Sellers on hold

sun special report

10 homes on market in first half of year for every one sold

August 25, 2008|By Jamie Smith Hopkins | Jamie Smith Hopkins,

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 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 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.

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