Increasingly, Price Is Right

The Portion Of The Baltimore-area Real Estate Market In Reach Of Many First-time Buyers Has Nearly Doubled Since '06

Listing Information As Of July 2

July 15, 2009|By Jamie Smith Hopkins | Jamie Smith Hopkins,jamie.smith.hopkins@baltsun.com

If you wanted to buy a home for less than $250,000 three years ago, three-quarters of the market in the Baltimore metro area was out of your price range.

Then sellers got walloped. Housing slump. Mortgage meltdown. Recession.

Now you under-$250,000 buyers - classic first-time home purchasers - have a lot more to choose from.

Properties with asking prices in that range made up 43 percent of the metro area's housing market in May, up from 24 percent in May 2006. More under-$250,000 homes were for sale at the end of May - 8,149 - than in any previous May since 2001, according to a Baltimore Sun analysis of Metropolitan Regional Information Systems data.

"It's really opened up," said Bob Lucido, president of the Bob Lucido Team with ReMax Advantage Realty in Howard County. In some cases, "first-time buyers are able to get single-family homes as their first home because prices have come down."

Better affordability is good news not only for buyers but the housing market, which has suffered from a domino effect after Baltimore metro area prices practically doubled earlier in the decade. When first-timers can't buy, people in starter homes can't sell - which means they can't buy bigger homes, and the owners of those homes can't buy anything else either. Sales have plummeted in the metro area since the end of 2005. Thousands of homes have simply been sitting on the market.

But last month, as the price for a typical home in the metro area dropped to $250,000, sales increased. Real estate agents say they're seeing more activity because people think there are deals to be had and they're trying to take advantage of the $8,000 federal tax credit for first-time buyers.

Rising unemployment makes would-be buyers nervous, said Michael Hamby, a real estate agent with Champion Realty in Annapolis. But they're still looking.

"Right now, there's ... more first-time homebuyers out there than probably anything," Hamby said. "Hopefully that will help us clear some of the inventory."

Under $250,000 is the sweet spot for buyers and sellers, and here's why: The typical household in the Baltimore metro area earns about $71,000. Buyers getting a low-down-payment FHA mortgage can comfortably afford a $250,000 house with today's rates as long as they make at least $65,000, by themselves or as part of a couple.

"There's a lot more stuff that's been dropping into the realm of affordability," said Zack Blum, 24, who lives in Pennsylvania and wants a Baltimore-suburbs townhouse in the low $200,000s. "But they're not going to be perfect. The ones in the best shape, you have to pounce on, because you don't get a second chance."

That's because options are still pretty limited in parts of the region. Blum, who wants to reduce his commute to a job in the Washington area, has mostly been searching in Anne Arundel County, where just two out of every 10 homes for sale in May were priced below $250,000. It's the same in Carroll County, according to The Sun's analysis. And it's even worse in Howard County, with 1 1/2 homes under $250,000 for every 10 on the market.

In Baltimore and Harford counties, about four in 10 homes were priced below $250,000. And in the city? Nearly eight in 10.

On top of that geographic split, there's the "distressed property" dilemma. More and more of the homes in lower price ranges are foreclosures or potential "short sales," which require a lender's OK because the owners are trying to sell for less than they owe on their mortgages. It can take months for buyers to get from offer to settlement on either type of distress deal, said Joseph T. "Jody" Landers III, executive vice president of the Greater Baltimore Board of Realtors.

Blum knows that all too well. He's had a $220,000 contract on a short-sale townhouse in Laurel since April. The settlement date is up in the air, and he realizes he might never get the home.

"The bank is just horribly slow," said Blum, who feels as if his life is on hold. But, he added, "For that price, you kind of have to suck it up and go deal with the short-sale stuff."

What, exactly, buyers can get in lower price ranges piqued Landers' curiosity. Right before the July Fourth weekend, he logged onto the regional listing service for homes, run by Metropolitan Regional Information Systems, to see what was on the market in a price range that's solidly first-time-buyer territory: $200,000 or less.

He pulled up listings at random. An Ellicott City condo with two bedrooms, two baths and a balcony (asking price: $194,900). A four-bedroom rowhouse in Baltimore's Fells Point neighborhood ($179,900). A three-bedroom Glen Burnie rancher, white with green shutters ($160,000). A Cape Cod in Dundalk with three bedrooms and a carport ($129,900). A four-bedroom Colonial in Northeast Baltimore ($82,900). A two-bedroom mobile home in Elkridge, with a snazzy sunken tub in one of the bathrooms ($44,900).

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