An up-and-down year for Baltimore's housing market

Sales rise in some neighborhoods; other areas continue to struggle

February 18, 2011|By Jamie Smith Hopkins, The Baltimore Sun

Gauging the trajectory of the real estate market in the Baltimore region has become a hyper-local exercise — it depends on precisely where you live.

While a handful of communities roared back so much last year that the number of home sales actually topped the market peak of 2005, many others are still free-falling years after the housing bubble popped, raising the possibility that the promise of revitalization during boom times truly was a mirage, a Baltimore Sun analysis found.

More than 40 percent of the metro area's ZIP codes saw homebuying increase last year. Most of the rest lost ground.

For buyers trying to determine where home prices and mortgage rates are headed, these neighborhood-by-neighborhood differences add another layer of uncertainty to the decision about whether to purchase or wait. After all, no one will know a community's housing market has hit bottom until it comes back up.

Donna Spare thought she got a good deal on a townhouse — she bought a foreclosure in Middle River for $190,000 last June after being outbid on three others — but the neighborhood hadn't bottomed out after all, she discovered.

"There's two foreclosures in my neighborhood that are $40,000 less than I paid," said Spare, a real estate agent with Advance Realty in Timonium. "I don't know when the price drops are ever going to stop."

The calculus has become much more complicated than buying and assuming values will increase. While foreclosures hurt a neighborhood's values, rising rents can make tenants decide to take the leap. Mike Kaspar made up his mind to purchase a home in Parkville last fall after crunching the numbers.

The townhouse he bought in November for under $170,000 costs him $265 less a month than the house he had rented in the same community. He thinks he got a great deal. But even if prices continue to fall, he figures he'll be OK: He could turn a profit by becoming a landlord if he needed to move and couldn't sell.

"I kind of look at it as an investment property," said Kaspar, 35, an information-technology worker. "As long as the area maintains, I don't see it ever being a problem."

While sales gyrate, declines in value remain the norm. Most suburban ZIP codes and city neighborhoods had falling average sale prices last year, according to The Sun's analysis of data from Metropolitan Regional Information Systems. The Rockville-based company runs the local multiple-listing service used to buy and sell homes.

Even in some areas that did post price gains, sellers aren't actually making out better than people who sold similar homes a year earlier. An area's average price can easily be skewed as the mix of properties sold — condos, townhomes, small houses and large ones — changes from one year to the next.

That was true in the past two years in part because of a federal tax credit for first-time homebuyers, which brought more purchasers of starter homes into the fray in 2009 but expired in mid-2010. After that, move-up buyers accounted for more of the market in some communities, pushing up average prices.

Nonetheless, some Realtors see pockets of hope. Dorian Keydash, owner of ReMax Experts in Federal Hill, said prices in the city neighborhoods he focuses on near the Inner Harbor seem to have stabilized for homes that aren't foreclosures or short sales.

"We're seeing those values slowly, slowly starting to move in an upward direction," he said. "It's slight, it's real slight, but it's something."

Economists are cautious about where prices are headed, and not just because unemployment and mortgage defaults remain elevated. Moody's Analytics sees Baltimore as a market that is still overpriced — the most overpriced in the country when compared with household incomes and apartment rents, in fact.

Baltimore-area prices have fallen about 19 percent since peaking at the beginning of 2007, compared with a 30 percent decline nationally since the U.S. peak a year earlier, according to the company's calculations.

"Baltimore's at the top of the list in part because many other places have collapsed," said Mark Zandi, chief economist at Moody's Analytics, a Pennsylvania-based economic consulting firm. "Prices have completely cratered in Miami, Las Vegas and San Diego."

Baltimore-area prices could fall further. Or, Zandi said, they could stay put for at least several years as incomes and rents catch up.

"I think they'll basically be flat-lined through that period," he said.

Past experiences with regional housing downturns, such as the oil-patch busts in Texas and Louisiana in the 1980s, suggest that homeowners shouldn't count on values returning to previous highs anytime soon, said Sam Khater, senior economist at real estate data firm CoreLogic in California.

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