The bill passed on 06/11/07 by Baltimore's City Council that will require developers to include a percentage of affordable housing units in new developments is a welcome strategy to provide more opportunities for low-income residents to remain in the city. Similar policies have been successfully implemented in Montgomery and other counties.
This major step forward should work in Baltimore - so long as it dovetails with the city's efforts to convert vacant houses into viable places to live.
Like many surrounding areas, Baltimore's housing prices have climbed significantly in recent years. But what constitutes welcome rising property values for some means unaffordable housing for others, and soaring prices have pushed out many low-income residents. City officials, housing advocates, developers and others have tried for about two years to come up with a workable response.
This bill represents a reasonable compromise. By the beginning of 2009, it will require developers who receive tax breaks or discounted land from the city to set aside 20 percent of their units for low- to moderate-income residents. After another 18 months, development projects that benefit from city rezonings would be required to make 10 percent of units affordable. And if overall housing hits high-end prices, 10 percent of all development projects would have to be made affordable.
Providing more affordable housing is critical as Baltimore remains one of the 10 most impoverished areas of the country, while also experiencing tremendous increases in expensive residences, especially in downtown areas around the waterfront. New mixed-income projects contemplated by the bill would be spread throughout the city, a necessary element to help prevent further concentrations of poverty and affluence that make for a divided city.
The legislation should provide additional affordable housing without discouraging developers from undertaking mixed-income projects. But as with many things, the proof will be in the details.
It's unclear whether $2 million designated for the first year of a trust fund that will allow the city to compensate developers for expenses they incur as a result of the required set-asides will be sufficient - or whether it can be expanded and sustained.
The city will also have to ensure coordination of this new program with its ambitious efforts to reclaim and revitalize thousands of vacant houses. It would not make sense to undermine well-intentioned mixed-income development projects with too-slow efforts to deal with vacant and boarded-up houses in the same vicinity. (baltimoresun.com)
Tuesday, June 19, 2007
Thursday, June 7, 2007
Baltimore: 4-year low in home sales
Values in Baltimore rise, but pace slows.
Sales of existing homes fell more than expected in April while prices slid for a record ninth consecutive month, indicating further troubles ahead for the housing market.
The National Association of Realtors reported that sales of existing homes dropped by 2.6 percent last month to a seasonally adjusted annual rate of 5.99 million units, the slowest sales pace in nearly four years.
The median price of a home fell to $220,900, an 0.8 percent decline from the median price a year ago. The median is the point at which half the homes are sold for more and half for less.
In the Baltimore region, house values have continued to increase every month, though not at the double-digit rates registered during the height of the boom. The median price last month rose 2.61 percent to $275,000, according to Metropolitan Regional Information Systems.
But, as in the rest of the nation, Baltimore area home sales have been slumping for more than a year.
Last month, sales of homes sold through the multiple listing service sagged 11.23 percent from a year earlier. That was the fewest sold during any April since 2000, according to data from MRIS. Sales in Baltimore and the five surrounding counties have declined in 18 of the past 19 months.
The slide in existing home sales came after a report Thursday that showed a big 16.2 percent surge in sales of new homes in April that occurred as the median price of a new home fell by a record 11.1 percent from the previous month.
Analysts said the disparity in sales of new and existing homes for April reflected in part the decision by builders to aggressively cut prices to unload inventory while homeowners are still reluctant to lower their asking prices.
"The market is lousy," said David Sloan, senior economist with 4Cast, a market research firm in New York. "The overall economy is not growing particularly strong. The Fed is keeping interest rates reasonably high because it's worried about inflation. So I don't think much is going to change in the fundamentals of the housing market."
The supply of existing homes for sale shot up to a record total of 4.2 million in April, an increase of 394,000 from the March supply. Analysts predicted that this big inventory surge would act to further depress prices.
"We're swimming in supply," said Mike Larson, a real estate analyst with Weiss Research, who cited a number of factors for the unsold homes.
"Unrealistic sellers, stuck flippers, stretched borrowers, foreclosures. They're all contributing to a surge in homes on the market," he said. Flippers are investors who bought homes during the boom hoping to resell them for a quick profit only to be caught as the market softened.
Patrick Newport, an economist with Global Insight, said that the inventory bulge was "worrisome, since builders are less likely to start new homes as long as inventories are climbing."
A recovery in housing is being held back by a wave of subprime mortgage defaults, which is throwing homes back onto the market and prompting banks to tighten lending standards for borrowers with poor or limited credit histories.
Curbs on subprime lending "are expected to be a source of some restraint on home purchases and residential investment in coming quarters," Fed Chairman Ben S. Bernanke said May 17. Even so, Bernanke said he doesn't foresee "significant spillovers" from the subprime market to the rest of the economy.
Housing enjoyed an extended surge in which sales of both new and existing homes set records for five straight years until 2006. The Realtors are forecasting that existing home prices could decline by around 2 percent this year, which would be the first setback for an entire year on records that go back four decades.
But Lawrence Yun, senior economist for the Realtors, noted that the expected price decline would be modest in comparison with the 50 percent appreciation in home prices that occurred during the boom period.
It had appeared that housing sales might be hitting a bottom at the end of last year. However, since that time, the troubles in the mortgage market, which has seen many subprime lenders forced to stop operations, has worsened the housing downturn.
"We've been anticipating slower home sales because many subprime loan products are no longer available," Yun said. "Fortunately, a wide availability of conventional mortgage products ... will help stabilize the market going forward."
Yun said the big rise in unsold homes on the market could be an indication that sellers are testing the market in the early spring in hopes of selling their homes and moving up to larger units, which he said would be a positive sign of a rebound in housing.
But other analysts were not so optimistic, expressing concerns that housing could remain under downward pressure for the rest of this year and stage only a modest recovery in 2008.
"The continued decline in existing home sales and the huge rise in inventories put in doubt the hopes that the housing market is stabilizing," said Joel Naroff, chief economist at Naroff Economic Advisors.
The troubles in housing have acted to depress overall economic activity, which slowed to a growth rate of just 1.3 percent in the first three months of this year, the slowest economic growth rate in four years.
For April, sales of existing homes were weak in all parts of the country. The Northeast experienced the biggest decline, a fall of 8.8 percent in April from the March sales pace. Sales were down 1.7 percent in the West, 1.2 percent in the South and 0.7 percent in the Midwest.
Housing accounts for about 23 percent of the U.S. economy, when taking into account purchases of furniture, appliances and other items for new homes, according to the Joint Center for Housing Studies at Harvard University in Cambridge, Massachusetts. (baltimoresun.com)
Sales of existing homes fell more than expected in April while prices slid for a record ninth consecutive month, indicating further troubles ahead for the housing market.
The National Association of Realtors reported that sales of existing homes dropped by 2.6 percent last month to a seasonally adjusted annual rate of 5.99 million units, the slowest sales pace in nearly four years.
The median price of a home fell to $220,900, an 0.8 percent decline from the median price a year ago. The median is the point at which half the homes are sold for more and half for less.
In the Baltimore region, house values have continued to increase every month, though not at the double-digit rates registered during the height of the boom. The median price last month rose 2.61 percent to $275,000, according to Metropolitan Regional Information Systems.
But, as in the rest of the nation, Baltimore area home sales have been slumping for more than a year.
Last month, sales of homes sold through the multiple listing service sagged 11.23 percent from a year earlier. That was the fewest sold during any April since 2000, according to data from MRIS. Sales in Baltimore and the five surrounding counties have declined in 18 of the past 19 months.
The slide in existing home sales came after a report Thursday that showed a big 16.2 percent surge in sales of new homes in April that occurred as the median price of a new home fell by a record 11.1 percent from the previous month.
Analysts said the disparity in sales of new and existing homes for April reflected in part the decision by builders to aggressively cut prices to unload inventory while homeowners are still reluctant to lower their asking prices.
"The market is lousy," said David Sloan, senior economist with 4Cast, a market research firm in New York. "The overall economy is not growing particularly strong. The Fed is keeping interest rates reasonably high because it's worried about inflation. So I don't think much is going to change in the fundamentals of the housing market."
The supply of existing homes for sale shot up to a record total of 4.2 million in April, an increase of 394,000 from the March supply. Analysts predicted that this big inventory surge would act to further depress prices.
"We're swimming in supply," said Mike Larson, a real estate analyst with Weiss Research, who cited a number of factors for the unsold homes.
"Unrealistic sellers, stuck flippers, stretched borrowers, foreclosures. They're all contributing to a surge in homes on the market," he said. Flippers are investors who bought homes during the boom hoping to resell them for a quick profit only to be caught as the market softened.
Patrick Newport, an economist with Global Insight, said that the inventory bulge was "worrisome, since builders are less likely to start new homes as long as inventories are climbing."
A recovery in housing is being held back by a wave of subprime mortgage defaults, which is throwing homes back onto the market and prompting banks to tighten lending standards for borrowers with poor or limited credit histories.
Curbs on subprime lending "are expected to be a source of some restraint on home purchases and residential investment in coming quarters," Fed Chairman Ben S. Bernanke said May 17. Even so, Bernanke said he doesn't foresee "significant spillovers" from the subprime market to the rest of the economy.
Housing enjoyed an extended surge in which sales of both new and existing homes set records for five straight years until 2006. The Realtors are forecasting that existing home prices could decline by around 2 percent this year, which would be the first setback for an entire year on records that go back four decades.
But Lawrence Yun, senior economist for the Realtors, noted that the expected price decline would be modest in comparison with the 50 percent appreciation in home prices that occurred during the boom period.
It had appeared that housing sales might be hitting a bottom at the end of last year. However, since that time, the troubles in the mortgage market, which has seen many subprime lenders forced to stop operations, has worsened the housing downturn.
"We've been anticipating slower home sales because many subprime loan products are no longer available," Yun said. "Fortunately, a wide availability of conventional mortgage products ... will help stabilize the market going forward."
Yun said the big rise in unsold homes on the market could be an indication that sellers are testing the market in the early spring in hopes of selling their homes and moving up to larger units, which he said would be a positive sign of a rebound in housing.
But other analysts were not so optimistic, expressing concerns that housing could remain under downward pressure for the rest of this year and stage only a modest recovery in 2008.
"The continued decline in existing home sales and the huge rise in inventories put in doubt the hopes that the housing market is stabilizing," said Joel Naroff, chief economist at Naroff Economic Advisors.
The troubles in housing have acted to depress overall economic activity, which slowed to a growth rate of just 1.3 percent in the first three months of this year, the slowest economic growth rate in four years.
For April, sales of existing homes were weak in all parts of the country. The Northeast experienced the biggest decline, a fall of 8.8 percent in April from the March sales pace. Sales were down 1.7 percent in the West, 1.2 percent in the South and 0.7 percent in the Midwest.
Housing accounts for about 23 percent of the U.S. economy, when taking into account purchases of furniture, appliances and other items for new homes, according to the Joint Center for Housing Studies at Harvard University in Cambridge, Massachusetts. (baltimoresun.com)
Economist: Record Foreclosures Could Hit Maryland
BALTIMORE - Maryland's foreclosure rates have been among the lowest in the country, but a local economist says the worst is still to come.
Anirban Basu warns of increased "blood in the water" as the impact of the housing downturn hits the state.
"Thus far the rate of foreclosures in Maryland has not had an effect overall because we have not yet seen a period of elevated foreclosure rates," said Basu, chief executive of Sage Policy Group, an economic consulting company in Baltimore. "However they are rising fast and the worst period is in front of us, not behind."
So far, Maryland has avoided the record foreclosures on both the prime and subprime markets in other parts of the country.
"Maryland's foreclosure inventory rate of .5 percent and new foreclosure rate of .31 percent are well below the national rates of 1.19 percent and .57 percent," said Doug Duncan, chief economist and senior vice president of research at the Mortgage Bankers Association.
Basu told The Baltimore Examiner that the increase in housing stock in Maryland is due to "the resettling of adjustable mortgage rates and the fact that people can't make those high interest payments. In addition, people over did it on the amount of debt they took on, not only with homes, but car and credit card debt and loans with has translated into increased delinquencies, and sadly, involuntary (foreclosure) home sales."
The Maryland Bankers Association says that while nearly 70 percent of Americans own their own homes, many that qualified did so with adjustable rate loans or subprime loans whose high interest rates borrowers can no longer afford.
"The regulatory environment is shifting," said Basu. "Borrowers who could have accessed credit in 2002-2003 can't anymore. The subprime market is virtually shutdown. If the state's economy falters and unemployment rises there will be increased blood in the water in respect to foreclosures." (www.examiner.com)
Anirban Basu warns of increased "blood in the water" as the impact of the housing downturn hits the state.
"Thus far the rate of foreclosures in Maryland has not had an effect overall because we have not yet seen a period of elevated foreclosure rates," said Basu, chief executive of Sage Policy Group, an economic consulting company in Baltimore. "However they are rising fast and the worst period is in front of us, not behind."
So far, Maryland has avoided the record foreclosures on both the prime and subprime markets in other parts of the country.
"Maryland's foreclosure inventory rate of .5 percent and new foreclosure rate of .31 percent are well below the national rates of 1.19 percent and .57 percent," said Doug Duncan, chief economist and senior vice president of research at the Mortgage Bankers Association.
Basu told The Baltimore Examiner that the increase in housing stock in Maryland is due to "the resettling of adjustable mortgage rates and the fact that people can't make those high interest payments. In addition, people over did it on the amount of debt they took on, not only with homes, but car and credit card debt and loans with has translated into increased delinquencies, and sadly, involuntary (foreclosure) home sales."
The Maryland Bankers Association says that while nearly 70 percent of Americans own their own homes, many that qualified did so with adjustable rate loans or subprime loans whose high interest rates borrowers can no longer afford.
"The regulatory environment is shifting," said Basu. "Borrowers who could have accessed credit in 2002-2003 can't anymore. The subprime market is virtually shutdown. If the state's economy falters and unemployment rises there will be increased blood in the water in respect to foreclosures." (www.examiner.com)
First-time homebuyers, just say no to foreclosures
Q:I am a first-time homebuyer and I want to buy a foreclosure property. Do you think this is a good idea? And can I get a mortgage for a foreclosure property? Thanks! Lyle T.
A: Dear Mr. T:
Something is telling me that this could be a big mistake, but you and I may be thinking of two different things. If you are asking about buying a pre-foreclosure property, listed by an agent or for sale by owner ("FSBO", pronounced "fizzbo" in common usage) that you can see in advance and have inspected and appraised, then fine. The process is the same for buying a pre-foreclosure property as it is for buying any other property.
If you are talking about buying a foreclosure property at auction, then I do not recommend it for a first-time home buyer. Auctions are interesting. It is a unique group of people that show up to bid on properties.
Generally speaking, investors bid on properties, often sight-unseen, and they accept a great deal of risk in doing so. What is the condition of the property? Will it be delivered vacant or will they have to evict the former owners? There are no guarantees. This type of investor is generally pretty battle-hardened, has rehabbed properties before, and has some extra capital to carry the property and pay attorney's fees if any legal issues arise after the purchase.
And sometimes the properties are sold at or above market value and are not the instant bargain that people think they are. If you are thinking of buying your first home at auction, please think again.
As for financing, you can obtain a mortgage to buy a foreclosure property. The lender has to know that the property is in foreclosure, but you can get pre-approved for a mortgage subject to a ratified contract, appraisal and title work.
People who buy at a foreclosure auction are seeking instant equity over everything else - location, (think school districts and your commute to work), the number of bedrooms and bathrooms, recent renovations, upgraded systems, etc. But today's market is already a buyer's market. There is so much more to enjoying living in your first home than how much instant equity you have in your property.
You should interview three realtors or buyers agents that specialize in working with first-time home buyers. Pick the one that you feel listens to you and understands your concerns the best. Have your agent help you articulate your goals and prioritize a list of must-haves for your home. If you are not already pre-qualified for a home loan, get pre-qualified as soon as possible so your real estate agent knows your purchasing power. (http://media.www.districtchronicles.com)
A: Dear Mr. T:
Something is telling me that this could be a big mistake, but you and I may be thinking of two different things. If you are asking about buying a pre-foreclosure property, listed by an agent or for sale by owner ("FSBO", pronounced "fizzbo" in common usage) that you can see in advance and have inspected and appraised, then fine. The process is the same for buying a pre-foreclosure property as it is for buying any other property.
If you are talking about buying a foreclosure property at auction, then I do not recommend it for a first-time home buyer. Auctions are interesting. It is a unique group of people that show up to bid on properties.
Generally speaking, investors bid on properties, often sight-unseen, and they accept a great deal of risk in doing so. What is the condition of the property? Will it be delivered vacant or will they have to evict the former owners? There are no guarantees. This type of investor is generally pretty battle-hardened, has rehabbed properties before, and has some extra capital to carry the property and pay attorney's fees if any legal issues arise after the purchase.
And sometimes the properties are sold at or above market value and are not the instant bargain that people think they are. If you are thinking of buying your first home at auction, please think again.
As for financing, you can obtain a mortgage to buy a foreclosure property. The lender has to know that the property is in foreclosure, but you can get pre-approved for a mortgage subject to a ratified contract, appraisal and title work.
People who buy at a foreclosure auction are seeking instant equity over everything else - location, (think school districts and your commute to work), the number of bedrooms and bathrooms, recent renovations, upgraded systems, etc. But today's market is already a buyer's market. There is so much more to enjoying living in your first home than how much instant equity you have in your property.
You should interview three realtors or buyers agents that specialize in working with first-time home buyers. Pick the one that you feel listens to you and understands your concerns the best. Have your agent help you articulate your goals and prioritize a list of must-haves for your home. If you are not already pre-qualified for a home loan, get pre-qualified as soon as possible so your real estate agent knows your purchasing power. (http://media.www.districtchronicles.com)
Monday, June 4, 2007
Maryland ranks second in U.S. for larger homes
31.1 percent in Anne Arundel County have at least 4 bedrooms.
Jeaneene Scott, a 44-year-old mortgage lender, moved her family from a Crofton townhome into a five-bedroom home at the Homeport community in Edgewater. Jeaneene Scott never thought she'd own a mansion. But this month, the 44-year-old mortgage lender moved her family from a Crofton townhouse into a five-bedroom home in Edgewater. "It's definitely a dream home," said Ms. Scott. "My son said it's the perfect hide-and-go-seek house."
Anne Arundel ranks eighth statewide, with 31.1 percent of occupied homes with at least four bedrooms, according to a recent U.S. Census Bureau report. And that's a safe sign the demand for McMansions here is still hot.
Calvert County took first place with 42.8 percent of homes equipped with four or more bedrooms. Howard County came in second with 41.9 percent and Charles County followed with 40 percent. Last place went to Baltimore city, which had 11.8 percent.
Anne Arundel's larger housing stock helped Maryland rank second in the nation, with 28 percent of its homes having at least four bedrooms. The state came in just behind Utah with 39.2 percent. Meanwhile, homes are steadily growing on a national basis, with 20 percent of occupied housing units having four or more bedrooms. That's an increase from 17.7 percent in 2000.
John Kortecamp, executive vice president of the Home Builders Association of Maryland, said he thought Anne Arundel County could rank higher if it weren't for zoning rules that limit home construction to "pretty much anything but age-restricted housing."
In Anne Arundel, Winchester Homes is building the larger homes that Ms. Scott and other home buyers are seeking. Winchester's 29-unit Homeport community off Solomons Island Road sells multi-bedroom homes starting around $1.2 million.
The county's affluent population has helped drive demand for the community and roughly 20 Homeport units sold since last summer, said Winchester President Larry Burrows.
"We have good job growth and household incomes, and we have a very educated, sophisticated customer base," he said.
Anirban Basu, chairman and chief executive officer of Sage Policy Group, an economic and policy consulting firm in Baltimore, said the proportion of large homes directly correlates to income levels. Anne Arundel ranks higher on the large-home list because of affluent communities like Severna Park and Annapolis, he said.
But younger buyers have flocked to less expensive areas, such as Odenton and Laurel because they may not have the wealth to purchase a four-bedroom home, or need to, he said.
Mr. Basu said that co-existence of residents with various income levels contributes to Anne Arundel's diverse and robust economy.
"Efficient economies are diverse economics," Mr. Basu said. "It doesn't just take the lawyer or the lobbyist to sit at lunch and have a power meal. Somebody actually has to serve the meal."
Mr. Basu said he expects home size to dwindle thanks to a growing number of empty nesters and baby boomers who want to downsize. The smaller-home trend already is taking place.
Buyers bought 197 county homes with four or more bedrooms last month, down from 273 in April 2005, according to the Metropolitan Regional Information Systems.
Charlie Buckley, a Realtor with Long & Foster who sells waterfront homes in Annapolis, said his clients are empty nesters and baby boomers looking to shed the "six-bedroom home."
These clients are saying "I just sold my big house in Potomac, my kids are grown now," he said.
Mr. Buckley said he's working to fill their needs with a builder who develops 3,000-square-foot waterfront homes that are "top quality" and "priced under $2 million."
"We always sell these houses right away," he said. "These houses have everything you would expect in a 6,000-square-foot house but they're 3,000 square feet." (www.hometownannapolis.com)
Jeaneene Scott, a 44-year-old mortgage lender, moved her family from a Crofton townhome into a five-bedroom home at the Homeport community in Edgewater. Jeaneene Scott never thought she'd own a mansion. But this month, the 44-year-old mortgage lender moved her family from a Crofton townhouse into a five-bedroom home in Edgewater. "It's definitely a dream home," said Ms. Scott. "My son said it's the perfect hide-and-go-seek house."
Anne Arundel ranks eighth statewide, with 31.1 percent of occupied homes with at least four bedrooms, according to a recent U.S. Census Bureau report. And that's a safe sign the demand for McMansions here is still hot.
Calvert County took first place with 42.8 percent of homes equipped with four or more bedrooms. Howard County came in second with 41.9 percent and Charles County followed with 40 percent. Last place went to Baltimore city, which had 11.8 percent.
Anne Arundel's larger housing stock helped Maryland rank second in the nation, with 28 percent of its homes having at least four bedrooms. The state came in just behind Utah with 39.2 percent. Meanwhile, homes are steadily growing on a national basis, with 20 percent of occupied housing units having four or more bedrooms. That's an increase from 17.7 percent in 2000.
John Kortecamp, executive vice president of the Home Builders Association of Maryland, said he thought Anne Arundel County could rank higher if it weren't for zoning rules that limit home construction to "pretty much anything but age-restricted housing."
In Anne Arundel, Winchester Homes is building the larger homes that Ms. Scott and other home buyers are seeking. Winchester's 29-unit Homeport community off Solomons Island Road sells multi-bedroom homes starting around $1.2 million.
The county's affluent population has helped drive demand for the community and roughly 20 Homeport units sold since last summer, said Winchester President Larry Burrows.
"We have good job growth and household incomes, and we have a very educated, sophisticated customer base," he said.
Anirban Basu, chairman and chief executive officer of Sage Policy Group, an economic and policy consulting firm in Baltimore, said the proportion of large homes directly correlates to income levels. Anne Arundel ranks higher on the large-home list because of affluent communities like Severna Park and Annapolis, he said.
But younger buyers have flocked to less expensive areas, such as Odenton and Laurel because they may not have the wealth to purchase a four-bedroom home, or need to, he said.
Mr. Basu said that co-existence of residents with various income levels contributes to Anne Arundel's diverse and robust economy.
"Efficient economies are diverse economics," Mr. Basu said. "It doesn't just take the lawyer or the lobbyist to sit at lunch and have a power meal. Somebody actually has to serve the meal."
Mr. Basu said he expects home size to dwindle thanks to a growing number of empty nesters and baby boomers who want to downsize. The smaller-home trend already is taking place.
Buyers bought 197 county homes with four or more bedrooms last month, down from 273 in April 2005, according to the Metropolitan Regional Information Systems.
Charlie Buckley, a Realtor with Long & Foster who sells waterfront homes in Annapolis, said his clients are empty nesters and baby boomers looking to shed the "six-bedroom home."
These clients are saying "I just sold my big house in Potomac, my kids are grown now," he said.
Mr. Buckley said he's working to fill their needs with a builder who develops 3,000-square-foot waterfront homes that are "top quality" and "priced under $2 million."
"We always sell these houses right away," he said. "These houses have everything you would expect in a 6,000-square-foot house but they're 3,000 square feet." (www.hometownannapolis.com)
Selling short. For many facing foreclosure, it's the only way out
Danielle Merriweather added up all the numbers and they didn't look good. The mortgage was $1,162 a month. The winter gas bills ran $500 a month. There were four children to care for. And there was little money coming in after the young mother lost her job as a medical biller.
"It's not easy to come up with that kind of money when you don't have a job," said Merriweather, 29, who bought her home on Detroit's west side two years ago. "I was just like, 'Oh my God, I can't afford this house.' "
Merriweather hasn't made a mortgage payment since December. But instead of joining the 16,351 Detroiters whose properties were foreclosed on during the first quarter of the year, Merriweather began to work with her lender and agreed to sell her property in what's called a short sale. That's when the lender agrees to accept a lower price for a property than what the seller owes.
A short sale differs from a so-called upside-down sale, which happens when the homeowner is not at risk of foreclosure but must pay the difference between the purchase price and the principal owed at settlement.
Merriweather's situation illustrates the painful, yet simple math many homeowners face. She paid $140,000 for the house and owes roughly $127,000. The house is on the market for $125,000 and probably will sell for even less.
In a short sale, the buyer negotiates directly with the mortgage company through a real estate agent. The lender typically requires an appraisal and proof of hardship before allowing a short sale.
Sellers lose all equity, but they walk away without a foreclosure to mar their credit rating. The late payments will still be reported.
What many short-sale sellers don't realize is that they face income tax liabilities, too. Banks report the canceled debt as income for the seller to the Internal Revenue Service (though Congress is considering a bill that would amend the tax code to forgive the tax debt).
Banks on board
Real estate agents said they're advising more sellers who've fallen behind on payments to look at short sales as a way to avoid foreclosure and, increasingly, banks are willing to work with them.
Michigan has the 10th-highest foreclosure rate in the country -- with 29,467 foreclosures in the first quarter of the year, according to RealtyTrac, an Irvine, Calif., firm that publishes foreclosure data.
"The worst thing possible for a bank is to foreclose," said Eric Burgoon, group senior vice president of LaSalle Bank, based in Troy. Burgoon advises homeowners unable to pay their mortgage to contact the lender before missing a payment. Some may be able to refinance the mortgage at a lower interest rate or change the monthly payments.
"It's the last thing we want to do," Burgoon said. "It doesn't help the customer and it's the worst thing for us."
Many expect the number of short sales to grow. Property values have tanked in the state's overcrowded real estate market as unemployment rates have soared, leaving owners unable to sell their homes for what they owe on the mortgage.
The ranks of financially strapped homeowners also likely will increase as those with adjustable-rate mortgages find themselves unable to handle the higher monthly payments.
"I'm getting calls every day," said real estate agent Venesha Harris of the Loft Warehouse in Royal Oak. Homeowners "ask, 'What can I do?' It's desperate times out there."
Double jeopardy
Angela Armstrong agreed to a short sale on her Southfield property this year. Armstrong, who was laid off as a finance manager for Oak Park Schools in 2005, moved to Maryland soon after and placed her house on the market.
When it didn't sell, she leased it in May 2006 to a tenant for $1,000 a month, $237 short of the mortgage payment. The tenant has bounced five checks since then and a few months ago stopped paying rent altogether. Hoping to preserve her credit score, Armstrong struggled for a while to cover living expenses in both states.
"We were eating peanut butter," Armstrong said. Her home is now on the market for $105,000. She paid $137,000 for it in 2004. "We were tapped. We were always on the brink of losing everything."
There's a potential buyer for the property, and last week Armstrong evicted her nonpaying tenant and is hoping for a quick sale.
The main downside to the short sale, Armstrong said, is that she will lose the equity in the home.
"I just kind of walk away," she said. "I get nothing."
Still, if not for the short sale, "I probably would have been in foreclosure," she added. "I got to a point that I was either going to have a heart attack or let it go."
Getting a bank to agree to a short sale isn't always easy. Real estate agent Denise Consiglio said she worked for four weeks to try to get a lender to accept a short sale offer on a client's listing. By the time the bank agreed, the buyer was gone.
"They say we're willing to work with you, but their system is outdated," said Consiglio, who works for Real Estate One in Fraser. "If I told you," as a buyer, "it was going to take four weeks, what would you do?"
Consiglio and other agents say they will take reduced commissions to get banks to accept short-sale offers.
Even when lenders agree to a short sale, some may not be willing to take much below what they are owned, said Mandy Melone, a Realtor with Added Value Reality in Livonia.
But in some cases, lenders "are taking 50 cents on the dollar of what's owed them," said Melone, who has three short-sale listings and closed on 12 others in recent months.
Merriweather is hoping to put her short sale behind her. She plans to move to a home owned by her mother in Troy, rebuild her credit and eventually purchase another house.
"I'm going to try to build my money back up," Merriweather said. "We've got to do what we got to do until I get myself back together." (www.freep.com)
"It's not easy to come up with that kind of money when you don't have a job," said Merriweather, 29, who bought her home on Detroit's west side two years ago. "I was just like, 'Oh my God, I can't afford this house.' "
Merriweather hasn't made a mortgage payment since December. But instead of joining the 16,351 Detroiters whose properties were foreclosed on during the first quarter of the year, Merriweather began to work with her lender and agreed to sell her property in what's called a short sale. That's when the lender agrees to accept a lower price for a property than what the seller owes.
A short sale differs from a so-called upside-down sale, which happens when the homeowner is not at risk of foreclosure but must pay the difference between the purchase price and the principal owed at settlement.
Merriweather's situation illustrates the painful, yet simple math many homeowners face. She paid $140,000 for the house and owes roughly $127,000. The house is on the market for $125,000 and probably will sell for even less.
In a short sale, the buyer negotiates directly with the mortgage company through a real estate agent. The lender typically requires an appraisal and proof of hardship before allowing a short sale.
Sellers lose all equity, but they walk away without a foreclosure to mar their credit rating. The late payments will still be reported.
What many short-sale sellers don't realize is that they face income tax liabilities, too. Banks report the canceled debt as income for the seller to the Internal Revenue Service (though Congress is considering a bill that would amend the tax code to forgive the tax debt).
Banks on board
Real estate agents said they're advising more sellers who've fallen behind on payments to look at short sales as a way to avoid foreclosure and, increasingly, banks are willing to work with them.
Michigan has the 10th-highest foreclosure rate in the country -- with 29,467 foreclosures in the first quarter of the year, according to RealtyTrac, an Irvine, Calif., firm that publishes foreclosure data.
"The worst thing possible for a bank is to foreclose," said Eric Burgoon, group senior vice president of LaSalle Bank, based in Troy. Burgoon advises homeowners unable to pay their mortgage to contact the lender before missing a payment. Some may be able to refinance the mortgage at a lower interest rate or change the monthly payments.
"It's the last thing we want to do," Burgoon said. "It doesn't help the customer and it's the worst thing for us."
Many expect the number of short sales to grow. Property values have tanked in the state's overcrowded real estate market as unemployment rates have soared, leaving owners unable to sell their homes for what they owe on the mortgage.
The ranks of financially strapped homeowners also likely will increase as those with adjustable-rate mortgages find themselves unable to handle the higher monthly payments.
"I'm getting calls every day," said real estate agent Venesha Harris of the Loft Warehouse in Royal Oak. Homeowners "ask, 'What can I do?' It's desperate times out there."
Double jeopardy
Angela Armstrong agreed to a short sale on her Southfield property this year. Armstrong, who was laid off as a finance manager for Oak Park Schools in 2005, moved to Maryland soon after and placed her house on the market.
When it didn't sell, she leased it in May 2006 to a tenant for $1,000 a month, $237 short of the mortgage payment. The tenant has bounced five checks since then and a few months ago stopped paying rent altogether. Hoping to preserve her credit score, Armstrong struggled for a while to cover living expenses in both states.
"We were eating peanut butter," Armstrong said. Her home is now on the market for $105,000. She paid $137,000 for it in 2004. "We were tapped. We were always on the brink of losing everything."
There's a potential buyer for the property, and last week Armstrong evicted her nonpaying tenant and is hoping for a quick sale.
The main downside to the short sale, Armstrong said, is that she will lose the equity in the home.
"I just kind of walk away," she said. "I get nothing."
Still, if not for the short sale, "I probably would have been in foreclosure," she added. "I got to a point that I was either going to have a heart attack or let it go."
Getting a bank to agree to a short sale isn't always easy. Real estate agent Denise Consiglio said she worked for four weeks to try to get a lender to accept a short sale offer on a client's listing. By the time the bank agreed, the buyer was gone.
"They say we're willing to work with you, but their system is outdated," said Consiglio, who works for Real Estate One in Fraser. "If I told you," as a buyer, "it was going to take four weeks, what would you do?"
Consiglio and other agents say they will take reduced commissions to get banks to accept short-sale offers.
Even when lenders agree to a short sale, some may not be willing to take much below what they are owned, said Mandy Melone, a Realtor with Added Value Reality in Livonia.
But in some cases, lenders "are taking 50 cents on the dollar of what's owed them," said Melone, who has three short-sale listings and closed on 12 others in recent months.
Merriweather is hoping to put her short sale behind her. She plans to move to a home owned by her mother in Troy, rebuild her credit and eventually purchase another house.
"I'm going to try to build my money back up," Merriweather said. "We've got to do what we got to do until I get myself back together." (www.freep.com)
Economist: Record foreclosures could hit Maryland
BALTIMORE — Maryland's foreclosure rates have been among the lowest in the country, but a local economist says the worst is still to come.
Anirban Basu warns of increased "blood in the water" as the impact of the housing downturn hits the state.
"Thus far the rate of foreclosures in Maryland has not had an effect overall because we have not yet seen a period of elevated foreclosure rates," said Basu, chief executive of Sage Policy Group, an economic consulting company in Baltimore. "However they are rising fast and the worst period is in front of us, not behind."
So far, Maryland has avoided the record foreclosures on both the prime and subprime markets in other parts of the country. (www.delmarvanow.com)
"Maryland's foreclosure inventory rate of .5 percent and new foreclosure rate of .31 percent are well below the national rates of 1.19 percent and .57 percent," said Doug Duncan, chief economist and senior vice president of research at the Mortgage Bankers Association.
Basu told The Baltimore Examiner that the increase in housing stock in Maryland is due to "the resettling of adjustable mortgage rates and the fact that people can't make those high interest payments. In addition, people over did it on the amount of debt they took on, not only with homes, but car and credit card debt and loans with has translated into increased delinquencies, and sadly, involuntary (foreclosure) home sales."
The Maryland Bankers Association says that while nearly 70 percent of Americans own their own homes, many that qualified did so with adjustable rate loans or subprime loans whose high interest rates borrowers can no longer afford.
"The regulatory environment is shifting," said Basu. "Borrowers who could have accessed credit in 2002-2003 can't anymore. The subprime market is virtually shutdown. If the state's economy falters and unemployment rises there will be increased blood in the water in respect to foreclosures."
Anirban Basu warns of increased "blood in the water" as the impact of the housing downturn hits the state.
"Thus far the rate of foreclosures in Maryland has not had an effect overall because we have not yet seen a period of elevated foreclosure rates," said Basu, chief executive of Sage Policy Group, an economic consulting company in Baltimore. "However they are rising fast and the worst period is in front of us, not behind."
So far, Maryland has avoided the record foreclosures on both the prime and subprime markets in other parts of the country. (www.delmarvanow.com)
"Maryland's foreclosure inventory rate of .5 percent and new foreclosure rate of .31 percent are well below the national rates of 1.19 percent and .57 percent," said Doug Duncan, chief economist and senior vice president of research at the Mortgage Bankers Association.
Basu told The Baltimore Examiner that the increase in housing stock in Maryland is due to "the resettling of adjustable mortgage rates and the fact that people can't make those high interest payments. In addition, people over did it on the amount of debt they took on, not only with homes, but car and credit card debt and loans with has translated into increased delinquencies, and sadly, involuntary (foreclosure) home sales."
The Maryland Bankers Association says that while nearly 70 percent of Americans own their own homes, many that qualified did so with adjustable rate loans or subprime loans whose high interest rates borrowers can no longer afford.
"The regulatory environment is shifting," said Basu. "Borrowers who could have accessed credit in 2002-2003 can't anymore. The subprime market is virtually shutdown. If the state's economy falters and unemployment rises there will be increased blood in the water in respect to foreclosures."
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