I have been saying for awhile that housing is still overpriced. Before government intervention, prices were falling at a 20% rate in the FREE MARKET. For the past 14 months, the free market has ceased to exist. Prices have been artificially re-inflated, not to help homeowners from losing THEIR equity, but to help the banks from losing more money. Government intervention has somewhat stabilized home prices with a 5% year over year decrease. This allows the banks to sell their REO's for a higher price than they could in the free market.

The free market is a beautiful thing. The market we see today is not real. If you tell the people that everything is great and the recession is over long enough, they may believe it. But when the government exits from the real estate business, things will go back to reality. The real estate market was on life support before the Fed stepped in. Do people really think when they get out that things are going to continue improving or get worse once again? Take the cash for clunkers as a perfect example. People rushed to buy cars to take advantage of another government subsidy program to help the automakers from going under. Are people buying cars like they were during that program? Everyone should expect the same thing to happen with real estate. Once these subsidies are taken out of the equation, the free fall will continue.

Also, now that the health care bill passed, most people are going to see higher taxes taken from their paycheck. This will be in the form of higher payroll taxes. Not only that, but the Bush tax credits are going to expire the end of this year. Those two factors alone will dampen future housing sales as buyers will have less disposable income. When tax rates go up, underwriting will require even lower debt to income ratios to get approved for a loan. Don't discount the fact that employers will lay off employees due to higher payroll costs because of the health care bill. This has yet to be seen, but is a prediction I am making for the future a year from now.

Is the recession really over? Are we are out of the woods even though foreclosures continue to increase year over year? Are employers really hiring full time employees or are they hiring temp. workers which make the numbers look better than they really are? Are home prices going to increase when mortgage rates go up?

Jamie, I will formally suggest your next blog topic/question/poll: are high or "strong" real estate prices desirable or not? Government policy and action seems to indicate their desirability is a forgone conclusion. As Pete stated, you can only sell a house for what someone else can buy it for and unless you plan on selling, cashing out, and never buying a house again (or full time property flipping), there's no net gain to the average person. Many a client had this revelation over the years when they discovered the small, rundown starter they paid 120k for 6 years ago was now worth 270k, but soon realized the big, nice homes they'd been eying back then at 300k were now 600k.

Frank, I'm not going to hijack this thread so I'll keep it short. You're off your mark on rising payroll taxes due to health reform. There is a minuscule increase on those making over 200k/year. Nothing broad or severe enough to impact affordability.

That's a good idea for a poll, Josh. Thanks.

By the way, you all should feel free to suggest polls and topics. Make good use of the interactivity we get from a blog.

Real Estate is not a commodity. Real Estate prices are based on income in an area. During the last decade - Real Estate prices were based on how much money banks were giving to people (completely without regard for one's income). Real Estate prices WILL return to early 2000 pricing at some point.
There is zero way they cannot. One cannot base the value of their home based on a crooked decade. The problem with the real estate industry (and mortgage co's) is nobody tells anyone the truth. There is nobody watching out for the consumer. Nobody. They just want their money. It really is sad actually.

Frank and Jon are correct. I look very forward to the continued crash, and probably overshoot (on the DOWN side) of prices. Over-lending and over-borrowing were the vectors of disease, and foreclosure and inability access credit, where credit is not due, is the cure.

I understand what the Maryland Department of Housing is trying to do but I wonder if that is correct way to do it.

I just purchased a home a couple of weeks ago in Howard County and I would consider myself a first-time home buyer even though I don't meet their definition. While my personal situation might be different from others, I've never owned a home in my life. So I got all the first-time home buyer assistance that was available. The reason I don't meet their definition of a first-time buyer is because I put down a large down payment. That down payment and extremely low interest rates made the payments affordable.

It should be mentioned that it is very hard to determine what an "average " house costs in Baltimore.Even if you narrow it down by area.

In the suburbs it is easy to base it on a few samples.But there are way too many variables in the City.

Has the house been rehabbed ? How good is the work? What quality is the cabinets, shower,ect?

You can find a really nice house that has been redone a few years ago but doesnt have central a/c or central heating. they often are great houses.But obviously they aren't worth as much as one with a rooftop deck and an eight foot basement.

As everyone here knows parking is an issue as well.A house on a sidestreet with no parking in front is worth less than one with parking in front. And a rowhouse in Canton with a backyard parking pad is worth a lot more than one without.

If I asked someone what a car cost in Baltimore their response would be "What kind?".
Why should it be different for a house.

And neighborhoods are hard to measure.There often no straight dividing line between a "nice" neigborhood and a "scary " neighborhood.It often goes block by block.And it is always changing month to month.

If one bad apple[like a dope dealer] moves on a block it often goes downhill.If the dealer is kicked out it gets better.One single person can affect the whole block.This happened on my own block.

When I moved to Baltimore in 1994 the official "average" rent for a 1 bedroom apartment was $500 a month. I found one in Canton for $225.And most people that i knew at the time were paying $500-$600 a month for a HOUSE.

I still know a lady who lives near the Square in Canton who pays $575 for a 3 bedroom house.

There is nothing wrong with statistics.They just need to be taken with a grain of salt.

Good point, Pete.

jfg, kudos for saving up a big down payment. Many buyers are just squeaking by with 3.5 percent through FHA.

Agree with Jamie. Nice job jfg. You have done it rihgt. Hopefully the bonus tax credits will cover the spread of your home value loss oer the next few years.

Of course, no one cares if the market continues to decline and jfg (who actually saved and did what things the right way) loses her downpayment. The government only cares about the people who put nothing down, they will be happy to write down their mortgage.