Home buyer help sought

Realtors push state to aid 1st-time buyers

November 29, 2006|By Lorraine Mirabella | Lorraine Mirabella,Sun reporter

Concerned that shrinking affordability is crimping the state's housing market, the Maryland Association of Realtors launched a grass-roots effort yesterday to persuade the governor-elect and state lawmakers to help first-time buyers.

A run-up in home values over the past few years has left the typical first-time buyer in Maryland with less than half the income needed to buy a starter home, the association said.

The price of a typical starter home in Maryland - one priced at 85 percent of the median home price in the state - increased from $183,796 at the end of 2003 to $261,211 in September, the association said.

The MAR-sponsored coalition, the League of Maryland Homeowners, will push for legislation to ease what the association is calling an affordability crisis, said Ilene Kessler, MAR president. MAR's housing affordability index shows that in December 2003, a typical first-time buyer earned just over 63 percent of the income needed to buy a starter home with a 5 percent down payment. As of September, affordability had dropped, with a first-time buyer earning just 44.5 percent of the income needed to buy a first home.

"First-time buyers in Maryland are finding it harder and harder to afford to buy a home," Kessler said during a conference call yesterday. "As housing prices have gone up, incomes have remained fairly stable."

The MAR initiative comes amid a nationwide cooling of the once sizzling housing market. In the Baltimore region, sales started falling a year ago, with the decline gaining momentum over the summer and into the fall. The association hopes a hand-up to buyers who were frozen out by record price gains during the boom will help stimulate sales.

"Housing is a feeding chain," Kessler said. "You start at one level and move up. Without entry level, there is no feeding chain. If people can't buy or people can't rent, it's a major problem."

Despite the current falloff in sales, prices are still increasing, though at a slower pace. In October, the average Baltimore-area home price crept up 3.15 percent from October 2005 to $307,190, Rockville-based Metropolitan Regional Information Systems Inc. reported.

Maryland is hardly alone in facing an affordability crunch.

In its 2006 State of the Nation's Housing report, Harvard University's Joint Center for Housing Studies found that from 2001 to 2004, the number of households spending more than half their incomes on housing increased by 14 percent to 15.8 million. Though more homeowners are building equity than ever before, slow wage growth for households in the bottom three-quarters of the income range has not kept pace with rising housing costs, the report said. The housing boom has also made it difficult to build houses at prices that low-income families can afford without subsidies.

"Up until the last several years, it used to be conventional wisdom that if you work, of course you'll be able to find a decent place to live, but working does not always mean you can afford a decent place to live," Nicolas P. Retsinas, director of Harvard's housing studies center, said yesterday. "Home prices have escalated substantially, and rents are starting to trend back up, so as a result it puts real pressure on people who are left out and not owning a home."

It's been difficult to win support for affordable-housing programs because homeowners typically want to see prices rise and equity increase, he said.

But in the last couple of years, business groups, including real estate associations, around the country have been stepping in to lobby at the state level for affordable-housing relief, Retsinas said. Sometimes that comes in the form of employer assistance programs, relaxing regulations, selling public land near public transit for housing, or encouraging mixed-income housing, Retsinas said.

"The Realtors are natural allies," Retsinas said. "If they can help people buy homes and buy more homes, help that family become homeowners, it's good for business."

Kessler said it was too early to talk about specific proposals. Among the possibilities are state income-tax credits for buyers and employers, grants for work force housing and ways to coordinate planning among state agencies handling transportation and development so residents can live in or near communities where they work.

A spokesman for Gov.-elect Martin O'Malley said yesterday that O'Malley is still working out the details of some of the affordable-housing initiatives discussed during the campaign, such as setting up an affordable-housing trust fund on a state level. "I'm sure that many of these issues will be discussed during the transition," the spokesman, Rick Abbruzzese, said.

lorraine.mirabella@baltsun.com

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