Bidders snap up Baltimore housing

Low-end properties going fast at auction

After down years, `a hot market'

May 13, 2004|By Antero Pietila | Antero Pietila,SUN STAFF

Results of an auction that saw vigorous bidding on 87 inner-city rowhouses yesterday reinforced the notion that Baltimore's low-end investment property market has turned the corner after years of sluggish demand and low prices.

"Auctions give the pulse of the real estate market," said longtime city landlord Stanley Sugarman as he watched a roomful of investors engage in fierce bidding for the properties at Alex Cooper Auctioneers Inc. in Towson.

All 87 buildings were snapped up by bidders at an average price of $30,000, said Paul Cooper, an officer of the auction company. Yesterday's average was twice what Cooper was hoping to get in a similar auction of 83 rowhouses in February.

That auction three months ago yielded an average sale price of $24,000, and another in March sold 82 city rowhouses at an average price of $36,000. In the three auctions, $7 million worth of inner-city real estate was sold, according to the auctioneers.

In many cases, the sellers were landlords who were liquidating or rearranging their real estate portfolios, and the buildings being auctioned had solid rental histories. Only a handful of the properties were vacant.

Bidders have come from as far as New York and Virginia, and included relatively inexperienced real estate investors, Cooper said. Meanwhile, city officials warned that some buyers might overestimate the potential for profit in the buildings.

"I'm new at this," acknowledged Wendell Holmes, 36, an auditor from Bowie who attended yesterday's auction. Holmes said he was interested in the Baltimore real estate market because "the prices are good, the offerings are good."

Juan Johnson, 26, a State Highway Administration engineer, said he had bought three rehab properties previously in the northeastern part of the city and was casting yesterday for rental properties on the fringes of Charles Village for "residual income."

"People say rentals are a headache," he conceded, "but I'm going to try, man."

Daniel M. Billig of the auction house A.J. Billig & Co. said factors fueling the market for inner-city housing are the decision by several longtime landlords with large holdings to get out of the rowhouse rental business, historically low interest rates and easy availability of loan money, and the city's comparatively low prices.

"The market is crazy, in that for several years there haven't been any buyers at all," said Billig, who has auctioned inner-city buildings on site. "It's now 100 percent more active than three or four years ago."

Billig noted the recent sale of an Oliver Street rowhouse in East Baltimore. The $11,500 price might have been unremarkable, he said, but a half-dozen bidders made offers where "three years ago, no one would have shown up."

"Baltimore is a hot market," said James Crockett, a veteran real estate broker.

Crockett said buyers from outside the area are willing to pay higher than usual prices for Baltimore's inner-city investment properties because "they think it's a bargain" in comparison with Washington or Philadelphia.

While Baltimore officials welcome the investor interest, they do not want a repeat of the early 1980s, when a number of Washington speculators - including high-ranking Reagan administration officials - purchased, then abandoned more than 200 rowhouses in Baltimore, aggravating the problem of vacant housing.

"We have some incredibly naive investors who salivate at night listening to infomercials about get-rich schemes," said Kenneth Strong, director of the city's homeownership drive. "We want to discourage them."

He also cautioned against speculating on Section 8 rental properties. In that program, federally funded payment vouchers are issued to landlords of low-income tenants.

Because rents are based on wider geographic areas and not on rents prevailing in a specific neighborhood, some landlords have tried to overcharge, city officials said.

Strong said the city has recently reviewed Section 8 contracts and readjusted them downward in many cases, making it more difficult for landlords to charge rents deemed excessive.

Optimism among real estate investors seems to extend even to shells. Abandoned rowhouses have also started to sell, said Joseph T. "Jody" Landers III, executive director of the Greater Baltimore Board of Realtors.

He said that out of 65 vacant shells that the city offered recently through the multiple listing, all that were in Reservoir Hill were gobbled up and 75 percent of the rest were sold.

The city has released 50 more shells since then and plans to offer hundreds more in the next few months as part of Mayor Martin O'Malley's pledge to rehabilitate, replace or demolish 5,000 vacant houses.

Individuals have seldom bought those vacant houses. Instead, most have gone to small developers who plan to renovate 10 to 15 houses, Landers said.

"You need investors," he added. "There just aren't enough owner rehabbers around to absorb the stock."

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