Tough times for Real Estate Investors
Foreclosure filings rise in city neighborhoods as real estate market sags
Real estate investors, leaping to buy Baltimore homes during the boom, helped fuel the frenzy and drive up prices in neighborhoods from Canton to Reservoir Hill.
Now they’re part of the fallout.
Properties belonging to “nonowner occupiers” - usually investors - accounted for nearly 30 percent of the city homes that lenders were trying to foreclose on during the first three months of the year, according to a Sun analysis of state court and assessment data. Caught by the market slowdown and in some cases blindsided by other problems, they defaulted on loans for more than 250 homes.
And they are disproportionately affecting a handful of city neighborhoods, both trendy and troubled.
In popular Canton, for instance, investor-owned real estate added up to more than half the 25 homes on the court foreclosure-filing rolls. At least eight of those properties - most bought during the housing boom - belong to a single investor.
“Some people just got left holding the bag,” said T. Guy Cook, owner of Parkville-based Advance America Property & Finance LLC, whose niche is lending to Baltimore real estate investors. “It was inevitable. You knew it was going to happen - it’s like musical chairs.”
… Investors who descended on certain areas to buy, buy, buy during the housing boom helped drive prices up even further at the time, said Mark Fleming, chief economist with First American CoreLogic, a firm that helps the mortgage-lending industry manage risk and fraud.
“They artificially inflated values, in essence, because of their interest in bidding it up to get it away from the other investor,” he said. “If you have concentrated investors in certain areas and then house prices start to move south or sideways, the ramification is their greater willingness to walk. It basically creates more volatility.”
Interthinx Inc., a California mortgage fraud detection company, said just over 30 percent of the Baltimore loan applications it looked at in the first five months of the year had possible “property valuation” problems - often inflated values. That compares with 8 percent nationwide.
… “There are inexperienced investors who are going to end up … and may already be, losing the houses because they can’t turn them around before these balloons come due,” said Strupp, who saw several investors with such loans file for bankruptcy recently to avoid foreclosure.
… “A lot of people [who] got in - put a lot of money into fixing up houses and have loans - can’t sell them, they can’t rent them for enough to cover mortgages, and they’re stuck,” said Alan Chantker, president of the Mid-Atlantic Real Estate Investors Association and a Baltimore rehabber. “They may have thought they were going to be in and out of the home in six months, nine months - and then it turns into a year, a year and a half.”