bostonbubble.com

[john p]

I still get MLS for a region slicing a bit north and south and east and west and a few benchmark towns sprinkled throughout the State.

I was wondering what people's thoughts were when noticing the recent flurry of activity in homes being listed recently.

This first wave of new listings is like the Real Estate Market's opening move.

Interest rates are at about 6%, about .25 point higher than last year this time for conforming 30 year deals. Jumbo loans, however are just over 7% and are over 1 full point from last year. The Jumbo situation will hit certain price points and regions harder.

Overall, regarding the opening moves, I see a bit of a mix.

For areas further from Boston, it is low tide and I see significant price reductions from the prior year i.e. areas in south Plymouth (4 square colonials about $80k less in some instances).

For areas that actually went up in value like Hanover, I see the prices bullish and actually higher than last year.

Last year's opening moves were interesting, the sellers pretended that the 2006 drop never happened and the ones with the more realistic asking prices actually sold. I see two year old listings from the real stubborn ones.

It seems to me that if there is a density of sales within a price point, you see more sales activity because the actual sales validate the basis of the transaction. I went to the "Best Selling Agent" in Plymouth (4 years or so running). I noticed that he moves a lot of inventory within the median price point of the town. Where fewer sales occur at a price point for a region, you see longer periods of days on the market because the buyers and sellers are selectively reading the news.

What is weighing on many's minds are the baggage (recession and subprime mess) and the future (the next administration, Socialism and hand outs for deadbeats or more War and nation building).

What do people see as the key issues that will weigh on this Spring Season? Any predictions (sales drops, what percentages, etc.). Any comments about momentum? I kind of feel that it is strongly in favor of the buyer unless mortgage rates drop to at least the low 5's. My prediction is that unless mortgage rates hit the low 5's, the hemmorage will continue.

The danger I see the FED needs to be concerned with is that although long term mortgages are limited in how low they go due to inflation, meaning that if someone lends you money that is worthless when they get it back, the inflation premium is the higher rate, so by lowering the interest rate, you flood the market with money making the money worth less and less, creating inflation. The danger isn't just that, that is just a challenge. The danger is that a lender may say, hey sure I'll lend the 30 year note and get a family's obligation and convert/dump the mortgage to a sale to a bond which gives me cash to invest in an emerging market overseas. If the FED allows lenders to walk away from their responsibility, it is no different from allowing homeowners to walk away from theirs.

[Guest]

The downturn trend is established. The job market is getting worse. The fed cannot do too much to lower 30 year interest rate. To make the market turnaround, some strong force is needed. I don't see that yet.

[admin]

[JCK]

I'll be curious to see what happens.

The credit crunch is big. The ARM market is totally gone (look at the rates now), and the jumbo rates are much higher than last year. But, as john p point out, the effects are going to be differential.

I think the two areas that will get hit the hardest are the less desirable urban areas, where the foreclosures are already happening, and the areas far from jobs, like south of Plymouth (again, as noted by john p), where people moved mainly due to lower costs, rather than any inherent desirability of those areas vis a vis the areas slightly closer in.

I don't see signs pointing to higher prices this year, and the recession/job situation is a big wild card. Unlike the dot-com bust, which hit Boston very hard, the job losses now seem to be in the construction business, which as a total proportion of the economy, is a much smaller part of the pie in Boston than places like Phoenix. So I think Boston will get a cold, but Phoenix will get the flu.

The one thing I see supporting prices, is that, with the decreased number of buyers, more people are choosing to sit the market out and rent. From what I can tell, that is driving down vacancies and increasing rents, which naturally supports higher prices. The real question will be one of jobs. Does Boston lose a lot of jobs this time around or not?

But the credit situation, (threat of?) recession, and market sentiment are likely to drive prices lower in the near term...

Just my opinion.

[john p]

What might be interesting is that at some point fundamentals might support a bottoming, but the weight of the downward momentum might make it dip beyond them the same way it overshot them going upward.

In prior years, I always thought that it was the eager buyers that made deals early on in the Spring selling season. If you don't have this segment of eager buyers to get recorded comperable sales data for the peak of the selling season and buyers are collectively patient, the eager sellers will emerge and set a real low level to base comperables from.

One big unknown I'm trying to understand is what type of buyer would buy right now and what type of seller would sell right now?

Because of inflation, I don't see too much of a difference in what the median price might be (people will pay what they can afford which might just be slightly less due to the higher cost of living). I see the big difference in what you will actually get for your money so the Case Shiller sales pairs will be very telling. For example, if a young family can afford a $400k property, they might be getting a 4 square colonial versus a condo in 2005.

[CJ]

Since I am a buyer, I watch the market daily. What I found is there are more reductions, but the market seems to not moving at all. I guessed the reasons are:

1) They are still too expensive. The show just began for about 2 years.

2) Fewer buyers, partly because homeownership is very high (those who can't buy a house bought one with 0% down) and, and people don't want to buy a falling price asset.

3) Some buyers are waiting (like myself). Why not just wait anyway? EVen it hits the bottom, the price will not get higher very soon. However, it really sucks. I hate waiting.......

[admin]

[JCK]

[krishnarama]

I waited since early 2003 for the market to come down. I pulled the plug finally by buying a SF house on a golf course. The price I paid is essentialy same as the one that was paid in 2001 by previous owners. The house was constructed in 2000 . Between 2000 and 2008 ,the price went up 20% exactly. I think housing bubble started from late 2001 after the Bernanke's now infamous speech "Deflation:Making sure it does not happen here" or something to that extent. So the annaul appreciation since begining of 2000 to end of 2007 is 3.1%. I think FED printed currency at much higher rate than 3.1% in similar period based on the evidence we see in grocery stores and at pump stations. FED can bring down short rates,but long rates are going to go up from now on. You just can't fool those foreigners forever who have been buying MBS until now. Based on what happened in last week, it is now clear that nobody cares about the $ and they are going to debase it even further. It is hyper inflation rather than deflation. First time I walked out of the grocery store without buying meat(Lamb). Banks do not trust each other,there is counter party risk and all papaer currencies look suspicious.I think it is better to hold onto hard assets. Real estate being the hard asset,I think that it would do well in terms of purchasing power going forward. All hard assets have done well(Gold,Wheat,Oil...) relative to real estate in last four years. But the biggest problem with real estate is there is always debt attached to it unlike commodities. So that is a big risk. But I don't think it is as big risk as buying in Miami,Phoenix,Las Vegas etc. Going gorward I think they are going to print more dollars and dollar holders are going to sell them for something better. This will drive long rates upward while FED lowers short rates. Besides this downturn looks very sharp compared to other real estate downturns. It is more like dot com crash rather than drawn out process. At least it feels that way. We are already into third year of downturn. I think it will last atleast until the end of the year. You may get 5% to 10% reduction by this time next year.But what will be long rates at the end of the year?

[john p]

Wow, that is a great buy (the same price as was paid in 2001).

What bullet points would you say was the basis of your decision?

I would imagine that the location and price were so far out of step from the current market that although the overall market was overpriced, you found an incredible steal? Is this fair to say?

[john p]

Oh, two more things for everyone:

As far as people tipping their hands: I wonder if people are waiting and seeing what their competition (sellers) are going to start their house price positions. I wonder if lots of sellers are in a holding pattern to see where other comperable homes will start off and we'll see a big supply enter the market.

Second and more important is the Propaganda. What will the real estate industry come up with as their basis to move inventory? I honestly expect some sort of propaganda, but I won't have an issue as long as it is in the strike zone, and doesn't misrepresent issues wholesale by selectively choosing and cherrypicking data. Just like the October surprise, expect some propaganda by the industry right before the peak of the Spring Season....

[StillRenting]

My wife and I make well over the state average family income, but an above average house is still way out of our affordability range. These are still bubble prices. The increase in supply during the spring will only help bring down prices.

I predict another 20-25% down in prices this year and into early 2009.

[krishnarama]

Wow, that is a great buy (the same price as was paid in 2001).

I hope so. The house was first sold for $507K in early 2000 after it was constructed. Within a year the owner sold it for $609K in mid 2001. The house was again sold for $615K in early 2003. Now I got it for $610K in 2008.

What is so confusing here is how come a house that was sold for $609K in 2001 went for only $615 in 2003. This guys lost money. That was one of the strongest period in this bubble. Not as crazy as 2004 and early 2005,but still that was a good market. That puzzles me a lot. Please note that this is outside 495. Yes location is little far off from main highways. I think this could be the reason why it hasn't gone up crazy. Then again it is such a unique house in very beautiful neighborhood. It has cathedral ceilings in dining room,step down family room,open floor plan,hardwood floors,granite counter tops, french doors,central vacum, two fire places,bumped out kitchen,central sterio system ,architectural shingles etc.. with over 3,500 sq feet of living space without including basement,two car garage etc. We still haven't closed the house yet. I am giving you more details of the house to see whether market in BOS is as crazy as we think it is. What I am getting between 95 and 495 (In south shore:that is canton,mansfield,walpole,sharon..) is crappy house even for over $600K. So I thought I could get much better house for the same price if I look elsewhere. I am not worried about school yet so I picked this town ,which does not have very good school system. At least that is what I read in various message boards on other sites.
What bullet points would you say was the basis of your decision?

mortgage rates,relentless debasement of currency and desire to live in a house which overlooks golf course or green open space. Just tell me where can I can get that kind of lot in MA without paying over $1million.
I would imagine that the location and price were so far out of step from the current market that although the overall market was overpriced, you found an incredible steal? Is this fair to say?
Yes, the market is still overpriced. It pains me to see that so many people still can't afford a decent house in a decent town. I went through that. Looked at every town in south shore. Everything is just too damn expensive. You have to go out of the main high ways to see good bargains. I am not worried about the school for next five years and commute wasn't a concern for me yet. But I guess lots of people don't have that kind of flexibility. [/i]

[john p]

Interesting; we're both in the same exact boat and had the same basis.

[john p]

Holy Smokes!

Did you notice how many properties came on the market March 31 to April 2!

Wow.