Reality hits home

Area housing values take a nose dive

Area housing values take a nose dive

May 26, 2008|By ARNOLD S. PLATOU

WASHINGTON COUNTY - Geographically, the large duplexes going up behind Hagerstown's old Pangborn Boulevard neighborhood are on a hillside.

Economically, some of their owners are on a cliff.

The houses they moved into just a year or two ago are now worth as much as 24 percent less than they paid.

"We don't know what to do," said Armita Varjavand, 40, standing with her young son inside the front doorway of their new home in Kensington Villas.

Their savings gone, a loan from her mother is the only way they can pay the rising mortgage that the lender refuses to refinance as the property loses value.


After that, "we don't know what," Varjavand said.

Michael Davis, 48, who lives a few doors away, is applying for refinancing because his mortgage is set to readjust this fall.


"Yeah, but I know a lot of these people have tried," he said, gesturing up and down the street. "That's why they have the 'For Sale' signs out."

Such predicaments are typical among the more than 1,000 families who bought the houses that popped up quickly in Washington County during the market's recent boom, an official said.

"For a lot of these people who purchased with an adjustable rate, they now have a house of less value, they're looking to refinance and they now have less equity," said Sharon Disque, executive director of the Hagerstown Neighborhood Development Partnership Inc. It's a nonprofit organization whose work includes counseling families facing foreclosure.

Worse yet, Disque said, "a lot of the people that bought in '04, '05, '06 and '07 are from areas east of here," and they still commute to jobs there.

So when gasoline prices began to spike, "we had a convergence of a housing boom that went bust, and then, it was compounded by a sustained rise in gas prices," she said.

Kensington Villas is an illustration of what observers say is likely happening in the newer housing developments across the county and, probably, across the nation. New owners of homes in older neighborhoods are likely facing difficulties, too. But the situation is especially prevalent in the new developments because those owners - new neighbor next to new neighbor next to new neighbor - bought about the same time under the same market conditions.

Building the homes

Kensington Villas is a 100-lot development on a long, skinny, 20-acre tract bought for $5 million in late 2004 by national home builder K. Hovnanian Homes.

Since 2005, K. Hovnanian has been building large two-story duplexes on either side of Brynwood Street, the development's single main road.

Dozens of families now live on the ridge where kids from the old neighborhood next door used to play. Ten families moved in in 2005, 30 more in 2006 and 24 more in 2007, records show.

Robert and Sharon Lopez were among the first.

Lopez, 54, said he and his wife were living in "the 'burbs of Washington" when they decided to move here in 2005.

They read a study showing "that Hagerstown had the right growth potential, property values were going up," recalled Lopez, a former IT manager who began investing in real estate at least eight years ago.

So in October 2005, they paid $324,650 for the 2,731-square-foot house at 215 Brynwood St.

Looking back, Lopez said he can see now it was very much the wrong time for them to buy - as prices were soaring to their peak and just before they began to drop.

"Of the investment properties we have," he said, "this is probably the worst. We put 20 percent down, and it's (the loss of value) probably eaten up most of that 20 percent."

According to a Herald-Mail examination of new property tax assessments in the Kensington development, Lopez's house has lost 19.9 percent of its value already.

The house's worth sunk to just $259,780 in January, when the latest assessments were issued by the Maryland Department of Assessments and Taxation.

Losing value

Fifty-six of the 64 Kensington houses assessed by January were actually worth less than what the owners paid.

Eight of the houses gained value, but not much.

The combined value of all 64 properties has fallen 11.3 percent. The homeowners paid a total of $18.4 million but, by January, the properties were worth just $16.3 million.

By comparison, the average value of the roughly 18,000 residential properties reassessed throughout the county for 2008 jumped 40 percent in those same three years.

That's quite a difference - if you believe that 40 percent increase.

W. Timothy O'Rourke, the county's supervisor of assessments, explained that housing prices soared since 2004, the last time these properties were assessed.

"Certainly, I could get more for my house now than I could in 2004," he said.

So why then have values in a newer development dropped so much?

"I wouldn't think that Kensington Villas is typical of the county," O'Rourke said. What's happened there "may be a clear indication of what has taken place" in the economy more recently.

The Herald-Mail Articles