MacRo LTD Blog

Better Late Than Never: Housing Makes a Comeback

2013 is shaping up to be the year that housing once again contributes to Frederick County’s economy.

Housing Makes a ComebackLast week was a good week for real estate, full of glad tidings about the nation’s housing market.  It started when Case-Shiller released their September housing numbers and pronounced that after six straight months of price increases, “Housing is in the midst of a recovery.”

During the Maryland Association of Realtors Economic and Real Estate Forecast last Thursday, Anirban Basu of Sage Policy Group concurred:  “We are now in housing market recovery.”

Sing it Etta James! “At Laaaast

As mentioned in the MacRo Report post Commercial Real Estate Market: Waiting to Exhale,” this has been the first economic “recovery” that hasn’t been driven by construction—housing is very late to this party.

A return to a healthier housing market will mean more jobs (especially in construction and manufacturing) and a start to recovering the catastrophic losses in personal wealth that touched virtually every home-owning American during the recession.  All of that trickles down to the commercial real estate market, with increased demand for industrial, retail, and office spaces.

In Maryland, median home prices rose significantly over last year in urban areas:  up 17% in Baltimore City, nearly 9% in Montgomery County, and 6% in Howard County.

According to Basu, “The best time to have bought a home is behind us.”

That may not be the case in the outlying suburbs and rural areas like Frederick, where housing prices are still bottoming out (in September median prices were down 1% over last year).  Frederick may in fact be in the midst of “the best time.”

However, with Frederick housing inventories down 30% from last year, interest rates below 4%, and consumer confidence at its highest since 2008, the stage has been set for home prices to begin a sustained rise here, too—and soon.

After multiple false starts and raised hopes, it’s hard to believe that housing is truly out of recession without playing devil’s advocate.  So what threats does 2013 hold that may derail our little housing engine that could?

Fiscal cliff

If for some reason congress fails to resolve— in any way—the double trouble of expiring tax cuts and monstrous budget deficits, the housing recovery will sputter.  This is highly unlikely, however.  In the event that our political leaders fail to execute lasting and impactful changes to the tax structure and/or government spending, they will put a band aid on the budget and kick the can on down the road.

Mortgage Interest Deduction

There have been rumblings (at both the federal and state levels) that with interest rates so low, the time will never be better to end the mortgage tax deduction.  When questioned about this, Basu seemed confident that the political will does not exist to remove this deduction.

For one thing, no one who wants to get re-elected is going to make a move to hurt the housing market.  Additionally, if the Bush tax credits ultimately are allowed to expire—even for only the highest wage earners—the mortgage interest deduction becomes even more important.

Foreclosure Inventory

Fewer than ½ of Americans believe their home is worth more than they owe on it.   This “shadow inventory” will continue to drag on the housing market, but how much it drags will depend on how fast prices rise, and whether those homeowners who finally break the surface decide to refinance or sell.  Short sales are now outpacing foreclosures, although if congress does not extend the that may change.


Germany, the great fiscal engine of Europe and the hope of European creditors the world over, is now officially in recession.  According to Basu, the rest of Europe is now in a “triple-dip” recession.  It remains to be seen how events will unfold this year in Europe, and what impact they will have on the U.S.  Of all the threats to the U.S. economy, this one is the most difficult to predict or measure.

All things considered, I feel a cautious sense of optimism in the air—maybe because the election is behind us, or because consumers and businesses alike are finally adjusting to the “new norm” of a sluggish economy.

Either way, it looks as though real estate will be an economic bright spot in 2013.  Not a super-nova or a big boom, mind you—just a bright spot.  But I’ll take it.

At last.

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The author: Rocky Mackintosh, President, MacRo, Ltd., a Land and Commercial Real Estate firm based in Frederick, Maryland. He also writes for

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