For sale, for less

Half the communities in the Baltimore metro area saw average home sale prices decline last year as the housing slump deepened.

That's a big change from 2006, the first full year of the downturn, when prices were still rising in eight out of 10 local communities, a Sun analysis found. Price drops hit ZIP codes in every Baltimore-area jurisdiction last year, and about a quarter in the metro area recorded decreases of at least 5 percent.


The most expensive counties - Howard, Anne Arundel and Carroll - had the biggest share of ZIP codes where average sale prices fell last year.

The lower-cost city is weathering the storm better: Six out of 10 neighborhoods posted gains, many double-digit.


But Baltimore hasn't escaped unscathed, particularly in its well-heeled pockets. The harborfront Canton neighborhood, where real estate investors and homebuyers alike bid up prices during the housing boom, is awash with For Sale signs and declining values.

About 250 homes are on the market there. That includes three houses in a row on one block, all with asking prices below what the owners paid.

"There's so much competition," said J.D. DiGirolamo, a real estate agent with Long & Foster in Canton who's handling one of the three rowhouses - a foreclosure taken back by the lender. "I think a lot of people got in over their head."

The Baltimore metro area housing market appears to be worsening for sellers. After lending rules tightened over the summer, the pace of sales downshifted sharply, with year-to-year drops of 30 percent in each of the last four months of the year. That increases the likelihood that more parts of the region will see price drops in 2008, despite favorable interest rates, economists warn.

As a result, a growing number of lenders are labeling certain local ZIP codes, whole counties and even all of the Baltimore metro area as "soft" or "declining" and requiring larger down payments for all types of loans. Borrowers wanting a 5 percent-down mortgage would find, for instance, that they need to put up 10 percent. Someone looking for 100 percent financing would have to come up with 5 percent.

Some lenders say they'll still do no-money-down here. But the changing rules add a new layer of complexity, said Tim Higgins, a home loan consultant with Patuxent Funding in Ellicott City.

Higgins, whose company sells its loans to banks and must follow their guidelines, said one lender is requiring larger down payments for all the Maryland counties where he does business. Another lender mandates it case by case - yes for a property in Columbia, but business as usual for one in Clarksville. And Fannie Mae's automated underwriting system is tagging some local homes with the declining-market warning, he said, which is the final word because so many lenders sell to the mortgage financing giant.

"So here we are in a declining market," said Higgins, who saw the change in rules last month. "I'm basically telling people it's going to be specific to the property that you're interested in, and I won't be able to tell you anything until I run it through. So, unfortunately, you're going to have to call me and say, 'Hey, we want to buy this house; can we still do it with a 5 percent down payment?'"


Average prices rose slightly overall last year in the Baltimore metro area, according to preliminary figures from Rockville-based Metropolitan Regional Information Systems Inc. The Sun analysis used data from MRIS, which records all sales of existing homes and new homes handled by real estate agents.

Calculating the change in average prices is a common way to measure the housing market, but it isn't perfect. If the houses that sold last year were significantly different from the ones that sold in 2006, the price change could be artificially high or low. To cut down on apples-to-oranges comparisons, The Sun analyzed only those ZIP codes and city neighborhoods with at least 10 sales each year.

The sales prices also don't account for increased givebacks from sellers, who are often paying for closing and other costs.

MRIS figures show a marked drop in sales across the region, with 80 percent of the metro area ZIP codes registering declines. That means more homes piling up on the market, increasing pressure on prices.

The analysis suggests that sellers in higher-priced communities were more likely to feel the squeeze than those in areas with homes for first-time buyers. Average prices dropped in most of the metro area's 10 most expensive ZIP codes; they rose in all but one of the 10 cheapest ZIPs.

It's even more obvious at a neighborhood level in Baltimore City. Price declines hit three-quarters of those with 2006 average prices of $300,000-plus but just one-quarter of the neighborhoods under $200,000. Generally the cheaper neighborhoods - those with homes priced under $150,000 in 2006 - saw the biggest gains.


"Anything over $200,000 is going to sit longer," said Arthur Jordan, a real estate investor trying to sell a rehabbed house in the city's Waverly neighborhood for $220,000. That's down $30,000 from his original asking price, but the only offers he has gotten - all for much less - were from other investors.

"I know investors who only sold one house last year. Some didn't sell any," said Jordan, whose house has been on the market for five months and is competing with others on the block. "I know guys getting houses foreclosed on."

Still, every local jurisdiction has communities where prices rose last year, including some where $500,000 prices are commonplace. And homes aren't languishing on the market everywhere. A lot hinges on location - nice area, good schools - in addition to pricing and competition.

Jodi M. Davis sold her family's four-bedroom Colonial in Bel Air two days after she listed it at the end of August - for the full asking price of $525,000. Average prices in her ZIP code rose 2 percent.

"People don't want to hear about it," said Davis, a banker. "They're like, 'Shut up.' ... We were reasonable, but we definitely didn't lowball."

Real estate agent Lorrie Geiss went so far as to send out postcards last month to people with end-of-group townhouses in Baltimore County's Rodgers Forge neighborhood because she saw none on the market and has clients with very specific desires.


Azam Khan, an agent with Coldwell Banker in Baltimore, said he's seeing sales prices ranging from 5 percent lower than a year ago to a bit higher, depending on the house. It's this case-by-case variation within the region that muddies the waters for mortgages.

Borrowers who want a house in a pocket of strength are in a better position to get the down payment option they want, lenders and brokers say. Buyers will likely need to pony up more money, regardless of the lender, if the appraisal for the home they want includes the words "declining values," "extended marketing times" or "oversupply," said David Stevens, who runs Long & Foster Cos.'s affiliated mortgage, title and insurance businesses.

In general, Stevens suggests, Baltimore-area buyers should be prepared to put down 5 percent to 10 percent. An exception: loans insured by the Federal Housing Administration. FHA accepts 3 percent down and isn't requiring more in declining markets. FHA's loan limit of $362,790 is too low for some homebuyers, but new legislation will raise the ceiling.

Some fear lenders have tightened too much, choking the market despite low interest rates.

"I've had to walk away from some deals because people just can't get their financing together in a timely manner," said Mel Stachura, a Baltimore redeveloper who rehabs homes to sell and manages rehabbing projects for homeowners. "A lot of reasonable deals aren't getting done."

Guy Cecala, publisher of Inside Mortgage Finance in Bethesda, suspects lenders will continue to pull back. It's the logical business move "when they don't really have a good idea of what the worth of a property is going to be down the road," he said.


Case in point: The trio of next-door Canton homes for sale on Foster Avenue, with their brick facades and high-end finishes.

One, bought for nearly $353,000 in 2005, is on the market for $349,900. Another has an asking price of about $28,000 less than its $262,500 purchase price in 2005. The third was foreclosed on by the lender last year - and DiGirolamo, the agent, figures the asking price will be about $100,000 less than its $430,000 sale price at the end of 2006.

"I don't know how it appraised for $430,000," he said. "I really don't."