Colleen Kelleher, wtop.com
OCEAN CITY, Md. – Drive up and down busy Coastal Highway in Ocean City and you’ll see real estate company after real estate company advertise foreclosed properties and short-sales.
The signs are not typically what you see in O.C. as real estate firms try to catch your eye to try to get you to buy a second home by the beach.
WTOP sat down with two-long time Ocean City real estate brokers to get a sense of how deep the resort’s foreclosure crisis is.
“Generally, the market now is different than anything I’ve ever seen in 39 years. The bad news is that there’s more foreclosures, more short sales now than I’ve seen in 39 years,” says Bud Church of Coldwell Banker/Bud Church Realty.
Statistics from the Clerk of the Circuit Court in Worcester County, where Ocean City is located, show an increasing number of properties in foreclosure.
“In 2009 there were 664 [foreclosures],” Church says.
“Now, 2010, now this is only from January the first until April the 10th, there’s been 227 foreclosures. That’s a huge amount of foreclosures.”
Church keeps close tabs on the foreclosure market, not only as a broker, but as president of the Worcester County Commissioners.
With the bulk of the county’s real estate in Ocean City, most of the foreclosures are there as well.
The foreclosure numbers have been trending up in recent years. Prior to 2009’s 664 foreclosures, the county had 391 in 2008 and 341 in 2007.
In looking at 2010 sales data that goes through June 11, out of 330 condo/townhome sales, 64 turned out to be short sales/bank owned sales.
“In my career I’ve never seen anything like it,” Church says of the short sales. Short sales occur when a bank agrees in advance to accept less on a property than an owner owes on the loan.
Church and Century 21/New Horizon broker Bernie Roache, who’s been in the business 32 years, say foreclosures and short sales are not hitting any particular area or price point for properties in Ocean City. They are across the board.
Church says he remembers hearing everyone say there would be a soft landing with the recession.
“I remember that I mean it sticks in my mind just like it was yesterday. ‘Soft landing. Soft landing.’ Well, guess what, we came in like a 747 in a nosedive. No one predicted that,” he says.
The impact of foreclosures affects more than the real estate industry. It affects property assessments and the taxes that pay for services in Maryland’s largest resort city, as well as in Worcester County and across Maryland.
“There’s been a major impact because of the current crisis,” says Church, as head of the county commissioners.
Revenue to the county declined as property values declined and as homeowners asked for reassessments. When sales stopped, so did recordation and transfer taxes. Church says Worcester County slashed $10.4 million out of its budget this year because of declining revenues.
“When the assessment goes down, the property value goes down. Everything goes down, the taxes go down. The county receives less. The state receives less. It’s a ripple effect from A to Z,” Church says.
“I think everyone underestimated the decline in property values,” Church says. “I don’t think anybody was fully aware of what was going happen to the real estate industry.”
In Ocean City, like elsewhere around the country, the problems started not only as prices rose dramatically, but as lenders made mortgages easier to get.
“You know they were crazy a few years ago lending to anybody that walked through the door — not literally, but practically speaking,” Roache says, adding that the pendulum has now shifted the other way, with mortgages now more difficult to get and requirements more stringent.
Church says one segment of buyers is getting caught in the foreclosure and short sale crunch – those who bought at the top of the market a few years ago.
For years property values in Ocean City remained constant.
“It was very difficult for anybody to lose money and property in Ocean City because it would go up, level off. Occasionally there would be a dip, but then it would go up and level off,” says Church in describing the market’s cycle in the 20 years before the price escalations.
“What’s happened is it skyrocketed. It was like a Saturn rocket taking off. And I couldn’t believe that my agents on a particular building that I sold many years ago for $49,000 to $60,000 are now worth $350,000. And, the people that bought years ago at $70,000, $80,000, $90,000, $100,000 are in great shape. So it’s the people that bought right at the top at $600,000, and now the values are down to $350,000, they’re the ones who are getting hurt.”
Church says in some cases, property owners are making a business decision about their investments.
“Now the decision is, ‘Do I continue to pay the mortgage for the $1 million property that’s only worth $600,000, or do I just say, let me out of here. I don’t want to take the loss?’ So some people are walking away from their properties.”
Sellers – including many whose properties are not upside -down in the market — found the drop in prices difficult to believe.
“For the last two or three years, we had a situation where sellers were not willing to come down on the price to where the market was going,” Roache says.
“They didn’t believe it was going where it was. And that’s, quite frankly, what stimulated some of the foreclosures or the short sales — the sellers holding back, holding back foreclosures in particular. But, everybody knows what the economy looks like now,” Roache says.
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Interns Katie Barlow and Cassie Hom assisted with transcribing interviews.
(Copyright 2010 by WTOP. All Rights Reserved.)
