More on June home sales
"Prices have more to fall, given the high level of foreclosure, but sales and construction, I think, are at bottom," Zandi said. "And part of it is related to much-improved affordability."No space in the story for this, but I also asked him about his expectations for price drops. Moody's Economy.com is forecasting "peak-to-trough" declines in the Baltimore metro area of 25 percent, as measured by the median price for resale homes. Nationally, the forecast is for a 37 percent decrease.Zandi's not expecting much in the way of sales gains, though. Just the promise of some stability after years of retrenching.
"As long as the job market is sinking, it's hard to imagine home sales taking off to any considerable degree," he said.
A smaller drop for our area, then, but Zandi expects it will be over sooner for the U.S.: the third quarter of next year, compared with a first-quarter 2011 bottom in prices for the Baltimore metro area.
Here's what he had to say about our market and its price outlook:
"It's certainly been hit hard, but it's held up much better than I thought it would through this period. It may be that I've been overly pessimistic. The region's economy has actually held up reasonably well given the severity of the national downtown. That may go to the preponderance of health-care activities in the region, which is the one industry nationwide which has continued to do reasonably well.
"It may also suggest, though, that Baltimore house prices don't start rising to any significant degree for longer. Prices didn't come down as much as I thought, so that means affordability hasn't improved as much as I would have hoped for. ... Prices need to fall a bit more to sufficiently restore affordability based on incomes and effective rents in the Baltimore metro area."
What's the magic number? He thinks an affordable median price for the metro area is around $210,000 to $220,000. Right now, as measured by MRIS, it's $250,000.
Thoughts?
Categories: Housing forecasts, Housing stats
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Comments
That sounds about right. But I wonder with factoring in the really low priced homes in the really bad areas of town if that doesn't distort the average somehow. Location is hugely important, more so than maybe other cities, for value of a home. During the bubble I think some neighborhoods might've had prices based on a giddy optimism in the potential of the hood rather than it's actual safety etc. Perhaps this has changed now with the prices reflecting the current neighborhood?
Posted by: Lesley | July 11, 2009 1:25 PM
Hi, Lesley -- I did get the sense during the bubble that some neighborhoods were seeing prices really REALLY increase on the expectation that future value would allow for flipping or rehabbing. No idea how much that influenced the metro area's overall median price, though.
Anyone have thoughts on that?
Posted by: Jamie Smith Hopkins | July 11, 2009 1:52 PM
"I did get the sense during the bubble that some neighborhoods were seeing prices really REALLY increase on the expectation that future value would allow for flipping or rehabbing."
Entirely agree. In (successful) RE investment the money is made at purchase NOT the sale. This axiom was not understood by most buyers in the last few years (and still isn't by the condo buyers in that other thread).
Posted by: Anonymous | July 11, 2009 2:11 PM
>What's the magic number? He thinks an affordable median price for the metro area is around $210,000 to $220,000. Right now, as measured by MRIS, it's $250,000. <
Such a forecast would assume a 16% drop in the housing prices, and I can say that if the homes we're looking at drop 10% -- then they'd definitely cross over into a much greater affordability sphere for us to purchase.
Another factor that promises to push housing prices down will be higher interest rates. If rates climb, prices will fall accordingly.
Posted by: smithbaltimore | July 13, 2009 12:47 AM
Smith... another constant factor that comes into greater effect the longer the recession/depression extends is the effect due to layoffs, wage and hour reductions and job transfers: a reduction in the median income.
So... as the median income drops and to maintain the effective affordability margins the prices will need to drop that much further to compensate.
This could spiral downward very fast and get very ugly before a real bottom is found (it already has in some places).
Posted by: MrRational | July 13, 2009 10:46 AM
Rational: Yes, it looks like median income will either hold steady or fall, and in either case the indication is downward for housing prices.
Posted by: smithbaltimore | July 15, 2009 10:22 PM