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When are prices coming down?
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samz



Joined: 19 Feb 2008
Posts: 102
Location: Medford, MA

PostPosted: Thu Apr 17, 2008 7:45 pm GMT    Post subject: When are prices coming down? Reply with quote

Hello all,

My wife and I have been looking at houses for almost a year and half now, and I've become very frustrated with the prices. We've been looking in the northwest quadrant inside 128 -- Arlington, Medford, Winchester, Lexington, Melrose. I feel like, if anything, prices seem *higher* than they were a year ago. I just saw a listing for a nice 3/1.5 SFH in Medford for $489K -- that's half a million dollars to live in *Medford* (where the median income is around $50K).

Every day we read about how the housing market is crashing. But our realtor, who's actually a pretty decent guy, is telling us not to expect prices to come down in places like Arlington. Recent listings have had many offers, selling for above the asking price. The cognitive dissonance of the situation is excruciating.

So, I guess my question is this: where's the bursting bubble? Are these towns immune to the downturn? Or are they experiencing some wholesale shift to a wealthier demographic? Or is it just too early, and prices will come down, even in those places?
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stillRenting
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PostPosted: Thu Apr 17, 2008 7:58 pm GMT    Post subject: Reply with quote

You are right. Prices really haven’t seemed to come down yet. Many people site the drop in average prices but that could just be the result in many people buying cheaper house due to the housing crunch. It is my feeling that this year and next we will see large drops in prices and that these prices will stay low for a few years after that.

You stat on how Medford’s Ave. Income is $50k but yet home prices are still high explains a lot. Hang in there. I know I am.
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AgentGrn



Joined: 28 Sep 2006
Posts: 82

PostPosted: Thu Apr 17, 2008 8:25 pm GMT    Post subject: Reply with quote

I find myself asking that same question rather often. Here's my latest braindump:

I'm in the Worcester Area and the only houses that are starting to approach what my wife and I are willing to pay are either foreclosures in rough shape, or estate sales.

Call me a pessimist, but I don't want to pay much more than $160k for a single-family with 3 bedrooms. (By the system, we can afford MUCH more than that) That's all we really want/need and that's not all that far off the 3x median income in the area.

Call me lazy too, because I'm not all that keen on putting in a bunch of sweat equity. It's not that I mind getting my hands dirty, but I'm not in construction by trade and really don't feel very inclined to do a ton of my own handy work.

What's frustrating me is that my son is a year and a half old and at some point soon, he's going to need a room of his own. I have no idea why this is, but it seems like a 3BR apartment with off-street parking is rather difficult to find.

So my wife and I saw an older (1920s) house for sale as part of an estate sale which is down $165. I figure I'd be willing to pay $155 for it, but the interior clearly needs updating ... and given the age of the house, probably the wiring, exterior insulation, etc. The town isn't a bad one to live in, but I've been having second thoughts on it since I'm not quite sure I want to spend all my free time rehabbing it.
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Brian C
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PostPosted: Thu Apr 17, 2008 8:46 pm GMT    Post subject: Reply with quote

I think the only movement you have seen are people "moving up" or downgrading into a another home.

Towns like Arlington, Watertown, Winchester have low amount of properties for sale, so when a property goes on the market at the right price, they typically go fast (and probably over asking).

But we all know the market is driven by first-time homebuyers. If FTHB can't buy the "trade-up" families property, the whole process stalls.

Just wait until April's numbers come out, they will be eye opening!
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GTKeeper
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PostPosted: Thu Apr 17, 2008 8:49 pm GMT    Post subject: Re: When are prices coming down? Reply with quote

samz wrote:
Hello all,

My wife and I have been looking at houses for almost a year and half now, and I've become very frustrated with the prices. We've been looking in the northwest quadrant inside 128 -- Arlington, Medford, Winchester, Lexington, Melrose. I feel like, if anything, prices seem *higher* than they were a year ago. I just saw a listing for a nice 3/1.5 SFH in Medford for $489K -- that's half a million dollars to live in *Medford* (where the median income is around $50K).

Every day we read about how the housing market is crashing. But our realtor, who's actually a pretty decent guy, is telling us not to expect prices to come down in places like Arlington. Recent listings have had many offers, selling for above the asking price. The cognitive dissonance of the situation is excruciating.

So, I guess my question is this: where's the bursting bubble? Are these towns immune to the downturn? Or are they experiencing some wholesale shift to a wealthier demographic? Or is it just too early, and prices will come down, even in those places?


You are right, nice houses in the Medford, Somerville, Cambridge area get lots of offers. And I mean anything nice in the 350-500k range. I think that people's misconception on the housing bubble is that ALL prices will go down. This is partially true, but prices will go down in the areas where people cannot afford to pay the prices. Look at East Boston, Chelsea, Bunker Hill, Dorchester, and even South Boston.... prices are going down there, and will continue to, but some places prices will go down less than others.

What I mean is if a condo in S. Boston goes from 500k to 400k thats a 20% decrease, and a condo in Medford stays at 500k, that is an average '10%' decrease, yet the Medford place stayed at 500k. Its all relative. You can buy places for 250-300k in the same area, but it will be a worse neighborhood, worse location etc.

People have to remember who the sub prime loans were given to. Most people who got sub prime loans were lower income who lived in poorer neighborhoods. Those prices have come down or been foreclosed on, its not an even distribution. Look at the thread 'Spring season is back' for a taste of what I have been through in trying to get a place around Davis Square.
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steverino
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PostPosted: Fri Apr 18, 2008 12:12 am GMT    Post subject: Re: When are prices coming down? Reply with quote

samz wrote:
Hello all,

But our realtor, who's actually a pretty decent guy, is telling us not to expect prices to come down in places like Arlington.


Stop talking to him. He's a coin-operated liar, and a piece of garbage you shouldn't listen to.

Read this to understand why:
http://paper-money.blogspot.com/search/label/arlington

Saying Arlington won't decline is the hallmark of a dishonest shill.
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balor123



Joined: 08 Mar 2008
Posts: 1204

PostPosted: Fri Apr 18, 2008 2:52 am GMT    Post subject: Ideal time to buy Reply with quote

I'm looking in similar areas - 128 belt cities from Newton to Lexington - and I share your opinion. Waltham is in a similar situation as Medford. The foreclosure tide doesn't hit MA until May - June and won't start affecting the market until late 2008, which happens to be when the winter season starts and prices are lower anyway. Foreclosures tend to affect lower income areas but other areas are affected indirectly as well. The slowing economy will have had some time to reduce affordibility by that point and with inflation rapidly devaluing properties it will become cheaper for you if your money is earning income (one of the 6% rewards checking accounts for example). My suggestion, then, is to buy near the end of this year.
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samz



Joined: 19 Feb 2008
Posts: 102
Location: Medford, MA

PostPosted: Fri Apr 18, 2008 3:04 am GMT    Post subject: Re: Ideal time to buy Reply with quote

balor123 wrote:
I'm looking in similar areas - 128 belt cities from Newton to Lexington - and I share your opinion. Waltham is in a similar situation as Medford. The foreclosure tide doesn't hit MA until May - June and won't start affecting the market until late 2008, which happens to be when the winter season starts and prices are lower anyway. Foreclosures tend to affect lower income areas but other areas are affected indirectly as well. The slowing economy will have had some time to reduce affordibility by that point and with inflation rapidly devaluing properties it will become cheaper for you if your money is earning income (one of the 6% rewards checking accounts for example). My suggestion, then, is to buy near the end of this year.


That makes a lot of sense. Thanks.

I feel like sometimes I lose my sense of perspective, and I start to think "Hey, maybe $500K for a house in Medford is alright". I wonder if a lot of people just resign themselves to the idea that they have to put more of their money towards housing.
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admin
Site Admin


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

PostPosted: Fri Apr 18, 2008 2:04 pm GMT    Post subject: Reply with quote

stillRenting wrote:
You are right. Prices really haven’t seemed to come down yet. Many people site the drop in average prices but that could just be the result in many people buying cheaper house due to the housing crunch.


That's definitely a vulnerability of using the median price, as the MAR does. However, the S&P/Case-Shiller Index corrects for this problem by chaining together same-home sales. The S&P/Case-Shiller Index for Boston is down roughly about as much as median prices, so I don't think that cheaper homes are skewing the data a whole lot (at least not yet).

Maybe the disconnect is in the asking prices. Many asking prices are still stubbornly high, but they don't necessarily reflect what is selling.

- admin
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samz



Joined: 19 Feb 2008
Posts: 102
Location: Medford, MA

PostPosted: Fri Apr 18, 2008 3:06 pm GMT    Post subject: Reply with quote

admin wrote:


Maybe the disconnect is in the asking prices. Many asking prices are still stubbornly high, but they don't necessarily reflect what is selling.

- admin


Someone made a good point on the "Spring Is Back" thread that the distribution seems very strongly bimodal: either a house sells right away with multiple bids ("in the bubble" style), or it sits for a very long time ("post bubble" style).

The first case might be happening when a really nice house comes on the market and there's some "pent up demand".

I do think there is a big disconnect in the asking prices, but I have no idea what makes sellers think that this is a good time to ask for a ton of money.

I suspect that the same realtors who are telling buyers that prices won't come down are also telling sellers how to prices their houses. That seems to be the biggest problem with having a single group advising both buyers and sellers about price trends -- they can control and distort the normal market forces. I don't believe it's a giant conspiracy (although some of you may disagree), I think it's a natural result of being in a position that has a fundamental conflict of interest.

On a lighter note, I saw someone compare sellers to Wile E. Coyote when he has just run off the cliff, but just hasn't looked down yet. Hilarious! I can just picture him holding a sign that says something like "Bye, bye, Bubble!". Here's what I have in mind:

http://watchingapple.com/wp-content/uploads/2007/06/coyote.jpg
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JeffG
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PostPosted: Sat Apr 19, 2008 3:27 am GMT    Post subject: Re: Ideal time to buy Reply with quote

Many people including myself are doing the same thing - wait at least until the end of this year. I see house price starting to fall in the 128 areas already in the past month. It is like the roller coaster ride. We just passed the peak a little so the speed is slow at first because of the inertia. But you know what is coming.

balor123 wrote:
I'm looking in similar areas - 128 belt cities from Newton to Lexington - and I share your opinion. Waltham is in a similar situation as Medford. The foreclosure tide doesn't hit MA until May - June and won't start affecting the market until late 2008, which happens to be when the winter season starts and prices are lower anyway. Foreclosures tend to affect lower income areas but other areas are affected indirectly as well. The slowing economy will have had some time to reduce affordibility by that point and with inflation rapidly devaluing properties it will become cheaper for you if your money is earning income (one of the 6% rewards checking accounts for example). My suggestion, then, is to buy near the end of this year.
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pescamaaan
Guest





PostPosted: Mon Apr 21, 2008 3:53 pm GMT    Post subject: buyers waiting it out Reply with quote

seems like there are a lot of people sitting on the sidelines waiting this out (myself included). hard to say what will happen but a few things to consider:

a) prices don't fall to the level we hope and we continue to rent. at the same time landlords see this squeeze and raise rents. the supposed benefit of renting vs owning shrinks.

b)prices start to fall but all of us waiting this out step in - our action of stepping in supports prices and we big correction we're all waiting for doesn't happen.

c) sellers take their homes off the market, further supporting prices.

i too am hoping that the high prices we are still seeing are a result of the early spring season....i'd like to wait until fall/winter to make a move but i've feel like a broken record. things have certainly stopped skyrocketing upward, but they haven't exactly dropped. maybe they won't ....maybe incomes will have to catch up instead of prices falling?
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guest
Guest





PostPosted: Mon Apr 21, 2008 5:31 pm GMT    Post subject: Reply with quote

how can there be a rebound...

1. Prices are still historically disconnected with income
2. Renting is disconnected with home prices
3. As discussed by the media and users on this site mortgages are tougher to get
4. Consumer spending and debt is at an all time high
5. Job creation in the bay state and nationally in anemic
6. Recession (we might already be in it)
7. Baby boomer retirement and sunshine belt migration (which in many cases has become much more attainable with the 20-50% drop in many of those speculative markets)
8. Mass negative population growth rate (if not considering immigrants)

how does any of this support a market stabilization... I am sure that there will be a bit of a bump in the short term but when the remainder of the Subprime mortgages reset (we are not even half way through) and recession impact the economy we will really see the prices get back within the realm sanity... this train is moving a few good signs are not going to slow it down.
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BK
Guest





PostPosted: Mon Apr 21, 2008 8:14 pm GMT    Post subject: Withdrawl of Lending Money from Education Reply with quote

I agree we are not at the bottom.

The Next shoe to drop will be lower enrollment/lower revenue for Colleges.
MEFA Announce last week it was cutting its student loan program, Bank of America cut their Student Loan program last week, and Sallie Mae (Student Loan funding company) has been in trouble for several months.

This will impact Bostons favorite conerstone - Education. Colleges have seen too much easy Money and this has fuel their growth in physical size and impact on the Boston economy.

You will see lowere employment by Colleges as the gravy train slows down and they have to learn to control their costs.
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Guest






PostPosted: Tue Apr 22, 2008 12:13 am GMT    Post subject: Incomes Reply with quote

Did you all see this article from the WSJ?

http://feeds.feedburner.com/~r/TheBigPicture/~3/274862742/middle-class-sq.html

Incomes have actually fallen since 2000 and savings rates have become negligible (nationwide at least). With overall inflation rising very quickly, there isn't much room for housing not to fall. Some sellers may actually do well though and we may be seeing this effect. With transportation inflation over 10%/year, properties closer to Boston become more attractive.

There are other reasons to wait. First, the state and federal government are likely to start offering some sort of incentive to get first time home buyers in the market. You won't get it if you buy now. Second, housing prices generally start to drop in the Aug - Nov timeframe because Winter is slow and sellers start panicking.
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