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

I recently asked Richard Pazornik of SunTrust, one of my recommended loan officers, to sit down and walk through a Question and Answer session with me so that we could fully explain the new 2010 housing credit for homebuyers. As you probably know, the initial tax credit from 2008 was beefed up in mid 2009 when Congress increased the amount of the credit and stopped requiring that it be paid back over time. That program was supposed to expire at the end of November, 2009.  But last Fall, the housing and mortgage industries pushed to have the credit extended.  For a while, Congress seemed to be willing to let the credit expire, which would have had a devastating impact on the housing market which was struggling to stand up again.

Fortunately, Congress and the President were eventually persuaded that extending the credit was in the best interest of the economic recovery.

W: So would you go over how the tax credit works?

R: For first-time homebuyers, which means someone who hasn’t owned a home in the last three years, you’ll get that same $8,000 tax credit if you sign a contract to buy a home before midnight April 30th, 2010 and you have to go to settlement before midnight June 30th, 2010.  Hopefully, we will be very busy those two days!

The new Tax Credit also sets a maximum income at $125,000 for a single person and $225,000 for a married couple.  Above those limits, the credit is phased out.

W: Now, Congress has expanded the credit to “move-up” buyers. What does that mean?

R: A “move up” buyer can now get a tax credit of $6,500, if they’ve lived in their home continuously for 5 of the last 8 years as their primary residence.
The same income limits and phase outs apply to move up buyers as applied to first-time homebuyers.

W: Can someone buy any house on the market?

R: They can buy any house as their primary home so long as it’s priced less than $800,000.  So here in Baltimore, this covers about 96% or more of all the homes listed in the Multiple Listing Service.

The government sweetened the deal by allowing taxpayers to go back and amend their prior year tax returns to claim the tax credit quicker and if your above the income limits in 2010, go back an look at your 2009 income, you might be better off!

W: What’s the difference between a Tax Credit and a Tax Deduction?

R: Well, a tax credit is a lot better than a tax deduction.  A credit is a dollar for dollar reduction of your tax bill and a tax deduction only saves you a portion of the amount based upon your actual tax rate.  Now, I wouldn’t turn either down, but I’d much rather have an $8,000 tax credit than an $8,000 tax deduction.  And here’s why, if you’re in a 20% tax bracket an $8,000 deduction would save you $1,600 in taxes but the $8,000 tax credit actually saves you $8,000 in taxes.   That’s why this credit is so good! But, there’s a warning I need to give.  If you sell the house within three years then you must repay the $8,000.

W: So, let’s say I’m a regular wage-earner who has taxes deducted from my pay. How would this tax credit work?

R: It means your tax bill is actually decreased by $8,000.  So for example, if you had $5,000 deducted from your salary for your Federal Income taxes and your tax bill computed to be $2,000, normally, you would’ve received a refund of $3,000.  But, if you sign a contract to buy a house before April 30, 2010 and it settles before June 30, 2010, when you file your taxes in April of 2011, you’ll not only receive the refund of $3,000, but you’ll also get an additional tax credit of $8,000 making your total refund $11,000.

W: That’s a nice piece of change! So what is your overall impression of this new program?

R: Overall, I’m thrilled that the Homebuyer Tax Credit was extended and expanded and here are the 3 keys to remember;

• Income, $125k single, or  $225k couple
• Home Price, $800000 or less, and
• Contract, signed by April 30, 2010 for settlement by June 30, 2010.

While the market has been flooded with good news in the last few weeks, an end of the year reflection still shows we have lots of work to do in the new year.

For a transcript of this podcast, please email me at .

Who says you have to be depressed during the greatest economic catastrophe since the Great Depression?

Three international researchers recently announced that they have used a mixture of economic, industrial and Gallup poll data to rank the individual US states by happiness level. Their resulting study, which will be published in the December issue of the Journal of Research in Personality, crowns Utah as the happiest state in the Union. And you wondered why all those gleaming smiles were wandering around the Great Salt Lake! The most unhappy of our nifty fifty is West Virginia. Perhaps it has something to do with all those incest jokes at their expense.

The study measures physical and emotional health, overall satisfaction with the respondents personal and professional lives, and how they view the possibilities of the future. Their findings discovered a direct correlation between higher happiness scores and more concrete measurements of education, wealth, diversity and a larger proportion of creative occupations — you know, the giddy artsy types like artists, architects, writers, teachers, engineers, scientists, and so on.

You know… I don’t think I would ever have defined an engineer or a scientist as one of the artsy occupations. Lets hope they start to buy houses soon and make the rest of us even happier.

Anyway, where is Maryland on the list? Actually higher than you think! Maryland ranks as number 6, the highest ranking of any east coast state. The top five are all in the west or midwest, and we beat the pants off of all of our neighbors — not just the Mountaineers. Virginia is closest to us at number 15; Pennsylvania is way down at number 32; Delaware moans its way to number 36.

So, the next time you find yourself thinking that the grass is greener on the other side of the … border — any border, just pick one — smile and remember the value of all those wild and crazy mechanical engineers, and all the joy they bring to your life.

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.

A drop in consumer confidence frustrates the market as autumn settles in and buyers disappear.

For a transcript of this podcast, please email me at .

It’s time for me to take a position on a controversial discussion beginning to take place around our offices, and in Washington.

Congress should act quickly to not just extend the Homebuyer Tax Credit, but it should also be expanded to cover more transactions and move beyond first-time homebuyers. Our marketplace is still very fragile. The real estate market, admittedly, was the starting point of this severe recession and needs to be supported so that the “tender green shoots” of recovery continue to grow and spread into next year. We will have new foreclosures entering the market, new short sales, and continuing economic distress long after the current expiration date of November 30. Its likely, in my opinion, that the housing market will shrink in the new year without this stimulus — which could jeopardize the health of the economy. The reasons for extension are perfectly clear.

The argument for expansion is equally compelling. First, the existing first-time buyer credit has jump started the under $250,000 segment of the marketplace, but in our area it has not had a similar effect on ‘move-up’ homes or ‘downsizing’ condominiums. To begin to spread the wealth, and help struggling homeowners out of economic distress, or the growing family feeling the pinch in a terrible economy, expansion of the tax credit to those segments would have an incredible effect on associated businesses and communities. There’s very little stimulus that would have the same impact for each dollar invested, not only in actual capital investments but also consumer sentiment, arresting the slide of home values and shoring them up against further upheaval.

In order to make the distribution of these monies is equitable, the eligible properties could be defined as those falling under the regionally adjusted FHA loan guidelines. That would effectively exclude investors and the very wealthy whose properties would require non-FHA ‘jumbo’ loans. This is an idea whose time is right now.

The Baltimore-Washington marketplace was awash in good news, even before Fed Chair Bernanke declared the recession over!

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I don’t usually lift large sections from local media, but this article in the Baltimore Business Journal by Rachel Bernstein, caught my eye:

Baltimore was named one of the top cities for young professionals to work in, based on cost of living, educational opportunities and the city’s nightlife.

The survey was conducted by Madison, Wisc.-based Next Generation Consulting. The report broke down cities into three population categories — Baltimore in the largest city category for those with more than 500,000 people — and evaluated them based on assets the report deemed as important to 20 to 40 year olds.

Among the other cities in Baltimore’s category, San Francisco was named No. 1. Baltimore was named No. 7, beating out Portland, Ore., New York City, Chicago and Los Angeles.

The seven indexes of a top city, or “Next City,” are average earnings, dedication to education, cleanliness of the city, around town, nightlife, cost of lifestyle and safety and diversity of the
population, according to Next Generation Consulting.

Baltimore residents have historically had an inferiority complex about their city compared to their more cosmopolitan neighbors in Philadelphia and Washington. But in the last ten years, the city skyline has grown and spread across acres of what once were parking lots and hinterlands. Neighborhoods have revitalized, and a burgeoning arts and entertainment scene has developed — whether its theatre in Mt. Vernon, fine arts and art galleries in Fells Point and downtown, or live music in Fells Point. Baltimore now has one of the most heavily populated downtown areas among cities its size, with the re-development of old office buildings into modern apartments and condos and the return of grocery stores and even big box retail to the Inner Harbor. And never forget about the added life that the tens of millions of Inner Harbor visitors, sports fans, half-dozen new hotels, and an expanded convention center bring to the city.

Baltimore’s affordable housing certainly provides one of the most important boosts to this type of favorable publicity. People can afford to live here, and live well. That’s a message that really needs to be told, and its studies like this that will tell it better than an ad campaign or promotional gimmicks that the public doesn’t always trust to be accurate. Young, first-time homebuyers have been the rock on which the budding recovery of our housing market is being built — the very buyers that are covered in this survey. The timing couldn’t be better for this type of news.

Baltimore is moving from the classification of “big small city” to “small big city”  and its about time.

Recent economic statistics and recent opinion polls are showing a peculiar dissonance in the public mind.

On one hand, economic news lately has been predominantly positive. Unemployment, while bad, has not risen as fast as had been predicted and there is even some evidence that its slowing and may be in the process of turning around. Housing news has been (and I feel will continue to be) positive, as residential resales and new home construction have both increased at surprising rates this spring. Even media outlets that tend to look on the dark side all the time (are you listening, Baltimore SUN?) have written headline stories on the positive trends that are developing. It would seem that economic stimulus, an increase in positive consumer sentiment, and other factors are turning this recession faster than had been predicted just six months ago. Great news, right?

Then how can the news be explained that a growing number of people are dissatisfied with the performance of the new administration and are losing confidence that the stimulus and the new government spending, regulation and other initiatives aimed at the recession will work? It would seem that the evidence is all around them, that it will — and is working — right now.

I have a couple of theories. First is simply that as a nation our ability to wait for good things has been severely diminished over the last 30 years. If its hard, if it takes awhile, and if it requires personal sacrifice, we don’t like it. We lose patience quickly, and blame the very people whose policies and principles are necessary to achieve the goal. Second, as a body politic, we have not yet managed to shake the poisonous habit of the last decade of shouting doom and gloom and twisting reality simply to fashion a hammer with which to beat up the other side. This has begun to achieve Orwellian dimensions… no matter the reality, no matter the truth… simply say the lie often enough and some people will believe it. And as more people join the Falsehood Chorus, more people believe. Passionately.

In my own personal life, I’ve seen friends who I have always credited with being smart, reasonable people become raving lunatics by repeating things that they have heard that are simply ridiculous. And believing them.

This gives me unease, both for the future of the efforts to curb this recession and return us to economic health, and for the future of the country. But as long as the public rewards the liars, the lunatics, the hatemongers, the loud and bombastic over the truth seekers and the reasonable explainers… we will be condemned to travel the wrong paths.

The recent statistics published by the National Association of Realtors — that pending sales of existing homes rose 6.7% in April over the previous year — was the first time in the last several months that highly publicized statistics actually agreed with the experience I was having, out in the trenches. Finally the stats publicly confirmed that people *were* returning to the marketplace and putting homes under contract. Throughout April and May I’ve been busier than I have been in years, and put in five contracts worth about $1.4 million total … one of which has now settled. And as I look around my office, I’m hearing tales of similar activity. My colleagues and I were running crazy, but none of the national statistics were showing it.

So this is real *good* news, but its also *real* good news. Statistics don’t always show what’s going on beneath. And the media — for whatever reason — prefers to trumpet bad news over encouraging developments. If this manages to keep going through the hot months, we will have a genuine recovery under way, with declining inventory and stabilizing home prices. I just hope that if that happens, the people who decide what news *is* will decide to let everyone else know. I’ll certainly be broadcasting it to anyone who will listen.