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August 16, 2009

Poll results: Calling the housing-market bottom(s)

A plurality of you (there's your word of the day) don't think the Baltimore metro area's housing market has hit bottom yet. But you do think prices and sales will stop falling around the same time.

That was the result of last week's twin Wonk polls, which asked you to put on your forecasting hat.

The most popular answer was 2010 for a market bottom, both for sales (30 percent of votes) and prices (33 percent of votes).

Here are the rest of your answers:

For a bottom in home sales, 20 percent of you said "now," 17 percent said 2011, 16 percent said not for years and 15 percent said by the end of the year. (If you add the "now" folks to the "end of the year" folks, you get a plurality of people who think sales have or will stop falling this year.)

For a bottom in average home prices, 26 percent said 2011, 22 percent said not for years and 18 percent said this year.

And one reader said "when we have 1999 prices" for both questions. (Darwin Rules, I presume?)

You had a lot to say about this topic, not surprisingly.

BigDragon, for instance, wrote: "Calling the point where home sales stabilize is rather tricky. I think what you're seeing right now is a bull trap. It's not so apparent at the moment, but government interference in the foreclosure process has artificially limited the supply. Soon a whole new batch of foreclosures will hit the market and slow things down again."

Readers "Little Debbie," Frank Rizzo and Darwin Rules battled it out, with "Little Debbie" generally more optimistic.

Frank Rizzo wrote, among other points: "Price declines have a long way to go. As more and more people are underwater, more and more people will walk away."

"Little Debbie," asking him to cite sources, said: "Opinions and speculation are silly."

After some back and forth, "Little Debbie" issued this modest forecast:
I herewith change my position: We will see 1979 (2nd quarter) prices before we hit 98.902% inflation because 83.9% of all homeowners will foreclose (that includes people who own their house free and clear). This is because there are 37.97 million homes on the shadow inventory and lenders will soon start charging 57% interest rates after 73.5% of the lenders go belly up. Once the 8k tax credit expires, oil will hit 5000 a barrel and everyone (and I mean EVERYONE) will begin to foreclose.

This is all extremely clear because we are already on this trajectory. That is how economics work!

The bottom is NOT close. We are only at 2003 prices: we have 24 more years left.

The only safe investments are guns and gold. I would also recommend moving to Greenland and buying an igloo with cash.

Jaded responded: "Your last post made me laugh 107.43% of my pants off!"
Posted by Jamie Smith Hopkins at 8:32 AM | | Comments (3)
Categories: Polls


Big Dragon has it right. "...interference in the foreclosure process has artificially limited the supply..."

That interference also includes the lenders who are also attempting to hold back that flood of foreclosures through a whole series of dams; eg: allowing debtors to remain in place for the interim without filing paper.

This maneuver could force a bottom if the lenders have enough discipline to maintain it... which also includes lending new money out based on those still false valuations. Oh yeah, that's how they got in this mess.

Nope. One more time everyone... the bottom will have happened only when three basic conditions exist:
1) Buyers are legitimized by genuine job strength and security and aren't trading on tax benefits and
2) Lenders are lending transparently and
3) the deadwood in the market has been sold off.

The Baltimore MSA is rather strong on the first point, rather weak on the third point and simply "along for the ride" with the rest of the country on the second point.

What I really want to know is why Darwin Rules switched from 1997 to 1999 prices? Darwin was so committed to 1997. What could've brought about such a change?

Thanks for picking this up Lesley - prices were almost flat between 1997-1999, with the pathetic bubble run-up beginning toward the end of '99. So let's just go with "late 1990's" prices. We should see these around 2015, but possibly earlier if the finacial implosion resumes at an accelerated pace.

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About Jamie Smith Hopkins
Jamie Smith Hopkins, a Baltimore Sun reporter since 1999, writes about the regional economy. Her reporting on the housing market has won national and local awards. Hopkins is a Columbia native and has lived in Maryland all her life, save for 10 months spent covering schools in Ames, Iowa.
She trained to become a wonk by spending large chunks of time as a geek and an insufferable know-it-all.
Baltimore Sun articles by Jamie

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