First of all, since there is zero accountability for any "predictions" Wall Street makes or Financial analysts or economists make - there seems to be no stress to answering this question. Get a load of some of these quotes from the past and still current FED chairman, Ben Bernanke
http://www.sourcewatch.org/index.php?title=Ben_S._Bernanke

I think until salaries are in line with housing prices - prices will continue to go down significantly. I am thinking another 33% or so. If people buy today, they will get a low interest rate for sure but they will also be buying something that will be much cheaper in the future.

The need and appropriateness for mortgage interest deduction is as valid as ever and should be maintained, but...

But it should be limited to ONE fixed loan amount and at ONE fixed rate for ONE fixed time period and probably less than 30 years.

No second homes (eg vacation homes) at all and somewhat rigidly fix the parameters to allow transfer of an older and deductible home loan to tie in with the purchase of a second primary residence property.

Sticking with 1990's nominal prices until sanity is restored.

Also, ditch entire tax code including mortagage tax deduction and all other deductions and loopholes. You get 15% of all income withheld, regardless of salary. At the end of the year, the IRS sends you an index card showing total income that you received, and the 85% amount you get to keep.

Some folks just cannot get any sunshine in their eyes. One rescues the house while renting out to some decent people, and they already talk of LOSING something.

Jamie, good post.

I agree with others that the mortgage interest deduction needs to go, but only as part of a true overall reform of the tax code to eliminate all the ways that the system is gamed--by individuals and corporations. I don't really see Congress and the President getting this done. Most people think real estate should be treated differnently than other investments--note thick heavy involvement of state and federal governments in the mortgage market or even yesterday's Bmore Sun article about the city wanting to shift more residences downtown. The key line of a famous Supreme Court decision was "the power to tax is the power to kill". Well, using the tax code to promote social goals leads to distortion and we're reeling from the effect of that now. Even as a homeowner, I can truly say that the mortgage int deduction needs to go and we need to stop pushing the idea that everyone should own a home or that the gov't should subsidize them to do it.

Here are some other things i"m seeing:

- price appreciation in low single digits, probably right around inflation. stagnant market for new construction and large homes as boomers downsize. slightly higher demand for small homes and rentals as 20somethings leave the nest after a cultural and economic-downturn-based delay

- baltimore city will eventually realize they need to lower the property tax rate to attract the kind of residents that will strengthen its overall tax and employment base

- as energy prices rise for gasoline at the pump and energy from BGE, exurban areas will age and stagnate. lot sof power plants currently providing cheap energy will go out of service in the next decade. coal is still cheap but most people would agree that burning coal for electricity is a step backwards. only 2 nuclear plants currently being build in the US. and we're probably right at peak oil. smaller homes in urban or close-in suburbs will be smart plays.

- mortgages will become more expensive and harder to get as fannie and freddie are wound down. higher down payments required should drive prices down or hold them steady. meanwhile, less potential buyers since you can't fake your income or get a house with a 550 FICO anymore.

- interest rates will be higher over the next decade. they're already about a percent higher than just 6 months ago.

- foreclosures will account for a big chunk of sales over the next 3-4 years. simply looking at supply & demand, it will have to be a buyers market. only a dumb buyer would get into a bidding war when your average block has several "for sale" signs on it, plus a few foreclosures that the banks are holding off the market.

- red line will drive people in canton crazy, but generally be a good thing for several neighborhoods on the east/west axis of the city.

Red Line will not be good. It can't handle the crowds.

You heard it here....foreclosure activity will peak this year and inventories will remain high through 2013. Did you realize that over a million REOs have not been listed for sale yet and that over a million homes are currently in the foreclosure process, not to mention, 5 MILLION homes are in some stage of delinquency.

All that inventory will be released to the public SLOWLY over the next 3 or 4 years so as to not promote another devasting price crash.

So, the current and future foreclosure inventory will help keep prices down, keep home building down and continue to outpace absorption. Without job creation, more readily available money to borrow and improved consumer confidence, we will be mired in a very slow and uneven market recovery.

However, with all this dismal news comes a silver lining...nearly 1/3 of all sales last year were REOs or foreclosure properties and they sold at a ~30% discount. If you have the wherewithall, start investing!!

i'm essentially on-board with what damon said. prices are going nowhere for the next few years. in the long run, prices might stay just as good because of the shift of many Baby Boomers from owners of large suburban homes to owners of retirement condos or residents of nursing homes. will us Millenials pick up the slack? i doubt this. of my friends who own homes, we all own townhouses/row homes, i'm the only one with a single family house and it's a modest 3br. if you desire a 4 br/3.5 ba mcmansion, just wait 5 yrs or so, plenty of baby boomers will be putting them on the market

as for the "red line won't be good" comment... i'm not sure what that means. overall i think it's a net negative for certain neighborhoods, primarily canton. however, it bridges a needed gap in the city's transportation. i'm not sure if anyone else has tried to go from the east of the city to the west on public transportation, but it is very slow, with transfers required. no one with a car would try it. with the red line, it will be very convenient. from JHU-Bayview to Charles Center in 10 min? sign me up! i couldn't do it in 20 minutes, especially with parking.

i'd be interested to see what jamie has to say about the red line and property values or economic activity? i'm not frequently optimistic, but the Red Line is something i'm pretty high on.