Baltimore Real Estate

Baltimore Real Estate Sees New Investors Rush Into Poor Neighborhoods

BALTIMORE CITY Last year, Terence Trader and a friend paid $77,000 for a crumbling, six-bedroom home here with garish yellow asbestos siding.

After partially renovating the property, which abuts two boarded-up homes, the former social worker agreed to sell it last month for roughly $300,000. The buyers, a young couple from Washington, D.C., say they plan to settle down here.

It's kind of a diamond in the rough, says Jennifer Hoover, a doctoral student in psychology, who is buying the house with her husband.

The transaction marks a small victory for Baltimore as the city recovers from one of the nation's most relentless urban declines. Over the past 50 years, Baltimore has lost about a third of its population amid an exodus of industrial jobs and the flight of middle-class people to the suburbs. As recently as last year, the city housing department kept five crews busy boarding up abandoned homes to shut out prostitutes and drug dealers.

Now the national real-estate boom is starting to transform some neighborhoods long resistant to government or philanthropic recovery programs. The five-year-old boom in residential housing initially was concentrated heavily on economically vibrant cities like San Diego, Miami and New York. In the past couple of years, it has spread to some less obvious places, including long-distressed sections of Baltimore, Philadelphia and Oakland, Calif. Parts of these cities have turned into hot real-estate markets largely because their house prices still seem like bargains compared with those in more glamorous cities nearby.

The lowest mortgage interest rates in four decades have spurred spending on housing across the country and sent individual investors searching for real-estate opportunities much as they used to scour the financial news for the latest initial public offering. Cities are promoting blighted areas as investment opportunities, offering a lure many prosperous suburbs lack: vacant property suitable for developers.

Philadelphia offers property-tax breaks to people who build new houses or rehabilitate old ones under a program created about five years ago. In Oakland, the city government has long offered low-interest loans to low- and moderate-income people who renovate homes. A few years ago, Oakland also tried to lure residents from San Francisco with ads touting far lower prices and less fog. Now, says Samee Roberts, the city's marketing manager, "the housing market is so hot we don't really need to spend dollars on advertising."

It's not clear whether real-estate fever will translate into long-term gains for poor urban neighborhoods. Some buyers are absentee landlords who hope for quick profits and may not be much more willing or able than their predecessors to invest heavily in renovation. Moreover, a spike in interest rates could cool investors' interest in marginal neighborhoods.

But officials in Baltimore say the rush of investment in housing is helping them turn the city around. The population, estimated by the U.S. Census Bureau at 636,000, has nearly stopped shrinking. In 2004, the median home price in Baltimore jumped 20% to $90,000, according to Metropolitan Regional Information Systems Inc., Rockville, Md., which tracks sales made by real-estate agents. That compares with an 8% rise nationwide.

A Moat of Despair.

Baltimore helped lay the groundwork for a recovery in the late 1990s by beginning to tear down high-rise public-housing projects that Mayor Martin O'Malley says ringed downtown "like a moat of despair." The 42-year-old mayor has pushed forward with the redevelopment of those sites to provide a mix of subsidized and market-rate housing.

His administration also has acquired thousands of vacant houses and begun selling them to people willing to renovate the properties. It has brought in experts from other cities including New York to shake up the city housing department. And the city is concentrating government aid on the most promising neighborhoods, such as those near Johns Hopkins University, rather than spreading it thinly throughout the city.

Mr. O'Malley acknowledges that none of these efforts will suffice if the city can't make the streets safe. He has embraced the New York approach of using statistics to pinpoint high-crime areas that need more policing. In 2003, the latest year for which comparable statistics are available from the Federal Bureau of Investigation, Baltimore reported 11,183 incidents of violent crime, down 40% from 1999, the year before Mr. O'Malley took office. That compares with a nationwide decline of 3.5% in the same period. But the homicide rate has stayed relatively high. In 2004, Baltimore had about 44 homicides per 100,000 residents, compared with 7.3 in New York.

Baltimore gets a lift from its proximity to Washington, D.C., one of the nation's strongest job markets, where home prices are more than three times as high. Some people with jobs in Washington now commute to Baltimore, about 45 minutes away by train.

To promote the idea of Baltimore as a haven for people priced out of the Washington market, Mayor O'Malley works closely with a nonprofit organization called the Live Baltimore Home Center, funded by the city and private foundations. Live Baltimore markets Baltimore as a trendy urban lifestyle choice. The organization has run ads in Washington publications showing flower pots crowding a few square feet of pavement. "If you call this a yard," the ads say, "you need to get out of D.C."