Baltimore’s housing industry is under credit crisis. Rate of sale of new homes has fallen heavily in the first month of 2008 as investors retreat from investing in the market.
According to the data released by Metropolitan Regional Information System (MRIS), Baltimore metropolitan region in Washington DC witnessed 40% decline in home sales in January 2008, as reported by baltimoresun.
In January, all the major counties of Baltimore, including Anne Arundel, Baltimore city, Carroll, Baltimore, Howard, and Harford recorded 6% decline in home sales, accounting to $250, 000 against $265, 000 during the same period last year. Specifically talking about homes sold in that month, around 1300 Units were sold, a steep decline against 2,200 Units sold in January 2007. Moreover, in the last month (January 2008), the sales figures drastically fell to half of January 2005, when home sales were at its peak.
This drastic slump in housing industry seems to be due to rising fraud cases in home loans. Financial companies are not providing home loans easily to consumers because of hit in financial credits. Investors are withdrawing money from the market as they are apprehensive about getting their money back.
On the other side, credit providers or lenders have stiffened their rules. Consequently, potential home buyers were unable to access home loans which, in turn, harmed the housing industry. To avail the benefits of home loans, people were required to put extra things on mortgage. Unavailability of credit pushed investor and homebuyers at back foot and they did not purchase home in January this year.
Other reason for decline include higher interest rate for loans of over $417, 000, also known as “Jumbo” loans against less amount “conforming” mortgages. The difference is about one percentage point, which usually stays at one-fifth of a percentage point. Investors are trying not to invest in housing industry because they do not want to pay extra money on borrowed money.
As per a Research Analyst at RNCOS, “Housing industry of Baltimore is facing the heat of credit crunch. The sale of new homes has fallen and the present situation is likely to continue in coming months because the US is facing credit crisis. To boost the growth in the industry, housing industry should construct houses of various varieties which small investors can afford easily.”
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