A Tale of Two Cities: Baltimore’s Recovering Housing Market

Mar 2, 2016

Situated between the larger Washington, DC, and Philadelphia/Wilmington metropolitan areas, Baltimore is its own distinct town, known as both “Charm City” and “The City that Reads,” referencing the impact of the Enoch Pratt Free Library system of public libraries across the city (and one of the oldest public library systems in the nation).

Often thought of as a working-class city, Baltimore also has major universities as well as a center for finance and international trade. Baltimore is home to world-class art featured in the Walters Art Museum and the American Visionary Art Museum; historical sites like Fort McHenry, where Francis Scott Key wrote the “Star Spangled Banner,” the Babe Ruth birthplace; and professional sports teams such as the Baltimore Orioles and Ravens.

As is the case with many cities, particularly in the East, the Baltimore housing market is complicated, with homes worth more than $500,000 only blocks away from houses that will only sell for $15,000.

That said, the housing market in Baltimore is improving as the rest of the country sees housing recovery. As Mark Arnold, director of loss mitigation for Fannie Mae, notes, “the Baltimore market has been a bit slower to recover but it is a resilient city.” The population within the city limits remained stable in 2015, even after the civil unrest that occurred after the arrest of Freddie Gray. Population growth across the metropolitan area was similar to others across the country (2.7 percent for Baltimore compared with 3.3 percent nationally).

The Baltimore housing market is tightening as the supply of bank-owned properties—foreclosed homes such as those sold by Fannie Mae—is shrinking, reflecting the continued improvement in the housing market. As of early 2016, for every two properties Fannie Mae sells in Baltimore, only one new foreclosed property comes into the pipeline.

Many of these properties require considerable investment to bring back onto the market. These homes, sold through Fannie Mae’s HomePath®.com program, have a repair rate of about 40 percent. (This means that 4 out of 10 homes require at least $3,000 in upgrades before being listed. The average figure is $20,000 across the MSA.) As Fannie Mae’s Arnold notes, “This (high repair rate) represents a considerable investment in these communities.”

The division between Baltimore city and the rest of the MSA (focusing on Baltimore County) also shows in U.S. Census Bureau data on housing costs. While the median value of owner-occupied housing units is $155,000—below the U.S. national mean of $175,700—the median value in Baltimore County is $248,700.

As have many other housing markets across the country, Federal Housing Finance Agency data shows that Baltimore’s has recovered, with the median annual price rising 12.4 percent since 2011 (see chart below).

balt pic

The market also only fell about 20.5 percent from the top of the market in 2006 to the low point in 2011. Home prices have recovered about half their value since the crash, and the recovery trend has slightly flattened since earlier in the decade. Signs now point to a Baltimore housing market that has experienced challenges — but is pulling itself up from them.

This energetic, diverse city has a brighter future ahead.

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