Annapolis Maryland Luxury Real Estate

REAL ESTATE MARKET ASSESSMENT

Last week during the season's first snow temperatures plummeted and we had our first taste of winter. And it was chilly. But the cold snap was short lived unlike the current real estate market which appears to have frozen solid. While sellers wonder if the market will ever thaw, buyers seem to have gone into hibernation. With the holidays just around the corner, perhaps buyers are distracted. With all the negative press, perhaps buyers don't think that there are mortgage products available to them or that they will not qualify. However, there are very serious buyers who are actively looking for deals in the current market. Sellers that can undercut their competition are likely to attract those serious buyers out looking.

The supply of active listings has to some degree stabilized and prices should also stabilize in response. Supply and demand may now be in equilibrium. Basic economic theory cannot predict what will happen next. But, something must happen to encourage buyers to reenter the market - buyers earning more income, banks offering affordable mortgage products, or sellers lowering their asking price. Which will it be? Perhaps all three!

Inventory levels fell for the second month in a row to 4,243 active listings in Anne Arundel County at the end of November 2007 - down from the peak at the end of September when there were 4,646 active units on the market. Sold prices slipped less than 1% from last month but were up 3.6% from this time last year. Total volume was down 14.5% from October which was down 15.9% from September and off 18.3% from last year. More alarming for sellers is that the average list price to sold price ratio slipped to 90.2%.

There were 346 units sold in Anne Arundel County in November 2007, down from the 401 units sold in October. The number of active listings was 4,243 in November, down from 4,484 in October. The number of new listings taken in November was 730 in November, down from 927 listings taken in October. The average sold price was $415,771 in November, down slightly from $419,355 in October. The average list price was $461,138 in November, up slightly from $454,159 in October. The average number of days on market was 120 in November, down slightly from 123 in October. The average list price to sold price ratio was 90.2% in November, down from 92.34% in October. Total volume for November was $143,856,708 in November, down 14.5% from October.

There were 61 units sold in Annapolis in November 2007, down slightly from 64 units sold in October. The number of active listings was 883 in November, down from 954 in October. The number of new listings taken in November was 143, down from 186 listing taken in October. The average sold price was $561,546 in November, up 5.4% from $532,689 in October. The average list price was $606,151 in November, up 9.2% from $555,213 in October. The average number of days on market was 150 in November, up 13% from 133 in October. The average list price to sold price ratio was 92.6% in November, down from 94.9% in October. Total volume in November was $34,254,306, about the same as $34,092,066 in October.

According to Bankrate.com, the average national rate for 30-year fixed rate mortgages is at 5.8%, down from 5.9% quoted this time last month. The National Average Composite Mortgage Rate is steady at 6.4% for November.

According to RealtyTrac.com, the number of pre-foreclosures in Anne Arundel County was 172 in November, up from 116 in October. The number of auction properties in the county was 393 in November, about the same as 391 in October. And, the number of bank owned properties was 167 in November, up from 151 in October.

So what can we expect for December? Sales are likely to slow as our attention focuses on our families and the holidays. Inventory levels will decline as sellers wait for the spring market. Prices are likely to fall where sellers are ready to make a deal to get their homes sold before spring. Sellers should expect to be on the market for a year or more. Buyers have choices in all price ranges. Sellers should take all competition seriously and should price below any direct competition. Where there are only a few buyers, sellers who want their homes sold now must get the serious buyers to look at their home FIRST! Lowest price, best condition, favorable terms will result in a faster sale.

While no one can predict the future with any certainty, one thing is certain - it remains a buyer's market. Buyers have large numbers of desirable properties from which to choose and sellers have lots of competition. A firm understanding of the market trends and forces is necessary for making the best real estate decisions. So, if you are serious about buying or selling a home in today's real estate market, contact Stephen Howell, Associate Broker, REALTOR^®, Coldwell Banker Residential Brokerage, at 410-923-3217.

Maryland Housing Economics

Anne Arundel County Housing Affordability Index Rises 2.1%

December 10, 2007 - The Anne Arundel County Housing Affordability Index rose 2.1% in November 2007 to 61.1 - up slightly from 59.9 in October 2007.  In November 2007 the Average Sold Price of a home in Anne Arundel County was $415,771 - up from $419,355 in October 2007 as reported by the Metropolitan Regional Information Systems, Inc. ("MRIS", http://www.mris.com/).  Assuming industry accepted qualifying ratios (28%) for conventional 30-year fixed mortgages with an 80% loan-to-value ratio and 6.5% annual interest rate, buyers needed approximately $108,024 in household income to purchase a home in Anne Arundel County last month (See Table 1, below).  Their monthly mortgage payment is estimated at $2,521 (principal, interest, taxes and insurance).

Although it appears that prices remain stable as the year-end approaches, buyer's income has not kept pace with the increase in the cost of housing.  Buyer's that didn't refinance and can use available equity from their home when they sell or had an income windfall sometime this year may be able to keep their mortgages affordable when purchasing more expensive homes.   Everyone else may be out of luck.  This is one explanation why so many homes remain unsold in the Anne Arundel County real estate market.

According to Stephen Howell - an Associate Broker with Coldwell Banker Residential Brokerage in Annapolis, Maryland "Many buyers, who own homes in our area today, couldn't afford to purchase the home they now live in at today's prices.  They might not qualify for the loan.  Banks with their interest only adjustable rate mortgage products enabled buyers to qualify to purchase more home on the lower monthly payment, but those days may be over.  Sellers are going to have to wait until the banks and the buyers figure out what to do.  But sellers who have to sell are going to have to lower their price to get their home sold this winter."

Table 1 - Anne Arundel County Housing Affordability Index

Across Maryland, Harford County was the most affordable location in Maryland in November 2007 with a HAI of 104.5 - and was barely changed from last month.  Talbot County, on the other hand, was the least affordable location in Maryland with a HAI of 33.5 in November of 2007 - down from 37.2 in October 2007.  Across the U.S. as a whole, the National Association of REALTORS^® ("NAR", http://www.realtor.org/) reports the September 2007 (revised) HAI as 115.8, up 8.9% from August when the Index was 106.3.  The cost of the Median Priced Existing Single-Family home reported by NAR is $208,600 - almost half that of the $415,771 Average Sold Price reported by MRIS for Anne Arundel County in November 2007.

Table 2 - November 2007 Maryland Housing Affordability Index

According to Mr. Howell "Very few buyers bring a sizable down payment to the settlement table.  During the last few years adjustable rate interest only mortgages have keep monthly payments inline with buyers' income.  It's not unreasonable to think that some buyers purchasing in Anne Arundel County will have household incomes exceeding one hundred thousand dollars, but, many others will not.  Income has not kept pace with rising home prices and housing affordability has fallen as a result."

Furthermore according to Mr. Howell "The glut of homes on the market may be due in a large part to the inability of buyers to afford a home.  For sellers, when a buyer does make an offer on their home - if they're bringing twenty percent to the table - those buyers are gold plated and should be taken seriously.  They might be first-time home buyers or transfers relocating from out of our area.  Either way, they are serious and looking for deals."

Mr. Howell's sentiments about the market are backed up by the statistics published by MRIS.  According to statistics released today, MRIS reported the Average Sale Prices as a percentage of Average List Price was 90.16% in November 2007 - nearly three percent worse than this time last year when the ratio was reported to be 93.06%.  Sellers were accepting offers that were nearly ten percent less than their asking price on properties going to settlement in November.  In the months leading up to these November settlements, buyers were negotiating excellent deals while sellers continued to hold onto their asking prices.  In the end - at the settlement table - the buyers prevailed.

When the Housing Affordability Index ("HAI") rises, sales prices or interest rates are falling or median income is rising.  When the Index falls, then prices or rates are rising or median income is falling.  As with any mathematical equation, there is a fixed relationship between all the variables.  The HAI is calculated first by computing an estimated mortgage payment amount comprised of principal, interest, taxes and insurance (often referred to as PITI).  The calculation is based on 80% of the Average Sold Prices.  Taxes are estimated at 0.891 per $100 per year of the Average Sold Price.  Insurance is estimated at 0.35% of the Average Sold Price.  A buyer's actual PITI will vary depending on many factors, including their credit score, loan program and the lender the buyer works with.  Once you have computed PITI, divide PITI by 0.28 in order to obtain the income needed to qualify for the mortgage.  Using an estimated 2006 Median Household Income of $66,050 for Anne Arundel County according to the Maryland Department of Planning ("MDP", http://www.mdp.state.md.us/), divide the income needed to qualify to calculate the Index.  The lower the index, the more income buyers must have to qualify for the loan in order to purchase the house.

Mr. Howell operates a Maryland Econometrics website as a public service for use by real estate consumers and other interested parties.  More about the Anne Arundel County Housing Affordability Index and other Maryland counties can be found on the Maryland Econometrics website located at http://www.marylandeconometrics.com/ or by contacting Mr. Stephen Howell at 410-923-3217.

NOTICE:  The information included herein is deemed reliable but not guaranteed. Information and data reported may be revised when updates are available.  The views expressed herein are solely those of the author and do not necessarily reflect the views or policies of, and should not be attributed to, Coldwell Banker Residential Brokerage or NRT Incorporated or any other companies or officials.

Real Estate Market Assessment

The seasonal slump in the real estate market may already be upon us. As it does each year, home sales slow in late November and don't pick back up until January or February. And, it is likely to be slower this winter than in years past. Why? Well, there is still a lot of negative press about the real estate market and mortgages and it's the year before the election. Why just this morning there was a segment on the morning news "Foreclosure Corner". The anchor was discussing how to avoid foreclosure with a Prince Georges County judge - the steps to take and what not - and I thought to myself "has it gotten that bad?" Well, it might be.

But, there is a silver lining. There will be a gold rush. The real estate market will go through another boom cycle. The Base Realignment and Closure (better known as BRAC) process will result in twenty thousand plus jobs coming to our area and countless more support jobs. But, the realignment process hasn't started yet and sellers are not likely to see any real benefit from an influx of buyers until 2009.

Inventory levels reached a peak in September at 4,646 active units on the market and fell slightly to 4,484 in October while up 16% from this time one year ago. Sold prices slipped 5.4% from last month but remain level from one year ago. Total volume was down 15.9% from September and off 17.4% for the same period last year. More alarming for sellers is that the average list price to sold price ratio slipped to 92.3%.

There were 401 units sold in Anne Arundel County in October, down from 453 units sold in September 2007. The number of active listings was 4,484 in October, down from 4,646 in September. The number of new listings taken in October was 927, down from 956 listings taken in September. The average sold price was $419,355 in October, down from $441,246 in September. The average list price was $454,159 in October, down from $480,279 in September. The average number of days on market was 123 in October, up from 109 in September. The average list price to sold price ratio was 92.34% in October, down from 97.56% in September. Total volume for October was $168,161,351, down 16% from $199,884,468 in September.

There were 64 units sold in October in Annapolis, down slightly from 68 units sold in September. The number of active listings was 954 in October, down slightly from 966 in September. The number of new listings taken in October was 186, down slight from the number of new listings taken in September. The average sold price was $532,689 in October, down significantly from $617,421 in September. The average list price was $555,213 in October, down significantly from $643,968 in September. The average number of days on market was 133 in October, up from 126 in September. The average list price to sold price ratio was 95.94% in October, slightly better than 95.9% in September. Total volume in October was $34,092,066, down from $41,984,611 in September.

According to Bankrate.com, the average national rate for 30-year fixed rate mortgages is at 5.94%, down from 6.13% quoted this time last month. The National Average Composite Mortgage Rate is steady at 6.5% for October, down very slightly from 6.6% in September, and the same as October 2006!

According to RealtyTrac.com, the number of pre-foreclosure properties in Anne Arundel County was 116 in October, down from 192 in September. The number of action properties in the county was 391 in October, down from 525 in September. And, the number of bank owned properties was 151 in October, down from 108 in September.

The number of building permits was reported at 128 in September, down from 164 in August.

So what can we expect for the remainder of the year? Sales are likely to slow as our attention focuses on family and holiday activities. Prices are likely to fall where sellers are ready to make deals to get their homes sold before the end of the year. More homes will go unsold since banks have yet to relax lending guidelines. Sellers should expect to be on the market between 11 and 15 months. Buyers have choices in all price ranges from which to choose. Sellers should take competition very seriously and should always price below any competition. Where there are only a few buyers, sellers who want their homes sold must get the serious buyers to look at their home FIRST! Lowest price, best condition, favorable terms, will all contribute to achieving the fastest sale.

While no one can predict the future with any certainty, one thing is certain - it remains a buyer's market. Buyers have large numbers of desirable properties from which to choose and sellers have lots of competition. A firm understanding of the market trends and forces is necessary for making the best real estate decisions. So, when you are ready to get serious about buying or selling a home, please contact Stephen Howell, Associate Broker, REALTOR^®, Coldwell Banker Residential Brokerage, at 410-923-3217.

What is Affordable in Today's Market?

What is affordable in today's real estate market? Using the classic definition affordable means the ability to purchase a home with a 20% down payment while qualifying for a conventional 30-year fixed rate mortgage under traditional lender guidelines where the borrower's mortgage payment does not exceed 28% of total household income.

Since 2000 home prices have risen and the Anne Arundel County Housing Affordability Index has fallen. Throughout most of 2001 housing was quite affordable. When the index is at or above 100, the typical borrower whose household income exceeds the median income level for that period will have enough income to meet the debt-to-income qualifying ratio of 28% to purchase an average priced home. In 2001 the median income was reported by the Maryland Department of Planning as $57,800. So for much of 2001 borrowers had sufficient household income to meet lender requirements to purchase a $210,000 home.

During the last six years lenders have relaxed guidelines and introduced new products whereby borrowers qualify for more expensive homes on the same or less income using, for example, an interest only mortgage. Borrower's income has not kept pace with the increase in the cost of housing. While the average sales price has doubled since 2001, the median income was calculated at $66,050 in 2006. Many borrowers no longer qualify for mortgage loans using traditional lender guidelines. Furthermore, lenders have tightened guidelines in response to the sub-prime mortgage meltdown.

The mortgage engine that has fueled the growth in local home prices - loan products requiring lower debt-to-income ratios - has stalled at today's prices. Until the lenders introduce new products enabling buyers to purchase more expensive homes on less income, or buyers bring more down-payment to the settlement table, sales volume and sale prices are likely to continue to loose traction and continue to fall.

More information about housing affordability can be found online at www.MarylandEconometrics.com.

In Conclusion

If you are thinking about buying or selling a home or know someone who is, for a confidential, private, professional consultation without any obligation to discuss today's real estate market, please contact Stephen Howell at 410-923-3217.