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A WINDOW ON 2008

The Baltimore Sun

An adjusting market. More conventional mortgages. Lethargic buyers. Figuring out what's next for the real estate market requires the use of tea leaves. Some say there's room for optimism this year; others have a wait-and-see posture. Most experts agree prices will continue to be a sticking point and interest rates will continue to be low for much of the year.

Beyond the market, there are some clear directions, if not radical changes, for real estate, including a rising demand for smaller houses, greater interest in environmentally friendly home elements and a continuation of the melding of indoors and outdoors.

Here's a look at some trends in real estate for 2008.

A flat market

The Baltimore-area housing market is insulated from the huge woes of places such as Detroit, given job growth in this region, experts say. However, most expect few changes overall.

"The home sales in the region have fallen off. But the prices have not really dropped significantly," said Lawrence Yun, chief economist with the National Association of Realtors.

The housing inventory may have topped out, and builder incentives for upper-end new homes are high, he said. The "decent" local economy may lead to a pent-up demand for housing, and "given that the interest rate is low, it is only the battle of the prices," Yun said.

Going into the new year, Baltimore home sales had dropped 30 percent for each of the three months before December. Sales prices, however, were fairly stable.

Anirban Basu, chief executive of the Sage Policy Group, sees 2008 as a "transitional year" largely because of unknowns, such as what will happen to the foreclosure rate and buyer motivation.

"The buyer has become disengaged from this market. They think prices will fall. So they wait to purchase. Then that puts downward pressure on the market," Basu said.

"My sense is that the bottom of the housing market is likely to arrive sometime after 2008."

Steady rates

Greg McBride, senior financial analyst at Bankrate.com, believes that mortgage rates will remain low in 2008. But they could begin to head upward in the second half if -- as he expects -- the economy improves.

Interest rates for jumbo mortgages, on the other hand, should fall when the credit crunch that hit last summer eases, he said. Jumbo loans, which top $417,000, have had stubbornly high rates compared with ones offered for smaller, conforming mortgages.

Many prime borrowers with adjustable-rate loans will see their first payment reset this year, McBride said. The good news: That reset won't be as big as it could have been, thanks to cuts in short-term interest rates by the Federal Reserve. (Subprime borrowers aren't so lucky: Most of those loans, meant for people with imperfect credit, have rates that follow the London Interbank Offered Rate -- and that has "remained uncharacteristically high," McBride said.)

"If you're in the market to refinance, it pays to do it now," McBride said. "There's no guarantee on which way rates will move, and there's also no guarantee on how underwriting guidelines may change. ... If you have 5 percent equity in your home, but you hold out and wait for rates to drop, yeah, rates might drop, but so might the value of your house."

Green growth

The big theme for 2008 is environmentally friendly homes and furnishings -- from flooring planks made of reclaimed wood to paints that emit little or no fumes to drought-tolerant landscaping.

"Green is in because there is a higher level of awareness now of the issues surrounding the environment and, specifically, global warming," said David Pratt, a principal in the Lorax Partnership consulting firm and president of the Baltimore chapter of the U.S. Green Building Council.

Surveys indicate that people will pay up to $5,000 for "greening" a home, he said.

Rising energy costs, if not eco-sensitivity, drive people to consider higher efficiency ventilation systems, Energy Star appliances, on-demand water heaters, low-voltage bright lights, even solar and geothermal heating and cooling systems.

New products include walls that use plants to filter air (they are starting to show up in offices but not yet in homes) and vegetative retaining walls, which are made of stackable cement drawers filled with dirt.

"Maybe when the plants grow out you don't see any retaining wall at all," said Michael Furbish, of the Furbish Co., which specializes in sustainable building products and distributes the drawers.

Techno luxury

High-tech comfort is also in, said Brett Schoolnick, president of the Baywood Design & Build Group in Columbia.

"People are nesting and putting nice stuff in their houses," he said. "They are deciding to stay. If they decide to sell it, they sell it with nice stuff."

Demand is on the upswing for amenities such as massaging bubble jets in tubs; mirrors with built-in, vanishing television screens; super-quiet garbage disposals that are heavy-duty enough to crunch most dinner waste; dual-temperature beverage centers (warmer for wine, cooler for soda) and gas fireplaces with battery backups so they generate heat when the power goes out.

As people put increasing amounts of technology in their homes, they want to cut back on the number of remotes and switches by integrating the systems and automating them, especially in higher-end homes. At the upper echelon, such systems can top $1 million and can include home theaters and full-house management of lighting, window-shade control and music.

Tom Duncan, vice president for operations of Chesapeake Smart Homes, a Kent Island-based company, said the demand for home technology has not slowed in the past 2 1/2 years, and there's no indication that it will.

Brown walls

Rich but subdued wall colors are fashionable. Look to browns as neutrals -- though grays are gaining ground -- browns with pinks, browns with greens, browns with blues. Palettes for '08 typically show a tranquil -- but not powdery -- group, earthy tones and vibrant tints.

Test the colors at home. Many paint manufacturers sell sample sizes. New is myperfectcolor.com, which stocks pints and mixes custom color. "Usually, you should live with them a few days, look morning and evening, colors look different under sunlight. Look under the full cycle of lighting conditions," said Jason Shaw, the company founder.

Traditional with a modern twist is being translated into sleek sofas on legs; patterns and color splashes are for pillows. The pared-down look highlights old-time -- sometimes newly added -- architectural details, woods and favorite old tables and accent pieces.

"People come home and they want to be comfortable," said Marianne Fishman, owner of Row House Interiors in the city, who said demand is rising for steam showers with speakers in the tile, fog-free mirrors and soft throws.

andrea.siegel@baltsun.com

Sun reporter Jamie Smith Hopkins contributed to this article.

2008 FORECAST WHAT'S IN

1. Smaller houses 2. FHA loans 3. Wood and cork 4. Green roofs for condos 5. Built-ins: recycling bins in kitchens, hampers in vanities 6. Brown and gray walls 7. Copper and oil-rubbed bronze finishes on lamps, sinks and more 8. Eclectic mix and match 9. Layered lighting with sconces, chandeliers and lamps 10. Trees

WHAT'S OUT

1. McMansions 2. Subprime loans 3. Fake-looking, "pseudo-green" materials 4. Colored mulch for yards 5. Baskets of clutter 6. White and beige walls 7. Lacquered baroque mirrors 8. Themed rooms 9. Big-box fluorescent ceiling fixtures 10. Annuals

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