The number of home sales in the Baltimore metro area is still falling far short of the tax-credit-fueled days of a year ago, depressing prices to levels not seen in seven years.
One bright spot for sellers: Buyers are picking up the pace on new offers. But a significant share of those buyers are bargain-hunters chasing foreclosures.
"It feels like a lot of the sales now are investors," said Pat Hiban, a real estate agent with Keller Williams Crossroads Realty in Columbia, who is himself renovating three homes to resell.
Just under 2,100 homes changed hands in the metro area in May, a 20 percent drop from a year earlier, Rockville-based Metropolitan Regional Information Systems said Friday. The average price tumbled nearly 5 percent to about $257,000.
First-time buyers and some repeat buyers who settled deals by last summer qualified for an incentive of up to $8,000 from the federal government, intended to boost the ailing housing market. The incentive drew buyers to the table, but when the program ended the market re-slumped, buffeted by high unemployment and large numbers of distress sales.
The tax credit's two-part deadline required that buyers get under contract by April 2010, which prompted a rush of offers that month — and a steep drop-off the next. That helps explain why new contracts signed this May in the Baltimore metro area outnumbered last year's figure by an eye-popping 54 percent.
But new contract signings year-to-date also top — by 10 percent — the number of contracts struck during the corresponding period in 2010. Contracts generally turn into sales in a month or two if all goes smoothly, making them a bellwether for future sales activity.
However, it would take much greater acceleration to get back to something like a normal market. The number of homes sold last month in the metro area was the lowest on record for the month of May other than in the recessionary year of 2009, according to Metropolitan Regional Information Systems. The company, which runs the area's multiple-listing service used to buy and sell homes, has figures back to 1997.
One part of the market is hopping, though — foreclosures.
John Kantorski, a real estate agent with Cummings & Co. Realtors in Lutherville, said about half of his clients are investors going head-to-head to snap up bank-owned homes. They're spending anywhere from $10,000 to $60,000 per transaction, usually in cash, "and they're having to bid more than list price," he said.
"There's multiple offers on most of these, where you're dealing with two, three, four bidders," Kantorski said.
Homeowners trying to sell nondistressed properties are rarely so lucky. Noninvestor buyers are their target audience, and some of them are being lured away by foreclosures, too. Keith L. Cross, office manager of Cornerstone Real Estate in Baltimore, said city foreclosures tend to go to investors, while a lot of the bank-owned homes he sees in the suburbs are selling to owner-occupiers.
The rough market also creates other complications.
"I have plenty of quote-unquote regular buyers looking at houses, and I think they're in a position where they really can't afford to sell their current home, or they're trying to find something priced really low, because they're afraid that whatever they buy is going to lose value," Kantorski said.
About 120,000 homeowners in the Baltimore area owed more on their mortgages at the beginning of the year than their properties were worth, real estate data firm CoreLogic reported this week. That's nearly 20 percent of everyone with a mortgage — a big problem for the move-up market.
Homeowners who still have equity don't have the amount they did a few years ago, further shrinking the number of people who can trade up. The average American homeowner owns 38 percent of his or her property, down from 60 percent in 2005, the Federal Reserve said this week.
Brandt and Kim Lego, who bought their three-bedroom Parkville townhouse in 2004, aren't underwater on their mortgage. But they figure their best shot at getting a larger house they can afford is to sell now and buy later. They're planning to move in with relatives for a year or so in order to save money.
"That will put us in a really good cash position to buy when the market really does bottom out, to buy something more suitable for us long-term," said Brandt Lego, 33, who will graduate from nursing school in December.
The Legos renovated their townhouse, most recently the kitchen, which they hope will help as they compete for attention. "On my street alone, there are nine houses for sale," Brandt Lego said.
Clear Capital, a company that tracks repeat sales of the same homes to try to capture the true change in value, says market pressures have pushed prices in the Baltimore metro area back to where they were in 2004. But from a seller's perspective, the situation could be worse.
"Compare that to the nation, where prices are back to where they were in May of 2000," said Alex Villacorta, director of research and analytics for Clear Capital. "For the Baltimore area, the decline since the peak … is about 33 percent, whereas at the national level it's pushing 42 percent."
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