For sale, for less

Real estate investor Arthur Jordan, outside a Waverly rowhouse he rehabbed and has been trying to sell for five months. He cut the price to $220,000, but the only offers he has gotten were well below that. (Sun photo by Amy Davis / February 4, 2008)

Half the communities in the Baltimore metro area saw average home sale prices decline last year as the housing slump deepened.

That's a big change from 2006, the first full year of the downturn, when prices were still rising in eight out of 10 local communities, a Sun analysis found. Price drops hit ZIP codes in every Baltimore-area jurisdiction last year, and about a quarter in the metro area recorded decreases of at least 5 percent.

The most expensive counties - Howard, Anne Arundel and Carroll - had the biggest share of ZIP codes where average sale prices fell last year.

The lower-cost city is weathering the storm better: Six out of 10 neighborhoods posted gains, many double-digit.

But Baltimore hasn't escaped unscathed, particularly in its well-heeled pockets. The harborfront Canton neighborhood, where real estate investors and homebuyers alike bid up prices during the housing boom, is awash with For Sale signs and declining values.

About 250 homes are on the market there. That includes three houses in a row on one block, all with asking prices below what the owners paid.

"There's so much competition," said J.D. DiGirolamo, a real estate agent with Long & Foster in Canton who's handling one of the three rowhouses - a foreclosure taken back by the lender. "I think a lot of people got in over their head."

The Baltimore metro area housing market appears to be worsening for sellers. After lending rules tightened over the summer, the pace of sales downshifted sharply, with year-to-year drops of 30 percent in each of the last four months of the year. That increases the likelihood that more parts of the region will see price drops in 2008, despite favorable interest rates, economists warn.

As a result, a growing number of lenders are labeling certain local ZIP codes, whole counties and even all of the Baltimore metro area as "soft" or "declining" and requiring larger down payments for all types of loans. Borrowers wanting a 5 percent-down mortgage would find, for instance, that they need to put up 10 percent. Someone looking for 100 percent financing would have to come up with 5 percent.

Some lenders say they'll still do no-money-down here. But the changing rules add a new layer of complexity, said Tim Higgins, a home loan consultant with Patuxent Funding in Ellicott City.

Higgins, whose company sells its loans to banks and must follow their guidelines, said one lender is requiring larger down payments for all the Maryland counties where he does business. Another lender mandates it case by case - yes for a property in Columbia, but business as usual for one in Clarksville. And Fannie Mae's automated underwriting system is tagging some local homes with the declining-market warning, he said, which is the final word because so many lenders sell to the mortgage financing giant.

"So here we are in a declining market," said Higgins, who saw the change in rules last month. "I'm basically telling people it's going to be specific to the property that you're interested in, and I won't be able to tell you anything until I run it through. So, unfortunately, you're going to have to call me and say, 'Hey, we want to buy this house; can we still do it with a 5 percent down payment?'"

Average prices rose slightly overall last year in the Baltimore metro area, according to preliminary figures from Rockville-based Metropolitan Regional Information Systems Inc. The Sun analysis used data from MRIS, which records all sales of existing homes and new homes handled by real estate agents.

Calculating the change in average prices is a common way to measure the housing market, but it isn't perfect. If the houses that sold last year were significantly different from the ones that sold in 2006, the price change could be artificially high or low. To cut down on apples-to-oranges comparisons, The Sun analyzed only those ZIP codes and city neighborhoods with at least 10 sales each year.

The sales prices also don't account for increased givebacks from sellers, who are often paying for closing and other costs.

MRIS figures show a marked drop in sales across the region, with 80 percent of the metro area ZIP codes registering declines. That means more homes piling up on the market, increasing pressure on prices.

The analysis suggests that sellers in higher-priced communities were more likely to feel the squeeze than those in areas with homes for first-time buyers. Average prices dropped in most of the metro area's 10 most expensive ZIP codes; they rose in all but one of the 10 cheapest ZIPs.

It's even more obvious at a neighborhood level in Baltimore City. Price declines hit three-quarters of those with 2006 average prices of $300,000-plus but just one-quarter of the neighborhoods under $200,000. Generally the cheaper neighborhoods - those with homes priced under $150,000 in 2006 - saw the biggest gains.

"Anything over $200,000 is going to sit longer," said Arthur Jordan, a real estate investor trying to sell a rehabbed house in the city's Waverly neighborhood for $220,000. That's down $30,000 from his original asking price, but the only offers he has gotten - all for much less - were from other investors.

"I know investors who only sold one house last year. Some didn't sell any," said Jordan, whose house has been on the market for five months and is competing with others on the block. "I know guys getting houses foreclosed on."

Related topic galleries: Ellicott City, Sales, Financial and Business Services, Mortgages, Real Estate Agents, Photography, Banking

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