August 14, 2005

Perspective From the Number Crunchers

The risk that home values in D.C. and its ever expanding ring of suburbs increased slightly over the last several weeks, say the number crunchers at PMI Group, which provides mortgage insurance on many loans. Its latest report, Economic and Real Estate Trends (ERET) from August declares there is a 20.9% chance the local market will fall in the next two years. The May ERET report showed only a 18.7 % chance the market would drop.

Considering the recent runups, a 20% or so chance that the market will drop in the next two years lets me rest easy at night. First, this means that there is an 80% chance that the huge gains the lucky ones have enjoyed will not disappear and may even grow.

Second, D.C. and its 'burbs are a heaven for the faint at heart considering that places like Boston, San Diego, Nassau County, NY, have a greater than 50% chance of losing value in the next two years. This statistic only restates one of the truisms of living in the District, the Commonwealth and Merland: our economy is relatively stable. While the stock makert and high-tech mania produce lots and lots of overnight millionaires, our frumpy, but stable, economic base means we don't soar as high as other regions and don't plunge as deeply when things to sour.


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