Baltimore economist Anirban Basu didn’t hold any punches when he told area Realtors the difficult 2008 residential real estate market will be nothing compared with a bleak 2009 and beyond.
“My guess is many of you will have a banner 2011,” Basu said to a room of several hundred Realtors on Monday. “One of the reasons is there will be fewer of you.”
The room erupted with laughter, but everyone got Basu’s point. The U.S. economic recession will likely last longer than many economists are predicting, with layoffs widespread and consumer confidence destroyed, and it could be years before a real recovery is seen in the housing market.
Home sales in the Baltimore area slumped 28 percent in 2008, according to data from Realtor-owned Metropolitan Regional Information Services Inc. Basu expects it to be worse in 2009, as layoffs only mount after U.S. employers shed 1.1 million jobs in November and December.
“When the January employment report comes out in February, that’s when you’re going to see a blood bath in terms of loss of jobs,” Basu said.
Rising unemployment will further damage consumer confidence, which is already at a all-time low, Basu said. Unemployment, up to 7.2 percent in December, could go above 10 percent in the second half of 2009, Basu said.
“People are not going to want to buy a new home,” Basu said. “It’s going to be a long time before it changes.”
Jed Smith, managing director of quantitative research for the National Association of Realtors, offered a more optimistic viewpoint, saying recovery could come as soon at the second or third quarter of 2009.
“We have a little ways to go, but a lot of it remains to be seen,” Smith said. “There’s really nothing any of us can do to make the recovery come sooner.”
From a buyer’s perspective, it’s an attractive market, with mortgage rates around 5 percent, an increasing inventory and decreasing prices, Smith said.
“It’s a really good market if you want to buy a house and hold it for three, five, seven years,” Smith said. “If you want to flip it in a month, not so much.”
Basu and Smith both spoke at the Greater Baltimore Board of Realtors’ “State of Maryland Real Estate Market” event at the Sheraton Baltimore North in Towson.
Adam Cockey, chairman of MRIS, said he worried about the increasing number of foreclosures in the Baltimore region and the effect they’ll have on the 2009 market.
“I think it could be devastating and put more pressure on that inventory,” Cockey said.
