Development in city defies housing slump

Cheap land, subsidies yield hot-selling affordable new homes

Since the first batch of 72 Orchard Ridge townhouses went on sale July 5, buyers have snatched up 56. The homes in Northeast Baltimore range in price from $135,490 to $274,990. The median home price in Maryland is $435,528.

By Lorraine Mirabella | Sun reporter

August 17, 2007

The new townhouses in Northeast Baltimore will offer designer fixtures, master suites and, on some models, bay windows and porches, all centered on parks, playgrounds and a clubhouse with a fitness room.

Not so different from any other new home developments except for this: Most of the homes in the first phase of the Towns at Orchard Ridge, a $118 million 467-unit community near Belair-Edison, have sold since going on the market in July.

The boom comes at a time when builders of new homes here and across the nation are reporting plunging sales and existing homes are languishing on the market.

Since the first batch of 72 townhouses went on sale July 5, buyers have snatched up 56, according to developers Pennrose Properties and Doracon Development, who say they've hit a nerve in pent-up demand for relatively affordable new homes.

Townhouses at Orchard Ridge range from $135,490 to $246,990 for income-qualified buyers and from $254,990 to $274,990 with no maximum income requirement. Buyers can also get closing cost assistance.

The estimated median price of a new home in Maryland, at $435,528, is among the highest in the nation, according to the National Association of Home Builders.

"We've been amazed by the sales pace," said Kyle F. Speece, a development officer for Pennrose as he looked out over the 59-acre site where bulldozers have begun work. "We really found a niche."

No other new, single-family houses in the city with comparable amenities are currently selling in that price range, said Cynthia Newman-Lynch, interim assistant commissioner for development projects for the city's Department of Housing and Community Development.

"Given today's market, that's extraordinary," Newman-Lynch said of the sales pace.

High land costs are a big reason new home prices in the area are so high, said Anirban Basu, president and chief executive of Sage Policy Group, an economic research firm in Baltimore.

"Many homebuilders will tell you that if they were able to supply housing at price points less than $300,000, they could make sales all day long," said Basu. "However, with suburban land being so expensive, it is effectively impossible to supply much housing at those price points."

The developers of Orchard Ridge didn't have to contend with land costs: They got the ground under lease from the city. As units settle, titles will transfer to the buyers.

In addition, Pennrose and Doracon are able to sell some of the lower-priced homes for less than it cost to build them thanks to more than $2.1 million in subsidies from the city's Home program and a federal Housing and Urban Development grant to Baltimore's housing authority.

A mix of city and state programs is available to help buyers with down payments and closing costs, along with closing cost help from the developers.

Speece said he does not expect the implosion of the market for subprime mortgages to affect Orchard Ridge sales.

The project's lenders, approved by the state Community Development Association's Maryland Mortgage Program, already have stringent loan standards for buyers, he said. Borrowers must have good credit and meet income guidelines to get the loans, which are typically offered with interest rates slightly below market rate.

Baltimore officials awarded the right to develop the city-owned Orchard Ridge site to the Pennrose/Doracon team in May 2005 after issuing a request for proposals for affordable new homes.

The site, bounded by Sinclair Lane, Erdman Avenue, Federal Street and Archbishop Curley High School, had for decades been the site of Claremont Homes, a public housing project, and Freedom Village. The two complexes had about 700 apartments.

The first townhouses to go on sale include both larger, market-rate homes, with three bedrooms and an optional fourth, and the smaller subsidized homes for those who qualify. Residents can start moving in next spring.

Aaron Hippolyte, a 30-year-old Washington special-education teacher who owns a condo in the capital but who often travels to Baltimore, had been in the market for a townhouse with some yard space. A friend noticed the signs at Orchard Ridge and let Hippolyte know.

The major thrust for me was the affordability," he said. "I couldn't find anything within reason in Washington, D.C., to my liking. In my area of Southeast, D.C., you pay $380,000 for a brand new townhouse - that's a hundred thousand dollar difference.

"I like the Belair Edison area quite a bit. For the price and the access to 895 and I-95 and not far from downtown, I felt I couldn't beat the price," said Hippolyte, who is paying $270,000 for a three-bedroom home and three levels and a basement.

The developers are to soon embark on another, bigger housing development in Baltimore. Late last month, city officials chose Pennrose and a team that also includes Doracon to transform the nearly 100-acre site of Southwest Baltimore's aging Uplands apartment complex into a $200 million development with 1,100 apartments, houses and condominiums. About 800 of them will be affordable and market-rate homes.