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Live chat with Anirban Basu on Maryland economy
 
8:28
Jamie -  Hi, everyone! I'll be your host for this live chat with economist Anirban Basu. We're about a half-hour away from the chat, so please ask your questions now.
8:30
Jamie -  Here's a quick bio:

Basu is chairman and chief executive of Sage Policy Group Inc., an economic and policy consulting firm in Baltimore. His clients include developers, bankers, brokerage houses, energy suppliers and law firms, and he's written economic development strategies for government agencies and nonprofits.

 

In addition to economic development, he focuses on health economics and the economics of education. And he's a regular speaker at the Home Builders Association of Maryland's construction-forecast conferences.

 

Basu, a Baltimore City Public School System board member, earned a bachelor's degree in foreign service at Georgetown University. He earned a master’s degree in public policy from Harvard University’s John F. Kennedy School of Government and a master’s degree in economics from the University of Maryland. He graduated from the University of Maryland School of Law in 2003.

8:31
8:31
Jamie -  And here's a poll to take while you wait:
8:58
[Comment From Mike ]
Maryland has the highest per capita number of McMansions. How will this fact affect future homebuilding and both new and existing homebuying?
8:59
Anirban Basu -  

The market for larger homes has shifted due to a number of economic and cultural forces.   Savings is in, conspicuous consumption is out.   Energy savings is in, intense utilization is out.   Moreover, the demographic of the state suggest that there will be more demand over the next 10-15 years for smaller homes in more urban settings.   Based on that, this is where much of the investment will occur.

9:00
Jamie -  Interesting question and answer! We're getting some good questions, folks, but there's still time to submit more.
9:01
[Comment From Bud ]
Is there a point in which the federal government will not be able to borrow any more money? Do you think the federal government, like state and local governments, will have to resort to drastic cost cutting and layoffs at some point in the future?
9:01
Anirban Basu -  The federal government will have to begin cutting costs in the very near-term, certainly within the next 3 to 5 fiscal years.   The deficit will approach or exceed $1.6 trillion this year and there are much larger liabilities in the years ahead.   Thus far, the federal government has not been forced to make difficult decisions regarding Social Security and Medicare.   In fact, these programs have been expanding.   The defense budget has also expanded dramatically for obvious reasons.   This cannot   persist.   The dollar is already plummeting, in part I think because of concerns around the rest of the world regarding our massive debt.
9:02
[Comment From whirrrp ]
How has the market been faring for houses at the top end of the spectrum? Has it been affected by the $8000 first-time credit? I am curious as to the health of the market for homes in the higher range, let's say $450,000 and up.
9:04
Anirban Basu -  The higher end of the market is improving.   Though this market is less susceptible to assistance from the first-time homebuyer tax credit, there are other forces at work, including recovering financial markets and the perception among the rich that there are some superb properties out there available at relatively low prices.   The million dollar plus market in Montgomery County has now shown three consecutive months of life according to a prominent realtor at Long and Foster.   In Baltimore City, there has been a significant increase in the number of homes sold for more than $1 million.   Who would have guessed?
9:04
[Comment From Mike ]
What do you anticipate happening with regard to housing appreciation? How long will prices remain close to flat (in the Baltimore area) after the decline is over?
9:07
Anirban Basu -  The problem with the average and median sales price statistics is that they can be highly misleading.   Because of short sales and foreclosures, these statistics are likely to continue to indicate falling sales prices into 2010 and perhaps beyond.   However, take those transactions out of the mix, and the story is much different.   For the typical house, I would anticipate prices remaining flat in the Baltimore area next year.   Appreciation is possible thereafter, but only if mortgage rates remain well-behaved and credit is available.   But there is no guarantee of that.   My guess is that mortgage rates will be on the rise over the next two years and that banks will continue to struggle to make credit available in part because of weak commercial real estate performance.
9:08
[Comment From Bud ]
When will the feds reach the breaking point as to not being able to borrow more money?
9:10
Anirban Basu -  Tongue in cheek -   when the Chinese say so.   Presently, the federal government is finding ready buyers for its debt.   This is understandable since there is still an aversion to risk among many investors and U.S. debt is still considered very safe from the perspective of return of principal.   But as equity markets continue to improve and as the appetite for risk/reward returns, my guess is that the demand for U.S. debt will decline.   That's why interest rates will rise.   It's really not a question of when will the Federal government not be able to borrow money.   It's a question of how much interest the Feds will have to pay to access that money.
9:10
[Comment From Aftab ]
Since the dollars value is tied to oil values, does a slow down in the economy and production (which uses oil) doubly effect the dollar?
9:12
Anirban Basu -  The dollar's value is inversely related to the price of oil.   Recently, the dollar has been in decline and oil prices presently sit at $71.   To the extent that oil prices rise, that certainly slows down the economy.   But it's not that simple.   A weaker dollar is also associated with more competitive exports and higher import prices, which provides domestic producers with greater opportunity to serve Americans.   Frankly, I like a weaker dollar and believe that a steadily weakening dollar means a steadily strengthening America.
9:13
[Comment From Bill ]
Do you think the State should take a stronger stance in guiding growth across the counties? For instance, Harford County is trying to get as much residential growth as it can out of BRAC, when it should just try to get as many jobs as possible and try and send the residential growth to Baltimore County and Baltimore City.
9:15
Anirban Basu -  Tough question from a public policy perspective -- the problem here is that broadly shared goals and values are in conflict here.   For years Marylanders have emphasized the notion of "live near your work".   Smart Growth is all about the co-location of jobs and homes to promote shorter commutes.   Well, the BRAC-related jobs are disproportionately in Harford and Anne Arundel counties and one could argue that that is where the new homes should be.   In general, however, I agree that there needs to be a greater concentration of population growth in the Baltimore City's, Cambridge's, Cumberland's and Towson's of the state.
9:16
[Comment From PM ]
The Maryland job market is better for those in sectors like defense and health care. Is job growth in those areas enough to spur growth in unrelated (and lesser paying) sectors? Are you worried that new job growth in the state will not be broad-based enough?
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