For many, housing in Md. still out of reach

Prices and interest rates haven't dropped far enough, study says

March 24, 2010|By Jamie Smith Hopkins |

Interest rates and home prices haven't fallen far enough to put homeownership within reach of many moderate-income workers in the Baltimore metro area, a new study suggests.

A buyer making a 10 percent down payment would need to earn $70,000 a year to afford the Baltimore area's median home price of $235,000, according to a report released Tuesday by the Center for Housing Policy. Police and elementary school teachers make about $52,000, the nonprofit research group said. Nurses earn about $41,000.

Among the 208 metro areas the center studied, Baltimore home prices were tied for 29th most expensive - more than in Philadelphia, ranked 36th at $227,000, and far more than in Detroit, one of the least expensive at $86,000. The report looked at sale prices during the last three months of 2009.

"Home price drops have made homeownership more affordable for some workers, but a lot of workers in a lot of jobs are still priced out," said Maya Brennan, a senior research associate at the center.

A dearth of affordable housing was part of the corrosive brew that threw the nation into financial meltdown in 2008. As prices skyrocketed earlier in the decade, buyers stretched their budgets to get in the door. Defaults and foreclosures followed.

Now the mortgage payment on a median home price is in line with median household income in the Baltimore metro area - at least with today's low interest rates and a 10 percent down payment. But household incomes often include two salaries, a luxury that many no longer have amid widespread layoffs in recent months. In this uncertain economy, Brennan said, prospective buyers should consider whether they can afford a home on one salary.

"A lot of two-income households have become one-income households," she said.

Celia Chen, a housing economist at Moody's, said affordability is much improved across the country compared with the bubble days. Among homes that changed hands at least twice, prices in the Baltimore area dropped 17 percent from the peak to last summer, the most recent figures available.

"Even areas that were really unaffordable before are now almost affordable," she said.

Moody's assumes a 20 percent down payment, which lowers the mortgage amount, but few first-time buyers can afford such sums these days. Even the Center for Housing Policy's 10 percent down payment calculation is overly optimistic, some agents say.

Marney Kirk, an agent with Keller Williams in Timonium, said some buyers are concerned about the possibility that the Federal Housing Administration might be forced to increase the down payment required on the loans it insures - from 3 1/2 percent to 5 percent. FHA changes to shore up the loan program, plus the approaching end of the $8,000 first-time homebuyers' tax credit, will make homes less affordable, Kirk said. That in turn could put downward pressure on prices.

"If you can't afford it, you can't buy it," Kirk said. "If somebody needs to sell it, [they've] got to decrease the price."

The Center for Housing Policy's report defined "affordable" as no more than 28 percent of income going to the mortgage, property taxes and insurance.

The center, which also looked at the landscape for tenants, said the fair-market rent of $1,200 for two-bedroom units in Baltimore ranked the area as the 27th-most expensive among the 210 analyzed. A worker would need to earn more than $23 per hour - or about $48,000 a year - to avoid paying more than 30 percent of his or her income at that rent.

When it comes to home prices, some parts of the region are more affordable than others. The median home price last month was $115,000 in Baltimore City and $336,000 - nearly three times higher - in Howard County.

Anita Mohamed, a real estate agent with the Pat Hiban Real Estate Group in Columbia, said first-time buyers looking in Howard, Montgomery and Prince George's counties are hard pressed to buy anything but foreclosures. Many are single folks making $50,000 to $60,000 annually.

"For the average first-time homebuyer with a single income, it's still very difficult," Mohamed said.Tiffany M. Pertillar, a project manager for a government contractor in Lanham, was looking to buy a home for about $200,000 and found that many of the townhouses in that range were foreclosures in Prince George's County. And many of those she saw required tens of thousands of dollars in renovations. Finding a place in good shape for what she wants to spend has proved tough.

"When you do find them, you definitely have to jump on them quickly because it seems to be everyone's price range," said Pertillar, 28, who makes $62,500 between her day job and a side gig as a fitness instructor. "They don't stay on the market for any longer than a couple of days."

She was outbid several times. Now she's got a contract on a short sale in Bowie and hopes the bank will approve the deal. The market seems affordable to her - but just barely.

"I have two master's degrees I've got to pay for," she said. "I will be getting a roommate."

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