Jason Berkowitz wants to sell his family's townhouse and get a place nearby with more room, but there's a lot less on offer than you'd expect in a buyer's market.
The number of homes for sale in Berkowitz's Lutherville-Timonium ZIP code is down to levels not seen for five years, just before the financial crisis hit. New listings — the homes that just came on the market in January — are especially low for this time of year.
It's essentially the same story in communities in the Baltimore region — and across the country. But this is not the usual story of less supply and more demand, the precursor to price gains, that beleaguered homeowners have been waiting for.
Millions of Americans who would otherwise be trying to sell and buy something new are stuck in the homes they've got and probably will be for years, said Mark Hanson, managing director of M Hanson Advisors, a California company that does housing-market analysis for investors and asset managers.
"We call that … 'ghost inventory,'" he said. "It's ready sellers that have held off because prices have moved too low. They don't want to take a loss or don't feel it's worth it."
Berkowitz has come to that conclusion about his community after several years of market-watching. He's not underwater on his mortgage, but many others — 125,000 in the Baltimore region, according to real estate data firm CoreLogic — aren't so fortunate. Thousands more do not have enough equity for a down payment on another place.
"It's not that people don't want to sell," said Berkowitz, 36, who works for a software company. "They're just not selling."
Fewer choices for buyers works in his favor as a seller, though. Berkowitz put his home on the market just over a week ago for $355,000 and got it under contract in just six days. He was stunned. The lesson he takes away: If the price and condition are right, buyers will jump on a home — while those that aren't in that sweet spot sit ignored.
Some of the drop in homes for sale is driven by the slowdown in foreclosures that hit after the revelations a year and a half ago of widespread "robo-signing" by mortgage servicers. The number of bank-owned homes on the market in the Baltimore area is down 70 percent from a year ago — a slump that is likely temporary. Mortgage delinquencies remain high.
But buyers also have fewer homes to choose from that aren't foreclosures or short sales. Their numbers dropped 20 percent over the past year, according to Rockville-based Metropolitan Regional Information Systems, the multiple-listing service for buying and selling homes in the area.
This comes despite the fact that far fewer people have moved in recent years than normal, creating not just "pent-up demand" but also pent-up supply. Across the Baltimore region, a total of 23,000 fewer homes sold in the past five years than from 1997 to 2001, before the bubble. And the past five years saw a whopping 76,000 fewer homes sold than in the 2002 to 2006 period, during the bubble.
"There is some fatigue and resignation in the market on the part of sellers," said Jonathan Hill, president of the multiple-listing service's RealEstate Business Intelligence arm, in an email. "Unless they are forced to sell, due to financial or relocation issues, most do not want to take the equity hit with current lower market prices."
So while they might like to move now, some homeowners aren't putting up a "For Sale" sign. Their hope is that improving employment and economic indicators will at some point raise home values, Hill said. "Lower inventory will eventually drive prices back up."
There's no stabilization yet for most of the region. Average sale prices dropped at least 5 percent last year in the majority of ZIP codes in Baltimore and its five surrounding counties, according to a Baltimore Sun analysis of Metropolitan Regional Information Systems data.
Drops were especially pronounced in Baltimore, home to many of the region's distress sales. Average prices fell at least 20 percent last year in nearly half the city's neighborhoods.
The biggest declines hit areas that were modestly priced to begin with. In Carrollton Ridge in Southwest Baltimore, the average price fell roughly 70 percent to just under $10,000. McElderry Park in Southeast Baltimore, north of Patterson Park, saw prices drop nearly 60 percent to $24,000. More than half the sales in both neighborhoods' ZIP codes last year were either foreclosures or short sales.
"These are tough, tough areas where investors were dominating during the boom days, and the only reason that homeowners bought there is because they could not buy anywhere else," said Vladimir Kats, whose Kats & Associates team at Keller Williams Realty Baltimore provided the MRIS distress-sale data that The Sun analyzed.
The suburbs haven't proved immune to falling values or financial distress.
Foreclosures and short sales accounted for just over half the sales last year in hard-hit Edgewood in Harford County. Average prices there fell 20 percent. Communities with distress transactions making up more than a third of all sales last year include Randallstown and Owings Mills in Baltimore County, Severn in Anne Arundel County and Cooksville in Howard County.
Right now, though, bank-owned deals are harder to come by. Fewer than 500 were listed for sale in January in the Baltimore region, compared with more than 1,600 a year earlier. The foreclosure delays have given more time to homeowners trying to avoid the auction block — and heartburn to real estate investors who base their business on snapping up low-priced homes in need of renovation.
"There's a lot of flippers who are struggling," Kats said.
Then there are the homeowners who tried to sell and have given up, at least for now. The number of non-distress listings on the Baltimore-area market dropped below 10,000 in January for the first time since Metropolitan Regional Information Systems began tracking foreclosures and short sales in 2009. A year earlier, there were more than 12,000 of those homes for sale.
Burt Bachrach, 64, thought it wouldn't be too hard to sell his townhouse just outside Roland Park in Baltimore after buying a condo in Bethesda last summer to downsize and move closer to his children. He and his wife, Peg, put the house on the market five months ago at just under $300,000. They dropped the price twice, $10,000 each time. No takers.
"There's been no interest," said Bachrach, a state worker. "A couple people saw it, but there was nothing, no follow-up at all."
Location and condition can be deal-breakers, but he doesn't think that's the problem. "It's a nice place, it's in a nice neighborhood, it's got a lot of upgrades," Bachrach said.
But figuring out the right price for the current pool of buyers? That's tricky. Nothing has sold in his neighborhood of 104 townhouses for more than a year. Three other homes were on the market when he listed his place for sale, and two have since been pulled off without being sold.
Now the Bachrachs' house is off the market, too. They just agreed to a two-year lease with a woman they know who would like to purchase the house but isn't in a position to buy right now. Her rent should just about cover the mortgage, property taxes and insurance costs on the house, Bachrach said.
"It's just a burden off of us — off of our minds," he said.
Berkowitz, the Lutherville-Timonium resident, wanted to get his home under contract before buying another so he wouldn't end up stuck with two mortgages. But he wonders how long it will take to find something suitable now that there are fewer homes for sale. He, his wife and their three young children might have to move twice, and either stay with relatives or rent between selling and buying.
And that's despite the fact that he and his wife, Bethany, are pretty flexible. They're considering a broad range of styles and prices in their ZIP code and in nearby Sparks, Phoenix and Cockeysville — any single-family house with at least four bedrooms from $375,000 to $600,000, depending on condition. Last he checked, there were fewer than 30 in that range.
Compared with a few years ago, "it's like nothing," he said of the choices for sale. "And that covers a very wide spectrum of homes."
He knows several neighbors on his street who want to put their homes on the market in time for the spring selling season. He hopes his own choices will soon multiply, too.
"I really don't want to live on anyone's couch," Berkowitz said.