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.

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.

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.

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?

For the last few years, there’s been a real decision for consumers, especially younger consumers who might never have owned a home before, as to whether it made economic sense to buy a home. Home prices have generally fallen all over the country since 2006 or 2007, depending on your region, and many buyers decided that the possibility of buying a house as it was losing value was too scary from their perspective. Some consumers who were homeowners and had to move for their job sold their home and rented in their new city.

The Rent vs. Buy contest is now beginning to tilt back toward the Buy side in many areas. Trulia, the well-known real estate website, publishes a Rent vs. Buy Index every three months. On that list, they rank the fifty largest metro areas in the country, based on a ratio comparing the costs of home ownership with the average cost to rent. In their First Quarter 2011 Index, thirty-six of the fifty regions qualified for the “Much Less Expensive to Buy than to Rent” classification, including Baltimore (#11) and Washington (#13).

Renting a home in this region has gotten comparatively more expensive in the last few years as vacancy rates have declined and landlords have enjoyed stiff competition for their properties. But there are also several reasons why now may be the best time in many years to consider purchasing a home.

1. Prices in the greater Baltimore-Washington region have begun to stabilize. Especially on the Washington DC end of the region, as prices in the District have actually increased 8% in the last two years. One of the biggest advantages Baltimore had in the last decade was its affordability when compared to Washington. If prices have begun to rise in DC, Baltimore will once again start to look like the bargain it still is (even with much publicized commuter rail problems between the two cities).

2. Interest rates have started to rise, and are about .5% higher than at their low point last fall. We’ve been hearing about how interest rates have tumbled to low points not seen in fifty years, and while they continued to fall or held steady, there was no motivation to buy. In fact, many buyers watched falling home prices and decided to wait, no matter what the interest rates were doing. But now, with prices starting to stabilize and interest rates actually rising again, we may be at the most affordable point in the cycle.

3. Interest rates are predicted to be yet another 1% higher by the end of 2011. For an idea of what that might mean to a potential buyer, I used one of my own current listings and calculated the principal and interest payment that would be available today to a qualified buyer, and then did the same calculation adding 1% to the interest rate. With everything else staying the same, the mortgage payment went up by about 5%. On a $1,500 a month payment at today’s rate, that means the buyer will pay another $900 every year just on principal and interest on their loan.

To me, that says it may be time to get off the rent bandwagon and start looking to cash in on the bargains that the housing crisis has created.

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?

Every real estate agent I know is thankful that 2010 is nearly over. When the year began there was a lot of hope that the housing market would begin to recover by year’s end, and the Federal Homebuyer Tax Credit was stirring people to buy — boosting that hope.

But when that credit expired, hopes for the recovery began to expire as well. One of the hottest summers in memory kept people inside, and the economic news kept us all sweating. Late summer and early autumn sales numbers retreated back to levels that were equal to the worst of the housing slump.

Never mind that housing prices continued to fall and started to look like good values again, or that mortgage interest rates had fallen to levels that hadn’t been seen since our grandparents had been buying homes. No amount of good news could convince the buying public that it was time to make a purchase.

One of the most important trends of 2010 is only now beginning to become plain: the huge number of properties in distress — either 90+ days late on the mortgage, listed as a short sale, in pre-foreclosure, or actually foreclosed upon and bank-owned — was creating a large “shadow inventory” of homes that lenders were not listing for sale because buyers were not absorbing the distressed properties that already were on the market.

There are a couple of sources for this information. In late November, CoreLogic released a report on the large increase in the “shadow inventory” in 2010. As of August, there were 2.1 million units of housing classified as being in that shadowy group, up more than 10% from the previous year. When added to the 4.2 million “visible” units currently for sale, that constitutes a distressed property glut that isn’t moving. According to CoreLogic’s report, Maryland has a two-year supply of such distressed properties; the figure for Baltimore-Towson is only slightly better, with an 18-month supply.

While the sharp and rapid rise in the number of properties included in this category is alarming, at the same time overall sales figures were falling, and the proportion of distressed homes within the number being sold also fell. According to the National Association of Realtors’ 2010 Homebuyer Survey, only four percent of buyers purchased a home that would be categorized as “distressed.” Nearly 40% of those buyers did not even consider a distressed property among their home choices. Of the remaining 60% who at least considered such a home, one-third decided against it because the process of dealing with the lender as seller was too difficult or complex. One-fourth decided against it because the house was in poor condition; the remaining buyers just couldn’t find a distressed property that they liked.

What does this mean? Different professionals will come to different conclusions about this data, all of which was just released at the end of November, but here are two things that I believe are clear:

1. Buyers are learning that purchasing a distressed property, especially a short sale, is not easy and the vast majority of them are opting not to do so. Since half of all homebuyers in 2010 were first-time homebuyers, it might be that the uncertainty of how long it will take to settle such properties makes them impractical. While these first-time buyers don’t have a home to sell, they do have a landlord who requires a set amount of notice to get out of their lease — give notice too soon, they might become homeless; give notice too late, and they might be required to pay extra rent. If lenders want to make these distressed properties more attractive to these buyers they have to standardize the short sale process and get it done in a predictable amount of time.

2. Lenders may have to hold back millions of dollars worth of ‘shadow inventory’ well into the future. That means maintaining these properties in liveable condition for an extended period of time. Most lenders are NOT good at this. While they want to get their money back on these properties, they cannot flood the market with them all at once. Not only will that drive down the price on the properties for sale, it will also drive down the values on the neighboring properties, putting more homeowners “under water” and destabilizing the neighborhood. Since that lender may also hold the mortgages on a significant number of properties in the vicinity, flooding the market with bank-owned properties just drives down the values of the rest of their investment portfolio. So, while they won’t like the idea of holding on to these properties, self-interest will demand that they do.

There are many indicators that actually give hope for a much better 2011. I’ll cover those in January’s post.

I hope all of my readers have a peaceful holiday season, and best wishes for a prosperous new year!

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