The Real Estate Wonk

Too good to be true

2008-05-12T22:08:00Z

Readers of The Sun, not to mention this blog, may remember that I had a story last Thursday about a study showing that sales of less expensive homes were actually rising year-over-year despite the steep falloff in sales overall.

Alas -- the study was wrong.

Delta Associates, a real estate research firm that prepared the report for multiple listing service Metropolitan Regional Information Systems, said today that it included condos in its calculation for the first three months of this year but excluded them in the first quarter 2007 calculation. That apples-to-oranges comparison made it look like cheaper homes were selling like hotcakes when in fact they too were seeing sales declines.

Delta says now that single-family home sales -- that is, not condos -- fell 26 percent in the $120,000 to $249,999 category. (Its original calculation was a sales increase of nearly 20 percent.)

Ouch.

So why did no one -- either at Delta, at Wonk Central or in the Realtor ranks I interviewed -- suspect there was an error at first? Because all anecdotal evidence has for months suggested that this price range is doing significantly better than more expensive homes. Over and over, agents have said there are more buyers interested in under-$250 homes.

And they're right, relatively speaking. Cheaper homes haven't seen as steep a sales dropoff as more expensive ones. Sales of homes priced at $250,000 and above declined 37 percent in the first quarter of this year vs. the first quarter of last year, according to Delta's new calculation. (That includes a dropoff of almost 50 percent in the $500,000-plus range.)

It's a useful reminder that data errors can crop up, even at reputable research firms. And it's made me even more paranoid about the accuracy of any analysis that I haven't done personally. (Which is not to say I'm not extremely paranoid about potential data foul-ups in my own analyses, because I am.)

We'll have a correction in tomorrow's Business section.

How-to Monday: The buying timeline

2008-05-12T08:00:00Z

Image courtesy of Stock.XCHNG

Few things in everyday life are as intimidating and overwhelming as first-time home buying can be. There's so much to consider, and you don't know what you don't know.

So here's a rough to-do list -- the steps buyers typically go through from start to finish.

Keith L. Cross, a Realtor with Century 21 Downtown in Baltimore, suggests that Step One -- long before you get your heart set on a particular price range -- is to get pre-qualified for a mortgage. You need to know what lenders are willing to lend you in this ever-changing market.

Next, identify your wants and needs. Where do you see yourself living? What type of house do you want, and with how many bedrooms and bathrooms?

If you're working with an agent, this is the point at which he or she will make a list of properties meeting your criteria. You decide which to see.

Perhaps you'll find something immediately. Perhaps you'll look and look and look. But once you're ready to make an offer, your agent will write it up, present it to the listing agent to give to the seller and wait for a response.

"Usually in this market, there's a little bit of negotiation back and forth," Cross says.

If negotiations break down, you keep looking. If not, a contract is ratified -- and then there's even more to do.

A home inspection to see if there's anything wrong with the property. A termite inspection to look for the wood-chewing insects. An appraisal, ordered by your lender, to see what a third party thinks the property is worth.

Also during this period, both the lender and the title company you'll be using will need copies of your contract so they can get to work on processing. The title company has to make sure, for instance, that there's nothing legally preventing the seller from selling.

When the home inspection is done, you'll probably have a list of problems to consider, small or otherwise. (There's usually something wrong, Cross finds.) You can request that the homeowner make repairs or lower the sales price to give you money to make the fixes yourself. Depending on your contract, you might have to give the seller the opportunity to make things right but be able to get out of the deal if he or she isn't cooperative, Cross says.

If the appraisal comes in lower than the price you offered, you can walk or negotiate a lower price, Cross says. (If you do neither, your lender may balk. But that will depend on the company and your situation.) "In this kind of market, you may very well get that lower price," Cross adds.

Shortly before settlement, you'll do a final walk-through of the property to make sure any agreed-upon repairs were done and to give it a once-over for unexpected new problems -- i.e. flooded basement.

"Then we go to settlement -- and hopefully everybody's happy," Cross says.

Other things for the to-do list before settlement: Get homeowners' insurance, contact Baltimore Gas & Electric, start the process for telephone service ... That list can go on and on. (Click HERE to see the sorts of things new homeowners might want to do.)

Is this buying timeline missing something -- or do you have a buying story you'd like to share? Chime in.

An affordable housing suggestion

2008-05-11T10:43:20Z

Planners in expensive Westchester County, N.Y., have a thought about moderately priced homes that could work in most suburbs: Build them on top of some of the oodles of unnecessarily large office parking lots.

The New York Times reports today:

The recommendations came in response to a severe shortage of moderate-income housing in Westchester. Demand is expected to reach 19,083 units by 2015, yet between 2000 and 2005 only 970 units had been built, according to Deborah DeLong, the county’s housing director.
Because the roads and utilities in existing office parks are already in place, the study asserts, further development of those properties would not be as costly for developers.

Are we there yet?

2008-05-10T14:21:06Z

Forget horse racing, presidential elections and stock picking. The in thing to predict nowadays is when the housing market will start improving.

Fannie Mae's CEO says his best guess is 2010. Delta Associates and analyst John McClain of George Mason University, both speaking of our neck of the woods, say 2009 and the second half of 2008, respectively. Cyril Moulle-Berteaux, managing partner of hedge fund firm Traxis Partners LP, opines in a Wall Street Journal piece that the housing market already hit bottom last month.

But why let them have all the fun? You've been paying attention -- obviously, as you're here -- and you have opinions.

So: What's your forecast, either for the Baltimore area or the nation as a whole? Feel free to leave a detailed comment or just a date.

April home sales

2008-05-10T01:16:36Z

To the disappointment of all hoping for signs of a turnaround, April continued the trend of big sales declines in the Baltimore metro area. The number of homes sold last month was down 31 percent from a year earlier. Average prices were essentially flat. (The median price -- the point at which half the homes are less expensive and half more expensive -- fell 4.7 percent.)

Click HERE to see the data, released today by Metropolitan Regional Information Systems.

The sales drop ranged from 27 percent in Baltimore County to 42 percent in Carroll, which has really been taking a pummeling. Prices fell the most in Carroll, down 7.6 percent on average. Every other jurisdiction in the area saw tiny-to-modest price drops except Baltimore, where average prices rose 3.7 percent. (But the city's median price fell, which just goes to show that it depends on what you're measuring.)

The number of unsold homes is again on the rise. That's probably to be expected, because a number of agents mentioned in the winter months that they had clients planning to put their properties on the market in the spring.

Thoughts about the market? As always, chime in.

Housing and the government

2008-05-09T13:24:40Z

Now comes the latest salvo in the political wrangling over what the government should and shouldn't do about the housing slump, credit crunch and foreclosure problem: The House yesterday passed a measure to have the FHA insure billions in refinanced mortgages.

The Los Angeles Times, which notes that President Bush has "threatened a veto," reports in today's story:

At the center of the legislation is a measure that would allow the Federal Housing Administration to insure up to $300 billion in refinanced mortgages if lenders agree to write down the loan principal below the home's current appraised value. The plan would help an estimated 500,000 homeowners avoid foreclosure.
The measure would cost about $2.7 billion, according to the Congressional Budget Office.
Another provision, with particular relevance to states with high home costs, would permanently raise to $729,750 the limit for mortgages that government-sponsored holders Fannie Mae and Freddie Mac can buy.

I know some of you have strong opinions about government housing efforts thus far. For your reading pleasure, click HERE to see a list of recent federal actions and proposals.

Your idea here

2008-05-08T16:25:10Z

Every Monday in this space, I cover an issue related to buying, selling, renting or just generally living in a home. Every Monday. Eventually I'm going to run out of ideas.

So help me out, kind readers: Tell me what topics you're most interested in. What would you like to see? (Click HERE for all the previous How-to posts, if you'd prefer to check there first.)

How-to Monday isn't the time for exhaustive analyses or big investigations, of course. It has to be a how-to, for one, and it can't be too complicated or it'll never fit in the small space they give me when it gets printed in The Sun the following Friday. But that doesn't mean you can't suggest news stories for my (frightening long) queue.

So chime in, either in the comments or by email. What would you like to know? What do you think others should know?

(Image courtesy of Stock.XCHNG)

These homes are selling

2008-05-08T13:20:22Z

I've lost track of how many times I've noted in stories that less expensive homes are selling more easily than pricier ones, but a new analysis puts a number on the strength of that part of the market. From today's article:

Nearly 20 percent more properties priced from $120,000 to $249,999 sold in the first three months of the year than in the same period in 2007, according to a report released yesterday by Metropolitan Regional Information Systems. That comes as sales in all pricier categories, particularly $500,000 and over, continued to fall sharply.
The report, prepared for the multiple listing service by real estate research firm Delta Associates, is a potent reminder that price matters. Homes affordable to first-time buyers are getting contracts faster because those buyers don't have property of their own to sell first. The $120,000 to $249,999 category, which accounted for one-fifth of sales in the early part of last year, swelled to more than a third of the market in the first quarter.

Other interesting statistics from the MRIS/Delta report that I couldn't fit in the story:

--Vacancy among Baltimore metro area Class A apartments is rising (6.1 percent in the first quarter, up from 4.4 percent a year earlier). Rental prices are essentially flat, at $1,296.

--Vacancy is also rising in the Baltimore metro area office market -- it's 12 percent, up from 10.9 percent a year ago. While homebuilders have been assiduously cutting back to get inventory under control, office development is still growing. Delta reports that there are 4 million square feet under construction, compared with 2.5 million square feet a year ago.

State Center plans unveiled

2008-05-07T15:38:16Z

The housing, credit and economic troubles killing development projects here and nationwide haven't stopped plans to redevelop the state complex in midtown Baltimore into new offices, apartments, condos and shops.

Lorraine Mirabella reports today that "state officials and developers said yesterday that they hoped to start construction of a new State Center by 2010."

A master plan totaling 6 million square feet, to be presented tomorrow to a city design panel, includes 2 million square feet of office space, 1,200 market-rate and affordable residences and about 250,000 square feet of restaurants, shops and, possibly, a supermarket.
The dozen state agencies that currently occupy four state-owned buildings would become a key anchor, filling about three-quarters of the office space.

Home buying fair this Saturday

2008-05-06T14:35:43Z

Live Baltimore Home Center is holding a home buying fair and neighborhood tour event this Saturday from 9 a.m. to 2 p.m. It starts at Baltimore Polytechnic Institute, 1400 W. Cold Spring Lane, and concludes with tours in the western half of the city.

Want more details? Click HERE.

Owing more than the home is worth

2008-05-06T13:16:00Z

Nearly half the people who bought homes last year in the Baltimore metro area owe more than those properties are worth now, same as the nationwide average, Zillow.com estimates. The company, best known for its "Zestimates" of home values, released the negative-equity numbers today as part of its report on trends in the first quarter of the year.

In the "could be worse" category, here are the 10 metro areas that Zillow believes have the biggest share of '07 buyers with negative equity:

1. Merced, Calif. -- 90.9%

2. Stockton, Calif. -- 90.5%

3. Modesto, Calif. -- 84.6%

4. Las Vegas-Paradise, Nev. -- 82.9%

5. Riverside-San Bernardino-Ontario, Calif. -- 80.9%

6. Madera, Calif. -- 80.3%

7. Vallejo-Fairfield, Calif. -- 78.9%

8. Bakersfield, Calif. -- 77.6%

9. Jackson, Mich. -- 77%

10. Fresno, Calif. -- 75.9%

At the other end: About 9 percent of 2007 buyers have negative equity in Corvallis, Ore., Zillow says.

Interested in other housing-market stats? Click HERE to see the first-quarter report.

Zillow also pinpoints the Baltimore metro area's market peak as summer of 2007 -- judging by price -- and says values have fallen 7 percent since then, back to levels last seen at the end of 2005.

How-to Monday: Property lines (or, Whose tree is it anyway?)

2008-05-05T08:00:00Z

Photo courtesy of Stock.XCHNG

If good fences make good neighbors, then you'll want to know the extent of your property. How else can you figure out where to put the fence?

Problem is, the "location" or "mortgage" survey a buyer gets is conducted to assure the lender that the house is inside the property lines, said John V. Mettee III, vice president of Frederick Ward Associates, an engineering, architecture and surveying firm in Bel Air. It's not very useful for telling you if that tree that needs trimming belongs to you or the Joneses next door.

Mettee suggests buyers do a true survey of property lines so they know what they're getting upfront. That will run you at least $1,000 -- possibly several thousand dollars, depending on the size of the property, he said.

"I've heard individuals say many a time, they thought that their property went to such-and-such a place and never really had a survey to determine that, only to find out years later that they didn't actually acquire what they thought they were acquiring," said Mettee, who gets a number of calls from homeowners disputing property lines with neighbors.

You can go to your local land records office to see the official word on your property. But unless you have professional training, Mettee doubts you'll be able to translate it into useful information.

If the tree that needs trimming might be sitting in public right-of-way, you have other places to turn. In Baltimore County, for instance, you'll want to call the Bureau of Highways, 410-887-3560 , which will make a determination. Should the tree be in the right-of-way, the bureau will also decide whether to trim (or remove).

The county doesn't charge for the maintenance, but you will have to pay a $25 work-order application fee, said David F. Fidler, a spokesman for the county Department of Public Works.

You also might find yourself with neighbor issues, never mind that the tree is county responsibility.

"We've had so much interest in the last year or two about trees -- for various reasons, it's become a hot topic in the county," Fidler said. "You may ask to have it taken down, and your neighbors may love that tree. ... This has sparked a good deal of controversy."

More news on the "credit squeeze" front

2008-05-04T17:47:33Z

Kenneth Harney continues documenting restrictions in the mortgage world with today's column, noting changes you might face if you're interested in cash-out refinancing, investment purchases and other specialized parts of the lending market:

Why the continuing rollbacks and how long could they continue? Lenders and insurers are carefully studying the sources of their greatest losses from mortgage vintages between 2003 and 2007. Where they see inordinate risk, they are reacting much as they would to a disease: They are eradicating it.
In the meantime, consumers have little choice: Get used to it. The excesses of the boom begat the credit squeeze, and it's not going away anytime soon.

If you're in the market for a new-purchase loan or a refinance, have you had any issues? Or have you found a product -- whether private market or government backed -- that suits you?

Harvard center: Pay attention to rentals

2008-05-03T10:57:23Z

As most of the nation fixates on home sales, housing prices, homeownership and foreclosures, Harvard's Joint Center for Housing Studies makes a plea for policymakers to consider the plight of renters:

While some owners who have lost their homes will quickly buy another unit and others will move in with family and friends, many will become renters. Indeed, after averaging just 0.7 percent annual growth from 2003 to 2006, the number of renter households jumped by 2.8 percent or nearly one million in 2007.
The growing numbers of renters must now compete for the limited supply of affordable housing, adding to the longstanding pressures in markets across the country.

Interested in this subject? Read the center's report HERE.

Tallying up foreclosure's toll on children

2008-05-02T16:15:30Z

First Focus, a Washington group that advocates for child-friendly policies and funding, said today it's estimating that 43,200 Maryland children will have to move as a result of subprime foreclosures -- primarily this year and next.

First Focus used as its base the Center for Responsible Lending's forecast that more than 55,000 Maryland homes with subprime loans will be foreclosed on. It then compared that to the share of households with children and the average number of kids in those households.

In its report, First Focus says:

These children are not just losing their homes, but they also risk losing their friends, schools, and in many ways, their childhood. When foreclosures force children from their homes, their education is disrupted, their peer relationships crumble, and the social networks that support them are fractured. Indeed, their physical health, as well as their emotional health and well-being, is placed at risk.