A new study of housing by a University of Michigan professor says metropolitan Baltimore may face slow sales and some equity erosion, but the researcher who did the study cautioned that his findings aren't cause for major alarm among local homeowners.
The study ranks housing markets for risk based on local job growth, average income, construction rates, tax rates and recent price trends, said Dennis Capozza, professor of real estate and director of the Real Estate Risk Project in the School of Business Administration.
The Baltimore metropolitan area was ranked the fourth-riskiest market in the country.
But Mr. Capozza, who did his graduate study at the Johns Hopkins University, said that this area is not in as bad a shape as its ranking might suggest. And whatever is in store for the currently sluggish real estate market isn't likely to be nearly as bad as what some other Northeastern markets have been struggling through.
"There's a big difference between first and fourth," he said. "It won't be nearly as bad as Boston, because your economy is stronger and your prices aren't as high. Cities with the biggest excesses are the most vulnerable."
"I wouldn't put Baltimore in the category that's grossly out of whack" with economic fundamentals, he said.
The study is designed to flag real estate markets that could be headed for trouble up to five years from now. Currently troubled markets, such as Boston and New York, rank below Baltimore for risk because those areas have already suffered retrenchment.
Baltimore ranks as fairly risky because job growth here has slowed sharply from the 1980s, Mr. Capozza said, and because median prices rose sharply the past five years. He said taxes and personal income aren't posing a major risk to property values in the Baltimore area because taxes here have been stable and because personal income here is neither very high nor very low.
Even though Mr. Capozza said home prices here don't appear to be headed for a major downturn, the study does say that areas at risk, including metropolitan Baltimore, could see increases in mortgage delinquencies and defaults. Slow sales and some equity erosion -- the consequence of falling prices -- could also result, Mr. Capozza said.
"It could happen," he said of falling prices. "But because people see it coming, they'll take measures."
The study ranks San Francisco and Anaheim, Calif., as the two riskiest markets in the nation, with the Albany-Schenectady area of upstate New York ranked third. The California markets are highly risky because of their tremendous late-1980s appreciation and because of their slowing job growth, Mr. Capozza said.
/# "In terms of employment growth,
California has dropped from above average to average," he said. Metropolitan Baltimore has seen its job growth slow to about one-half of1 percent annually, he said, compared to annual rates as high as1.7 percent in the 1980s.
The fifth-ranked area for risk is metropolitan New York, suggesting that the upper mid-Atlantic states, where home prices have begun to fall, are in for still more hard times, Mr. Capozza said. Hartford, Conn., another soft market, is ranked sixth.
The safest areas studied were areas where prices fell sharply at some point in the last decade, or areas that largely skipped the price boom that hit markets in the Northeast during the 1980s. Those include areas such as Oklahoma City and San Antonio, which were hurt by falling oil prices in the mid-1980s, and Tampa, Fla., where the market was hurt by what critics now say was overbuilding. Salt Lake City and Louisville, Ky., are also among the least-risky markets.