The passing of the old year and the beginning of the new is a great time to look forward and try to predict where the road ahead will take us. So as 2009 trudges forward, here are a few things to think about and look out for, and what the new year might hold for the local real estate market.
Consumer Confidence
This index gets reported monthly and is an attempt to measure the level of optimism in the general public’s mind. I think its an important leading indicator of how the economy in general, and the real estate market in particular, will fare in the months ahead. People don’t buy houses if they are worried about their jobs, their financial stability, and whether their property will appreciate in the mid- to long-term. After the nation gets a new President, I think this indicator will begin to rise — especially if the new administration is able to get a stimulus package in place and mortgage interest rates, either naturally or artificially, are kept low.
The Change We Needed
Aside from the stimulus and mortgage interest rate support mentioned above, the incoming Obama Administration also will need to get a handle on last fall’s financial industry bailout: where that money has gone, and why banks are not using it to make existing home mortgages more secure and new lending a bit easier to get. The current Treasury Department “oversight,” from all public appearances, has not been enforcing the terms and spirit of the legislation that made the funds available. For housing to stabilize and begin to recover, troubled mortgage assets have to be addressed. That’s where this crisis began, and that’s also where I believe the solution will begin.
BRAC
We’ve been hearing a lot about Base Re-Alignment and Closure for several years, but according to the impact study prepared for the Department of Labor back in 2006, this is the year we should actually start to see some significant impact of these jobs moving to Maryland. The numbers are impressive: between now and 2015 there should be 14,000 new jobs on the bases at Aberdeen Proving Ground and Fort Meade, plus thousands more support jobs created by the move of these new professionals. Based on past base closure experience, at least 5,000 of those on-base jobs and thousands more of the support positions should be filled by relocating personnel, the rest will most likely be filled by new hires. That’s thousands of new households, many of them buying homes in Maryland. Thousands more of those new hires from the local population might also decide the new job and higher salary make a new house possible.
These figures are conservative; the government impact report actually predicts that there could be an even greater impact on local housing. However, since it was written in 2006 the economic downturn and the housing crisis were not factored into its predictions, so a healthy skepticism might be in order.
Since Baltimore and its surroundings have some of the most affordable housing in the region, we should see some increase in activity in those areas closest to the two bases in question: the Aberdeen area of Harford County, the east sides of Baltimore County and Baltimore City, and the southwestern neighborhoods of the city and adjacent areas in Anne Arundel County.
Pent-Up Demand
Baltimore’s real estate market started weakening in late 2006 and early 2007, which means we have been in a difficult environment for two years. That uncertainty persuaded people to delay making decisions and taking action, keeping them out of the real estate market long after they felt the need to change their living situation.
That pent-up demand can only be held back for so long before the need to make a change becomes overwhelming, so I believe that 2009 will see some of those people finally moving forward. Watch the local housing figures as spring returns, the weather starts to warm up, and the traditional spring market gathers steam. A robust improvement in sales could be enough to start stabilizing the local real estate market by bringing down our current inventory of houses for sale.
This could be good news for city neighborhoods that offer great housing value for the dollar, areas like Greater Hamilton and Lauraville, and the downtown and harbor areas where the draw is location, location, location!
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Remember, most everything above is simply my own opinion. (Pay no attention to the man behind the curtain!) I hope that 2009 has started well for you, and that we see some of these signs of returning prosperity sooner rather than later. Happy New Year!
