bostonbubble.com

[JCK]

[JCK]

[stillRenting]

To help answer the interest rate correlation to interest rates debate above, I would look at the Capital Asset Pricing Model (CAPM).

Check out http://www.investopedia.com/terms/c/capm.asp and you will see that the interest rate has a direct effect on the evaluations that effect the markets evaluation of stock prices.

[CJ]

It's mid April now. I saw there are more houses on the market. Some still priced high, some are lower, but it looks like nothing is moving.

What's going on now? ANyway, I predict April's numbers will not look good.

[john p]

I'm kind of thinking that it might be a two tiered and group decision.

First, you have a price structure, kind of like a ladder. You are seeing a handful of homes in a town that are out of order (priced higher or lower than their comperables).

Second, realtors get a feel as to what the prevailing price drop gets things moving i.e. houses selling at 5% off of asking.... There hasn't been enough activity to determine this. Without a prevailing temerature reading, people get nervous about buying a new place before selling their place.

I think there are a bunch other reasons that are causing the pause. First, obviously is that why would anyone buy if they thought there was a chance for a substantial price drop? Second, we have an election and different people's future could be quite different depending on who wins. Third, this Government interaction crap is a wildcard; and interest rates aren't quite low enough to spark buying activity. Further the buyers to sellers ratio is favoring buyers because babyboomers are retiring and retirement areas are falling faster than Boston so they might get great deals moving away.

I think also that if we get inflation, prices will eventually go up because a weaker dollar means more dollars to get something. If you have a fixed rate mortgage and we get inflation, eventually you'll make more and your monthly mortgage payment will feel less and less. If interest rates go down, it will increase affordability.

I'm keeping my eye on two things: Emerging Markets and Recession. Capitalism is not always Red White and Blue and alot of US wealth is invested in overseas emerging markets. If they tank or become unstable, money might come back home. If we get held under in a price correction from international competition and we don't innovate and stick our heads in the sand, we could get Stagflation.

Even if new buyers were salivating at the opportunities here, unless you're in a good situation that is sustainable, your ability to reach the opportunity might not be available.

[GTKeeper]

Here is what I see as a general trend for the Boston area and what I saw as I was looking to buy a condo (and finally did).

Dorchester, Chelsea, South Boston, non-desirable parts of Cambridge / Somerville are NOT selling. Anything with 50+ days on market is not selling.

There are some specific areas that are selling like hot cakes:

In particular the Davis Square, Somerville area in the 350-500k range. Of the last 4 properties that I saw and was interested in:

Property 1 sold in 2 weeks (just missed this one) on Electric Ave
Property 2 sold in 4 days after listing (about 900 sq. feet for 360k)
Property 3 sold 1 day after Open House (tried to give an offer, was out bid!)
Property 4 put an offer right after open house, and there was another offer! Luckily the owners took the offer.

The gut-renovated places right around Davis Square are selling really really well. Especially ones with 2 bedrooms. The inventory for desirable areas such as powderhouse blvd, electric ave, curtis ave, orchard st, lexington ave are really really low. If you go on zillow and look at recent sales, there are about a dozen in that entire area in the last 3 years or so.


So overall the market sucks, but I think not all prices will be driven down, just the prices of the least desirable areas.

As anyone will tell you location is THE most important factor. You could give me a 5000 sq. foot condo for the same price as 1000 sq feet, but if its right next to a homeless shelter, then there is NO WAY I am taking that.

[john p]

There are some realtors that understand the old trends and others that understand the new trends, and now that we're in a different market cycle, which track people follow will be curious.

For instance, older folks remember when the City was a tougher place to live in as people moved out to the suburbs and bought homes in quiet neighborhoods. People who think like this wouldn't touch any condo, no matter where it was.

On the other hand, younger, hipper professionals, many who don't have roots in the suburbs, have embraced the city living as well as a certain segment of retirees, divorcees, college students from rich families and europeans. Given the new Greenway and other urban development, I wouldn't think it was unwise to invest in certain areas.

Many people are dialed in to this Davis Square place. I mean what do they give you free foot massages on every street corner? What this tells me is that many follow trends.

My thought about this is that the "cool" people that made Davis Square cool can't afford to live there. It's kind of like Greenwich Village and SoHo.

We have a lot of really cool places on the South Shore (lots of lakes like Silver Lake that have older converted cottage homes in and around them). The character of these places are amazing and would make the coolest artist community. So if you can't afford Davis Square come on down and take a look. On Sunday mornings you'll see old fashioned cars and bikers going up and down the streets throughstreets lined by forests, cranberry bogs, horse farms, and farms. You'll live among working class families and see a government of the people and not always the "elites".

[SamChady]

To John P - you are right, the people that made Davis cool are finding it harder to live in Davis Square, but its not as bad as NYC's SOHO, etc. It still has plenty of students living there who can find relatively affordable housing.

I love Davis Square, and I would live there over the South Shore. My reason is that if you don't need a car or work in the city, its cheaper to forget the car and live in a more expensive area with great public transportation.

Davis Square has great live music, dining, bars, stores, bowling, movie theatre, coffee shops, etc. And what it does not have, you hop on the T and get it. Also many of the houses having off-street parking or at least more plentiful on-street.

My only complaints about Davis is that its 45 minutes into Boston by the T which can get old after a while, and of course, the sewage flooding which is a huge problem. My brother's entire block flooded every year and would FILL the basement with 5' of very murky disgusting water. So if you do want to live there, be sure to check on the elevation and history of flooding.

[Guest]

I found houses in good condition and locations priced 15% or more lower than competiters', they well sell quickly, probably just in few weeks. Other than that, most houses just sit.

[steverino]

The bloom is coming off the rose in Davis just as much as anywhere. I love it when people who have never seen a down market think they have discovered penicillin when they notice that undesirable areas decline before the desirable ones. It's just the way things work. Crap falls first, but everything falls in the end.

Curtis? There's a POS on Curtis that hasn't sold in two years. A fully renovated Davis Victorian sold after almost a year on the market, for $150K less than the previous high comp.

I said it before, and I'll say it again. There's nothing much in Davis except its unearned reputation. It is still mostly very ugly, with downtrodden housing stock, though a tad less repulsive than it was in the '80s when the Red Line first went in. It offers mostly trailer trash retail, like a sewing store, insurance agencies that haven't seen a customer since Reagan was president, and dollar stores. A wonderful used bookstore just closed. All the so-called hip retail caters to students, and students are not buying $800K houses in Davis. Those houses are being filled with rapidly-aging Boomers, and those Boomers are not going to Johnny D's.

[Brian C]

Field Report April 20th

- Needham 3BR/2BA Cape 1300sq ft with 2 car garage with a good size lot, priced at $400k. When we got there at 1:30 (it started at 1), there was already 23 names on the list. The property had not been updated in 25 years and estimated $60k worth of work. Sadly, I think this property will sell 10k over asking due to the amount of traffic and that people will spend more to live in Needham.

- Next house was in Milton. 3BA/2BA cape located off Route 28, priced at $399k. We got there at 2:15 (started at 1), there was only 4 names on the list but outside I thought it was a block party. Had to be 15-20 people hanging outside the house talking about it. The property overall wasn't that bad, they definitely put some money into the place. They bought it in 2002 for $370k and it probably end up selling for that price.

But the most interesting thing I saw was the clones of myself and my girlfriend. Ages 23-32, first time homebuyers, making about 100k, have a 10-20% downpayment, and ready to buy. I talked to one of the couples walking around, asked how long they have been looking, "about 2 years now, what people are looking for their properties are insane. The more we wait, the lower the prices get." You can thank us when the prices keep dropping...LOL

[GTKeeper]

[john p]

What are your feelings about buying/investing for a chapter of your life? I know young people have embraced city living and empty nesters have as well, but I wonder if younger couples want to eventually move to the suburbs if they choose to rent longer than buy a condo for a 3-5 year chapter? Does a divorcee rent versus buy during his/her hopefully temporary chapter? Does a college student decide to pay for the dorms as opposed to buying a condo that will appreciate during their 4 years in school? Another thing about Europe, although the dollar is weaker, in many European nations the growth rate (GDP) isn't outpacing the US, so I wonder if people are really able to take advantage of the exchange rate?

I think that some people at work are working really hard and long hours and are so busy and other companies hit a wall. So, you have some thinking that things are flying high and others that are more fearful of a down cycle. I would imagine that some buyers are getting decent pay increases if their companies are busy and are oblivious that others are feeling the weight of the recession.

Someone on this blog mentioned that the "tidal wave" of foreclosures will hit in May. My prediction is that the FED drops rates in late April/May. This will provide the catalyst to promote buying activity and refinances. If people can refinance as opposed to putting their home on the market, it will lessen the weight of inventory that will drop home prices even more. I wonder if this is a necessary move similar to providing the money to lend for the Bears and Stearns buyout? It seems that each few months has a targetted set of issues that need to be addressed.

[john p]

Another thought related to segments:

Seller Segments: those in trouble needing to sell, the ones trading up or down, relocation, investers divesting, developers.

Buyer segments: first timers with long term buying plan in a stable industry, those fearful of more and more restrictive lending regulations without 10 to 20 percent to put down, those that have been living in areas where the school system is below the standard they expect for their children, and bullish buyers.

Realtor segments: buyers agents who will beg, borrow and steal for you, local realtors that are more concerned about their standing in the community than your transaction, incompetent stay-at-homes that took a weekend real estate course, competent stay-at-homes that took a weekend real estate course, and for sale by owners (FSBO's).

The cohesiveness of the industry while controlled by the NAR and MAR might further break apart in this selling cycle, which would mean some people operating under one set of assumptions and others under another set of assumptions. If this is the case, you need to shop around and find the seller or buyer that subscribes to the story you want them to.

Keep in mind, if hard nosed buyers don't make transactions and the eager beavers who are bullish do, the records, the statistics will reflect the segment of buyers/sellers that actually came to the table. If this is the case, it is important to note the amount of activity. A small amount of transactions may leverage common perception unless people are aware that it is just a small segment not reflective of an overall disposition of the market.

[samz]