The Good and The Bad of the Baltimore Housing Market

You’ve probably read recently that Baltimore properties are still weighed down by negative equity — ranking fourth in the nation for metropolitan areas with homes underwater — where the value of the property is less than the debt owed on the homes.

Zillow, the gigantic online clearinghouse for the real estate market and an incredible source for data on housing trends, reported some discouraging facts in March: 17.4 percent of homes in Baltimore are underwater, and 12.9 percent of those homeowners owe twice or more than twice the current value of their homes.

Nationally, 6 million homeowners were in negative equity in the fourth quarter of 2015. Baltimore ranks behind only Las Vegas, Chicago, and Atlanta in the percentage of homes underwater.

That can cause heartache for homeowners who want to sell their properties, and it is certainly a contributor for the shortage in housing inventory in the area, since people aren’t selling homes that bring in too little money to pay off the mortgage.

Areas in these cities with less expensive homes are last to come out from underwater, which makes the worst part of the statistics the two accompanying realizations — 1) Communities that were harder hit by the recession continue to face the longest recovery time, and 2) those challenged communities are the entry points for first-time buyers, so without homes available, that slice of the American Dream remains a distant aspiration for many willing participants.

But not all the news is bad, and if we consider the rapid changes occurring, both nationally and in this area, there’s reason for hope.

For one, nationally 8 million homeowners were upside down on their mortgages just one year ago so a 25 percent drop in negative equity  to 6 million homes is welcome news.

Baltimore doesn’t rank in the top 10 for homes where debt is more than double the property value, and it is slightly below the national average of 13.1 percent when it comes to homes whose value is half or less than half the debt. That’s a relief for buyers and sellers looking at the horizon for hopes of home equity.

In Baltimore County, almost 46 percent of homes were increasing in value in January, which is an improvement from last August, when only 39 percent of homes were rising in value.

The number of foreclosures in Baltimore County peaked in April 2015, which on its face seems surprisingly late considering the market crashed in 2008. However, the market until much later, and Maryland has a “judicial foreclosure process,” which means that the courts have to approve the foreclosure, which really left people lingering.

Fortunately, the percentage of foreclosures in February was less than half the peak of April 2015. It would be great if it dropped to the pre-housing bust numbers of 2006, when only 0.5 percent of homes faced foreclosure, but don’t hold your breath yet.

For buyers, there are dozens of new home projects under way in Baltimore County, including several in Dundalk, Essex, White Marsh, Perry Hall, and Parkville, Timonium and Towson, among other areas.

Additionally, the longtime downward trend in the number of single-family homes in the county, which has been on a decline for nearly a decade, has slowly, slowly started to creep up since October 2015. That has occurred because more single-family homes are being built in the area.

Inventory is tight, with fewer homes for sale this January and February than were available last year. That means the percentage of homes sold in the county is unlikely to approach the peak of nearly 6.9 percent turnover in the month of November 2005. Indeed, February had only a 4.6 percent turnover in the total number of homes in the county, comparable to last February. With prices holding steady, it’s unlikely a surge of homes for sale is coming. Still, spring is home-buying and selling season so this number should rise over the next several months.

In all, the economy continues to show improvements, and along with that, consumers continue to feel confident about it, then that can only mean good things for Baltimore County. And of course, it’s important to keep in mind that neighborhoods and community pockets will over- and underperform. If you look at Baltimore City, for instance, several communities like Belair-Edison, North Harford Road, and Greektown are still struggling while median list prices in Canton, Federal Hill, Locust Point, and Riverside are all higher than were one year ago, and some are outright booming.

For buyers, the last upside to consider is that if you’re buying a home right now, you are getting a deal on it. Many homes that are available now used to cost more. In the long-term equity will rise, and you will have purchased a property at a good time.

For sellers who can afford to put the homes on the market, the news is also good. Supply is extremely tight, so while prices haven’t quite crept up to where they once were, credit is readily available and buyers are looking to purchase. That means sales are moving at a brisk pace. On top of that, The Commodari Group at Keller Williams Gateway is here to make sure the entire process is smooth and simple.