TR-HNR-April-2019

MARKET SPOTLIGHT: MARYLAND STILL AN ATTRACTIVE PLACE TO INVEST

Flips accounted for only 6 percent of all home sales in the third quarter of 2018, down 10.6 percent from the same quarter of the year before. The total number of distressed sales statewide – REO sales, short sales and third-party foreclosure auction sales combined – fell 51 percent between 2017 and last year. While the number of flipped and distressed properties were lower statewide in 2018, Maryland still experienced the third highest foreclosure rate in the country at one in every 116 housing units with a foreclosure filing last year. Plus, as of the fourth quarter of 2018, ATTOM reported that 11 percent of Maryland homeowners were seriously underwater while 18.3 percent were equity-rich. Still, for seasoned investors who know where to look, and how to analyze a market, foreclosure activity and homeowners seriously underwater present good poten- tial opportunities to expand their portfolio. However, for new investors or investors new to the area, hooking up with boots-on-the-ground from a local veteran can help avoid the pitfalls of spending too much money and losing their investment. Based on the analysis of data provided by ATTOM, along with input from local experts, Housing News Report determined four counties show good promise for investing in Maryland – Anne Arundel, Baltimore, Mont- gomery, and Prince George’s counties. A BAYSIDE CAPITOL INVESTMENT For investors seeking potential locations with sound economic activity in Maryland, Anne Arundel County is a good fit. With a population of more than 550,000 people, and a forecast unemployment rate of 3.4 percent for 2018, the county is situated along the Chesapeake Bay. Its county seat, Annapolis, also happens to be the state capitol and the home of the United States Naval Academy. Investors did well there in 2018. Flipping properties in Anne Arundel was profitable. In the third quarter alone, investors flipped 102 properties, accounting for 4.4 percent of all total home sales in the county. While that was down 12 percent from the third quarter of 2017, flippers made a gross return on investment of 61.7 percent with an average of 170 days to flip, down from the year before. Two-thirds of the flipped properties were purchased with cash at a median purchase price of $186,000, according to ATTOM. One in every 139 properties in Anne Arundel County had a foreclosure filing in 2018, totaling 1,574 properties with foreclosure filings, down 5.29 percent from the pre- vious year. The county ended 2018 with a median sales price of $328,000, a 6 percent increase from 2017. Anne Arundel County ended 2018 with 19.5 percent of its

homeowners in an equity rich position in the fourth quar- ter, down slightly from the same quarter the year before. For the quarter 7.6 percent of county homeowners were still seriously underwater, down 8.4 percent a year ago. ATTOM’s rental affordability report, which incorporat- ed fair market rent data for 2019 from the U.S. De- partment of Housing and Urban Development, reported that the average rent for a three-bedroom, single-fam- ily home in Anne Arundel County for 2019 is $1,870 a month, a three percent increase from 2018. The affordability to rent a home in the county this year is 38.6 percent of the average wage, while the percent of wages to buy a home in the county with three percent down was 51.3 percent last year. Baltimore City is the largest independent city in the country, but it is not a part of Baltimore County. Known for its high crime rate, the Baltimore area is home to more than 1.4 million between the city and county com- bined. For investors, the difference between the two is the price point of entry. “For me, I’m looking in Baltimore County. It’s a little more expensive but I’m hoping to find properties that pay the expenses,” said realtor and investor Patrick Cozado with Leigh Allen Investments. “I invest in real estate for passive income. I’m typically looking for lon- ger term cash flow opportunities.” IT’S A CITYAND IT’S A COUNTY… BUT NOT TOGETHER

ment of 142.3 percent with an average of 205 days to flip, while flippers in the county saw a 87.9 percent gross return on investment with an average of 204 days to flip. In the city, 65.6 percent of the properties flipped were purchased all-cash, while 57 percent in the county were purchased that way. The median purchase price for a flipped property in Baltimore City was $63,500 in the third quarter and $125,000 in Baltimore County, accord- ing to ATTOM. One in every 80 properties in Baltimore City had a foreclosure filing in 2018, while one in every 112 proper- ties in Baltimore County had a foreclosure filing during the year. The median sales price in the city was $103,000 in 2018, down 6 percent from 2017 compared to $225,000 in the county where the price was up 5 percent from the year before. For the fourth quarter of 2018, a total 21.3 percent of homeowners in Baltimore City were seriously under- water while 16 percent were equity-rich. In Baltimore County 10.8 percent of homeowners were seriously underwater while 177 percent were equity-rich. According to HUD, the average rent for a three-bed- room, single-family home in both Baltimore City and county for 2019 is $1,870 a month, a three percent increase from 2018.

There’s a lot of foreclosure inventory from what I understand in Baltimore City. What that means is that active investors, flippers and people who come in and buy distressed assets and fix up and sell, they come in and create value. It’s a fertile market for investors. And they have a higher than average renter pool.”

MARCO SANTARELLI

distressed assets and fix up and sell, they come in and create value,” he said. “It’s a fertile market for investors. And they have a higher than average renter pool.” Baltimore City had 262 home flips in the third quarter of 2018 accounting for 9.3 percent of total home sales, while Baltimore County had 221 flips for the period, accounting for 8.6 percent of total home sales. Flippers in the city made a gross return on invest-

MEDIAN HOME PRICE COMPARISON

BALTIMORE

BALTIMORE CITY

$250,000

I invest in real estate for passive income. I’m typically looking for longer term cash flow opportunities.”

$225,000

$215,000

$205,000

$199,900

$199,500

$200,000

$198,000

$190,000

PATRICK COZADO

$150,000

$110,000

$103,000

$102,000

$100,000

$96,335

Marco Santorelli, realtor and investor with Norada Real Estate Investments in Laguna Niguel, California, who specializes in selling turnkey properties sees Bal- timore as a “good second tier market” and is looking to enter the market. “There’s a lot of foreclosure inventory from what I un- derstand in Baltimore City. What that means is that ac- tive investors, flippers, and people who come in and buy

$90,000

$90,000

$88,079

$50,000

$

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