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Washington County housing market off to fairly strong start this year despite bumpy economy

July 28, 2013|By ARNOLD S. PLATOU | arnoldp@herald-mail.com
  • Larry and Cindy Harnish sit poolside at their Maugansville home which they purchased in March and have made many upgrades to.
By Joe Crocetta / Staff Photographer

This spring, Chad and Erin Breeden bought gallons of paint — a very pale blue, a toned-down olive shade of green, and a white — to brighten three rooms of the early 20th-century house they had just bought in Hagerstown.

Meantime, Larry and Cindy Harnish were buying countertops and plumbing parts to redo two bathrooms in the brick rancher they had just bought near Maugansville. They also purchased white paint; stones and pavers for the area around their swimming pool; and a refrigerator, stove and a 55-inch TV.

Collectively, the Breedens, the Harnishes and two other new homeowners whom The Herald-Mail interviewed for this story have pumped more than $565,000 into Washington County’s economy since early March. They each bought a house and have been buying items for it.

Their total investment makes but a small ripple in an economy in which there was $1.6 billion in taxable spending during 2012, according to the newspaper’s estimates.

Nonetheless, it is a slice of economic life to look at the buying and renting of products and the hiring of services generated by those now making moves in the housing market. It not only is one of the economy’s largest sectors, but one that is leading a hesitant recovery across the nation.

The economy’s course still is bumpy in Washington County, but its housing market is off to a fairly strong start this year.

Overall, from January through June, a total of $101 million in home sales were recorded in the county. That’s more than 14 percent higher than the $88 million in sales during the first six months of 2012.

One caution is that in June, the local housing market faltered, notching $19.8 million in sales compared to $22.4 million in June 2012, according to the latest figures from Metropolitan Regional Information Systems Inc. (MRIS).

Last month, both the number of sales and their prices were down slightly. In all, 111 houses were sold with a median price of $165,000, compared to 118 sales with a median of $166,950 in June 2012, MRIS data shows.

Another sign of caution has a wider base.

In its review of sales tax collections reported to the Maryland Comptroller of the Treasury by local businesses, the newspaper found that this spring’s consumer spending here has barely kept pace with last spring’s numbers.

In fact, the sales totals are so close that it’s possible the spending has even fallen a bit behind last year’s level.


Clouding the analysis

Consumers pay a sales tax of 6 cents on every dollar’s worth of taxable items bought in Maryland. Taxable items can include paint, decorative stone, vacuum cleaners, rugs and appliances that new homeowners, in particular, tend to buy all in a rush.

According to the newspaper’s study, consumers spent a total of $411.1 million on taxable items in the county this year in the three-month period of March, April and May. May is the most recent month for which tax collection data is available.

The $411.1 million is roughly $700,000 less than the estimated $411.8 million that was spent here during the same three-month period a year ago.

That would indicate the county’s economy is slowing, but a couple of factors cloud the analysis.

One is that according to state law, Maryland consumers are supposed to pay a “use tax” — at the same rate as the sales tax — on taxable items bought on out-of-state trips, or over the phone or on the Internet from out-of-state businesses for use in Maryland.

But state officials think that many Internet sales aren’t being taxed. State Comptroller Peter Franchot was quoted earlier this year as saying that Maryland is missing out on $175 million in taxes a year on Internet sales.

As a result, the state’s tax collection data used for this story probably doesn’t reflect all of the Internet sales to Marylanders, and whether their spending is up or down.

Nonetheless, for the bulk of the economy that it covers, the data does show that some local business sectors have been growing, while others have been slowing.

In general, the ones growing are those whose main business is to sell food and beverages; furniture and appliances; building and industrial supplies; and hardware, machinery and equipment, and to provide utilities and communications services.

Businesses that have been slowing include those selling general merchandise and automotive supplies.

Sales also are off in a broad category that the state lists as 33 types of “miscellaneous” businesses. These include barber and beauty shops, gift and card shops, and print shops, but the newspaper didn’t examine which of those businesses are up in sales and which are down.

Another factor signals some good news for the county.

In May alone, consumers spent almost $139 million on taxable items here. That’s up more than $4 million over the $134.7 million they spent here in May 2012.

The sales tax data reflecting June’s sales won’t be available for a couple of weeks.


A chain reaction

Simply put, you can think about the economy as a group of dominos. The movement of one domino can touch off a chain reaction.

The purchase of a gallon of paint, multiplied by similar purchases by other homeowners, provides money for the paint store to buy more inventory or to hire someone to replace the broken glass in a display window.

The new money in the economy helps move other dominos — encouraging a business to hire another worker or making more secure the jobs of those already employed. Perhaps those people will buy “paint,” fueling more and more economic domino movements.

Similarly, as happened in the recession, an unexpected increase in mortgage interest rates cost homeowners more, making them less able to buy “paint.”

When they don’t buy, one domino doesn’t move. So the entire line of dominos might stop moving — until some really large force, such as a government stimulus program, turns consumer hesitation into action.


Making the move

Just such a stimulus helped Chelsea Weaver decide where to buy her first house.

Weaver, 24, who grew up on the outskirts of Funkstown, long had wanted to own her own home. But after graduating from Hood College in 2011, she lived with her parents and, accepting her father’s advice, saved her money.

“My dad suggested I wait, save money and then start looking at houses. (He said) I could have a mortgage payment for less amount of money that I would have in a rent,” Weaver said.

“I was looking at rent for a two-bedroom, with a bath and-a-half, at $850 to $1,000, whereas I could get a three-bedroom house and own it, with my monthly mortgage being less than that.”

Weaver began her search early this year, intent on buying a house in a rural area of Washington County or in a town no larger than Funkstown or Boonsboro.

But then, she heard that up to $11,000 in Maryland governmental funding is available through the nonprofit Hagerstown Home Store to first-time homebuyers who are willing to live in Hagerstown.

The offer was too good to ignore, Weaver said.

“I took a class at the Home Store, so I qualified for $6,000,” she said. “And Maryland had a program to assist first-time homebuyers, giving (them) $5,000.”

Both amounts have to be repaid eventually, she said, but they help with the initial costs of buying a house. And the debt doesn’t have to be included in your mortgage payments — repayment can wait until you sell the house or transfer it, or do a cash-out refinance.

Not that Weaver’s purchase of a three-bedroom cape cod with one and-a-half baths on Salem Avenue in March has been without worries.

Within two months of the purchase, Weaver said, she was offered a job in sales and marketing at a local photography studio. The full-time position meant more manageable hours than the 60 or 70 hours she was working elsewhere but, she wondered, was it wise to change jobs just when you’ve started paying the biggest debt of your life?

“It was a big stressor,” Weaver said. “It was definitely something that I had multiple conversations with (a good friend), with my parents, with my support system before I decided to take that job” at the photo studio.

The job change has gone well and now, she said, she is more confident about the economy.

How has she contributed to the economy since buying the house?

The house had been owned by an investor, who had fixed it up, “so it was move-in ready,” Weaver said.

Nonetheless, she did buy paint, and she bought a “tweed gray” couch and a new bed. The couch and the bed were bought, for $1,800 total, at a store in Montgomery County, Md. — so not all homeowner purchases are a direct benefit to the local economy. The way economics works, however, the ripple should reach here eventually.


‘The perfect opportunity’

The Breedens, both of whom are 23, “fell in love” with the tall brick five-bedroom house they bought on Hagerstown’s Guilford Avenue in March, Erin Breeden said.

“We just love the historic charm of it. The sales listing said it was built in 1910. It has the original fireplace. The original radiators still work and it has hardwood floors throughout,” Breeden said.

But it was the low interest rates that the federal government’s actions have encouraged since the recession’s onset that convinced the young couple this was the right time for them to buy a home.

“The interest rates were at a really good spot when we started looking” last December, Erin Breeden said. “We decided that was the perfect opportunity to go ahead and invest and make the smart choice of purchasing rather than renting. We always wanted to be homeowners and to have something to call our own.”

“We were able to lock in 3.75 percent” as their rate of interest on a mortgage, she said. She said her fears in the wake of the nation’s recent recession helped her to persuade her husband to get a fixed, rather than an adjustable, interest rate.

It was adjustable-rate loans that got a lot of Americans into trouble during the recession. They had bought homes in 2004, 2005 and 2006 — when such seemingly low-interest loans were fueling home buying and values were soaring.

But when the rates adjusted higher, demand fell and prices collapsed. Suddenly, many families faced foreclosure because they couldn’t afford to pay their mortgages, or they were locked into financial nightmares, unable to sell and unable to refinance because they owed more than their homes now were worth.

Today’s mortgage interest rates are much lower.

“The way interest rates are now, they’re never going to be as fantastic,” Breeden said. “I definitely didn’t want anything to change that. I’ve heard of situations like that,” of families being financially trapped during the recession.

“I was afraid of the past happening again,” she said. “So I decided the fixed (interest loan) would be the safer route of thinking.”


A complication

Not long after they bought their home, the economy reached out in a way that could have tripped them up.

Erin Breeden, who was working full time as coordinator of youth ministry at a church in Boonsboro, learned that the church had decided to reduce her hours because of its financial situation, she said.

That was a blow, but Breeden’s husband, who is an accounting tech for the Frederick County, Md., government, had just received a raise, Erin Breeden said.

And, she said, the church has offered to give her more paid hours by having her take on its music ministry in addition to being the youth coordinator. Still, she said, she is trying to find another part-time job and soon will begin offering piano lessons from her home.

So how, as new homeowners, have the Breedens helped the economy?

In addition to buying paint for three rooms, they refinished the hardwood floors throughout the house, Erin Breeden said.

“My father and my husband and my uncle slaved away for three weekends and restored them to their former glory,” she said. “We rented a big sander and we bought the sandpaper for it. And I purchased the stain and the polyurethane for it.”

The Breedens also bought a sofa, some rugs, a microwave and a food mixer.


Playing it smart

Allen and Cheyenne Dunlap had been married for about three years when they decided last year to begin looking for a house to buy.

With the couple hoping to increase the size of their family, the old two-story brick house they bought this spring on Hagerstown’s South Prospect Street seemed perfect, not only because it has three bathrooms and five bedrooms, as high up as the finished attic, but because it overlooks City Park.

“We wanted something near the park,” Cheyenne Dunlap said.

It’s a good place to raise their 2-year-old son, she said.

And now, the house seems even more perfect because the Dunlaps are expecting their second child, a girl, in November.

They’ve already chosen a room for the nursery and “are in the process of getting a new crib and changing table,” Cheyenne said.

They bought pink and gray paint for the room.

“The wall with the windows on it is gray and the other three walls are pink,” she said.

The young couple waited to buy a house, renting first and saving money for the big purchase they knew would come someday.

Allen, 24, is a technician for DIRECTV, and Cheyenne, 22, isn’t working outside the home now, but was working as a restaurant waitress when they married.

“The economy does feel kind of hard since we’re young, but we’re smart about what we do,” Cheyenne said. “So it does affect us, but then, it doesn’t because we’re being smart about what we’re doing.”

Long before they bought the house, they began buying and saving furnishings for it, always looking for good deals.

For instance, almost four hours before a local discount store opened on Black Friday, the day after Thanksgiving last year, the Dunlaps were standing in line outside.

“We had to stay up until 2 a.m., waiting in line,” Cheyenne said. “They were selling five sets of washers and dryers. And we were, like, the fifth people in line. We got it — the whole set — for less than $200. It was a great sale.”

Since moving into their house, they’ve bought two, dark brown sectional couches for the living room from another local discount store. And they bought a coffee table from still another local discount store.


Changing houses

And then, there’s the Harnishes.

Unlike the other three families, Larry and Cindy Harnish are veterans at owning homes, having bought and sold houses several times before, during and since the recession.

They are not investors, trying to flip houses to make a profit.

Until he retired last month, Larry was a driver for FedEx for more than 20 years. And Cindy has worked at the Bon-Ton chain of stores for 30 years, mostly as a visual merchandising coordinator, setting up store displays, dressing mannequins and helping make certain merchandise is arranged well.

Both divorced, Larry and Cindy married 10 years ago after meeting at a church in Hagerstown. Cindy, 49, was raised in Maugansville, and Larry, 55, grew up in Boonsboro.

After getting married, the couple bought a rancher in Maugansville. So then, Larry had to sell the “tiny little rancher” he had owned, Cindy said.

That was back in 2003, “when the market was crazy, booming” amid the rapid run-up of home prices before the recession, she said.

“He stuck a ‘for sale’ sign out for that and we had calls like crazy. I think he might have paid 80 grand for it and sold it for 90 or 100 grand,” she said.

Over the next 10 years, as the economy and Cindy’s job changed, the couple sold their house in Maugansville, bought another in Greencastle, Pa., where prices were lower, then sold that and bought another house in Maugansville. Then, in March, they sold that and bought the nearby Garden Spot Drive house, where they are now.

Along the way, they were able to sell houses for more than they had paid and had to sell at least one for several thousand dollars less than they had paid. In their most recent exchange of houses in the Maugansville area, Larry said, they came out comfortably ahead.

More surprising about the recent sale was “we sold that house within a month,” Larry said. “We were surprised, with the market as depressed as it has been.”

The Harnishes give God the credit for seeing them and all of their housing changes through the nation’s worst economy in decades.

“It’s been with God’s favor. It’s something we are praying about, ask Him about: ‘If you open the door, we’ll move. If not, we’ll stay,’” Larry said, chuckling that the Christian reference to opening a door is especially apt when talking about houses.

Nonetheless, he said, “To sell in this market, to us, that’s probably the favor of God.”

Without the money they cleared on the latest sale and purchase of houses, Larry and Cindy said, they probably wouldn’t be spending money as they are now to fix up their current house.

“I do all the work myself, all the countertops, sinks, faucets, plumbing in both bathrooms,” Larry said. “We bought flowers for landscaping. We painted the windows outside. We painted the fence around the pool. We put copper tops on each post.”

“And we did have a pool man come” to adjust the chemicals and clean the liner in the swimming pool, he said. “And near the pool, we put in about $150 worth of stone and pavers that cost $5 each. And for the family room downstairs, we bought a $1,600 TV that we got for $700. It was a floor model and they were discounting it.”

The pool man they hired was from a local company. And all of the couple’s various purchases were made at two large local stores.

“To date, I’d say, we’ve spent around $7,000,” Larry said. “And we replaced the refrigerator and stove with some pretty nice equipment.”


Another picture

Amid so much economic activity of his own making, Larry said he is pessimistic about the area’s economy.

As a driver delivering packages for FedEx, “I’ve seen firsthand the foreclosed or abandoned houses everywhere” throughout the region, he said. “I’d see the houses, motorcycles, campers for sale in the neighborhoods. The cost of living has gone up.”

With his wife still working and a mortgage still to pay, Larry said he has started looking for another job. But, he said, he knows that will be hard because as recently as last month, before he retired, the conditions he was seeing while making deliveries looked worse than ever.

“People (are) selling their toys, more than I have ever seen. I see more now, even more for sale than I ever have.”

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