Baltimore's vacancy rate stabilizing

Housing vacancies increased at a faster rate along much of Maryland's Eastern Shore over the last decade than in the nation as a whole, according to a report released Thursday by the U.S. Census Bureau.

Baltimore's supply of vacant homes, though, expanded more slowly than the nation's rate.

The census report contradicts the notion that the number of Baltimore's empty rowhouses is growing at a rapid pace while Marylanders are rushing to new developments in distant counties. The slow pace of construction in the city helped stabilize vacancy rates from 2000 to 2010, while the boom in new homes on Maryland's eastern periphery made the rates escalate there, experts said.

"Baltimore didn't have a lot of new houses built; there were a lot of rehabbed houses," said Deborah A. Ford, a real estate professor at the University of Baltimore's Merrick School of Business.

Between 1990 and 2000, the number of vacant homes in Baltimore went from just over 27,000 residences, about 9 percent of the city's homes, to about 42,500, more than 14 percent.

But by 2010, that number only crept up to around 46,800. In terms of a percentage of total homes in the city, vacancies are now just slightly above the rate a decade ago, at roughly 15.8 percent.

On the Eastern Shore, meanwhile, developers were building aggressively during the middle part of the decade, said Memo Diriker, director of the Business, Economic, and Community Outreach Network at Salisbury University.

"At the height of the building boom … everybody was playing musical chairs, hoping when the music stopped they would have a place to sit," he said. "The developers were going gangbusters and the lenders were going gangbusters, trying to get in on the market before the music stopped. Not only did the music stop quicker than anybody expected, but we were five chairs short rather than one. Too much was being built in anticipation of people moving in."

The Eastern Shore's jump in vacancies, which came after a decade of constancy, rivals the big increase in Baltimore during the 1990s.

Five of the Shore's nine counties saw increases above the national rate. In 2000, 9 percent of the nation's homes were vacant; that had climbed to 11.4 percent in 2010 — a change of 2.4 percentage points.

Meanwhile, Dorchester County's vacancy rate increased by more than 4.8 percentage points, the largest jump in the state between 2000 and 2010. Kent and Talbot counties saw vacancy rate increases of more than 4 percentage points.

That's because of new houses that were either going unused or only being used part of the year, said Ford.

If a vacation home is not being lived in at the time of the Census, it is listed as vacant.

Although the jump in vacancy rates on the Eastern Shore over the last decade rivals Baltimore's increase during the 1990s, the reasons behind those changes are not the same.

The vacancy figure went up in Baltimore during the '90s mostly because of population loss, when the city shed 13 percent of its residents — 85,000 people. The rates have gone up on the Eastern Shore largely because of a failure to fill newly built primary residences.

Diriker blamed overbuilding during the housing bubble years — which peaked during the middle of the last decade — and a sharp drop-off in demand as the recession set in.

Prices crashed. Builders who spent $200 to $250 per square foot constructing high-end homes during the bubble would be lucky to sell at $100 a square foot now, Diriker said. "So they're sitting on it, which creates the vacancy."

Foreclosures also add to the supply of unoccupied homes, he said. "And because of the foreclosures, people expect prices to keep coming down. It's going to take years to get back to something resembling normal."

Vacancies and falling prices have created opportunities for people in a position to buy, he said, but it's bad news for many homeowners. And it is creating "major" problems for local governments, because property-tax revenue is declining along with home values, he said.

"Infrastructure is deteriorating, there's no money for public sewers, there's no money for public services," Diriker said. With budgets strapped everywhere, "it's going to get a lot worse before it gets better," he said.

Doug Marshall, president of Marshall Real Estate Auctions in Salisbury, said the Eastern Shore's economy and housing market feed into each other more than is the case on the other side of the Bay Bridge, and both are suffering.

"Development drove a lot of our economy and our businesses," said Marshall, who is also a homebuilder. "If you're not in a resort region, within five to 10 miles of the resort area, it's very stagnant."

The price of building lots — land ready for new homes — has plummeted as the number of empty homes has climbed. "We've seen building lots in some areas, especially Dorchester and Somerset County, come down 90 percent," he said.

Marshall said he just sold two building lots in Pocomoke City, in Worcester County, for $10,000 that his client had paid $85,000 for a few years ago.

What Marshall finds heartening is that buying hasn't come to a halt. In 85 of his company's last 95 voluntary auctions — the ones that weren't foreclosures — the properties sold, he said.