Cash Is King In Baltimore's Real Estate Market

In Baltimore, Md., homes that once sold for $300,000 can be had for just $30,000. Investors are paying cash and snapping up distressed properties throughout the city. But unlike house flippers of the real estate boom, these investors typically rent out the properties rather than sell them for a quick profit.

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The housing market is still in a slump. But with prices so low in many parts of the country, investors are snapping up properties with cash.

Roughly one-third of all homes purchased in the United States this year were bought that way, that is three times the normal rate, according to the National Association of Realtors.

In Baltimore, more than half of homes sold this year have been bought with cash, as NPR's Alex Kellogg reports.

ALEX KELLOGG: Janet Tonkins is making a name for herself around Baltimore, and she's not above bragging about it.

Ms. JANET TONKINS (President, A*R*T* Enterprises, LLC): I am known as the Baltimore Real Estate Diva. I buy properties, just like a lot of women buy shoes.

KELLOGG: But instead of shopping at high-end boutiques, Tonkins shops in transitioning Baltimore neighborhoods. Most of her tenants are low-income renters who qualify for federally-subsidized housing. That's guaranteed money. But she still goes the extra mile, putting granite counter tops and hardwood floors in her homes.

Ms. TONKINS: How are you today?

Unidentified Woman: I'm fine.

Ms. TONKINS: All right. So we're going to 720 Millington.

KELLOGG: On a recent afternoon, she picked up a prospective renter who didn't have a car, a 28-year-old single mother named Andrea Geter.

Tonkins used to invest elsewhere in the country. But for the past two years, she's bought only in Baltimore, the city she calls home. She's purchased more than two dozen properties here, each dirt cheap and bought with nothing but cash.

Ms. TONKINS: Baltimore, right now, it's an excellent time in Baltimore City to buy properties. Properties that were going two or three years ago for $300,000 and $400,000, you can now pick them up for $20,000 to $30,000.

KELLOGG: Baltimore's median home sales price slipped to just $95,000 this spring. That's helped cash home sales reach their highest rate on record. Sixty-two percent of home sales were cash sales in May, according to MRIS, the regional real-estate listing service. One reason? Banks and credit unions remain reluctant to make loans. There's also a glut of distressed properties on the market in Baltimore, meaning homes that are vacant, in foreclosure, or the like. In fact, more than half of all homes sold so far this year in Baltimore, were distressed.

Mr. JUAN ZAYAS (Real estate developer): I mean all those things are bad, but at the same time it's good. I look at it as a good opportunity for me.

KELLOGG: That's Juan Zayas. Like Tonkins, he has been gobbling up run-down properties in recent years.

Mr. ZAYAS: The more damages, the more messed up, or the more distressed the property look, the more I can see like a diamond in the rough.

KELLOGG: On a recent afternoon, he gave me a tour of several homes he owns, including a duplex he bought in Northeast Baltimore in May.

(Soundbite of worker spackling drywall)

KELLOGG: He paid just $45,000 for the home. A worker spackling drywall on the second floor is making just one of many improvements. Zayas plans to put about $75,000 worth of work into the property.

Mr. ZAYAS: All I got to do is just polish it and make it really nice, you know, to get a true gem. So when I looked at this property, that's what it was.

KELLOGG: When that's done, he says its market value - even today - is more than $200,000. But investors like Zayas and Tonkins rarely resell homes quickly. More often than not, they rent them out. That's because while home prices are dropping nationwide, rents are rising. So Zayas fixes up the properties he buys, hoping that in several years home prices will rise again.

City officials in Baltimore are welcoming this new crop of investors.

Mr. PAUL GRAZIANO (Housing commissioner, Baltimore): Some people say well, these people are bottom feeders, they're slumlords. Actually, they are the antidote to the slumlords, because they are providing a product of quality for these renters.

KELLOGG: That's Paul Graziano, Baltimore's housing commissioner.

Mr. GRAZIANO: Not only are they creating more home ownership opportunities, but also a much better quality of rental housing - affordable rental housing -through Section 8.

KELLOGG: A glut of vacant, bank-owned properties, many of them in disrepair, may not sound like a recipe for a housing turnaround. But city officials say this is Baltimore's best bet right now.

Alex Kellogg, NPR News.

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