Is the Market Back to Normal?

Is the real estate market back to normal or are prices still declining. First, based on history, normal would generally be defined as a period where real estate values are appreciating. From year to year the amount of appreciation may vary, but over the long period, just as has been the historical case with the stock market, values go up. The charts below compare two criteria, average and median, which are used in determining what is happening in the market. A quick definition of these terms is as follows: Average is the value obtained when all values are added together and then divided by the number of values. Median is the value whereby half of the values are higher and half of the values are lower. The charts look at monthly data from year 2003 through 2007 and are only for Baltimore City. Typically the highest prices are achieved during the warmer months of the year, however the charts show an exception to this in years 2005 and 2006, where the prices appreciated at the end of the year. This period corresponds with the boom period where prices were substantially appreciating. Note that the average is consistently higher than the median. If there were only limited data or if this were for a short period of time, then this might be related to just a few much higher values skewing the average to the high side. Since this is the case for several years with statistically sufficient data, it is more likely that this is an indication of rising values. In the later months of 2007, the values are going down to the levels of 2005 and 2006, but remember, this was a time when the numbers were higher than normal during the boom period. If the graphs for 2007 are compared to those of 2003 and 2004 and even to those of 2005 and 2006 during the first three quarters of those years, then 2007 begins to show a normal pattern. Also of significance, is that each year shows an increase in both average and median, with the exception of 2005 and 2006 being out of normal. If indeed 2007 is showing a normal pattern, then the values for 2008 should show an increase. The answer to the question seems to be Yes; the market is back to normal.

The next question concerns what should be done with this knowledge.

• If one is thinking of Buying, then they should stop waiting because prices are likely to increase. Also, they will not find interest rates any lower than they are today.
• Those who are facing foereclosure, should work closely with their banks to buy some time. as the prices go up they will gain equity in their properties and be in a better position to refinance to more suitable terms.

Call Ron at 410-935-5844 for more information about the market as it relates to your particular situation.