Interesting view on the real estate slump (Baltimore: fit in, sales)

[jonjj]

From the bubble:
South Florida Vs. Baltimore Real Estate Markets

After visiting south Florida last week I realized that its real estate market had a true bubble. Prices there rose strictly out of speculation and as the industry grew so did the jobs and pay, but the 25+% increase per year was unsustainable for a varity of reasons. South Florida is limited in high paying jobs, most jobs are lower end service based jobs. The area is largely attractive to retirees, most of whom are looking to down size. For a while people in real estate related industries were making money. But the prices went out of control. Now there are few jobs left in construction, real estate sales, and lending. Many people have fled, just leaving their houses behind. In Lee County alone there were nearly 12,000 foreclosures last year, about the same as the entire state of Maryland.

The Baltimore region is fundementally different. Baltimore, in my opinion was undervalued, prior to its frothy years. Some of the real estate run up was simply catching up. During the boom years prices rose at 15% per year. These increases were not sustainable either, but not nearly as dramatic as other areas. The major difference is jobs. High paying jobs have been created with the bulk still on the way. Baltimore will benefit in the upcoming years from BRAC which is expected to bring 10's of thousands of new government and civilian jobs, thousands of new medical jobs are on the immediate horizon, Morgan Stanely and Under Armour have recently annouced plans to add hundreds of jobs, and that is just part of the new economy coming to Baltimore. Over the past two years prices in trendy city neighborhoods have fallen to '04 and in some cases '03 prices, once again making it afforable for many first time buyers. In the same period Baltimore has had a significant increase in ammenties: Dozens of new retailers, eateries, and an increase in cultural attractions. Baltimore is just beginning to realize its self as a future city. This is why 2008 will see the return of homebuyers to the city market place. Unlike South Florida which could take nearly a decade to recover, Baltimore has the fundementals in place to support growth. In Baltimore 2008 will prove to be the year of the wise homebuyer, by 2009 we will begin to see a streak of prosperity that has not been seen in the city for decades.


---I am sure there are a variety of opinions on the real estate market in the city. I am posting this one.

[barante]

Makes eminent sense. Until five-seven years ago, Baltimore was incedibly undervalued. With this correction, tremendous buys are awaiting a smart buyer.
As to Florida, the incredible bubble has been well documented. I know someone in Lantana. In her aging but well-kept condo buildings, a recently redone two-bedroom apartment sold for $27,000 some seven years ago before the bubble affected even such less desirable properties. There was a story in the New York Times, I believe, about these skeletons of speculative high-rise condos that were selling for totally insane prices. The story quoted a buyer who was walking away from his $600,000 deposit because the alternative, paying the full inflated prices of nearly $2 million, was even more insane.
There are dozens of such speculative skeletons that may never be finished. It's going to be interesting to see what happens to such aging properties as the one in Lantana. The building is not centrally airconditioned; I guess it has an elevatqr of sorts. Also, its units are not as functional as the modern ones. But for a retiree of modest expectations it was fine. The complication in Florida that makes any prediction impossible is the fact that many municipalities have been hit so badly that they are cutting essential services, including laying off police and fire officers. What will that do to their market desirability?

[bawlmer]

Sounds like a fun trip to Florida.

Here's an interesting juxtaposition of hype vs. reality in the same article from the August 2007 Examiner. Notice the first comment is from a real estate agent, then the acutal facts follow.

"Baltimore City is really up, and some other areas are up,” said Ilene Kessler, president of the Maryland Association of Realtors. “There’s a certain stability in this area that there’s not in other parts of the country.”

However, total transactions statewide decreased 18.3 percent, including 14.5 percent in Baltimore City and 11.9 percent in Baltimore County.

“What’s happening is there are a lot fewer housing units being transferred, but the ones that are being transferred are high price,” said Deb Ford, professor of finance at the University of Baltimore.

My opinion:

What this tells me is that sales (transactions) in the City are down almost 15 percent with only the high end homes moving. These high priced homes are having disproportionate impact on the value of the market. In addition, real estate agents are notoriously dishonest and will contradict the facts as often and as publicly as they can in hopes of influencing the market by shear hype alone.
Fact is the average homeowner still can't move his/her house in this market.

[barante]

"Notoriously dishonest?" I don't think this is true at all. There is a difference between being dishonest and making minimum disclosures unless forced to do otherwise.
The real problem here is that most buyers are so ignorant that later, when they get buyers' remorse, they decide that they were hoodwinkled by the agent.
Two things to keep in mind:
(1) In most cases, the agent you are dealing with -- and think you established a rapport with, thinking he/she is your friend -- is the seller's agent. Whatever you tell that agent about your flexibility and finances is likely to be reported back to the seller.
(2) If you don't know what you are doing -- and if you don't protect yourself by relying on outside counsel -- you will get screwed. It is you and not the seller's agent who should compile comps; it is you and not the seller's agent who should know that your taxes are determined by the price you pay.
(3) it is you, and not the seller's agent, who should scout the neighborhood and know the pluses and minuses. An ignorant buyer of anything has a sucker written all over him/herself.
The fact is that many buyers weigh the choice of burgers more carefully than buying a costly, illiquid asset like real estate.

[bawlmer]

Originally Posted by barante

"Notoriously dishonest?" I don't think this is true at all. There is a difference between being dishonest and making minimum disclosures unless forced to do otherwise.

Perfect example of real estate ethics! "Making minimum disclosures unless forced to do otherwise," is nothing more than a euphemism for a sin of omission. Please explain, if you can, how a sin of omission is any less a sin than one of comission.

[carolott]

Originally Posted by bawlmer

My opinion:

What this tells me is that sales (transactions) in the City are down almost 15 percent with only the high end homes moving. These high priced homes are having disproportionate impact on the value of the market. In addition, real estate agents are notoriously dishonest and will contradict the facts as often and as publicly as they can in hopes of influencing the market by shear hype alone.
Fact is the average homeowner still can't move his/her house in this market.

I think you're 100% correct in your assessment of the market. The unfortunate thing about my neighborhood is that the people we need here are being/have been priced out. I'm honestly hoping for a bit of a crash so we can start over -- this time with some common sense, instead of greed, being the motivator.

[helenejen]

Barante just summed up my view about why we don't even need real estate agents. They don't really do anything except put the listing in the MLS, and there are services that will do that for a nominal fee nowadays. (And that characterization of real estate agents doesn't even get into the questionable ethics of some realtors.)

In terms of actually showing the house, we should just pay someone an hourly fee for taking us into houses if people aren't comfortable showing their own homes or looking when the homeowners are on site.

[barante]

I have sold two houses on my own. You can do it but you need to know what you are doing and how it is done. An average buyer/seller is too clueless to do that.
By the way, one of those sales was to a lawyer. The first thing we discussed was whether we wanted to bring any outside lawyers to the table. We decided not to on the theory that if either of one wanted to break the contract, no lawyer could prevent that from happening. The sale went without a hitch.
In general, though, a good real estate agent can remove many headaches. The emphasis is on good.

[barante]

bawlmer-- I find it hilarious that I am now defending the real estate industry with which I am not connected in any way.
Omission/comission? As in all contractual agreements, it is the buyer's obligation to be informed so that he/she is not led astray, intentionally or not.

[carolott]

Originally Posted by barante

As in all contractual agreements, it is the buyer's obligation to be informed so that he/she is not led astray, intentionally or not.

I wish some of my neighbors understood that. When I listen to some of them, the only thing that goes through my mind is "WHERE did you think you were moving to??????"

Research is key to finding a community you'll be happy with -- and good grief, a simple Google search will bring up a wealth of information...most of it unedited and not from a realtor's point of view. This forum is a perfect example of that.