Falling home prices have transformed many properties from asset to albatross, but there's hope yet for those looking to sell: Nearly two-thirds of the Baltimore region's ZIP codes saw sales increases last year, the first time since 2005 that buying didn't slump across the board.
Sales are on the upswing as first-time homebuyers jump in - enticed by a temporary $8,000 tax credit - and investors snap up foreclosed properties. And some homeowners who can't wait any longer for prices to rise are finding ways to move on.
Baltimore residents Geoff and Gail Turk are in the market to buy a house despite not being able to sell their condo for anything close to what Gail bought it for in 2007. As they look for a three-bedroom property, the Turks are trying to rent the one-bedroom condo. They'd like to start a family, "and we just need more space," said Geoff Turk, 38, an Anne Arundel County teacher.
The market is far different from the housing-bubble days, when prices were escalating and selling was a snap. Four years since the slump took hold, foreclosures continue to be a problem and people selling at a loss are all too common. Even as home sales picked up in most areas last year, average prices fell in all but a handful of communities, a Baltimore Sun analysis found.
In half the region's ZIP codes, the drop was an average of 10 percent or more, which comes on top of widespread declines in 2007 and 2008. One result is that some 100,000 homeowners across the metro area - one out of every six borrowers - owed more on their mortgages than their homes were worth at the end of last year, real estate data firm First American CoreLogic estimates. An additional 30,000 borrowers were teetering on the edge of being underwater.
Prices drop, prospects risePaul Cooper, a real estate agent and vice president with Alex Cooper Auctioneers in Towson, said it's no coincidence that home sales are rising as values slump. He figures the vast majority of homes sitting on the market without offers are still overpriced.
"Every day I feel like a counselor to people who overpaid," Cooper said. "If people just drop the prices by 10 percent, you may be pleasantly surprised by the increased level of activity."
Many people managing to sell are doing just that. The average Baltimore-area ZIP code with rising sales last year had a 10 percent drop in price, according to The Sun's analysis of data from Metropolitan Regional Information Systems, which runs the local multiple-listing service used for buying and selling homes. ZIP codes with falling sales posted a slightly smaller price decline on average - 8 percent.
The Sun also analyzed Baltimore City neighborhoods and found the same trend amplified. The average city neighborhood with increasing sales had a 17 percent price drop, compared with a 12 percent decline in the average neighborhood with decreasing sales.
Economists say sales activity has to pick up before prices can stabilize. The counties are better off than Baltimore: Sixty-eight percent of suburban ZIP codes posted gains in home sales last year, compared with 40 percent of city neighborhoods.
"The city market's really lagging," said Joseph T. "Jody" Landers III, executive vice president of the Greater Baltimore Board of Realtors. When the housing boom went bust, "the city market kept going and going, even a year after the counties and the region had already slowed considerably. But now it's the reverse."
It's easier to judge the health of a market by the number of homes changing hands than by average prices, because prices are so easily skewed. The Sun's analysis included only those ZIP codes and city neighborhoods with at least five home sales during each of the past two years.
The severe housing slump here and nationwide followed on the heels of skyrocketing prices, a bubble market fed by easy mortgage money and speculation. In the Baltimore area, sales began falling at the end of 2005 and didn't show a sustained turnaround until the middle of last year.
Whether the national upturn will continue is uncertain because several factors could hinder progress, including high unemployment, millions of Americans in danger of foreclosure and government plans to phase out some market supports.
So far, the action in the Baltimore-area housing market is overwhelmingly in lower-price ranges. Sales of homes for less than $250,000 increased 20 percent in the metro area last year. Above that amount? A 9 percent decrease. Hardest hit was the $500,000-plus price range, which saw a 13 percent drop-off in sales last year.
Investors are part of increaseIncreases in the low end are partially fueled by investors snapping up properties to rent out. All-cash buyers - usually investors - made up 14 percent of the market in the metro area last year, the highest percentage since MRIS began tracking the region in 1999. In the city, all-cash buyers accounted for nearly a third of all deals.
Michael Johnson, a real estate agent with ReMax Summit Realty in Glen Burnie, said interest in foreclosures seems to be coming almost entirely from investors and first-time buyers.
"Some of the homes that are in poor condition are just better suited for investors," added Johnson, whose clients are predominantly banks trying to sell the foreclosed properties.
First-time buyers have the inducement of a federal tax credit worth up to $8,000, which is due to expire this spring. The credit has created "a temporary seller's market" in pockets across the region with affordable prices, said Pat Hiban, who runs the Pat Hiban Real Estate Group at Keller Williams in Ellicott City. But once the credit is gone, he thinks the market will slump again.
"We've essentially borrowed buyers from the future," Hiban said. "It takes time to catch back up."
The long-moribund market of home buyers looking to upgrade, on the other hand, is just starting to show some signs of life. Eighteen homes across the Baltimore metro area sold for $1 million or more in January, double the number of a year earlier. Sales of homes between $350,000 and $800,000 rose, too.
Brandon Gaines, a partner with Yerman, Witman, Gaines & Conklin Realty in Baltimore, said he's now seeing sales of lots for custom-built homes, a piece of the market that had ground to a halt.
People are feeling pressed to move after so many months of being frozen in place, said Karen Hubble Bisbee, an associate broker with Coldwell Banker Residential Brokerage in Lutherville.
"What's happened is, you've had two years' worth of people who have had changes in their lives," said Hubble Bisbee, whose specialty is luxury homes. "They've had babies, or they've had babies leave the nest and they're looking to downsize. You have people who have lost a spouse or have gained a spouse, or have brought older relatives to live with them. All of these things feed need. We're seeing a tremendous amount of activity in the market right now that [is] need-based."
Hiban thinks high-end sales will really take off as prices fall further. "People are looking at the upper end and saying, 'That's not affordable,' " he said. "Eventually they'll look at it and say, 'That's beyond affordable, that's too good of a deal to pass up - let's move.' "
That works in less ritzy price ranges, too. Shawn and Mindy Dingle weren't planning to sell their rowhouse in Baltimore's Ednor Gardens for another two years, but they found a four-bedroom stone bungalow they really liked in the Mayfield neighborhood. The seller, who had put it on the market for about $400,000, agreed to take $301,000 and cover $12,000 in closing costs. So the Dingles moved there in August.
"We thought we could get more house for the money than if we waited a few years," said Shawn Dingle, 30, a father of two boys. "It's a good time to buy if you can do it."
Because they bought their rowhouse in the bubble year of 2005, they considered renting it out as they were planning their move. But they ended up managing to sell for $3,000 more than they paid for it. They got a contract in less than four weeks.
"We put it on the market priced to sell," Shawn Dingle said.
The Turks don't have that option with their condo in Bolton Hill. They're underwater on the mortgage. Last fall, a condo just like theirs sold for about $40,000 less than the $175,000 Gail Turk paid in 2007 when the property was newly renovated.
The Turks figure they'll have to rent out their condo for about $200 less a month than their mortgage payment and other costs. So they're looking at suburban homes for $250,000 to $300,000, a lower range than they would otherwise be able to afford.
"We do feel we're getting close," Geoff Turk said. "But when the finances are this tight and the economy's this tight and you have to get a place rented, everything has to time out the right way. ... We can't even make an offer on a place until we're likely to have somebody rent."
Chris Gramiccioni is renting out his HarborView townhouse even though he would really like to sell. He's had to alternate between putting it on the market empty and pulling it off to rent it because he can't afford two mortgages at once.
Gramiccioni, a 37-year-old attorney, bought in 2005 and left about a year later to take a Justice Department job in New Jersey.
After about six months of squeezing in with relatives, he and his wife got another place. The last time his HarborView home was on the market, he was asking $689,000 - $66,000 less than he paid for it.
He's glad he's not underwater on that mortgage - he put a lot of money down. But the situation has left him "mortgaged to the hilt" on his new home. And his Baltimore property-tax bill spiked because landlords, even temporary ones, don't get the homestead tax credit that owner-occupants do.
As the months have passed, he has keenly felt the slump's effect on higher-end homes. "I've learned that at least in my neighborhood in HarborView, I have a real slim market," Gramiccioni said.
But now he sees more homes changing hands in the metro area. Maybe, just maybe, he thinks, he'll be able to sell this year.
"I'm hopeful," he said.