Unsold Baltimore homes put up for rent

The Baltimore Sun reports:

The Station North Townhomes had no shortage of pre-construction buyers, lured by the promise of luxury living near Penn Station in Baltimore's emerging arts district. Prices in 2005 reflected a red-hot market, rising tens of thousands of dollars with each batch of new contracts.

But when construction wrapped up last spring, subprime mortgage woes had begun to surface and the housing market was slumping.

Buyers with contracts no longer qualified for loans, and investors - who made up about a quarter of the buyers - dropped out. The four-story, four-bedroom homes, with granite kitchens, open floor plans, huge windows and garages, sat in stark contrast to nearby blocks of boarded and vacant homes. Just over half had been sold.

Now, amid a housing slump that has builders slashing prices and offering giveaways, Station North's developer is looking for tenants.

"The sales just pretty much stopped," said James D. Campbell, a principal with Somerset Development Co., of Washington.

Somerset hopes to rent the 14 unsold homes in the 32-unit development, offering a lease-to-buy program or straight rentals, with monthly payments ranging from $1,600 to $2,400. Rents are slightly higher for the lease-to-own program

So far, one family has signed on to lease with the option to buy, Campbell said. In that program, tenants sign a sales contract, but typically delay the closing six to 12 months, during which a portion of the rent gets applied to a down payment and tenants get help on improving their credit.

Somerset's sale prices, which started at a range of $280,000 to $300,000 in summer 2005 and climbed in a matter of months to the high $400,000s for the largest corner units, have already been reduced. They now range from $300,000 to $450,000. Campbell said additional price cuts were not an option.

"We didn't want to price them so low that it didn't make any kind of economic sense," Campbell said. "Renting will be a better strategy."

John E. Kortecamp, executive vice president of the Home Builders Association of Maryland, said he was unaware of any other Baltimore-area, for-sale housing projects that had converted to rentals.

Such conversions have become more common in the harder-hit housing market in metropolitan Washington, he said.

But "there is continued talk about more and more condos coming on the market, and if that trend turns out to be true, then we might very well see more of this," he said.

Square footage is square footage.Rents could be going much lower in certain areas.