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Markets has turned .... someone should let the sellers know!

 
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Bank Appraiser



Joined: 10 Jul 2006
Posts: 1

PostPosted: Mon Jul 10, 2006 7:59 pm GMT    Post subject: Markets has turned .... someone should let the sellers know! Reply with quote

http://www.boston.com/news/local/articles/2006/07/09/homeowners_play_double_jeopardy/?page=full


Appraising after the last boom of the late 80's was such a mess. Fast forward to 2005 and greed has taken over again. As recently as 1997, one could buy a decent home for 140k to 180k. Now it's 380k to 450k for the same houses!! Why shouldn't buyers hedge? Sellers are doing themselves in. A 400K bid is deemed....ridiculous? Only if they bought recently. Accept the price is you're not in debt up to your eyeballs and use the money to buy another home that is declining in value. It's a wash. Just like when prices are rising, right?

Denial is not just a river in Egypt.

Greed usually backfires!

Party is over!

Some economists are talking 50% down from peak on the east coast.

It's going to get ugly!!!!!!
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Dorchester grandma
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PostPosted: Tue Jul 11, 2006 5:30 am GMT    Post subject: condos still selling in ma for close to asking price Reply with quote

In checking MLS listings in places like Beverly, Salem and Chelsea, I clicked on the "compare to other homes" button which lists not only properties currently for sale but also those that have already sold. Nearly all sold condos have gone for very close to the asking price, some even a bit over the asking price. The number of sold condos appears to be about the same as the unsold condos,

My question is where is the glut of unsold properties? Condos seem to be selling just fine and sellers are getting what they are asking for or pretty close to it. I don't see any significant downturn in the market. So what is really happening here in MA? If I make a significantly lower offer than what is being asked then I don't stand a chance. Most condos are still out of my price range except the more unattractive or decrepit ones . Even properties that I saw which appeared to run down to me have sold for pretty close to the asking price.

It seems like my original plan to move far away from the Boston area to Lowell or Haverhill still seems to be the only option available and hours of commuting doesn't seem too appealing. Prices aren't coming down any time soon that's for sure. Playing this waiting game in order to find one closer to my job doesn't seem to be paying off.
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admin
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Joined: 14 Jul 2005
Posts: 1826
Location: Greater Boston

PostPosted: Wed Jul 12, 2006 3:58 pm GMT    Post subject: Reply with quote

Dorchester grandma,

There is a definite glut of single family homes in Massachusetts. Condos haven't been the focus of the statistics presented on this site, so I can't really tell you if there is a glut there or not.

There was, however, a discussion on whether it was worth buying a condo in Allston, Brighton, Brookline, or Cambridge at http://www.bostonbubble.com/forums/viewtopic.php?t=60 The numbers work out strongly in favor of renting. Can I ask what your motivation behind buying a condo is? Personally, I think that there are several disadvantages to buying a condo compared to a single family home, and in a sense you get the worst aspects of both renting and owning. That isn't to say that owning a condo is inherently bad, just that I would expect condos to sell at a substantial discount to single family homes, and that doesn't seem to be the case at present. Here are some of the reasons that I would expect condos to sell at a significant discount:

  • You have a monthly condo fee, which is essentially equivalent to rent.
  • You are subject to special assessments from the condo board.
  • Your use of the property is similarly restricted by the will of the condo board.
  • You don't actually own the land (I think), and the land is what appreciates. The structure depreciates.
  • You are on top of your neighbor, just as if you were renting. If tensions become bad, you can't easily move, whereas you could if renting.

These are some of the reasons why this site is focused on the statistics for single family homes as opposed to condos. The prices are pretty close to each other, but reason would seem to imply that condos should be significantly cheaper. I would personally look into buying a condo if it offered actual savings over renting, but I don't think that is the case at present.

- admin
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Dorchester grandma
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PostPosted: Thu Jul 13, 2006 5:51 am GMT    Post subject: condos over renting Reply with quote

I am currenty renting a five room triple decker apartment with a nice little yard but it is costing me $1100 per month which is about two thirds of my net income. I have had to rent a room which is not always a great option. I have mostly rented to students and they do like to party.

I came close to buying a triple decker condo in Haverhill for $147,000. but opted out when I was faced with five hours a day waiting for and riding on the commuter rail. I work mostly second shift too. It would have been cheaper than renting especially with first time home buyers assistance and a very low condo fee. Even with the commuter rail fare it would have been a bargain and I will get a senior discount in a few years but it would have taken hours out of my life every to live by the train schedule getting home after 1AM

I love my large Dorchester apartment with its porches, nice little yard and my lovely dining room. I would hate to have to rent a one bedroom to live more cheaply however I can't keep up the $1100 per month rent much longer without digging into my savings. I have been hoping that prices will fall in Chelsea, Revere, or Lynn to the point that I can buy a condo for a price similar to Haverhill. All I have seen is overpriced junk and even that is beyond my reach so far. A single family is impossible.

For now I am renting my extra room when I can and just waiting. If I was younger and didn't have a family and a job in the Boston area, I would get the hell out of here.
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admin
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Joined: 14 Jul 2005
Posts: 1826
Location: Greater Boston

PostPosted: Thu Jul 13, 2006 8:22 pm GMT    Post subject: Reply with quote

Dorchester grandma,

It sounds like your motivation for buying is to save money over renting. However, in the comparison you gave, it may very well have been the move to Haverhill that saved you the money rather than the act of buying. Are rents in Haverhill substantially lower than Dorchester? If so, then renting there may have saved you even more money than all of the other options you mentioned. Of course, you would still have the grueling commute in that case, so I'm not saying that it is a good option, just that a buy versus rent comparison in the same area for the same properties could better illuminate where the savings fundamentally are.

- admin
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WaitingToBuy
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PostPosted: Fri Jul 14, 2006 1:13 am GMT    Post subject: How do inventory gluts resolve? Reply with quote

In Scituate we have a 100% increase in unsold homes on the market and yet the sellers still list their houses for full replacement cost for the homes plus $500K per acre of land. For reference, five years ago, houses in Scituate sold for replacement cost and you got the land for free (except for water front). So, inventory keeps rising but the pricing hasn't changed. The brokers say they're powerless.

So how does this resolve?
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john p



Joined: 10 Mar 2006
Posts: 1820

PostPosted: Fri Jul 14, 2006 3:30 am GMT    Post subject: wait for someone that is ready to sell Reply with quote

You will find that a stubborn seller won't really need to sell. They will hang their price out well beyond what it is worth and if someone bites, great, they know they can relocate and make out in the exchange. I am finding that lots of empty nesters are moving to the Cape or Florida. They know that they can get a better deal and get more houses, but wait until they get that turkey to overpay for their house. Chances are the sellers overpaid themselves. The problem is when you have a handful of sellers that aren't serious sellers, their array of prices create a false price strata in the market. New sellers price within this inflated array so it stays afloat as long as they have their heads in the clouds. Further, houses that were put on the market several months ago with a lower interest rate often haven't adjusted adding to the days on the market. Scituate is a weird town; I see several small capes asking for a crazy amount of money. It may just be localized buyers to seller’s ratio. All it takes are a few motivated sellers to adjust the whole array fairly quickly. I would say offer what you honestly think the house is worth and protect yourself from a market correction so you're not kicking yourself later. Be polite and respectful in the negotiation. I have friends who do well in real estate and the frequently get calls back from seemingly stubborn sellers months or even weeks later. This one guy gets incredible discounts, and only pursues deal when they are. If you can, never buy or sell when you have to.

Think about it, selling a house at a price that would get snatched up in a week or a month would make a seller feel that they under priced. In a similar way, making offers that you'd have a 100 percent chance getting accepted is also not very business savvy. For some reason, I think that when people see a town as having a high level of status, they tend not to lowball. It's like the pretty girl that never gets asked out. Sellers in these towns either get close to asking or don't get offers at all. It will take the right combination of buyers and sellers in each local market to change the complexion. The market in Massachusetts is trending downward for sure, and some towns feel it sooner than others. The problem for sellers is that once the buyers smell blood in the water, they will wait, and wait until it hits the bottom. It's still moving down and starting to pick up speed so the best deal could be a ways away. I asked a buyers agent if there would be more deals after July 4th because buyer wouldn't be looking. He asked me where I heard this b.s. I look at the flood of "price changes" since the 4th, and I'm realizing that I shouldn't listen to salesmen....

The dynamic that no one really seems to talk about on this site is the bloat of real estate agents. It was such easy money for the past several years that just about every type threw their hat in. Car salesman, stay at home moms etc. all got their real estate license. I have had realtors (selling agents) communicate to me that the sellers were going through a divorce and all kinds of things to just get a deal done. I went to an open house and asked the listing agent if he had a plot plan. He said no, and that he'd fax me one. I saw that they had a little brochure along with cookies. I turned to the second page and showed him the plot plan. What a moron. Bottom line, with all the realtors out there, they will do whatever it takes to get a commission. They are inherently lazy so they will target the path of least resistance, so if it is a buyers market, these vultures will tear into the sellers.
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Dorchester grandma
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PostPosted: Fri Jul 14, 2006 3:45 pm GMT    Post subject: Diffiicult no matter what Reply with quote

You are so right! If I lived in Haverhill it might be even cheaper to rent than to buy. One thing for sure, I can have a better place for the money if I rent than if I buy anywhere. My triple decker apartment would be outrageously expensive to buy as a condo in Dorchester because it charming with crown moulding, wainscotting and a nice little grassy yard. What's more it is a five minute walk from the Red Line. The $1100 per month rent, though too high for me is still cheaper than most similar apartments in Dorchester which might go for as high as $1700 if they rent to section 8. Of course they do have to be deleaded to be accepted for section 8.

For me it has been a juggling act, trying to maintain this nice apartment by renting my extra room for a few months at a time. A great mature roommate would be a godsend instead of young people who do a lot of drinking which they all seem to do.

I would like something as nice for less than I am paying but unless I do an exhausting commute, it seems pretty impossible. I am seeing a few cheaper condos available in Dorchester now but they seem to be in areas where there are a lot of shootings. I don't want to put my grandson and kids in danger if they visit me. It seems like an unwinnable situation.
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draculess
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PostPosted: Sun Jul 16, 2006 2:01 pm GMT    Post subject: when to buy Reply with quote

Sellers continue to prop up price of their houses cos they don't need to sell
A combination of a recession and interest rate rise must happen to force their hand to sell lower. This i don't see tilll last 2007 since sellers usually
carry residual cash for these kind of situations for them to ride a 6-12 month rough ride prior to mental breakdown.
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john p



Joined: 10 Mar 2006
Posts: 1820

PostPosted: Tue Jul 18, 2006 2:03 am GMT    Post subject: sellers didn't earn a percentage of their net worth Reply with quote

Real estate was such an unbelievable investment. People didn't "double" their money in 3 years, it was more like they got 5 times, and it was over 15 times better than an investment in the stock market.

If someone bought a house for 350k and then sold it three or four years later for 550k, they got a bit more than you'd normally think.

First, if it the house was bought for 350k; assume the down payment was for 35k. Then add 36 months at what, 2k for mortgage (really, the delta between the sunk cost of rental to mortgage premium minus the tax savings) what's that come to 100 bucks or so difference? So say you have 3,600 for mortgage premium over rental, plus the down payment of 35,000 with maybe 5,000 in closing; that's about 43,600 invested. If the person sells their house for 550k, minus the 5% realtor fees, yields around 522,500 or something right? So at the time of the sale, the person owes about what, 305k (assume 35k for down payment and some traction on principal). That's 522.5k minus 305k is 217k profit. Looking at the money they put in (43,600), that's 5 times more!

If you put down 40k in an equity vehicle for 3 years good years at 10 percent, you'd get what, 53.25k (13,250 profit). So if you put your money in the house you get 217k profit; stocks 13.25k. The real estate was over 16 times better! How many more years would it take for the stock investment to catch up? I ran out of fingers and had a way's to go...

This is a dream come true. People earn 20 years savings in 3 years!

So why would I write this on a "Bostonbubble" website?

Turn this whole thing upside down..... What if you buy at 550k and have to sell at 350k? How many years will it take you to get out of that hole?

Reread above {inversed} it is a nightmare. You could be shoveling for a long time to recover from your losses. Think about all those trips to work for years. You've just handed that all to someone. If you value your time and your future, think long and hard about the risks in this investment.

The crazy prices are all about "trading up" say from 350k to 550k. If someone walks away with 217k and they could afford another 1500 in a monthly nut, they could be looking to upgrade from a 350k house three or four years ago to a 700k house!

Now, what if that 700k house is now worth 500k in a few years? They've broken even. Hopefully, they didn't hope to pay for junior's college with that money. They will get stung with the higher interest rate though.

Again, what if the first time buyer stretches to pay 550k and it drops to 350; they aren't insulated like the aforementioned trade up buyer.

First time buyers are very nervous right now, their risk is the greatest. Because this is real, and it is now clear the market is heading down, a first time buyer will be cautious along with investors. If you take the first time buyers and investors out of the buyer to seller ratio and you recognize that Massachusetts is losing residents and the baby boom is retiring and many will retire outside Massachusetts, prices will drop more rapidly.

If you're trying to ask someone to pay 200k more than what you paid yourself a few years earlier, think about what you’re asking them. You are asking them to believe that the market will behave the way it did for the past 3 years. You're like the scalper that's trying to sell a ticket when the game is over and the crowd is exiting the stadium.
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