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Lack of Greater Boston homes to buy reignites bidding wars

 
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RealEstateCafe



Joined: 11 Dec 2007
Posts: 234
Location: Cambridge, MA

PostPosted: Thu May 28, 2015 7:13 pm GMT    Post subject: Lack of Greater Boston homes to buy reignites bidding wars Reply with quote

Lack of Greater Boston homes to buy reignites bidding wars
Prices rising, sales off in many places

http://bit.ly/BidWarsBOS_052815

Boston Bubble readers, look into your crystal ball, do you think headlines over the next 12 to 24 months could be an echo of this ten years ago?

Mass. home sales slide 11% in a year
But prices still rising, and condo market's booming

By Kimberly Blanton
Globe Staff / June 24, 2005

”Supply is going up, demand is going down, and we’re still at record-low interest rates. When these rates go up," he said, ”sellers are going to have trouble."

Read the prediction below - how does that change the answer to your question?

Analyst: Housing bubble not a question of if but when
As in, when is it going to implode?

http://bit.ly/NextREBust
_________________
Bill Wendel
The Real Estate Cafe
Serving a menu of money-saving services since 1995
97a Garden St.
Cambridge, MA 02138
617-661-4046
realestatecafe@gmail.com
http://realestatecafe.com/blog
http://twitter.com/RealEstateCafe
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bsg61
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PostPosted: Tue Jun 02, 2015 2:59 am GMT    Post subject: Lack of Greater Boston homes to buy reignites bidding wars Reply with quote

Would love to know the answer to your question. Are we in a bubble and if interest rates (which they may not until 2016) will this cause the R.E. market to "correct"? Will prices just continue to rise until then?

Is the joke on all the people who stayed on the sidelines? Is it true: "buy now or be priced out forever?"
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bsg61
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PostPosted: Tue Jun 02, 2015 3:07 am GMT    Post subject: I was unable to read the Globe article Reply with quote

as I am not a subscriber….but just found this on boston.com:

http://www.boston.com/real-estate/news/2015/05/28/why-home-prices-are-likely-stay-high/BhCTGCPuNlpyMevPxp13eM/story.html?p1=menu_real%20estate_latest#sthash.8ti8cb2B.dpbs

Guess I missed the boat?
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PostPosted: Tue Jun 02, 2015 7:27 pm GMT    Post subject: missing the boat for now and near future Reply with quote

price hike on real estate is just one of many side effects on money printing since 2008. The price of real estate might never go back to 2010 to 2011 level, just because almost every necessity is more expensive now compare to back then, including housing, healthcare, education etc.

Well, there will be times when wage increase and inflation reach balance points, for now inflation is definitively out run wage increase. That definitively make people seat on a sideline with cash look like an absolute idiot. Remember, even a broken clock could be accurate twice a day. There will be time in the future when everyone is loaded up with debt, and suddenly cash is king with rate hike. I can see massive rate hike, only if U.S.A no longer in debt, or some currency try to replace USD as the international reserve currency. The later would be a more possible outcome that causes such.
If you are 'dumb' enough to wait until then, just make sure you got the courage to bite the bullet, and exchange that cash for beat-down in price property.
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PostPosted: Tue Jun 09, 2015 1:41 pm GMT    Post subject: Reply with quote

And here in Cambridge, we have condos selling for 50K+ over asking price:

489 Green St #3
Cambridge, MA 02139

Listed for $449,000
Sold for $505,000
2 Beds
1 Baths
716 Sq. Ft.
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RealEstateCafe



Joined: 11 Dec 2007
Posts: 234
Location: Cambridge, MA

PostPosted: Tue Jun 09, 2015 2:23 pm GMT    Post subject: $50K over asking price = irrational exuberance down 50%? Reply with quote

Does $50K over asking price in Cambridge mean that irrational exuberance is down by 50%? FLASHBACK:

Around this time last year, there were a handful of markets around the US where $100K over asking price wasn't enough according to one headline (see link in blog post below) and one in four homes in Cambridge was selling $100K or more over asking price:

http://bit.ly/BidDrone

So without more context and deeper analysis (not to mention a crystal ball), it's hard to say what $50K over asking price means. What's NOT hard to believe is that the real estate industry has used a BLIND bidding process to set new "behavioral anchors" in overheated #realestate markets like Cambridge & Somerville. See link to behavioral economics in this Tweet:

https://twitter.com/RealEstateCafe/status/601412037042970625

In Liverpool England, innovators are wrapping up a two-day housing Hackathon; and a year ago today, housing activists in San Francisco held a housing hack, too. One question that needs further investigation is: What impact are BLIND bidding wars, global investors, and conflicts of interest -- and now behavioral anchors -- having on housing markets?

https://twitter.com/RealEstateCafe/status/476002239543529472

Victims or fools, is it time for Emergency Bidding War Transparency Act, or while interest rate changes bring end this speculative cycle and begin a market correction faster some expect?

http://bit.ly/FoolishBids

http://bit.ly/LookOutRE
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Bill Wendel
The Real Estate Cafe
Serving a menu of money-saving services since 1995
97a Garden St.
Cambridge, MA 02138
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realestatecafe@gmail.com
http://realestatecafe.com/blog
http://twitter.com/RealEstateCafe
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PostPosted: Wed Jun 10, 2015 2:23 pm GMT    Post subject: Reply with quote

Thank you for that analysis, realestatecafe. I am a real estate novice so appreciate your expertise.

Just found this upon googling:
"The correct selling price of a home is the highest price that the market will bear. The market approach is based on the premise that a prudent, informed person will pay no more for a home than it would cost to purchase a comparable substitute."

If people are willing to pay these prices - 50-100K over asking price - isn't that what the market will bear?

And it looks like interest rates could stay low for a while:

http://www.wsj.com/articles/imf-cuts-u-s-2015-economic-growth-forecast-to-2-5-1433424601
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RealEstateCafe



Joined: 11 Dec 2007
Posts: 234
Location: Cambridge, MA

PostPosted: Wed Jun 10, 2015 3:42 pm GMT    Post subject: Reply with quote

During peak demand periods, Uber uses "surge pricing" to extract additional fees from travelers willing to pay them. Those are private decisions, and if the travel wants to pay, rather than exploring other alternatives, that's their decision.

Could one argue that bidding war premiums are the product of peak demand, hence the real estate equivalent of "surge pricing"?

The analogy has some validity, but Uber's surge pricing policy is transparent, BLIND bidding wars are not. Further, to my knowledge, there's nothing equivalent to escalator clauses -- which are easily manipulated -- in surge pricing.

When the housing market peaked in 2005, surge prices did not adjust immediately as Uber would, instead the housing market slid sideways before heading down. How far down? Savings of six figures -- $100K or more off original asking prices -- were not uncommon; and we made a sport of tracking "Million Dollar Markdowns."

http://realestatecafe.com/201049updating-million-dollar-markdowns-html/

If some people are willing to pay $50K - $100K or more over asking price, why should Boston Bubble readers care? I have lots of opinions on that subject, but would rather hear from other forum users. Before responding, please consider these two data items:

1. When the last housing bubble peaked, tax payers guaranteed one in three loans, not they guarantee 9 of 10;

2. Even before the market begins to crack, some industry observers are calling the housing recovery a lie

http://bit.ly/iCoveryLIE

Where do you think we'll be this Fall if interest rates change? Another article about the strange housing recovery, ...

http://bit.ly/iCoveryMA

...or the beginning of bidding war backlash because homebuyers working with counterfeit or inexperienced buyer agents feel burned by "surge pricing."
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Bill Wendel
The Real Estate Cafe
Serving a menu of money-saving services since 1995
97a Garden St.
Cambridge, MA 02138
617-661-4046
realestatecafe@gmail.com
http://realestatecafe.com/blog
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admin
Site Admin


Joined: 14 Jul 2005
Posts: 1826
Location: Greater Boston

PostPosted: Wed Jun 10, 2015 4:57 pm GMT    Post subject: Reply with quote

Anonymous wrote:

Just found this upon googling:
"The correct selling price of a home is the highest price that the market will bear. The market approach is based on the premise that a prudent, informed person will pay no more for a home than it would cost to purchase a comparable substitute."


That's the Efficient Market Hypothesis. I recommend that you get and read a copy of Irrational Exuberance. Professor Shiller, who won a Nobel prize for related work, essentially disproves the EMH in it. It's a very insightful book, it covers housing prices, and it is so well written that it is an enjoyable read, despite what might seem like a dry subject.

- admin
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RealEstateCafe



Joined: 11 Dec 2007
Posts: 234
Location: Cambridge, MA

PostPosted: Wed Jun 10, 2015 5:27 pm GMT    Post subject: Reply with quote

Shiller, Irrational Exuberance & Bidding Wars in historic context:

EXCERPT from RealEstateCafe blog post May 2014

Writing twenty-five years ago in The Behavior of Home Buyers in Boom and Post-Boom Cycles, Nobel-prize winning economist Robert Shiller and fellow housing economist Chip Case made this observation:

“…we see a market driven largely by expectations. People seem to form their expectations on the basis of past price movements rather than any knowledge of fundamentals. This increases the likelihood that price booms will persist as homebuyers in essence BECOME DESTABILIZING SPECULATORS!”

That was when just 6 to 10% of homes selling over asking price was considered overheated. The Cambridge housing market was at that pace in 4Q2010; but by 4Q2013, the pace increased ten-fold to 60% over asking price. And last month it rose to 75%.

So when speculation becomes self-perpetuating expectation as stated today’s in Boston.com : “just about any habitable patch of real estate in Cambridge is sure to spark a bidding war these days," isn’t it time for more transparency about what’s going on behind the scene?

FULL TEXT: http://bit.ly/FoolishBids
_________________
Bill Wendel
The Real Estate Cafe
Serving a menu of money-saving services since 1995
97a Garden St.
Cambridge, MA 02138
617-661-4046
realestatecafe@gmail.com
http://realestatecafe.com/blog
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