If you're thinking of investing in the Baltimore real estate market, you must be aware of the trends, factors, and potential for market crashes.
Home prices are increasing steadily, and that trend will likely continue through 2023. NeighborhoodScout claims that the appreciation rate for Baltimore has been sitting at 7.12 percent for the past 12 months. Likewise, that number was 2.51 percent in the last quarter. Compared to everywhere else in Maryland, it's lower.
Overall, real estate investors are sure to find excellent options in Baltimore's real estate market. New employers are being added, and people seem to want to live in Baltimore City.
Baltimore Housing Market Trends
With the low interest rates, the Baltimore real estate market has seen a boost for the past two years. Though rates are rising in all areas, real estate investing is on the rise, and the market is doing well. The housing supply is consistent with the national average, and there's an increased demand for all single-family homes.
Overall, these historically low interest rates are making it worthwhile to consider Baltimore County and beyond. Still, there's not even a month's worth of inventory.
There were about 562 homes sold in Baltimore City in 2022, and that jumped to 814 in 2023. Likewise, the median home price for Baltimore City was $191,000, which has decreased about 4.5 percent from last year.
Factors Affecting the Baltimore Housing Market
Real estate is always a good investment, but it's important to know the factors that might change the trends for the housing market in Baltimore, MD.
Median Sale Price
In the Baltimore metro area, the median sale price for homes was $329,000, which is up by 2.8 percent from last year. Though condo prices fell for the first time since June 2020, detached homes are seeing an increase in price of 6.3 percent.
Higher Median Household Income
Knowing how much to charge for median rent is crucial when investing in real estate. This means understanding the average household income, which is $83,811 in Baltimore. However, that number drops to $42,782 per capita.
The Baltimore metro area is likely to stay competitive because of the low inventory levels. Though fewer buyers are present, Howard County saw a significant gain. The increase in median price was 14.9 percent, though Baltimore City prices fell for two months in a row.
Inventory is increasing slightly in Baltimore City, but the supply is low in suburban areas. Overall, homes take longer to sell in most of the Baltimore region.
Investing in real estate during a seller's market is tough, but it's not impossible. Baltimore, MD, is likely to see population growth in the best neighborhoods. Therefore, you will have home sellers boost the asking price for an average home, but there will always be new listings.
There are very few homes for sale right now in Baltimore, but everyone seems to want to live here or buy houses to rent. Therefore, the low inventory could lead to bidding wars and other problems.
Will the Housing Market Crash in Baltimore City?
The Baltimore housing market is heading for a huge shift. Home prices are up, though houses sold have dropped. Most people believe it's because of the record-high mortgage rates. Sellers lower their prices because homes stay on the market for longer periods, so buyers have the upper hand.
Though it's promising for real estate investors, people still wonder if the market will crash. Clearly, there is a housing bubble. Inflated home prices with a low inventory mean it's harder for buyers to get what they want in Baltimore, MD.
Overall, experts think that the real estate market will probably slow down. However, it isn't likely to crash because of the low supply.
Baltimore Housing Market Statistics
- Inventory will continue rising in Baltimore while demand falls. Therefore, home prices should increase slowly throughout the coming months. Though there have been three months (consecutive) of inventory growth, the supply is restricted here.
- July 2022 saw 1.21 months of supply for the Baltimore metro area, but local markets see even tighter inventory.
- Zillow indicates that there could be a decline of 0.5 percent through July 2023 for the Baltimore-Columbia-Towson home values.
- The median days on market is about 25 days in Baltimore City, which increased by 20 percent from last year. However, Baltimore County sees about 14 days on the market, so that's an increase of eight days from the previous years.
Housing Market Predictions
The national trend has been a seller's market for the last two years. Lately, though, buyers are gaining leverage in the markets. Economic worries and affordability concerns will likely depress the buyer demand. Likewise, there's a low inventory of homes for sale. In a sense, it will be a balanced market that doesn't tilt to either side.
Leverage will likely vary on a national level, though this depends on the market type. During the pandemic, there was a spike in smaller and suburban markets, leading to bidding wars. Primarily, people wanted more flexibility and space. Now, most businesses and offices are back on track, so the large markets might revert to their pre-pandemic levels.
Baltimore Housing Market Forecast and Predictions
Zillow claims that the housing market in Baltimore will continue to rise in 2023. Average home values in Baltimore County are sitting at $310,288, which is 3.7 percent higher than last year. Likewise, the average home value for the Baltimore-Columbia-Towson MSA (metropolitan statistical area) is at $344,786, which has increased by four percent from the previous year.
Overall, the median home sale-to-list ratio for the Baltimore-Columbia-Towson MSA and Baltimore County areas is at 1.000, so homes sell for the asking price. In fact, 36.6 percent sell for more than the list price, and 36.6 percent sell just under the list price.
It's wise to consider the home values in various cities. For example, Lutherville Timonium saw the highest at $443,615. However, Cockeysville wasn't far behind at $437,404. Towson was selling homes quickly at $410,149. Then, you have Parksville, which saw a low home value of $238,739.
In a sense, the housing market in Baltimore, MD, is strong and should continue in that manner. However, there could be fluctuations that experts can't predict. Therefore, sellers and buyers should be informed and use a real estate agent to get the best deal.
The US economy is shifting, and it's taking the housing markets of the nation with it. Inflation is incredibly high, and the economy is softening. Overall, there's less activity, so the real estate market could diverge from where it's been.
Generally, the market is using different indicators now than in the past, so most people wonder what will happen for the rest of 2023 and beyond. Here are a few things to consider:
Drop in Home Values
The median home value will likely drop by about 0.5 percent. That doesn't seem like much, but it will reverse the trends you've seen in the past.
Investors will likely be happy to learn that rents will probably increase while the home prices fall. More people want to rent now because they're afraid of high mortgage rates. It's unlikely that rent prices will drop anytime soon.
Rising Interest Rates
Interest rates throughout the nation are higher than average. In fact, they've doubled after the fallout from the pandemic. That increase will likely prevent people from purchasing homes.
Overall, the Baltimore real estate market saw a slow start in February 2023 because of rising mortgage rates and less inventory. However, new pending sales and closed sales are increasing, so that's promising for the spring season.
Competition is high, so real estate investors will need to search carefully for low prices in the local market. This might mean considering foreclosures or staying away from the best neighborhoods.
Overall, real estate investing will likely always be a good idea in Baltimore, MD, but the problem will be finding homes for a decent list price. The diverse economy in the city will help, but landlords will generally require a big cash flow to make it happen.
Buyers are adjusting nicely to the new normal of higher mortgage rates. Supply is a huge problem for the suburban market, but buyers who can secure properties will see price appreciation as the years go by. Those who sell for a decent list price will likely find that the limited inventory helps them see multiple offers.
Should You Be Investing in Baltimore Real Estate?
Baltimore, MD, has a rich culture and history, and it's becoming a popular option for real estate investors. The economy, real estate market, and population growth make it an excellent opportunity for those who have the cash.
Here are the reasons you should invest in Baltimore real estate:
- Affordability - Baltimore has affordable prices for real estate compared to the other major cities around the US. Investors can likely buy properties for less than they would in San Francisco, Los Angeles, and New York. Plus, there's an upward trend, which indicates now is the best time to invest in Baltimore, MD, houses.
- More People - The population in Baltimore, MD, has steadily increased for the past few years, and the trend should continue. With more people moving to the area, there's a demand for housing, which could drive up rental prices.
- Higher Education - There are many prestigious colleges in Baltimore, MD, including the University of Maryland and Johns Hopkins University. This will likely attract faculty members and students who require housing. You might also tap into other professionals, such as researchers, who work at those institutions.
- Incentives for Investment - Baltimore, MD, offers incentives to investors, such as exemptions and tax credits. Plus, you can find programs that encourage investment in parts of the city, which will help you maximize your return on investment.
- Historic Charm - There's plenty of historic architecture to enjoy in Baltimore, MD. Most neighborhoods have unique characteristics and will appeal to renters. Therefore, you should easily be able to attract tenants.
- A Strong Rental Market - The rental market in Baltimore, MD, is thriving because of the cost of living and population growth. Investors can buy homes and rent them to others. Plus, there are plenty of large companies in Maryland, and employees need a place to live.
What Are the Tax Rates Like in Baltimore?
Before you buy rental properties to rent in Baltimore, MD, it's important to understand the tax rates you'll likely pay. Generally, real property is $1.10 per every $100 of assessed value.
Overall, Maryland is a tax-heavy state, so Baltimore residents pay more in taxes than those in similar cities because they're paying at the city and state levels. However, there's a much lower cost of living here than in major cities, so property taxes hit at the national average, evening things out.
Those who don't own property in Maryland yet will find a tax credit on transfer taxes. Therefore, you might be able to keep things lower for that first year.