Development in city defies housing slump

The Baltimore Sun

The new townhouses in Northeast Baltimore will offer designer fixtures, master suites and, on some models, bay windows and porches, all centered on parks, playgrounds and a clubhouse with a fitness room.

Not so different from any other new home developments except for this: Most of the homes in the first phase of the Towns at Orchard Ridge, a $118 million 467-unit community near Belair-Edison, have sold since going on the market in July.

The boom comes at a time when builders of new homes here and across the nation are reporting plunging sales and existing homes are languishing on the market.

Since the first batch of 72 townhouses went on sale July 5, buyers have snatched up 56, according to developers Pennrose Properties and Doracon Development, who say they've hit a nerve in pent-up demand for relatively affordable new homes.

Townhouses at Orchard Ridge range from $135,490 to $246,990 for income-qualified buyers and from $254,990 to $274,990 with no maximum income requirement. Buyers can also get closing cost assistance.

The estimated median price of a new home in Maryland, at $435,528, is among the highest in the nation, according to the National Association of Home Builders.

"We've been amazed by the sales pace," said Kyle F. Speece, a development officer for Pennrose as he looked out over the 59-acre site where bulldozers have begun work. "We really found a niche."

No other new, single-family houses in the city with comparable amenities are currently selling in that price range, said Cynthia Newman-Lynch, interim assistant commissioner for development projects for the city's Department of Housing and Community Development.

"Given today's market, that's extraordinary," Newman-Lynch said of the sales pace.

High land costs are a big reason new home prices in the area are so high, said Anirban Basu, president and chief executive of Sage Policy Group, an economic research firm in Baltimore.

"Many homebuilders will tell you that if they were able to supply housing at price points less than $300,000, they could make sales all day long," said Basu. "However, with suburban land being so expensive, it is effectively impossible to supply much housing at those price points."

The developers of Orchard Ridge didn't have to contend with land costs: They got the ground under lease from the city. As units settle, titles will transfer to the buyers.

In addition, Pennrose and Doracon are able to sell some of the lower-priced homes for less than it cost to build them thanks to more than $2.1 million in subsidies from the city's Home program and a federal Housing and Urban Development grant to Baltimore's housing authority.

A mix of city and state programs is available to help buyers with down payments and closing costs, along with closing cost help from the developers.

Speece said he does not expect the implosion of the market for subprime mortgages to affect Orchard Ridge sales.

The project's lenders, approved by the state Community Development Association's Maryland Mortgage Program, already have stringent loan standards for buyers, he said. Borrowers must have good credit and meet income guidelines to get the loans, which are typically offered with interest rates slightly below market rate.

Baltimore officials awarded the right to develop the city-owned Orchard Ridge site to the Pennrose/Doracon team in May 2005 after issuing a request for proposals for affordable new homes.

The site, bounded by Sinclair Lane, Erdman Avenue, Federal Street and Archbishop Curley High School, had for decades been the site of Claremont Homes, a public housing project, and Freedom Village. The two complexes had about 700 apartments.

The first townhouses to go on sale include both larger, market-rate homes, with three bedrooms and an optional fourth, and the smaller subsidized homes for those who qualify. Residents can start moving in next spring.

Aaron Hippolyte, a 30-year-old Washington special-education teacher who owns a condo in the capital but who often travels to Baltimore, had been in the market for a townhouse with some yard space. A friend noticed the signs at Orchard Ridge and let Hippolyte know.

"The major thrust for me was the affordability," he said. "I couldn't find anything within reason in Washington, D.C., to my liking. In my area of Southeast, D.C., you pay $380,000 for a brand new townhouse - that's a hundred thousand dollar difference.

"I like the Belair Edison area quite a bit. For the price and the access to 895 and I-95 and not far from downtown, I felt I couldn't beat the price," said Hippolyte, who is paying $270,000 for a three-bedroom home and three levels and a basement.

The developers are to soon embark on another, bigger housing development in Baltimore. Late last month, city officials chose Pennrose and a team that also includes Doracon to transform the nearly 100-acre site of Southwest Baltimore's aging Uplands apartment complex into a $200 million development with 1,100 apartments, houses and condominiums. About 800 of them will be affordable and market-rate homes.

Anna Custer, executive director of Live Baltimore, a nonprofit group that promotes city living, said the center often gets inquiries about affordable homes. She said it makes sense that the Orchard Ridge is selling fast because of the price ranges. "When you have a trifecta of the city and state and developer working together, it can be a great win-win," Custer said.

The sales boom at Orchard Ridge stands in stark contrast to the slump plaguing many of the nation's new- home builders. Sales of new single-family homes fell 6.6 percent in June, the biggest drop since January. Big national homebuilders - including Pulte Homes Inc. and D.R. Horton Inc. - are reporting losses and are cutting prices.

In Maryland, some builders and developers are holding off on projects or rethinking their strategy to bring starting prices down, either by renegotiating lot prices with land sellers or scaling back on amenities, said Chris Rachuba, president of the Home Builders Association of Maryland.

"What I'm finding is the $600,000 to $1 million range has slowed a lot, but as in anything, price will sell," said Rachuba, whose Eldersburg company, the Rachuba Group, specializes in custom homes. "I really think the affordable housing is moving."

Tiffany Hughes, a rehabilitation therapist who has signed a contract on a three-bedroom model at Orchard Ridge, said she jumped at the chance to get a new house in her price range for $236,000.

The single mother of a 9-year-old son will also get the chance to return to the site of her childhood home - Freedom Village. She recalls growing up in a working-class, family-oriented community surrounded by woods and space for children to play. Hughes, who is currently renting, hopes to provide a similar environment for her son.

Hughes had been disappointed in the selection of homes on the market in her price range. At Orchard Ridge, "for the price that they were offering these homes and getting a brand-new house with brand-new appliances and brand- new everything, it made sense."

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