Maryland Real Estate Market Trends & Analysis

The Maryland real estate market has fallen in line with national trends for the better part of 2019. Much like the rest of the country, real estate in Maryland has risen in value for approximately eight consecutive years. The latest price increases are primarily attributed to a distinct lack of inventory. With roughly half 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.

Maryland boasts one of the country’s highest foreclosure rates. For better or for worse, the state’s higher than average distressed inventory level has helped balance the market. Motivated sellers have given more buyers the opportunity to partake in what can only be described as a hot market, and real estate investors are no exception.

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

Overview

• Median Home Value: $292,300

• 1-Year Appreciation Rate: +1.8%

• Median Home Value (1-Year Forecast): +1.3%

• Median Rent Price: $1,700

• Price-To-Rent Ratio: 14.32

• Average Days On Market: 78

• Unemployment Rate: 3.8% (latest estimate by the Bureau Of Labor Statistics)

• Population: 6,042,718 (latest estimate by the U.S. Census Bureau)

• Median Household Income: $78,916 (latest estimate by the U.S. Census Bureau)

• Percentage Of Vacant Homes: 9.93%

• Foreclosure Rate: 1 in every 1,218 (8.2%)

• Months Of Inventory: 2.6

Median Home Prices In Maryland

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, in fact, real estate in Maryland has been subjected to several monumental shifts in a relatively short period of time. As recently as the first month of 2012, Maryland’s median home value had bottomed out around $221,000. As a result of The Great Recession, Maryland home prices had gone from historical highs in 2008 to prices residents never thought they would see again. Nonetheless, the Maryland housing market bounced back with a vengeance. Since that time (the first quarter of 2012), the state’s median home value has increased 32.2%. Today, after nearly eight consecutive years of appreciation, the median home value in Maryland is $292,300.

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 bottomed out at about $147,000 in the first quarter of 2012 at the depths of The Great Recession. After nearly a decade’s worth of appreciation, which saw prices across the country increase 57.6%, the median home value in the United States is now $231,700. 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.

While home values in the state of Maryland are higher than the national average, their growth potential remains limited. In fact, real estate in Maryland appears to have reached a tipping point. In the last year (October 2018 to November 2019), appreciation rates topped out around 1.8% — that’s less than half of the 4.7% change the country saw as a whole. Residents of Maryland should expect tempered appreciation rates to continue for the foreseeable future, too. While forecasts suggest real estate in Maryland will increase by 1.3% over the next 12 months, the median home value in the United should increase by as much as 3.4%.

Median Rent Prices In Maryland

There is an inherent connection between rental property rates and local home values; when prices increase in the real estate market rental prices will traditionally follow suit. While there are certainly exceptions to the rule, Maryland isn’t one of them. Consequently, rent list prices have increased significantly since the recovery took hold. Again, home prices have increased 32.2% from the first quarter of 2012. At that same time, rental listing prices went from about $1,600 per month to where they are today: $1,700. While it may seem small, the $100 increase represents a 6.2% rate hike.

Maryland’s rental price increases have trailed national increases since the recovery really started to hold water. After all, the median rent across the country increased four times more than in Maryland. That said, not unlike local home prices, rents in Maryland had already reached a tipping point. There was simply more room in the national average for increases than in Maryland. Therefore, the disparity of rent increases isn’t an indictment on Maryland, but rather more indicative of what needed to happen to balance national averages.

With a median rent of $1,700 and a median home value of $292,300, Maryland’s price-to-rent ratio is about 14.32. Anything below 15 suggests it is actually cheaper to buy a house than to rent one in the state of Maryland. However, with Maryland’s price-to-rent ratio bordering on 15, it’s only likely that owning a home is cheaper than renting. There are certainly pockets across the state that may find renting to be the cheaper alternative. At the very least, owning isn’t quite as affordable as most other states. Therefore, more residents may be inclined to rent in Maryland than states with lower price-to-rent ratios.

Maryland Foreclosure Trends & Statistics

Data presented by RealtyTrac, an online data company at the forefront of distressed property information, sheds some light on the foreclosure crisis in Maryland. With approximately one out of every 1,476 homes in some stage of distress (default, auction or bank owned), Maryland’s foreclosure rate is about 6.7%. At that rate, the distribution of foreclosures in Maryland is considerably higher than the national average. On a national level, one in every 2,453 homes are distressed, or 4.0% of the country’s inventory.

As recently as August, in fact, Maryland had the third highest foreclosure rate of any state in the country, falling behind only Delaware and New Jersey. States with the worst foreclosure rates in August 2019 were Delaware (one in every 1,106 housing units); New Jersey (one in every 1,192 housing units); Maryland (one in every 1,218 housing units); Illinois (one in every 1,562 housing units); and Florida (one in every 1,633 housing units), according to Attom Data Solutions.

Despite the foreclosure situation in the Maryland real estate market, progress has been made year-over-year. Thanks, in large part, to an improving economy and optimism in the housing sector, foreclosure filings have started to drop. As recently as November, “the number of properties that received a foreclosure filing in MD was 0% higher than the previous month and 32% lower than the same time last year,” according to RealtyTrac.

While the state, as a whole, saw foreclosure filings decrease, five counties across Maryland have seen higher distributions than anywhere else:

• Baltimore City (1 in every 601)

• Prince George's County (1 in every 785)

• Wicomico (1 in every 1,003)

• Allegany (1 in every 1,224)

• Charles (1 in every 1,436)

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 the state of Maryland. Click on the link to the county you would like to do research in. Maryland offers great opportunities for online tax lien investing:

• Baltimore County, MD - May/June

• Charles County, MD - May/June

• Harford County, MD - May/June

Real Estate Investing In Maryland

Real estate investors in Maryland have placed a priority on the state’s distressed innovatory. If for nothing else, distressed assets may typically be purchased with greater profit margins. Additionally, as their names suggest, distressed homes are typically in the possession of owners who may be better off without them. As a result, distressed real estate in Maryland may not only be had at a discount, but it may also be easier to land a deal. Distressed homeowners are traditionally more motivated to sell than to face the ramifications of their financial decisions. With that in mind, it may literally pay for real estate investors in Maryland to prioritize the state’s distressed inventory. Doing so will increase their odds of landing a deal with better ROI (return on investment) than non-distressed properties.

Boasting one of the county’s highest foreclosure rates, Maryland has a relatively even distribution of pre-foreclosures, auction homes, and bank-owned homes. At 29.3% of the state’s foreclosed inventory, auction homes represent the state’s smallest portion of distressed assets. Constituting nearly one-third of the state’s distressed inventory, however, auction homes are a completely viable source of deals for today’s investors. Real estate investors in Maryland will want to make sure they visit auctions the next time they attempt to acquire a deal.

The next place investors in Maryland should look is local banks and financial institutions. Making up another 31.4% of the state’s distressed inventory, bank-owned homes are yet another common source for deals with attractive profit margins. Perhaps even more importantly, these loan originators aren’t in the business of retaining non-performing assets; they would rather attempt to sell the homes than to incur additional costs while holding them. Savvy Maryland real estate investors may be able to find themselves with a good deal if they give these banks a reason to sell.

It is worth noting, however, that the majority of distressed homes in Maryland haven’t actually entered into the foreclosure process. Pre-foreclosures make up 39.3% of Maryland’s distressed homes. As their names suggest pre-foreclosures are merely at risk of falling into foreclosure; they aren’t actually in the foreclosure process. Their homeowners have neglected to keep up with mortgage payments for one reason or another, and are at risk of falling further behind. With the overwhelming majority of the state’s distressed homes classified as pre-foreclosures, investors seeking attractive profit margins should take a trip to their local courthouse; there, they’ll be able to look up the contact information of each home that is currently behind on payments.

Knowing where to find distressed homes is only going to take investors so far. Once investors locate and secure viable deals, they need to know what to do with them, which begs the question: Which exit strategies are working the best for Maryland real estate investors? What should local real estate investors do with these assets once they acquire them? After all, there are several options to consider.

While there isn’t a single exit strategy Maryland real estate investors couldn’t at least consider, today’s current environment appears to favor long-term, passive income strategies over anything else. For starters, acquisition costs are higher than they have ever been. Years of price increases have significantly detracted from profit margins. As a result, investors should consider buying homes to rent them out instead of rehabbing and flipping. Implementing a rental strategy could very easily offset today’s higher prices with years of cash flow. There’s no reason investors in Maryland couldn’t make up for the extra capital it costs to acquire an asset with several years of rental income. What’s more, the state’s price-to-rent ratio suggests renting is a viable alternative to ownership. Investors shouldn’t have a hard time filling vacancies with how the local economy is shaping up.

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, in fact, 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 are in line 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:

• Investors will remain optimistic: There are simply too many reasons for anyone involved in the real estate sector to be optimistic about 2020. Not only has the market come a long way in a relatively short period of time, but underlying fundamentals suggest the Maryland real estate market will prosper for at least the foreseeable future. Thanks, in large part, to an improved local economy, the housing market is expected to balance out and spark activity. More people will be able to participate in the market, which is great news for everyone.

• Prices will continue to rise: It is important to note that optimism appears to remain intact despite eight 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: Through 2019, the Maryland real estate market has been limited by a lack of available inventory. With 2.6 months of available inventory as recently as November, the Maryland housing market is about 3.4 months shy of a balanced market. As a result, prices have increased and facilities competition on a higher level. While more inventory will be introduced over the course of 2020, it’s safe to assume inventory will remain tight or the foreseeable future.

Maryland Real Estate Market Summary

The Maryland real estate market has been on the same rollercoaster as the rest of the country. In as little as 10 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:

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http://www.mdrealtor.org/Portals/0/adam/Page%20Elements/jpva-FM0aEyqDhHg7OrfjA/July/July_2019_Revised.pdf
https://www.census.gov/quickfacts/fact/table/MD/PST045218
https://www.bls.gov/regions/mid-atlantic/maryland.htm#eag
https://www.realtytrac.com/statsandtrends/foreclosuretrends/md/
https://www.realtytrac.com/statsandtrends/md/
https://www.realtytrac.com/statsandtrends/foreclosuretrends/
https://www.zillow.com/md/home-values/
https://www.zillow.com/home-values/
https://www.attomdata.com/news/market-trends/u-s-foreclosure-activity-down-24-percent-in-august-2019-14th-consecutive-month-over-month-decline/
https://www.attomdata.com/news/market-trends/mid-year-q2-2019-foreclosure-market-report/
http://www.mdrealtor.org/Publications/Publications/Monthly-Housing-Statistics