These sorts of things often become self-fulfilling prophecies. Public optimisim/pessimism is an important part of the market. We saw it as the market went nuts in the first half of the decade and we'll see negative attitudes spread the next couple years as well. Of course real estate is local, but I think over-inflated markets, including most of Baltimore will fall a bit this year. Coupled with inflation, the decrease in values is even greater. This is a good thing for society in general in the long run to bring prices more in line with the way they were with incomes previous to the boom.

I am interested in why prices in the city are still increasing?

Is this due to the fact that the median prices are lower than the counties and thus homes are more affordable? Does that affordability account for the $500 monthly premium it takes to live in the city (as mentioned in the article yesterday)?

Or is Baltimore city just coming late to the falling prices party? If investors and speculators are driving the price increase in the city will the lagging sales volume eventually catch up with them?

I also want to say thank you for writing this blog it is well written and informative. I hope you or your readers can help clear this up for me.

Hi, Pippen -- glad you like the blog.

I'm sure there are many different opinions on this issue. I can think of several possible explanations:

1) Affordability, as you mentioned. More people can afford to buy in the city. (Last I checked, the average city house cost less, taxes included, than the average suburban house with taxes. But I don't know if that's a useful comparison because people aren't necessarily shopping for one price range in the city vs. a significantly higher one in the 'burbs.)

Still, affordability issues aside, the city has been seeing a sales slump just as the suburbs have.

2) The city was a year behind the suburbs on price rises during the boom, so the slump's effects may take longer to be felt, too.

3) All the investor rehabbing will help lift prices for a while because there are more higher-value homes on the market.

http://realestate.msn.com/Buying/Article2.aspx?cp-documentid=6112643

To me a well written article. It drives home the fact that with everything your read out there, the market is very very local, neighborhood to neighborhood.

You can see that with the interactive map "The Sun" put out last week.

In the end people still need shelter and people love owing, I lose more renters to them buying than anything else. So most current owners will ride the wave and while prices in many areas in Baltimore may dip future buyers don't expect a $300k house to drop to $200k around here. As an investor myself I would scoop a property up much sooner than that, ride the rest of the current market and sell when the time is right.