With fewer foreclosures for sale, home sellers get boost

The sharp and likely temporary drop in the number of foreclosed homes for sale in the Baltimore region is making life easier for owners trying to find a buyer.

The number of home sales in the metro area that are not distress deals — neither foreclosures nor short sales — jumped about 25 percent in March from a year earlier, according to numbers released Tuesday by Metropolitan Regional Information Systems, a Rockville company that runs the area's multiple-listing service.

With far fewer bank-owned homes for sale, March buyers purchased about half as many foreclosures in Baltimore and the surrounding counties as their counterparts a year earlier.

The average home sale price rose 4 percent.

"Prices are trending upward in most markets in the U.S.," said Wayne Yamano, director of research at John Burns Real Estate Consulting, a California firm that does market analysis for the industry.

The great unknown is how many of the millions of Americans behind on their mortgages will end up losing their homes, and when. The drop-off in foreclosures here and nationwide was fueled not by a big improvement in homeowners' financial situations but rather by the "robo-signing" scandal, which involved shoddy and illegal foreclosure processing work.

Banks pulled back on auctions and sales as attorneys general across the country negotiated a mortgage settlement. The $25 billion agreement, announced in February and approved by a federal judge last week, lays out how the banks' mortgage servicing arms are to work with borrowers in trouble.

With uncertainty about the settlement now resolved, 2012 could top the previous peak — in 2009 — for the number of distress sales nationwide, John Burns Real Estate Consulting said.

"We do generally believe the housing market is in recovery and that we've turned the corner," Yamano said. "We're hopeful there's enough demand to absorb that supply. It's become very apparent to us that the investor appetite for distressed supply is huge."

But in the Baltimore area, so is the potential distressed supply. John Burns Real Estate Consulting estimates that the region's "shadow inventory" of homes not on the market now but likely to end up there as foreclosures or short sales outnumbers homes currently for sale by more than 3-to-1. Nationwide, the ratio is just under 2-to-1.

For the time being, though, prospective buyers have far fewer homes to choose from than just a few years ago. About 12,200 homes were for sale in the region in March, down by nearly 4,000 from a year earlier and off by more than 6,000 from March 2008, during the throes of the financial crisis.

Carol Walters, who is trying to sell her father's home in Towson, is crossing her fingers that this spring will do the trick — after three years of waiting.

Her family's asking price for the house, which overlooks a golf course, is $540,000. That's what they were about to sell it for last summer before the contract fell through — something that has happened to many would-be sellers over the past few years.

"I'm hoping it's starting to swing back the other way and things will get more reasonable," said Walters, who lives in North Carolina. "You couldn't build that house for what we're asking."

Total sales increased modestly in the Baltimore region in March, about 2 percent over the year. The pickup in deals with no bank involvement — other than as lenders — almost outweighed the decline in foreclosures, but a third type of transaction grew too.

Short sales — which result when borrowers underwater on their mortgages get permission to sell for less than they owe — increased 33 percent from a year earlier. They are still a small part of the market, about one in 10 sales, but some agents say they're seeing much more interest from the banks calling the shots.

Brandon Brittingham, a Salisbury-based real estate agent who heads short-sale training at Long & Foster, said servicers are not just agreeing to contracts, they are also more frequently saying upfront that they won't pursue cooperative sellers for the remaining loan balance after the sale. They are also offering sweeteners, Brittingham said.

Brittingham, who said a bank recently offered one of his clients $25,000 for moving costs as part of a short sale, thinks banks have decided that short sales hurt their bottom line and reputation less than foreclosures.

"It's something we as real estate agents could have told them four years ago, but they didn't want to listen then," Brittingham said.