Playing the Howard County Real Estate Game

By Lin Eagan



Real estate. It's a game everyone thought they could play until the bubble burst last fall. Now, after a devastating winter market where sales in Howard County were down 42% year over year, players are venturing back onto the field. The field is the same, but the rules have changed.

Traditionally, Howard County's bread and butter residential market is composed of homes in the $500,000 to $800,000 range, with a comfortable number of properties selling well over $1 million. This spring, these homes have been sidelined due to lack of both buyers and available financing. In 2009, the first-time homebuyer rules.

Armed with the $8,000 first-time homebuyer credit, the availability of FHA financing and 30-year fixed rate mortgages hovering around 4.75%, buyers are finally reappearing. Relieved real estate agents all over the county report phones ringing off the hook.



Last Year vs. This

Last year, the dream property call was for a million-dollar listing. Today the hot sellers are houses under $450,000. In fact, preliminary May sales figures show 177 pending townhouse sales, up from 112 pendings in May 2008. These figures sound strong but, unlike last year at this time, no one counts on a sale until after they've left the settlement table. Of those 177 to-be-settled transactions, as many as 50 will probably fall apart.

Financing criteria is certainly much tighter than a year ago. Gone are the days of 100% financing. Gone are the bridge loans that let you buy a house before the old one sold. Gone are the easy appraisals.

Lending and appraisal rules change daily, taking predictability out of the market. It's not unusual for lenders to ask for additional information up to the day of settlement. In rare cases, loans have been pulled at settlement. The whole process has become a stress test.

The move up market suffers the most. Single-family detached homes priced under $550,000 in Howard County are selling in fewer than six months, with a supply that will take six to eight months to be absorbed. Above $550,000, both the supply of available homes and the time on the market increase dramatically. So far in 2009, only 15 homes listed in MRIS for more than $900,000 have been reported settled, and at 3.5 sales per month, there is a 47-month inventory. This market will improve only after the lending on non-conforming loans - loans over $560,000 - once again becomes available. If a loan can't be sold to Fannie Mae or Freddie Mac, the money simply isn't available.



Short Sales, Foreclosures and Renting

Foreclosures and short sales (a sale where the mortgage owed is worth more than the property value) complicate things even more. There is no set of rules for buying or selling these distressed properties. Each bank has different rules and procedures and, again, they are revised constantly. Some cases can be closed in two or three months, but often it takes much longer. Few buyers are prepared to deal with the uncertainty and lack of response that often accompanies these transactions. Of course, there was the lucky buyer who didn't get his short sale approved, but was able to buy the same house at foreclosure auction two days later for $100,000 less.

For those who are unable to sell their properties, renting is an option - and a popular one. With the increased rental demand, agents are finding more complex credit issues. A lost job, a short sale or a few late payments on credit cards damages credit history for years and makes landlords, many of whom are facing the same issues, almost as skittish as the banks.



'Competition Will Be Intense'

And yet the phone is still ringing. One local agent received two calls within the timeframe of a single conversation from prospective buyers relocating because of BRAC, the massive base realignment taking place at Fort Meade that is now scheduled to open in 2011.

Even though it's only 2009, the initial BRAC wave is starting to affect the county real estate market. Homes under $450,000, priced at market, in good condition, are selling in less than a month. Lower priced properties are selling even faster, often with multiple offers. There is widespread hope that the real estate market is bottoming out, and that Howard County's unique desirability and strategic location will cause supply to diminish as demand picks up.

Dick Story, head of the Howard County Economic Development Authority, though optimistic by definition, was very convincing when he commented, "We all remember the days before the dot.com bubble burst when homes were selling up to 10% above list price, all cash and no contingencies. As BRAC approaches, we will see a similar market condition: The competition for new homes and inventory of re-sales will be intense. Attracted by our educational system and superior quality of life, a significant percentage of employees of BRAC agencies and their contractors will want to live in Howard County."

Predictions are based on fact and hope. That the economy will recover is certain. That BRAC will have a huge impact on our real estate market is a known. Put the two together and the result is a predicable and strong real estate recovery. The big challenge is establishing clear rules that keep people in the game, not on the sidelines.



Lin Eagan is president of Lakeview Title Company in Columbia. She can be reached at 410-992-4447 or lin@lakeviewtitle.com.