Home sales' rise is first since '05

First-time buyers, tax credit fuel year-over-year bump

March 07, 2010|By Jamie Smith Hopkins | jamie.smith.hopkins@baltsun.com

Falling home prices have transformed many properties from asset to albatross, but there's hope yet for those looking to sell: Nearly two-thirds of the Baltimore region's ZIP codes saw sales increases last year, the first time since 2005 that buying didn't slump across the board.

Sales are on the upswing as first-time homebuyers jump in - enticed by a temporary $8,000 tax credit - and investors snap up foreclosed properties. And some homeowners who can't wait any longer for prices to rise are finding ways to move on.

Baltimore residents Geoff and Gail Turk are in the market to buy a house despite not being able to sell their condo for anything close to what Gail bought it for in 2007. As they look for a three-bedroom property, the Turks are trying to rent the one-bedroom condo. They'd like to start a family, "and we just need more space," said Geoff Turk, 38, an Anne Arundel County teacher.

The market is far different from the housing-bubble days, when prices were escalating and selling was a snap. Four years since the slump took hold, foreclosures continue to be a problem and people selling at a loss are all too common. Even as home sales picked up in most areas last year, average prices fell in all but a handful of communities, a Baltimore Sun analysis found.

In half the region's ZIP codes, the drop was an average of 10 percent or more, which comes on top of widespread declines in 2007 and 2008. One result is that some 100,000 homeowners across the metro area - one out of every six borrowers - owed more on their mortgages than their homes were worth at the end of last year, real estate data firm First American CoreLogic estimates. An additional 30,000 borrowers were teetering on the edge of being underwater.

Prices drop, prospects rise
Paul Cooper, a real estate agent and vice president with Alex Cooper Auctioneers in Towson, said it's no coincidence that home sales are rising as values slump. He figures the vast majority of homes sitting on the market without offers are still overpriced.

"Every day I feel like a counselor to people who overpaid," Cooper said. "If people just drop the prices by 10 percent, you may be pleasantly surprised by the increased level of activity."

Many people managing to sell are doing just that. The average Baltimore-area ZIP code with rising sales last year had a 10 percent drop in price, according to The Sun's analysis of data from Metropolitan Regional Information Systems, which runs the local multiple-listing service used for buying and selling homes. ZIP codes with falling sales posted a slightly smaller price decline on average - 8 percent.

The Sun also analyzed Baltimore City neighborhoods and found the same trend amplified. The average city neighborhood with increasing sales had a 17 percent price drop, compared with a 12 percent decline in the average neighborhood with decreasing sales.

Economists say sales activity has to pick up before prices can stabilize. The counties are better off than Baltimore: Sixty-eight percent of suburban ZIP codes posted gains in home sales last year, compared with 40 percent of city neighborhoods.

"The city market's really lagging," said Joseph T. "Jody" Landers III, executive vice president of the Greater Baltimore Board of Realtors. When the housing boom went bust, "the city market kept going and going, even a year after the counties and the region had already slowed considerably. But now it's the reverse."

It's easier to judge the health of a market by the number of homes changing hands than by average prices, because prices are so easily skewed. The Sun's analysis included only those ZIP codes and city neighborhoods with at least five home sales during each of the past two years.

The severe housing slump here and nationwide followed on the heels of skyrocketing prices, a bubble market fed by easy mortgage money and speculation. In the Baltimore area, sales began falling at the end of 2005 and didn't show a sustained turnaround until the middle of last year.

Whether the national upturn will continue is uncertain because several factors could hinder progress, including high unemployment, millions of Americans in danger of foreclosure and government plans to phase out some market supports.

So far, the action in the Baltimore-area housing market is overwhelmingly in lower-price ranges. Sales of homes for less than $250,000 increased 20 percent in the metro area last year. Above that amount? A 9 percent decrease. Hardest hit was the $500,000-plus price range, which saw a 13 percent drop-off in sales last year.

Investors are part of increase
Increases in the low end are partially fueled by investors snapping up properties to rent out. All-cash buyers - usually investors - made up 14 percent of the market in the metro area last year, the highest percentage since MRIS began tracking the region in 1999. In the city, all-cash buyers accounted for nearly a third of all deals.

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