ANNAPOLIS – Maryland’s housing industry has seen the light at the end of the tunnel. Probably.
According to recent figures and industry experts, the state’s real estate and homebuilding industries have hit bottom and begun a slow climb back up.
BRAC-related jobs and a better-than-average economic outlook could mean a faster recovery than expected, but concerns remain about the expiring first-time home buyer tax credit and other problems in the industry, all of which put continued growth in doubt.
Housing sales in the state have more than doubled since January (2,209 to 4,838), according to figures from the Maryland Association of Realtors, which show that sales in July were higher than any month since August 2007. The number of homes on the market, roughly 44,000 last month, has also been decreasing, a positive sign showing homes being sold and moving off the market.
Steve Meszaros, the president of the Maryland Association of Realtors and a regional coordinator for Long and Foster, attributes these positive signs in part to the federal first-time home buyer tax credit.
“It’s been a big help,” Meszaros said. He estimates that about 30 percent of homebuyers are making use of the credit, which was included in the federal stimulus package and offers up to $8,000 for first time buyers who purchase a home as their primary residence.
Across the country, more than 1.4 million people have received the credit. Ted Koebel, a professor of urban planning at Virginia Tech, called the tax credit’s contribution to the housing recovery “rather exceptional.”
“In most recoveries, it’s more the pent-up demand from people who are moving up in the market than first-time buyers that fuel a recovery,” Koebel said. For first-time buyers, the $8,000 credit has been enough of an incentive “if somebody is straddling the fence.”
The tax credit is set to expire on Dec. 1, causing concern that its end could put the brakes on the positive gains in the housing market. Sen. Ben Cardin, D-Md., has introduced a bill that would extend the credit another six months.
If the extension doesn’t pass, Meszaros and others said that it would negatively affect home sales by taking away a major incentive to buy a home.
“First-time home buyers have one basic situation in most cases, and that is the lack of cash,” Meszaros said. “Anything we can do to provide some boost to them in some fashion is a help. And that’s why the tax credit is a huge item — it’s necessary that we make this happen.”
Even though home numbers have gone north these past few months, many in the industry still see a great deal of uncertainty ahead. Michael Owings, the president of the Homebuilders Association of Maryland, is concerned that qualified buyers are still unable to get credit from a bank.
“We feel like we’re putting some real qualified buyers in front of lenders and they’re getting spit out the back door with a big ‘no’,” Owings said at a meeting of the state Board of Revenue Estimates last month.
Another impediment to continued growth is home appraisals, which Meszaros said is holding up home sales because appraisers are low-balling the price of homes across the board.
“I think the lenders are being prudent,” Meszaros said, “and I think that the appraisers are either not familiar with the market or they’re being much too conservative with their appraising.”
But even with credit, appraisals and other issues looming over the industry, Owings thinks the state will recover sooner than most, thanks to lower-than-average unemployment and a stronger economic outlook.
A large piece of that recovery will also be driven by the 60,000 new jobs coming to the state in 2011 because of the Base Realignment and Closure (BRAC) process, said Owings. A 2006 state report estimated that roughly 28,000 new homeowners and renters would move to Maryland, and while updated numbers (a new report will be released in December) could show that the recession has driven the number down, officials expressed confidence the influx would be significant.
“We anticipate that we will be welcoming 28,000 new neighbors to the various communities,” said Mike Raia, spokesman for Lt. Gov. Anthony Brown. “I wouldn’t be surprised if that number went up.”
Even with a push from BRAC, experts and industry insiders alike predict that the market will really turn around once existing homeowners begin selling their current houses and moving up to larger, more expensive homes. Koebel said that it’s these homeowners — and not the first time buyers — that make up the bulk of house-buying demand, calling their return “extraordinarily critical” to continued growth.
Looking ahead, there’s consensus that any recovery in the housing sector will be slow and steady. Gone are the days of house flipping and buying property as an investment, and Meszaros, who received his real estate license in 1977, sees that as a good thing.
“If we can get back to the times when you buy a house for the kids and you put a picket fence around it, that’s what a house is for,” Meszaros said. “It’s a place to live. It’s a place to raise a family.”