For every home that sold in the first half of the year, 10 more would-be sellers in the Baltimore metro area were wishing, waiting, hoping.
With credit and economic woes weighing on buyers, that figure is twice as high as normal. And it's night and day compared with the peak of the buying frenzy three years ago.
Sales dropped substantially in all but a handful of communities in the metro area, according to a Baltimore Sun analysis of ZIP code data for the first six months of the year vs. the corresponding period last year. The number of homes changing hands in the city and five surrounding counties hit its lowest point since at least 2000, as far back as records for January through June go.
Sellers are feeling the squeeze. Average sale prices fell in three-quarters of the region's ZIP codes. Half showed price declines of at least 5 percent.
Rob Hruz Jr., a local real estate investor and appraiser, took a hit on a property in Baltimore's Northwood neighborhood. After rehabbing it inside and out - adding a four-car parking pad, among other amenities - he had to drop his asking price of $199,000 more than 10 percent to sell.
"I'm breaking even," said Hruz, who worked with a partner on that deal, scheduled to close at the end of the month. "When we bought it, we were going to make twenty to thirty thousand dollars."
A clear picture on where home values stand - let alone where they're headed - is proving elusive. Averages are being skewed, both down and up, by the sharp change in the types of homes selling this year. High-end homes are languishing on the market in many parts of the Baltimore suburbs now while less expensive homes find buyers. The reverse is true in the city, which has seen an unusually large drop in sales of homes under $250,000 - a result economists blame on the subprime lending implosion.
The bottom line, at least, isn't hard to see, said Anirban Basu, chief executive of Sage Policy Group, a Baltimore economic and policy consulting firm. "This housing market remains in bad shape," he said.
On the other hand, it could be worse. Las Vegas has 17 homes on the market for every one that sells rather than Baltimore's 10, said Kenneth Wenhold, Mid-Atlantic regional director for the real estate information firm Metrostudy. South Florida has 27. Both are among the slump's hardest-hit areas.
The Baltimore Sun analysis used sales data for Baltimore City and the counties of Anne Arundel, Baltimore, Carroll, Harford and Howard from Metropolitan Regional Information Systems Inc., which runs the local multiple listing service. To cut down on apples-to-oranges comparisons, the analysis does not include ZIP codes with fewer than 10 sales.
The numbers show a sharp change since the peak of buying three years ago. Sales have dropped by at least half in one out of three communities in the metro area. Average sale prices are down in one out of five communities compared with 2005.
Moody's Economy.com believes more drops are coming. Chief economist Mark Zandi - whose figures show prices declining 5 percent in the metro area since the start of 2007 - expects prices to fall 14 percent more by the time the local market bottoms out, probably at the end of next year. That's not as sharp a loss as he sees for the nation overall. But he warns that the pain will likely take months longer to play out here.
"Home sales in the area are down more than in many other parts of the country because sellers are hanging tough," Zandi said. "But ultimately I think they're going to have to give up and start cutting price."
That spells trouble for people who bought within the last few years and are trying to sell now. Already, close to 10 million U.S. homeowners - almost 20 percent of those with mortgages - owe more than their homes are worth, according to Economy.com. An increasing number of local residents are trying to do "short sales," in which their lenders let the homes go for less than the mortgage but forgive the difference in hopes of avoiding a more costly foreclosure.
"Right now, the short sales and foreclosures are a large part of our inventory," said Cathy Werner, president of the Greater Baltimore Board of Realtors and broker of ReMax American Dream.
How large is hard to say. Investment bank Barclays Capital estimated last month that 10 percent of home sales in Maryland are foreclosures, up from 1 1/2 percent a year ago. But that doesn't include people trying to sell to avoid foreclosure.
As distress sales mount, prices are further pressured, economists warn. These transactions are also far more complicated for both buyer and seller.
"When you go to a bank and say, 'I'm listing a property for a [borrower in trouble], they basically say, 'Well, send us the offers - we can't say what we'll accept,'" said Keith L. Cross, a Century 21 Downtown agent who has represented people trying to sell and buy via short sale. "I've never experienced getting a counteroffer from a bank, either. They either say yes or no. If it's no, you have to play guesswork and figure out what they will take."
That's bad for sellers, even those who aren't having mortgage troubles. More homes on the market means more homeowners competing for buyers.
Christine McDonough and her husband, David, think they got a better deal on the four-bedroom Colonial in Baldwin they bought last month in the $400,000s than they would have two years ago - perhaps $30,000 to $50,000 better. Transplants from Florida, they rented for those two years in Baltimore to get to know the market.
But their hunt wasn't quite the buyer's dream they'd expected. They were outbid on three homes before finally signing a deal.
"We wanted ... an area where the school districts were good based on state ratings," said Christine McDonough. "We found there were too many other people waiting for the same thing."
Their agent, Dahlia Kaminsky Fisher, said several of her other clients have been outbid this year, too. In "relatively sought after" areas that don't have a lot of homes on the market, buyers can easily end up with competition, she said. Price matters, too.
"If you think it's a good deal, so does somebody else," said Fisher, with Cummings & Co. Realtors in Canton.
Werner, whose real estate offices are in Baltimore and Harford counties, said her agents have similar stories of clients losing out to other buyers. It's not necessarily the highest price that wins. "It's the people with the strongest financing," she said.
Sellers have worried about financing troubles killing deals since lenders began to fail last year. Massive tightening in borrowing guidelines followed, a 180-degree change from the easy-money days of the housing boom. Subprime loans aimed at people with credit problems all but disappeared; down payment requirements increased.
And the reduction in credit is still going on. Three-quarters of U.S. lenders surveyed by the Federal Reserve last month said they had raised the bar on prime mortgages in the previous three months, further shrinking the buyer pool.
Hruz, the real estate investor and appraiser, blames this tightening for the drop in price on his Northwood home. He had 30 to 40 showings, but until recently, "no one was willing to pull the trigger."
Not all buyers are holding back because of loans, though. Nathan Hui, 32, who rents in Baltimore's Canton neighborhood, is a would-be buyer who sees no reason to hurry and plenty to hold off. All the research he's done, and he's done a lot, suggests to him that prices have further to fall. The one offer he made, back in February, was about 20 percent below the asking price to account for the future drops he expects. (No thanks, the sellers said.)
"In a case where there's [home-price] inflation, you've got to buy now because it'll get more expensive," said Hui, who works for a health care company and puts his chances of buying this year at about one in five. "But in a time of deflation, it's only to your advantage to sit back and wait."
Many seem to be doing the same. Metro-area home sales fell 33 percent in the first six months of the year compared with a year earlier, according to Metropolitan Regional Information Systems.
That's a much bigger drop than the U.S. overall, which was down about 19 percent, according to the National Association of Realtors. And it's a bigger decline than the metro area saw in the first half of last year, when sales were off 10 percent, or the first half of 2006, when the decrease was 16 percent.
Only three communities - White Marsh in Baltimore County, Crownsville in Anne Arundel and New Windsor in Carroll - saw an increase in home sales. Sales remained steady in one community, Anne Arundel's Davidsonville. They fell everywhere else, including a 60 percent drop in Edgewood. The number of homes changing hands in that Harford community went from more than 200 in the first half of last year to about 80 in the first half of this year.
These figures are mainly sales of so-called existing homes, not new ones. But builders are under pressure, too. New-home sales dropped more than 40 percent across the Baltimore metro area in the first half of 2008 vs. a year earlier, according to Hanley Wood Market Intelligence. Average prices fell 9 percent.
The base realignment and closure effort, expected to send thousands of new jobs to the Baltimore metro area, could turn the downward trend around for communities convenient to either Aberdeen Proving Ground or Fort Meade. But probably not soon. Many of the jobs won't appear until 2010 and 2011, says the Maryland Department of Business and Economic Development. And a number of the people currently based in Northern Virginia won't move here, at least not right away, the state believes.
The bright spot is that Maryland employers are still adding jobs rather than cutting, said Basu, the economist. Most states can't say the same.
"The market's down now, but it will be up later," said Hruz, the investor and appraiser. "Every real estate market is sooner or later pushed by two things: population and pent-up demand."