Flipping in bad "gem" neighborhoods

It is hard to read through the BBJ article reporting about zip code 21218 as one that is excellent for real estate speculation. "Hidden gem" means good for flipping, not quality of life or architecture, farmers markets or strong neighborhood associations, things that normal people associate with being a neighborhood gem.

Maybe that cynical $ based view is to be expected from a firm that's called RealtyTrac and is based in Irvine California, a hotbed of high real estate prices and very low true "gemness" in terms of character and authenticity. 

The list by RealtyTrac showed that the two locations in Baltimore are considered "down in the dumps" on paper because of a high amount of properties that are classified as underwater, low employment figures and mixed property values.

"It is ranked No. 2 out of 35 in the U.S. on the list, what stands out there to me is there is a strong increase — 32 percent from 2015 in homes being flipped and an 187 percent gross return in flipping profit." (Daren Blomquist of RealtyTrac, according to the BBJ).

Real estate, namely its use for speculation, is indeed at the root of much of what ails American cities and communities.

The wealth gap (Brandeis Study February 2013)

Aside from all the other negative aspects of speculation (no actual value is created in flipping, for example), an American specialty is that it continues to be a field that allows practically only white people to gather wealth that way.

Tracing the same households over 25 years, the total wealth gap between white and African-American families nearly triples, increasing from $85,000 in 1984 to $236,500 in 2009. (Brandeis study 2013)

The reason why especially black people are generally excluded from building wealth through real estate equity isn't any longer restrictive covenants or discriminating laws, but the unfortunate self-segregation that continues to sort communities by race. As a result, whenever blacks buy into a community at larger numbers whites move out and property values go down, if for no other reason than that blacks constitute a much smaller market with less disposable income to begin with.

...black families typically bought homes eight years later than whites, giving them less time to build equity. Meanwhile, even when they were able to buy a home, the typical black family did not see that property appreciate as much as did the typical white family.
One reason, the authors said, was that blacks frequently moved into predominantly black neighborhoods, where few whites shopped for homes, limiting the sales market and depressing prices. (Washington Post about a study on the wealth gap)

The reasons for the wealth gap: Homeownership is #1

The whole mechanism constitutes one of those evil downward pointing spirals that to this day is in full display all across the Baltimore region and most of the nation. As far as those Baltimore "gem" zip codes. Theoretically blacks owning there could now earn a bundle by selling to the new incoming high bidders. Practically, though, many of the properties sucked up by the flippers are homes where the previous owners had been long pushed out by the banks and which had been sold at bargain prices.  

Klaus Philipsen, FAIA 

BBJ article
Washington Post article about real estate disparities