Did anyone see the "60 Minutes" report this evening (12/14/2008) on the "second wave" of foreclosures? It was frightening! This is the link to the story from from reporter Scott Pelleyposted on CBS News http://www.cbsnews.com/stories/2008/12/12/60minutes/main4666112.shtml
Everyone knows that the first wave of foreclosures were spawned by sub-prime loans made to people who would never have qualified for more traditional loans. Well, the next round of foreclosures will come from certain types of adjustable rate loans which are scheduled to reset at much higher rates during the next few years. What is really scary is that a large proportion of these loans are defaulting during the low, introductory rates. The analyst they interviewed predicted that it will take years for the country to get out from under the massive amount of inventory on the market. This can only drive priced down even lower.
As we all know, however, location is a key influence of value. How will this mess affect the Baltimore metro area, and in particular, Harford County? Unfortunately, we are not immune to all of foreclosures on all of these bad loans made during the past several years. However, employment stability also has an impact on the housing market. Fortunately, the area has an extremely diverse employment base and is not solely dependent on any one industry. The migration of jobs into Harford County from BRAC (Base Realignment Commission) should help to mitigate an otherwise weak housing market. Another source of thousands jobs positively affecting the metro area is the Johns Hopkins Hospital's biomedical and other research laboratories.
I guess the bottom line as I see it is that Harford County real estate will continue to muddle through the most challenging market in a generation. I have to be careful with predictions, but I believe prices will continue to decline through 2009. How much, nobody really knows. When the BRAC jobs start coming online in 2010, then we may have a better handle on what will happen with real estate values.
On a side note, I have avoided writing a blog because, quite honestly, I knew the market was going to go south for some time. I just did not want to bring you negative news. If you know anything about me, you know that I am an optimistic person by nature. However, most of my clients count on me to "keep it real." In embarking on a more regular blog, I will be honest with you about what I see going on out there, but I will do everything I can to provide useful and positive information as well.
Talk to you soon,
Dom Corson