Housing out of reach

Costs called too high for wide segment of metro workers

January 30, 2008|By Jamie Smith Hopkins | Jamie Smith Hopkins,Sun reporter

Buyers have the upper hand in today's housing market, but that's no guarantee that they can actually afford to buy.

Despite the slump in home sales and growing concessions from sellers, prices remain out of reach for a wide section of workers in the Baltimore metro area, a new report suggests.

The nonprofit Center for Housing Policy said yesterday that the price of a typical local home last summer was $269,000, too expensive for a nurse, an elementary school teacher, a police officer, a retail sales employee and workers in many other jobs. Though the median price of new and existing homes fell 2 percent from a year earlier, the decline was far too small to close a gap that widened markedly during the run-up in prices earlier in the decade.

With a 10 percent down payment, a Baltimore-area buyer last summer needed to earn about $88,000 to stay within the recommended limit for housing costs - no more than 30 percent of income, according to the Center for Housing Policy's "Paycheck to Paycheck" report.

"Things haven't gotten much better as a result of this downturn," said Jeffrey Lubell, executive director of the Washington-based group, which had similar findings for the rest of the country. "I was actually surprised that Baltimore was as expensive as it was. Out of 200 markets, it's in the top 20 percent."

The typical family in the Baltimore metro area could afford fewer than half the homes sold last summer, according to the National Association of Home Builders. In 2000, right before the housing boom, seven out of 10 homes sold were in that family's price range.

What changed in between is that sales accelerated and prices soared, kicked off by low mortgage rates and tight supply but later fueled by loose lending standards that let buyers stretch themselves to the limit - and beyond. Concern grew as not just the working poor, but typical voters, found buying a challenge.

Even Baltimore City, the cheapest housing market in the metro area, passed a law last year requiring that developers getting city aid make some of their homes affordable to low- and moderate-income buyers or renters.

Advocates hoped the housing downturn would ease the pinch. But the effect has been mixed.

On the upside, real estate agent Patrick Smith said buyers looking for homes between $250,000 and $350,000 in Howard County - a tough range in the metro area's most expensive market - are having an easier time of it now. Smith, a Realtor with Long & Foster in Clarksville, said homeowners trying to sell quickly to avoid foreclosure have helped push prices down 5 percent to 10 percent in a variety of neighborhoods. He hears far fewer complaints from buyers about affordability than he did a few years ago.

"It's a big change," he said. "This is very good for those buyers in that price range."

On the downside, the rising number of foreclosures here and nationwide is creating a new pool of people who can't afford a house: former homeowners with tarnished credit.

Enterprise Community Partners, the Columbia-based financier and builder of affordable housing, is seeing land prices drop and construction costs fall, excellent trends for moderate-income buyers. But the government resources necessary to make homes and apartments affordable to more people are harder to come by - and aren't likely to increase, with fewer home sales producing less tax revenue. Meanwhile, the credit turmoil affecting mortgage lenders has made financial institutions less able to fund affordable-housing developments.

"Is it more pros than cons?" asked Chickie Grayson, chief executive of Enterprise Homes, the group's development arm. She thought about it for a moment and decided it was an impossible question. "I don't know."

John McClain, a senior fellow at George Mason University's Center for Regional Analysis, worries that the market downturn is distracting local governments from making more concerted efforts on affordable housing. Price declines have been tiny compared with the run-up, he said. And he doesn't subscribe to the theory that values will soon plummet, fixing affordability in one fell swoop.

"The focus has gone off this issue, but it hasn't gone away," McClain said. "It is a serious problem."

Even though the $88,000 income a Baltimore-area buyer needed last summer was less than what the center calculated was required the year before - $97,000 in today's dollars - it's still far more than many local jobs pay.

A typical local elementary school teacher and police officer each earn almost $50,000, which means they'd need a spouse with similar earning power to make the numbers work. Two licensed practical nurses pooling their resources would fall short, while retail sales pays so comparatively little that four employees would need to team up to afford the typical home, the study found.

In 2003, part-way into the housing boom, a couple composed of a schoolteacher and a retail worker had more than enough for the typical home. That leaves renting as the alternative. But at nearly $800 a month, even the typical one-bedroom is too pricey for a retail worker in the Baltimore area, the center said.

Yesterday the center launched an online guide, HousingPolicy.org, with information about ways that state and local governments can improve affordability. Lubell urged leaders to make use of the housing slump's silver lining before it's gone.

"It has put a pause on housing price increases - it has given us time to step back and develop long-term strategies," Lubell said. "I do hope communities take advantage of this opportunity."

jamie.smith.hopkins@baltsun.com

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