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January 12, 2012

When will home prices return to bubble-era levels?

Moody's Analytics is predicting that home prices in the Baltimore region will climb back to previous peaks in five or six years. Do you think that's likely? What's your own personal prediction?

It's easier, of course, to take a stab at what will happen within the current year. But you'll find plenty of varying forecasts. 

Forty-five percent of the nearly 200 readers who took last week's poll think home values near them will fall in the next six months, 41 percent think values will be unchanged and 14 percent think values will rise. Pretty similar to the results of a HomeGain poll of Maryland homeowners, as it happens.

And that's it for me today -- lousy cold. Hope you're feeling well, and feel free to talk amongst yourselves.

Posted by Jamie Smith Hopkins at 6:00 AM | | Comments (8)
Categories: Housing forecasts, Survey says ...


What is Moody's Analytics saying about changes in employment and wages and the number of rentals in that period?

Without that perfect storm of increased wages generally to go along with far fuller employment and at best a zero sum in rental units available... those ABLE to buy could be forced by those market pressures to pay more. Maybe even a lot more.

Hopefully... within another 5-6 years those things will have all resolved themselves and to the degree implied.
But other than for the purpose of making headlines and chatter... I think they have missed this one as well.


Won't increased inflation eventually help push housing prices higher?

I think it would be more interesting to see a break down of what led to price increases. Perhaps a percentage of the increase tied to increased demand and a percentage tied to inflation which would equal 100%.

Ha! What a hilarious question for todays topic!

My prediction? No sooner than 50 least 2 generations from now

We haven't even hit bottom yet, and we're asking when the return to the top will be??


There's absolutely no way on earth we'll be back to bubble era peak prices in 5 or 6 years. But I also think Darwin Rules' 50 year prediction is a bit out of whack.

If you look historically at housing prices, it usually takes about 10 to 12 years to return to a previous peak when the market goes down. I think this down market is much worse than most, so I think it will be about 10 to 15 years from NOW (and therefore 15 to 20 years from the 2007 peak) before we get back to peak prices.

You could tell that prices were out of whack back in 2005 because of the huge price gap between renting and buying. In Baltimore at least, we are now the other way round on that, with rents going up while sales prices stay flat. In the condo building where I live, the current price to buy means you could immediately make good money renting the place. For this reason among others, I really do think we are now at the bottom (whatever the precise *date* for the bottom, prices won't go much lower than the are now).

A prediction such as this makes me happy, however it seems a bit premature to make such a bold statement. WIthout knowing when the banks will settle what's going to happen with the properties they already hold, it seems more likely that property levels will remain the same until they are all occupied by new owners. Since the banks move as slowly as they want to, my guess is that it can take closer to ten years to see levels rise above pre-bubble values.

I am a long -time resident, but I have also lived in DC and other areas along the East Coast. I am absolutely convinced that Baltimore's success is tied to becoming a second city to DC--which is now projected to have real estate appreciate at 9% just this year. Unfortunately, the only large industry left in this region is that of the Federal Government. We must improve our rail links to DC and the Metro subway system in order to become a real option. I have lived in downtown and commuted to DC--if I could do it in 40 minutes it is well worth the time, Baltimore's downtown has many great features and is cheaper. Go High-Speed Rail!!

I would agree with SRM, about Baltimore basicly becoming a suburb of DC. But thta has its drawbacks as well. Virginia is already scared becauseof proposed Defence cutbacks.And whomever wins in 2012, it seems that we will be entering an age of austerity in Federal Government spending.This will be a huge problem for Baltimore and Maryland.Maryland has tied too much of its economy to the Government.Just as Detroit tied too much of its economy to the auto industry

As far as housing prices go, i think that the pre-bust levels were insane. 1200 sq foot Rowhouses in Canton were selling for over $600,000. They now go for $150,000-$350,000. Thats a much more realistic level. I myself dont see them rising high anytime soon .

Nor do i think that they should. Im a homeowner.But i also like living in a city where ordinary people can afford to buy a house. That is a large part of what makes Baltimore great

If prices bounce all the way back in 5 or 6 years, wouldn't that just create another bubble? Even if prices were to increase at 9% per year, it'd take about 8 years for them to double from current levels. As an investor, I'd love to see appreciation, but as a realist, I'm planning on much longer than Moody's projection, though nowhere nearly as long as Darwin Rules

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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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