Maryland Real Estate Market Trends & Analysis


The Maryland housing market has fallen in line with national trends for the better part of two years. Much like the rest of the country, real estate in Maryland has risen in value for approximately ten consecutive years. The latest price increases are primarily attributed to a distinct lack of inventory and historical demand. With nowhere near the inventory of a balanced market, the scales are clearly tipped in favor of sellers, who have been able to increase prices in the face of growing demand.

The rapid rate of appreciation in the Maryland housing market has altered how local investors carry out their business. Whereas flips and rehabs once reigned supreme, the new market created by the pandemic has begun to favor long-term investment strategies like rental properties. That's not to say investors can't flip homes in the Maryland real estate market, but rather that there is a much stronger case to own rental properties.

The Top Maryland Real Estate Markets


While the best real estate market in Maryland is up for debate, here’s a list of the cities investors may want to pay special considerations to:

  • Annapolis

  • Baltimore

  • Frederick

  • Gaithersburg

  • Rockville

Maryland Real Estate Fees & Regulations

Real Estate

Closing Conducted by: Title Companies, Attorneys
Conveyance: Grant Deed

Foreclosure Procedure

Primary Foreclosure Method: Judicial
Process Period: 2 - 3 months
Notice of Sale: Court
Redemption Period: Court Determined

Taxes

Income Tax: 2% - 5.5%
Corporate Tax: 8.25%
Sales Tax: 6.00%
Estate Tax: 16% - 40%
Inheritance Tax: 10%
Median Property Tax: 0.87%
Property Taxes by County: http://www.tax-rates.org/maryland/property-tax#Counties

Average Transactional Costs

Closing Cost: $2,404.00
Transfer Fee: Transfer tax 0.5%;(or 0.25% for 1st- time buyers)
Origination Fee: $1,836.00

Maryland Housing Market Overview


  • Median Home Value: $389,341

  • 1-Year Appreciation Rate: +12.3%

  • Average Sales Price: $406,499 (+4.9% year over year)

  • Median Rent Price: $1,697 (+11.1% year over year)

  • Price-To-Rent Ratio: 19.11

  • Average Days On Market: 11

  • Active Inventory: 5,480

  • New Listings: 6,508

  • Months Of Inventory: 0.6

  • Unemployment Rate: 35.4% (latest estimate by the Bureau Of Labor Statistics)

  • Population: 6,165,129 (latest estimate by the U.S. Census Bureau)

  • Median Household Income: $87,063 (latest estimate by the U.S. Census Bureau)

Maryland Median Home Prices


The Maryland real estate market hasn’t deviated from national trends — as the United States real estate market goes, so too does Maryland. Not unlike the rest of the country, real estate in Maryland has been subjected to several monumental shifts in a relatively short period. Most recently, the Coronavirus has resulted in some significant changes. Approximately two years ago, when COVID-19 was officially declared a global emergency, the median home value in the Maryland housing market was about $317,000. Fast forward to today, and the median home value is $389,341; that's an increase of 22.8%.

To put things into perspective, the ascent of home values in Maryland is similar to the rest of the country, only at a slightly tempered pace. The median home value in the United States was about $251,000 at the start of the pandemic. After two years of appreciation, which saw prices across the country increase 32.1%, the median home value in the United States is now $331,533. That’s not to say the real estate market in Maryland underperformed, but rather that the United States (as a whole) had a lot of ground to make up from the latest recession.

Moving forward, the same indicators which increased Maryland home values over the last two years will remain. As a result, prices are expected to continue rising, albeit at a slightly tempered pace. If, for nothing else, demand is expected to decrease as interest rates rise, and less demand should decrease competition over the little inventory that is available. That said, it will take some time for competition to subside. In the meantime, prices will rise for the foreseeable future.

Maryland Median Rent Prices


The rental market in Maryland has been impacted by the latest increase in home values. Appreciation and less than a month of available inventory have prevented many buyers from participating in the market. Consequently, many Maryland residents simply can't buy, even though they can afford to. With more buyers being turned away from the market, demand is increasing in the rental industry.

According to the latest data released by Apartment List, the median rent in Maryland has increased 11.1% in the last year and now sits around $1,697. The latest increase in rents hasn't kept pace with home value appreciation over the last year. As a result, renters can expect to pay the following in rents (for now):

  • Studio: $1,252

  • 1-Bedroom: $1,403

  • 2-Bedroom: $1,717

  • 3-Bedroom: $2,013

  • 4-Bedroom: $2,417



For context, the national average rent price is about $1,321, or 28.4% less than the average renter pays in the Maryland housing market. The difference is significant and may continue to widen for the foreseeable future. Despite expensive rents everywhere, landlords will be able to justify rent increases as long as inventory is tight. If that's the case, the Maryland real estate investing community still has time to get into the long-term rental space.

Maryland Foreclosure Trends & Statistics


According to ATTOM Data Solutions’ February 2022 U.S. Foreclosure Market Report, a total of 25,833 U.S. properties received a foreclosure filing (default notices, scheduled auctions, or bank repossessions) over the course of February. The same report acknowledges that foreclosures are up 1.0% from the previous month and 129.0% year over year.

“February foreclosure activity looks a lot like what we can expect to see for at least the next six months – double-digit month-over-month growth, and triple-digit year-over-year increases,” said Rick Sharga, executive vice president at RealtyTrac, an ATTOM company. “This isn’t an indication of economic turmoil, or of weakness in the housing market; it’s simply the gradual return to normal levels of foreclosure activity after two years of artificially low numbers due to government and industry efforts to protect financially impacted homeowners from defaulting.”

Throughout 2021, no other state saw a more significant year-over-year decrease in foreclosure starts than Maryland. "States that saw the greatest decline in foreclosure starts from last year included Maryland (down 81 percent); Oklahoma (down 70 percent); Idaho (down 64 percent); Nebraska (down 63 percent); and Connecticut (down 60 percent)," according to ATTOM Data Solutions' Year-End 2021 U.S. Foreclosure Market Report.

Maryland foreclosures are down, but that says more about government aid than the state of the housing market. If for nothing else, foreclosures bottomed when moratoriums prevented them from happening at all. Today, assistance is expiring, and delinquencies are expected to rise. While it's too soon to tell how many foreclosures will be filed in 2022, it's safe to assume there will simply be more.

Tax Lien Investing


  • Tax Lien or Deed: Tax Lien State

  • Interest Rate: 6% to 24% Varies by county

  • Redemption Period: 6 Months to 2 Years; Varies by county


Maryland Online Tax Lien Auction


Below you will find a list of online Tax Lien auctions in Maryland. Click on the link to the county you would like to do research in. Maryland offers great opportunities for online tax lien investing:

Maryland Real Estate Investing


According to ATTOM Data Solutions' third-quarter 2021 U.S. Home Flipping Report, "94,766 single-family houses and condominiums in the United States were flipped in the third quarter" of last year.

"Among all flips nationwide, the gross profit on typical transactions (the difference between the median sales price and the median paid by investors) stood at $68,847 in the third quarter of 2021. While that was up 2.7 percent from $67,008 in the second quarter of 2021, it was 1.6 percent less than the $70,000 level recorded in the third quarter of 2020."

Despite dropping 1.6% year over year, gross profits are historically high. Profit margins, on the other hand, continued their downward trend.

According to the Home Flipping Report, it "went down for the fourth quarter in a row, as the typical gross-flipping profit of $68,847 in the third quarter of 2021 translated into just a 32.3 percent return on investment compared to the original acquisition price. The national gross-flipping ROI was down from 33.2 percent in the second quarter of 2021 and from 43.8 percent a year earlier, to its lowest point since the first quarter of 2011."

Due to rapid appreciation, investors have turned to another exit strategy: long-term rental properties. Rental investments offer investors the ability to offset today’s high prices with equally impressive rental rates. Given the right property with a proper cash flow, there’s no reason to avoid homes that cost considerably more than they did one year ago. Rent checks could easily make the acquisition well worth the price in a relatively short period.

In addition to increasing rental rates, real estate investors in Maryland will find today's borrowing costs offer a unique advantage. While rates jumped to a three-year high, borrowing money remains affordable. Though rates have increased year to date, they can still offset higher acquisition costs and increase monthly cash flow from properties placed in operation. Consequently, if borrowers can lower their monthly mortgage obligations, they can pocket more of the money they earn in rent.

Maryland Housing Market Predictions


The Maryland real estate market has followed the same path as the rest of the country. For the better part of a decade, real estate in Maryland has exhibited many of the same characteristics as its national counterpart. Price increases, inventory levels, confidence in the market, and several other indicators align with national trends, but what does that mean moving forward? What can Maryland real estate investors, homeowners, and prospective buyers expect for the foreseeable future?

Let’s take a look at what is most likely to happen in the Maryland real estate market sooner rather than later:

  • Mortgage rates will rise: Mortgage rates are now above four percent, marking a year-over-year increase of 1.07%. The increase resulted from the Fed's latest decision to increase benchmark rates, but it is expected to be the first of many. Provided the Fed keeps to their word, acquisition costs will increase throughout 2022, making homes even less affordable than they already are.

  • Prices will continue to rise: It is important to note that optimism appears to remain intact despite 10 consecutive years of appreciation. While prices have risen to historical highs, Maryland residents are still inclined to buy, which will serve as the foundation for increased activity moving forward. That said, prices will continue to rise as long as inventory remains tight.

  • Inventory will remain tight: The Maryland real estate market has 0.6 months of available inventory; that means it will take a little more than two weeks to sell through all of the available inventory at the market's current pace. Simply put, Maryland doesn't have nearly enough homes to keep up with demand, and help looks to be a long way out. New builds are on the way, and higher interest rates will help balance the market, but inventory will remain a problem for buyers for the foreseeable future.

Summary


The Maryland real estate market has been on the same rollercoaster as the rest of the country. In as little as ten years, prices have gone from record highs to record lows and back to record highs again. Today, real estate in Maryland is still experiencing the lasting effects of The Great Recession, but the local economy has made great strides. As a result, the new environment is one filled with optimism. While there is still plenty of room for improvement, Maryland residents appear to exhibit confidence in the market. Their optimism, combined with improving fundamentals, should move the housing market forward for the foreseeable future.

Sources:



https://www.census.gov/quickfacts/fact/table/MD/PST045218
https://www.bls.gov/regions/mid-atlantic/maryland.htm#eag
https://www.freddiemac.com/pmms
https://www.apartmentlist.com/research/category/data-rent-estimates
https://www.attomdata.com
https://www.zillow.com/md/home-values/
https://www.zillow.com/home-values/
https://www.attomdata.com
https://www.attomdata.com
http://www.mdrealtor.org

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