groundhog predicted an early spring, most of us have been eagerly waiting for the little guy to be proven right.  And while the weather makes it a day-to-day affair to know if winter is truly over, from the real estate data coming out lately it seems that spring truly has arrived early.

February 2011 statistics show that in the Baltimore region, home sales were up 7% over February of 2010.  Down in the Washington metro area, which includes nearby Montgomery and Prince George’s Counties, pending home sales in February increased a whopping 33% over the same month a year earlier. The median home price in February 2011 in the DC region was $300,000, down from $309,000 the year before — but Baltimore’s median home price in February 2011 was $205,350, down from February 2010′s by 9.54%.  So, Baltimore metro still remains a much more affordable alternative for Washington-area homebuyers, even with price declines, and a lot of the activity here has come from DC residents looking for less expensive housing, a trend we expect to continue.

All of this is good news, unless you happen to be selling a home right now. From a seller’s perspective, the overriding issue is the number of distressed properties currently flooding the market and driving prices down. Most buyers enter the market eager to snap up a bargain, but not fully informed as to exactly what it means to them to buy a distressed property, or the differences between the types of distressed property currently on the market. So here’s a brief overview to get you up to speed.

The largest category of distressed properties include homes listed for sale that are “under water” — where the owner owes more than the house could currently sell for in the market.

Short sales are where a seller, who is under water, also doesn’t have the money to make up the difference and has to ask the lender to forgive the amount of the shortfall. Short sales get their name from this seller’s shortfall, not from the amount of time they take to settle — which is anything BUT short. Generally, the seller is still in the home and has listed the house as a short sale in consultation with their bank or institutional lender. The mortgage is still in place, as are all the investors who bought into that mortgage once it went to the private equity market. Sometimes there is a second mortgage, and yet another set of investors. Before a property can reach the settlement table and transfer to a new owner, the current seller has to negotiate a contract with a qualified buyer and then start to make the case to the lender(s) that he/she will require financial assistance to sell the property. If the lender(s) accept the fact that the seller is truly in distress, they then have to go to their investors and get them to agree to take the loss. All of this has to take place before the lender can notify the buyer if the contract offer will be acceptable — even if the contract has been signed by the seller.

This process is long and tedious. Buyers and their agents can only wait on the sidelines while the lender(s) and investors  go back and forth with the current owner to satisfy all the paperwork requirements. In today’s market it is not unusual for a short sale to take more than three months to settle, nor is it uncommon for a buyer to wait three months to discover that their offer will not be accepted by the lender at all. Most first-time buyers, who are dealing with a landlord who needs a specific date upon which his rental apartment will be vacant, cannot consider short sales as a viable option.

Foreclosures are where the lender has evicted the previous owner, passed the loss along to the investors who are now out of the picture, and has taken ownership of the property. Foreclosures are usually listed for less than market price, which is why they tend to drive down property values in the area.

Foreclosures present a completely different set of challenges from the buyer’s perspective. With the previous owner and the investors gone, the chain of authority for decision making is much clearer, but the bureaucratic nature of most lenders removes much of the give and take you’d find in a real negotiation. Listing prices are usually set with a businesslike efficiency, and routinely reduced on a four to six week schedule if no qualified buyer has surfaced. In between reductions, there is usually little flexibility on price. Many buyers think the bank will be desperate to negotiate and get rid of the property, only to have their opening low offer rejected in short order because it is too far below the current listing price.

A majority of foreclosures also need some level of renovation before they can be occupied. While this can be a great way to get a newly renovated house at a good price, many first time buyers are not ready to handle the purchase experience and then jump immediately into working with a contractor to complete a four to six week renovation.

If you’re a buyer in this market, do your homework, and you can truly use the current distress to your advantage and end up with equity in your new home from day one. But be realistic about your goals and your abilities, and if you don’t think your life will allow you to deal with the uncertainties of a short sale or the responsibilities of a renovation, stick to conventional non-distressed listings with individual sellers where the timeframe and the purchasing process is much more predictable.

For several years, the answer for many first time buyers was “rent.” That may be changing.

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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 month its time to answer a couple of the questions I’ve been getting from readers.

Q. My brother graduated from college five years ago and got a great loan to buy a house, using 100% financing and settlement assistance programs to pay most of his closing costs. Now I’m graduating in December, have got a sweet job lined up, and I’m being told no one can help me. What’s the deal?

A. Well, you’re a victim of the real estate meltdown. The generous financing programs that fueled the real estate boom of the last decade were one of the first things to go after it all came crashing down. The current market is on a different planet than the market of five years ago: some of the largest lenders in the country then have disappeared today, or been absorbed into bigger companies, and we’re going back to the “good old days” when you had to have some skin in the game.
There is some good news. FHA loan programs still allow you to buy a home with just 3.5% of the purchase price as a downpayment. Also, many of the settlement expense loan programs are still out there for qualified buyers. Try to keep your debts down (including student loans and credit cards) and save some money, and you should be able to purchase a home before you know it.

Q. I bought a house in Baltimore with something called a Ground Rent, but it was one that no one has been collecting. I’ve heard that there was a major change in the law that might allow me to get rid of it altogether, and I’ve also heard that wasn’t happening. I’m confused.

A. Ground rents confuse everyone, so you’re not alone. A ground rent is, literally, a lease payment for the right to use the land your house is on, like the old ‘quitrent’ you might have learned about in medieval history class! In Maryland, they generally are collected by someone, and can be bought out by a homeowner for a small payment and legal fees after which the deed is changed to Fee Simple (where you own the house and the land together). Some Maryland ground rents, you’re correct, are so old that no one is actively collecting them. Also, some were not redeemable at all.
After a small scandal a few years ago where someone actually lost their home for non-payment of the ground rent, the legislature tried to modernize and reform the ground rent system by creating a registry, and setting a deadline by which all ground rents had to be registered by the owner, or else they would become void.
Ground rent holders, however, have challenged that reform in court. So everything is on hold until that case is heard and judgment is rendered.

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Most homebuyers are interested in technologies that will save energy and reduce the monthly utility bills. Reducing energy consumption is also a primary goal of “green” technologies, and there are many ways to reduce the amount of energy you use without having a major impact on your lifestyle.

Owners of existing homes, however, are sometimes reluctant to research this subject because the flashy, high profile technologies, like solar panels, are expensive to implement and inconvenient to try to retrofit into older homes.

Reducing energy consumption is essential, however, both for the long term good of the planet, for assisting stretched household budgets, and — and this may be a surprise — for making your home competitive when you are trying to sell it. Replacing appliances and windows will raise the value of your property considerably, and on top of your monthly savings on energy, will reduce the cost of the improvement by resulting in a higher sales price. How? Most buyers in this market will research the monthly energy costs the current owner is paying, and this information is readily available with a simple phone call to your utility.

So, here are a few suggestions for ways that you can reduce your energy bills, and in the process, update and make your homes more attractive to new owners when that time comes.

1. The first way is the easiest and the cheapest. In fact, you’ll save money from the very first day: Take advantage of utility deregulation in Maryland. Finally, more than a decade after it was enacted, utility deregulation has resulted in real competition for most Maryland utility ratepayers. Check your current bill, and you’ll see a “rate to compare,” which is the amount your electrical supplier is charging for electricity.

Be aware of the fact that your electrical supplier is now separated from the company that delivers the power to your home. The delivery company will remain your local utility. You will receive your bill from them, as always, and call them if there is a power outage.

Make sure that your new supplier beats that “rate to compare”, doesn’t make you sign a long-term contract, doesn’t charge you to switch (or to leave), and doesn’t lock you into a particular rate. Rates go up dramatically in the summer, and come back down in winter. Its in the consumer’s interest to let that rate float, not be locked in at an inflated price. The supplier that I’ve recommended, who meets all of those criteria, and who offers the additional bonus of buying green wind-generated power, is Viridian. You can research this company, and switch your supplier if you wish, all online at www.viridian.com/charmcity. A list of all the companies that are currently licensed by the Public Service Commission is available at http://webapp.psc.state.md.us/Intranet/SupplierInfo/searchSupplier_E.cfm.

2. Pay attention to those Energy Star labels when you are replacing appliances, especially refrigerators, washers and dryers, and water heaters. According to the US Department of Energy, these appliances are accountable for about 20% of your home’s energy consumption. Older appliances, pre-1990 vintage, can consume double the energy of their new replacements. And until the end of 2010, there’s a Federal tax credit of up to $1,500 for the purchase of energy efficient products, like the new line of tankless water heaters, which are on average 24-34% more energy efficient than conventional storage tank water heaters.

3. Are your windows old and falling apart? Replacing them with more efficient models can save up to 25% of your winter heating bills and 15% of your summer cooling expense. Properly installed, modern windows are also a huge selling point for a new owner, and they can make your life a lot more comfortable.

The US Department of Energy maintains a website which outlines these type of improvements, their relative benefits, and — if you’re not ready to do any of these types of replacements — can offer ideas for inexpensive alternatives, all of which will reduce your energy bottom line and reduce our usage of fossil fuels. You can access that website at http://www1.eere.energy.gov/consumer/tips/index.html.

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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.

The Senate of the United States has passed legislation that not only extends the $8000 tax credit for first time homebuyers, but that expands the stimulus and offers a $6500 credit for current homeowners (who have been in their homes at least five years) to sell and move up into a new primary residence. Both of these would be available for contracts ratified by the end of April, 2010 and that settle before the end of June.

When I called for the extension and expansion of the credit in this blog a few months ago, not many of my colleagues gave the proposal much chance of actually coming to pass. Thank goodness there was one civic minded Republican and former Realtor, Johnny Isaacson from Georgia, who was able to give a bi-partisan impetus to the measure and who has championed it through. The House of Representatives now must pass the bill and send it to the President, who has indicated he will sign it.

Hopefully this will coax skittish buyers back into the market, and give encouragement to the many families who are sitting tight in their now-too-small homes to jump into the real estate market to move up.

Housing led us down into this mess, and in order for public confidence to stabilize and for people to start feeling better about the economy, housing must lead us out. This bill is good, public-spirited legislation that points out the constructive role that the government can play in economic affairs, if politicians could simply get their own ambitions out of the way. Its too much to hope that this effort will lead to other bi-partisan efforts. But that is what the country needs right now.