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Realities of Real Estate: Almost like housing bubble never happened

Servepro, the damage restoration company that comes to clean up your house after a fire or flood, has one of the best marketing tag lines ever created — “Like it never even happened.” For home owners looking to survive physical damage to their property, getting things back to how they were before is clearly what it’s all about. But the damage realized by most homeowners during the past eight years has been financial, not physical.

The housing bubble affected everyone, with a gut-wrenching roller-coaster ride from boom to bust. However, as bad as it was, the housing market, especially in our area, has recovered to a point that, for many homeowners, it’s like it never even happened.

From about 2003 to 2006, home prices deviated from the traditional trend line, rising at a rate that, in hindsight, was clearly unsustainable. At the beginning of 2003, the national median home price was about $180,000. In 2004, prices went up 13 percent, followed by 16 percent in 2005 and 12 percent in 2006. In just three short years, the median price grew to over $264,000. During the same period, median home prices in the Washington area rose from $294,000 to over $500,000. Then, from 2006 to 2009, the ride down was a mirror image of the ride up.

Nationally, home prices didn’t fully hit bottom until the end of 2011. For Washington, improvement came much more quickly, with prices starting to move up as early as mid-2009. By June of this year, the national median price had reached $203,400, and in Washington, it was $411,761. In short, we’ve come full circle, and home prices are now getting back to, and in some cases a little bit beyond, the trend lines established by pre-bubble price appreciation.

When the bottom fell out of the housing market, economists had two concerns. First, they were worried that we’d have what the stock market calls a dead cat bounce. That’s a condition where prices are falling so rapidly that they briefly bounce back up, giving a false impression of improvement. Second, many economists also believed that with prices going so far above the historical appreciation trends, we would have a prolonged period where prices would fall well below normal growth patterns. In the end, neither of these things happened.

So, for people who owned a home before 2004 and stayed with it through the run up and run down, they’re now pretty much back on track with historical averages for home price growth. And for those who bought or sold during the bubble, the timing of that would determine whether or not they have also fully recuperated. Regardless, it is now fair to say that, for large numbers of homeowners, the Servpro slogan applies.

That’s not to say that everything’s hunky dory out there. We still have a weak economy that’s facing a lot of uncertainty, and many homeowners continue to find themselves underwater. But, in the spirit of seeing the glass half full, a lot of us can look back at the housing bubble as nothing more than a hiccup in history. Plus, for many those who stuck it, the silver lining was an ability to refinance at rock bottom mortgage rates.

Barring any unique events, such as a terrorist attack or some economic calamity, we see the housing market as stable, with slow, but steady growth. An improving economy and job growth will help push prices up, but that will be tempered by expected increases for interest rates. All in all, we’ve got what some call the Goldilocks market — not too hot, not too cold.

Homestead Tax Credit

In 2007, the Maryland legislature passed a law that required all home owners to make application for the Homestead Tax Credit. Even homeowners who were already receiving the credit prior to 2007 had to reapply. Dec. 30 is the final deadline. For many homeowners, the credit can save literally thousands in real estate taxes.

If you are unsure about the status of your application or need more information on how to apply, email Homestead@dat.state.md.us or call 410-767-2165.

Bob and Donna McWilliams are practicing real estate agents in Maryland with more than 25 years of combined experience. Their email address is McWilliams@BobDonna.com.