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August 27, 2009

Dueling surveys on home values

Most Americans -- about 80 percent -- think their own home's value has bottomed out and will either stay put or rise in the next six months, according to a recent Zillow poll. Now we've got two new surveys on prices to compare and contrast.

Real estate site HomeGain surveys Realtors on a regular basis, and they're not quite as optimistic as homeowners. Just under 70 percent think home prices will stay put or rise in the next six months, HomeGain said. But more of the Maryland agents surveyed think things have bottomed out around here. Almost 80 percent believe prices won't fall in the next six months, according to numbers the company supplied to me.

I asked you all the same question, as it happens. Just under 60 percent of you (at least those of you who weighed in) think your own home's value won't fall in the next six months. So you're the least optimistic. But still, that's about six in 10 of you who see better days ahead.

Back to the HomeGain survey:

About 88 percent of the Maryland agents polled think their clients' homes lost value in the last year. (By comparison, 76 percent of you think your own home lost value.)

Many Maryland agents think people remain unrealistically optimistic about their home values. About four in 10 of the local agents surveyed said their average homeowner client thinks the property is worth 10 to 20 percent more than they think it's worth.

On the flip side: Nearly as many agents said their buyer clients think listing prices are 10 to 20 percent too high. And that's even though those listing prices might be lower than what owners originally wanted to ask.

HomeGain said it polled two dozen Maryland agents as part of the nearly 1,100 Realtors surveyed nationwide.

Posted by Jamie Smith Hopkins at 7:00 AM | | Comments (18)
Categories: Polls


"Many Maryland agents think people remain unrealistically optimistic about their home values. About four in 10 of the local agents surveyed said their average homeowner client thinks the property is worth 10 to 20 percent more than they think it's worth."

But what about the agents who remain unrealistically optimistic about home values? The ones who think that the home is worth $xx "for sure" while it sits on the market for months.

If you ask agents, many will say the homes are sitting on the market because the sellers refused to listen to their advice about prices. But at least some of those sitting-on-the-market homes are priced exactly where the agents recommended.


Is there any hard data that tells us how the percentage of option ARM loans were not refinanced?

From the post:
"Many Maryland agents think people remain unrealistically optimistic about their home values. About four in 10 of the local agents surveyed said their average homeowner client thinks the property is worth 10 to 20 percent more than they think it's worth."

From twitter feed:
"RT @mdsuburbs it took 4 yrs for sellers to get reasonable about selling their home re: price/condition. news of uptick is negating all that."

Yeah...I don't think this housing slump is ending anytime soon.

Home values will track the economy. Right now unemployment is high, wages for workers are frozen, home equity values and stocks are down, and local governments are cutting spending.

All this makes me wonder, where will buyers get the money to pay for homes? As budgets and spending shrink, prices will contract further. I am just hoping that the days of free fall are over.

Perhaps the recent "positive housing news" will reinflate the bubble a bit, and keep those overinflated prices sticky. OK with me - the higher they climb, the harder they fall. Would be nice to see the next phase of the drop coincide with increasing interest rates - fire mixed with gasoline.. I will continue to build a very large downpayment.

I think "Little Debbie" brought up a good point there. If a good percentage of people refinanced their ARMs (that were due to reset beginning this fall) their impact will be removed from the predicted wave of foreclosures coming our way. Is there any way to find out what percentage of those ARMs were re-fi'ed?

Darwin Rules- good idea. You'll need it b/c prices aren't going to drop as far as 1999 prices. I do think it will go down further- especially higher priced neighborhoods, but not that much.

Lesley -

Why won't prices drop to 1999 prices? Who is going to buy new homes exactly? Recent college grads? Are they going to buy rowhomes in Canton for $275,000 and outrageous taxes?

If Option Arms were re-financed (because people couldn't afford) - who are the new people who will come and buy houses for even more money? Will they be able to afford?

Why are "investors" the only people buying? Why aren't people trading up?

Peter- investors aren't the only people buying. Go back and read some posts here for yourself. And regular ol people are buying in my neighborhood too.

Uh, not only recent college grads will buy homes? Most people buying aren't recent college grads. Where'd you even get that idea? Not sure why you asked that. And Canton isn't the only neighborhood in Baltimore or the state of Maryland. Kinda stating the obvious here.

Three of my neighbors sold homes in the last 6 months to trade up. They can't be the only ones in the city- again go read older posts Jaime wrote here. Like less than a week ago.
In fact, I'm not sure what any of your points are about.

I ain't a psychic, and neither are you. But It 1997/1999 prices seem a bit too low compared to the overall trend of DC/Baltimore. And there are actually jobs hiring (again see previous posts Jamie has) that pay quite well. Enough to afford even outrageous city taxes. My own personal experiences confirm this. It's an uneven job market. Very uneven. Don't think it's fair. But it is what it is.

I'm not in the camp of people who think prices are going up or that the bubble was anything but that. In fact, as I said, I think they'll go down some more. But thinking they won't sink to 10 or 12 years ago isn't irrational exuberance or anything.
So what's with the fixation on 1999 prices? Why not pick 1992? Or 2000?

I have been basing my 1999 predicitions on the Case-Shiller data. The baseline is in the 1997-1999 range, and thereafter the bubble really inflated. Current economic and employment conditions are certainly no better than pre-bubble days - prime examples: real wages have been stagnant for the last decade, and current unemployemtn levels at highest levels in decades. So unless homes back then were underpriced, I see no reason why prices should not retrun to baseline.

Darwin (Peter?) - I see what your saying. And I totally agree about real wages etc. You've got numbers on your side in this debate and I got, well I guess my lame hunch, huh? But I just don't see Baltimore going into that much of a free fall. It looks more like parts of the real estate in MD have gone way down and parts have gone down some. Like some neighborhoods have improved enough that 1999 prices would be undervaluing in some neighborhoods. Maybe dead on in some? I would think we'd have seen precipitous drops already. Instead it seems like it slowing. But it doesn't feel like you can make an across the board generalization.

Darwin Rules: Why do you use real wages for income, but nominal values for housing?

if you (we) agree that 199 prices were generally reasonable...

then tack a 3% gain for the last 10 years onto that and you have a basis to set prices at 30% above that 1999 floor.

it's all conjecture of course but it does have a sort of er uhm rationality to it.

MrRational: three cheers for rationality!

Mr. Rationale:

Thank you for being more clear. The 30% is a relatively safe number to choose as it straddles the line between the late 90's and doesn't indicate exactly what measures you use for inflation. Fair enough.

I'm not sure if you use the CS index, and if you did I guess you'd focus on the aggregate and DC metro areas. For the aggregate, we are around 140 (which would suggest a 7.2% decline to 130) and with DC we're looking a far steeper decline! But then again, how you would track inflation and real-wage growth in DC would not be 30%!

This are more complicated. I doubt that you'll be able to buy houses in Federal Hill and Canton as you could 10 years ago and I suspect that houses on Greenmount are cheaper now than they would 50 years ago. Be careful of sweeping generalizations, especially since there are lots of conflicting data.

In other words, the data are not clear. And while we all should strive to make sense of everything, it is important to bear in mind that our horizons are limited and that data is less clear than we might think.

Anecdotally, my neighborhood had a house sell well over a million in the last year. That same house sold for just under a million in 1995, which would have placed it at 1988 prices relative to the 10-city CS aggregrate! This just illustrates how my neighborhood has been more affected by the difficulty of obtaining harder-to-get loans. Will we see something below 88 prices in my neck of the woods--I don't know?

little debbie... don't read too much into my approach. I used no indexes; only common sense and basic arithmetic.

the conjecture that a net average 3% annual gain compounded for 10 years (= ~30%) is a "fair" starting point for a conversation about current value independent of the immediate period issues but 1) I believe the 1999 prices were high and 2) the morass of the last two years MUST be factored in.

so... if a 3BR suburban rowhome (northwood? edmondson heights?) was commonly selling and could be justified at $125,000 in 1999... then 10 years later and all other considerations being equal... we could say that $162,000 is a "fair" point to begin the conversation about current value.

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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.
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