The second half of the 20th century was unkind to many American cities, and urban blight struck few places harder than Baltimore, Md. In 1950, with a population of 950,000, it was the sixth-largest city in the United States. Over the course of one human lifetime, it has lost roughly one-third of its residents and now ranks 30th.

And yet Charm City never gave in to the forces that drove it into distress. The population drain slowed to a trickle after 2009, and Baltimore’s real estate community has turned the stark reality of decline into the marketing appeal of affordability.

Cheap sleeps

According to one online real estate brokerage, three of “Redfin’s 2019 Hottest Affordable Neighborhoods” are in Baltimore, a distinction shared by Philadelphia, which Sharestates recently reported on. Specifically, Baltimore’s Parkville, Hamilton and Linthicum sections made the list.

“A lot of people are moving away from the city center into places that feel more like suburbs,” said Redfin agent Rebecca Hall. “They’re moving to areas that don’t feel as dense; they have more of a neighborhood feel and that’s really appealing to homebuyers. Some of these pockets are also known for desirable charter schools.”

Of the three neighborhoods cited by Redfin, only one is in Baltimore City. Parkville is in Baltimore County, which is nothing like the city. The city is a tight cluster of homes and businesses hugging a harbor off the Chesapeake Bay. The county spreads out east, west and especially north from there, all the way to the Pennsylvania border — what used to be called the Mason-Dixon Line. The city has a population density of 7,607 people per square mile, compared with the county’s 1,392. Average household income, $47,350 per year inside the city limits, rises to $50,667 on the other side. Linthicum is in Anne Arundel County, which is as suburban as Baltimore County. The region’s other suburban redoubt, Howard County, is currently experiencing a building boom, especially in its two largest communities, Ellicott City and Columbia.

But Hamilton is an inner-city community of 21,000 people tucked into Baltimore’s northeast corner. According to The Baltimore Sun, the median sale price for a home in Hamilton — which will almost certainly be a row house — is $159,500. That compares to a national average of $222,800 for homes in general, according to Zillow.

Hamilton is just one of roughly 300 neighborhoods in Baltimore which are, divided into nine geographic regions — named after the eight compass points, plus Central. Most locals, though, simply split the city into East Baltimore and West Baltimore, with I-83 as the dividing line.

Baltimore Housing Market is one-of-a-kind

The real estate business in Baltimore is distinct in many ways from the way it is in your city. To start with, you have to be very careful about landmarks. The duplex you’re trying to flip might have been the childhood home of Edgar Allan Poe or Babe Ruth. Baltimore has 65,000 buildings on the National Register of Historic Places. That’s more than any other city. Not just more per capita than any other city, more in absolute terms. Baltimore has more landmarks than Boston, Philadelphia, New York or Washington.

According to Marcus & Millichap, Baltimore is currently being inundated with real estate investment money that is flowing from the U.S. primary markets to take advantage of the city’s affordability, which is a rare find this late in the economic cycle. “Buyers from Los Angeles, New York City, San Francisco and Washington, D.C., are drawn to the area for its comparatively lower entry costs and higher initial yields,” according to a report published in the third quarter of 2018. “A similar property can change hands at a sale price $100,000 to $200,000 less per unit relative to one of those other metros, with going-in cap rates that are 200 basis points higher.” The paper goes on to state that average sales prices in Baltimore appreciated 81% over 10 years, “one of the highest rates in the country.”

As much as poverty and violent crime — and the occasional riot — have generated unfavorable views of Baltimore, City Hall has been successful to some degree in creating jobs and expanding the tax base. Baltimore’s worst days followed the April 4, 1968, assassination of Martin Luther King. Chaos reigned on the streets of many American cities, and nowhere more than Baltimore. It took years to recover, but the creation of the Inner Harbor tourist destination, Oriole Park at Camden Yards and the Ravens’ new home at M&T Bank Stadium have all had a positive impact. So too has the expansion of the Johns Hopkins Hospital, thanks to deep-pocketed donors from around the world. The city’s latest project, the redevelopment of the Port Covington facility, which was shuttered as a railroad terminal in 1988 and as a Walmart in 2016, is expected to cost $5.5 billion — that’s more than Amazon plans to spend on either of its new headquarters in New York or Virginia. The Port Covington project is controversial because it is unclear how a fairly remote retail center is going to benefit the typical Baltimorean, but it demonstrates the city’s willingness to support tax-increment financing on a grand scale.

Ultimately, Baltimore is a city of sharp contrasts. There are gleaming new towers, but there are also blocks with only one house standing. There are great museums and theaters and restaurant rows, and there are tracts of high-crime corridors. A year-over-year doubling of new jobs from 2017 to 2018 and a contemporaneous fourfold increase in household formations are cheery news, but these statistics are only possible in a town that is bouncing off the socioeconomic bottom. The best advice to buying real estate in Baltimore is to be selective. If you can’t view the property yourself, you should leverage an investment sales broker or fractional investment platform with a track record of success and reputation you can trust.

Baltimore at a glance

• New construction (2018, preliminary): 3,800 units, flat compared with 2017, centered in downtown Baltimore, Baltimore City East and Riverside/Tidal Point.
• Vacancy rate (2018, preliminary): 5.5%, a 0.2% decrease from 2017, continuing a tightening trend
• Average effective rent: $1,290/mo, a 2.3% year-over-year increase
• Median household income: $47,350 in 2016, compared with U.S. median $61,179
• Proportion of households renting: 52.5% in 2016, rising steeply

Source: Marcus & Millichap, Baltimore SunI am text block.