Sales of distressed properties in the Baltimore region continued to distort the area's real estate market in October, inflating overall sales but acting as a drag on home prices, according to the monthly report from the regional multiple listing service.
October sales were up 13 percent to 2,562 sales, the highest October total since 2006, according to the report by RealEstate Business Intelligence, a subsidiary of the Metropolitan Regional Information Systems multiple listing service. Yet the median sales price was essentially flat at $239,000.
Both the restrained prices and growing volume reflect a surge in sales of properties owned by banks or other financial institutions and government agencies. In the metro area, there were 434 such sales, a spike of 73.6 percent compared with last year.
Sharon McKenna, president of the Greater Baltimore Board of Realtors, said the report overall was "neutral" — neither good news nor bad — but she expressed concern that the picture of Baltimore City and five surrounding counties appeared darker than it is because of the flat median sales prices due to distressed property sales.
Ross Mackesey, the board's president-elect, noted that average prices for non-distressed properties are about the same as they were in October 2007, before the market collapsed.
If distressed properties — including short sales and foreclosed properties — were omitted from the equation, the median sales price would have risen 4.3 percent to $273,250.
Mackesey pointed out that the average sales price was $316,025 in October, just a little below the $317,491 average in October 2007, before the market collapse.
"All in all, it was a good month," said Corey Hart, senior product manager for RealEstate Business Intelligence. "Sales were up double digits."
It was the third straight month with higher sales than the same month a year ago. September sales topped the year before by 4.4 percent, August by 1.1 percent.
But some of that sales growth clearly was driven by sales of bank-owned properties. Of all October sales in the region, 17 percent were bank-owned, the highest proportion since March 2011. In Baltimore City, the 173 sales of bank-owned properties accounted for 30 percent of all sales.
The report said such sales were "likely the primary reason" the city led the metro area in median price decline at 13.2 percent lower than a year ago. In October 2013, such sales made up 20 percent of the city's total sales.
Also losing ground in median price were Anne Arundel County at 6.8 percent lower, followed by Harford, down 2.7 percent from a year before. Baltimore County led all six jurisdictions with a median price increase of 7.6 percent, followed by Carroll County at 7.5 percent and Howard at 5.7 percent.
The increasing sales of so-called "bank-owned" properties continues a trend that began slowly in the spring of 2013 and has picked up steam, spiking in the spring and again this fall, Hart said.
Hart said the increasing sales of so-called "bank-owned" properties continues a trend that began slowly in the spring of 2013, picked up steam about a year ago this time, spiked in spring of this year and again this fall.
The sales reflect the end of the foreclosure process, after banks and other institutions have taken properties from defaulted borrowers and are attempting to recoup any losses by selling them.
Even though the housing crisis hit several years ago, foreclosures are taking years in some cases for a number of reasons, especially in Maryland where lawmakers slowed the process in 2010 in an attempt to give homeowners more time to get help or negotiate terms to stay in their homes.
Foreclosures also were held up by a years-long dispute over mortgage ducumentation that affected several states that was finally resolved when a federal judge approved a settlement between mortgage service providers and state attorneys general in the spring of 2012.
Foreclosures that started after the federal settlement was approved in 2012 are "just now starting to hit the market," said Gina Gargeu, a Realtor for Century 21 Downtown, who specializes in bank-owned properties almost exclusively. She said the average foreclosure in Maryland now takes 575 days.
Gargeu disputes that these homes are lower-priced than others.
"The clients I work with take a lot of pride in their properties," said Gargeu, who is now handling 325 bank-owned properties, about three-quarters of which are in the city. "They don't want their house to be perceived as 'distressed.'"
David McIlvaine, a Realtor with Coldwell Banker in Ellicott City, said bank-owned property prices are not so different from the price of any other house: It depends on location and condition. In his experience, he said, bank-owned properties are often not in the best shape, needing lawn care, fresh paint, new floors and other repairs.
He recently sold a bank-owned home in Sykesville that was listed for $189,900. He could not disclose the final sale price but said it would have gone for about $210,000 had the prior owner not removed the appliances and all the light fixtures. Like many bank-owned properties, it was being sold "as is."
Both Gargeu and McIlvaine said the agent handling bank-owned properties becomes the property manager. Gargeu said her experience with the owners has been good, as they want to get the best price. McIlvaine said otherwise.
"I become the property manager, and advise them what they need to do," McIlvaine said. "Sometimes they do it, most times they don't."