I think I may have gotten your attention in my last blog. Good! We need to look at the world as it is. We can’t buy the spin coming from politicians and, yes, leaders from our own industry. Please consider the facts, particularly demographic trends in our county. There is no empirical data that suggests that we are headed for something anywhere close to a recovery. Perhaps we need to define “recovery.” Is it actual sales volume/number of transactions or is it values? It would be misleading to suggest sales volume if most of your transactions are foreclosures and other distressed sales going for bargain-basement prices. Conversely, it may be misleading to suggest a recovery is here if median prices go up if the number of lower or middle income buyers can afford houses and the only folks who can are in the upper income level. This would certain skew the statisticts.
Perhaps the best way to define a housing recovery is the same way the Supreme Court defined obscenity: you know it when you see it. You’ll know you are in a housing recover when there is a healthy balance between supply and demand, when foreclosures make up less than five percent of all transactions, and when buyers aren’t afraid their investment will go down in value.
So are we there yet in Harford County? BRAC was supposed to be the big savior for the real estate market. To some extent, it did mitigate what could have been a total collapse of the market, but it never really materialized the way public officials touted. So now that the migrating of folks from New Jersey has waned, where are the buyers coming from?
During the 1980’s and 1990’s much of the in-migration came from folks exiting Baltimore City and eastern Baltimore County. In those days, Harford County had a measurable price differential with Baltimore County. We had relatively cheap land and plenty of it. New construction was booming. We were ranging from 1,500 to close to 3,000 residential building permits every year for 20 years in a row. No we are doing about 400 residential building permits per year.
The county’s population was growing 3,000 to 6,000 people every year. The past five years, according to US Census statistics, we averaged approximately 1,300 per year. The student enrollment has been stagnant. Give or take a few hundred every year, it even down from its peak in 2002. The board of ed’s own projections do not foresee any growth in enrollment. So again I ask you, where are the buyers coming from? Without buyers, willing and able, there is no market, let alone a recovery.
This is what I see happening. It is still going to take years to get rid of all of the foreclosures and short sales. And we haven’t even tapped into the “shadow inventory.” This will lie over our market like a wet blanket. During this same period of time, in a virtual parallel universe, houses will sell. If a house is in good condition and priced correctly from the outset, it will sell in a reasonable amount of time. Americans are mobile people. There is always a segment out there that is buying or selling. I don’t think that is going to change.
The next blog will be some of my concerns for the future. What could make this fragile market fall off a cliff?
I’d love to hear what you think. I am only one person with one set of experiences and perspectives. What is your opinion? I’m hoping we can use this forum to learn from one another.