Slow housing market struggles to rebalance

Statewide foreclosure rate up, but lags national average

Last month, 3,104 homes were in various stages of foreclosure in Maryland, or one per 741 households, according to new data from RealtyTrac of Irvine, Calif., which monitors foreclosure filings nationwide.

That's up 74 percent from June 2008 and up 40 percent from July 2007. In June, the state's foreclosure rate dropped 23 percent from May, after new foreclosure relief laws took effect April 3 that extended the timetable of a foreclosure from 15 days to 150 days.

The state ranked 17th in the nation last month, below the national average of one filing per 464 households. The national rate increased only 8 percent from June.

Prince George's County, with one filing per 282 households, had the state's highest rate last month, about double its rate in June.

But Frederick County showed the biggest leap in July. Its rate, fifth in the state, was one per 745 households, up 171 percent from June.

Among the state's other large jurisdictions, Montgomery County was ninth, with one per 808 households, also about double its June rate. Baltimore City was 10th, one per 905 households, up 78 percent from June; and Anne Arundel County was 11th, one per 1,056, up 52 percent from June.

At the other end of the scale, Talbot County had four foreclosure filings last month — the fewest in Maryland.

Foreclosures increased 617 percent in Maryland from the first quarter of 2007 to the first quarter of 2008, according to the Maryland Department of Housing and Community Development. With 11,380 foreclosures, Maryland ranked 12th in the nation in the first quarter. Prince George's, Montgomery, Baltimore and Anne Arundel counties and Baltimore city accounted for 8,268 foreclosures that quarter, or 72.7 percent of all activity in Maryland.

Kenneth R.C. Wenhold, Washington regional director for Metrostudy, a Houston market data company, said Maryland's housing trends often follow Northern Virginia's, which are starting to stabilize after prices started dropping two years ago.

"Many are getting off the fence in Northern Virginia as buyers want to take advantage of low interest rates," Wenhold said. "In Maryland, the market hasn't been as bad for as long a period of time and prices haven't come down as much."

From July 2007 to July 2008, listings increased 8 percent while sales, which have begun to pick up the last three months, are still down 27 percent year-over-year. With Montgomery County being the healthiest market, according to Wenhold, it should be "one of the first in Maryland to ride the coattails of Northern Virginia."

The housing department in January predicted that roughly 33,000 Maryland homeowners would face interest rate resets this year.

Amid the growing number of foreclosures, the National Association of Homebuilders in Washington confidence levels are still at record lows, but more builders anticipate a turnaround for the building industry next year, according to a recent survey. Builder confidence in the Northeast remained low but gained two points after recent federal housing legislation passed.

"There is a sense that home sales may soon be reaching a turning point," association President Sandy Dunn, a homebuilder from Point Pleasant, W.Va., said in a statement. "Builders are anticipating the stimulative effects of this legislation and are optimistic that the tax credit will give those buyers who've been sitting on the fence the reason they need to jump back into the market."

The tax credit to which Dunn referred is actually a no-interest federal loan of $7,500 for first-time homebuyers.

Susan Matlick, executive vice president of the Maryland-National Capital Building Industry Association, said builders are trying to emphasize home values and regional job growth.

"There is no question that the housing market, new and resale, has been affected by tightened credit, declining appraisal values and overall reduction in consumer confidence," Matlick said in an e-mail. "At [the building association], we are taking a very cautious slow growth approach to 2009, anticipating that the recovery from this recession will be slow and drawn out extending into 2010."

Mount Airy real estate agent Robert Carney, who regularly blogs about the market, said he sees a light at the end of the housing slump tunnel.

"We're in a 16- to 18-month rebuilding period," Carney said. "If we're not at the very bottom, we're close to it. The last two months have been the busiest I've been all year long. We'll see some teetering up and down, but we have a lot of buyers who are done waiting. We have too much supply — buyers have a lot of choices."

In 2007, homebuilding contributed $15.1 billion to Maryland's economy, down 14.2 percent from the $17.6 billion the industry generated in 2005, according to the homebuilders association. This year, homebuilders are expected to generate $2.8 billion less than last year to the gross state product, a drop of 18.5 percent, the association forecasts.

Nationally, new home construction fell 11 percent last month from June, to 965,000, a decrease of 29.6 percent from July 2007, according to recent U.S. Census data. Housing permits in July fell to 937,000, a 17.7 percent drop from June — indicating no pickup in construction in the short term.