A Housing Price Drop - What if Moody's is Right?
Moody's Economy.com has released a report "Housing at the Tipping Point" that predicts 10-12% declines in real estate prices for Metro Washington, including Fairfax County. Moody's report suggests that, between the fourth quarter of 2005 and the second quarter of 2008, housing prices in our area are projected to decline a full 12%. Other big declines in prices are similarly forecasted for other hot housing markets around the U.S.
This report seems to contradict a recent prediction by the National Association of Realtors that the market has already hit bottom (without significant price decreases).
What happens if Moody's is correct? First, a significant number of people will be hurt economically. These include recent buyers, especially those who bought "up" and financed with creative mortgages; members of the real estate and construction industries; and local elected officials who have been spending like the proverbial drunken sailors as housing prices have been skyrocketing. Keep in mind that 2007 is an election year for the School Board and the Supervisors. Will Gerry Connolly propose an increase in the tax rate? Will assessments be largely flat or actually down? Will the School Board cooperate with Mr. Connolly, who I presume would do all in his power to avoid raising the tax rate? Lots of interesting questions.
Another group that could be affected significantly by a big housing slowdown is the illegal immigrant community, many of whom have come here to satisfy the demand for lower-skilled workers. (My purpose here is neither to attack or defend this group, but merely to raise some real issues that could well arise.) Will construction slow? What about the many other real-estate-related services where many of this group work? For example, landscaping and remodeling. What would be the impact on the many families in their native lands who rely on remittances from these workers? Will the illegal immigration stream slow? Will some workers return to their homes? What happens if the available work is substantially reduced, but the number of workers remains fairly constant or even increases? What if even more people arrive to compete for a diminished volume of work? Would crime and other social problems increase? Would there be an attempt, despite laws to the contrary, to extend social and economic benefits to people who are not here lawfully? If so, what would be the political fallout?
Just a few things to contemplate.
This report seems to contradict a recent prediction by the National Association of Realtors that the market has already hit bottom (without significant price decreases).
What happens if Moody's is correct? First, a significant number of people will be hurt economically. These include recent buyers, especially those who bought "up" and financed with creative mortgages; members of the real estate and construction industries; and local elected officials who have been spending like the proverbial drunken sailors as housing prices have been skyrocketing. Keep in mind that 2007 is an election year for the School Board and the Supervisors. Will Gerry Connolly propose an increase in the tax rate? Will assessments be largely flat or actually down? Will the School Board cooperate with Mr. Connolly, who I presume would do all in his power to avoid raising the tax rate? Lots of interesting questions.
Another group that could be affected significantly by a big housing slowdown is the illegal immigrant community, many of whom have come here to satisfy the demand for lower-skilled workers. (My purpose here is neither to attack or defend this group, but merely to raise some real issues that could well arise.) Will construction slow? What about the many other real-estate-related services where many of this group work? For example, landscaping and remodeling. What would be the impact on the many families in their native lands who rely on remittances from these workers? Will the illegal immigration stream slow? Will some workers return to their homes? What happens if the available work is substantially reduced, but the number of workers remains fairly constant or even increases? What if even more people arrive to compete for a diminished volume of work? Would crime and other social problems increase? Would there be an attempt, despite laws to the contrary, to extend social and economic benefits to people who are not here lawfully? If so, what would be the political fallout?
Just a few things to contemplate.
posted by Toomanytaxes at 5:37 PM
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