MARKET SNAPSHOT: Baltimore Apts. Are Performing Surprisingly Well, While Condo Market Weakens

By Erika Schnitzer, Associate Editor Baltimore—Despite losing nearly 26,000 jobs from January 2008 to January 2009, the Baltimore metro area is outperforming its neighbors, according to the first quarter 2009 report prepared by Transwestern and its research affiliate, Delta Associates.Although the overall metro area’s unemployment rate is currently 7.1 percent, as of January 2009, the urban core’s rate is slightly higher—at 10.0 percent—while the suburbs are faring better with an unemployment rate of 6.3 percent.While the national decline in housing prices is approximately 8.2 percent, housing prices in the Baltimore metro area declined only 3.8 percent in 2008.Further, condo resale prices have held up better than single-family home prices. The median condominium re-sale price for the metro area was down 7.7 percent, although effective new condo prices are down 11.6 percent. According to the report, “increased demand and a decline in construction will stabilize pricing, leading to an uptick in sales activity, with improvement in market conditions appearing in 2010.”On the apartment side, approximately 4,400 units are slated for delivery over the next three years, which is down from the originally planned 5,484 units. An additional 6,100 multifamily units—both condo and rental units—are planned for the pipeline.Apartment vacancy in Baltimore City has fallen when compared year-over-year, decreasing 120 basis points to 6.8 percent, as of the end of the first quarter of 2009.Vacancy in Class A apartments decreased to 5.3 percent across the metro area, while the city’s southern submarkets are faring even better, at 4.3 percent. Baltimore’s northern submarkets have a 5.8 percent vacancy rate.While the metro area has achieved positive rent growth, increasing 1.6 percent to $1,357 per month in effective rents, the downtown submarkets are experiencing negative rent growth, decreasing 1. 4 percent. However, the suburbs and the Fells Point/Inner Harbor areas also experienced growth—1.7 percent and 4.9 percent, respectively. Meanwhile, concessions are up 0.1 percent year-over-year, to 5.5 percent. Despite these positive signs, the report indicates, “supply will slightly exceed the number of units that will be absorbed in the Baltimore area over the next 36 months. This suggest that while occupancy and rent growth will continue to be positive over the next three years, they will still warrant close monitoring.”The condo market is not faring nearly as well as apartments, however. The report notes that in Baltimore City, there were more contract cancellations than closings in the last year. Further, the report predicts that more projects will be removed from the pipeline, as the inventory far outweighs the sales velocity.As the report advises, until the condo market turns in 2011 or 2012, “either convert to rental or pursue niche condo deals at exceptional locations of extraordinary design and small scale.”(Click here to see last week’s Market Snapshot on Chicago.)