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How will prices change in 2009 for Greater Boston?
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How will prices change in 2009 for Greater Boston single family homes?
Down more than 10%
62%
 62%  [ 5 ]
Down 5 - 10%
25%
 25%  [ 2 ]
Down 0 - 5%
12%
 12%  [ 1 ]
Up 0 - 5%
0%
 0%  [ 0 ]
Up 5 - 10%
0%
 0%  [ 0 ]
Up more than 10%
0%
 0%  [ 0 ]
Total Votes : 8

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admin
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Joined: 14 Jul 2005
Posts: 1823
Location: Greater Boston

PostPosted: Fri Jan 09, 2009 2:30 pm GMT    Post subject: How will prices change in 2009 for Greater Boston? Reply with quote

This poll will run for one year and is meant to catalog predictions of how home prices in the Greater Boston area will change in 2009. For the sake of having a consistent benchmark, predictions will be judged against the change in the S&P/Case-Shiller Boston Index from December 2008 to December 2009, in nominal terms. By corollary, predictions should be for single family homes withing the same MSA as the index. Please cast your vote in the poll and discuss below.
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admin
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Joined: 14 Jul 2005
Posts: 1823
Location: Greater Boston

PostPosted: Fri Jan 09, 2009 3:08 pm GMT    Post subject: Reply with quote

PS - You must be logged in to vote in the poll, though you can still comment as a guest.

- admin
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samz



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

PostPosted: Fri Jan 09, 2009 5:03 pm GMT    Post subject: Reply with quote

I still feel like parts of Boston are stuck in a state of stalemate/denial. I recently got a listing from ZipRealty for a house in Arlington (one of only 29 SFH on the market there). The asking price is $549K, but according to the "Estimated Value" page, comparable homes sold for $464K, Zillow estimates it at $469K and CyberHomes estimates it at $462. Who knows what the actual selling price will be, but it doesn't sound like they're going to go quietly into the post-bubble world.

(FYI, the MLS# is 70861184)
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john p



Joined: 10 Mar 2006
Posts: 1820

PostPosted: Fri Jan 09, 2009 7:34 pm GMT    Post subject: Reply with quote

I would say that for areas that are older (built in the 20's or prior), you see a real wide range of quality depending on how up to date the housing stock is. When you think that it can cost $30-50k just for a kitchen, $15k for a bathroom, $10k for a roof, etc. a place that is insulated with modern windows and updated rooms can be worth a lot more than one that has been neglected.

A new house, developer grade, could cost about $125 per square foot. Where I live, house lots (builder's acre) were going for $200k to $250k. For a four square colonial with a 2 car garage it runs like $450k to $500k ($187 per square foot for house and land cost). For a family room or upgraded finishes you add from there.

I found that there was a sweet spot as far as age of house was concerned in my area, meaning when my house was built in 1997, house lots cost $60k and the dollar per square foot cost was closer to $90 or so, so total cost was ($107 per square foot for house and land). The lot selection was much better at the time as well. I paid about $160 per square foot for a house and lot on a golf course. New house construction went from $90k to $125k and house lots went from $60k to $200k.

My alternative was to buy a beater within the 128 Belt for like $250 a square foot that needed $80k in work which would have ended up costing me $320 a square foot (double what I paid) plus the headaches of having to be a general contractor.
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Brian C
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PostPosted: Sat Jan 10, 2009 3:16 am GMT    Post subject: Reply with quote

samz wrote:
I still feel like parts of Boston are stuck in a state of stalemate/denial. I recently got a listing from ZipRealty for a house in Arlington (one of only 29 SFH on the market there). The asking price is $549K, but according to the "Estimated Value" page, comparable homes sold for $464K, Zillow estimates it at $469K and CyberHomes estimates it at $462. Who knows what the actual selling price will be, but it doesn't sound like they're going to go quietly into the post-bubble world.

(FYI, the MLS# is 70861184)
Also note that seller bought the house in 2003 for $475k. With realtor fees and eventual selling price, im sure it will be a break even transaction.
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RealEstateCafe



Joined: 11 Dec 2007
Posts: 199
Location: Cambridge, MA

PostPosted: Sat Jan 10, 2009 3:11 pm GMT    Post subject: Reply with quote

Brian C wrote:
samz wrote:
I still feel like parts of Boston are stuck in a state of stalemate/denial. I recently got a listing from ZipRealty for a house in Arlington (one of only 29 SFH on the market there). The asking price is $549K, but according to the "Estimated Value" page, comparable homes sold for $464K, Zillow estimates it at $469K and CyberHomes estimates it at $462. Who knows what the actual selling price will be, but it doesn't sound like they're going to go quietly into the post-bubble world.

(FYI, the MLS# is 70861184)
Also note that seller bought the house in 2003 for $475k. With realtor fees and eventual selling price, im sure it will be a break even transaction.


I don't this seller is alone, but the slump in pending sales should reveal even lower comps at the neighborhood level and put downward pressure on asking prices, even if median sales prices stay flat or rise for statistical reasons (ie. people buying now may be in higher price ranges.)

Blog post: When will pending sales slump be reflected in lower asking prices? http://tinyurl.com/7moudg

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samz



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

PostPosted: Mon Jan 12, 2009 3:25 am GMT    Post subject: Reply with quote

Brian C wrote:
samz wrote:
I still feel like parts of Boston are stuck in a state of stalemate/denial. I recently got a listing from ZipRealty for a house in Arlington (one of only 29 SFH on the market there). The asking price is $549K, but according to the "Estimated Value" page, comparable homes sold for $464K, Zillow estimates it at $469K and CyberHomes estimates it at $462. Who knows what the actual selling price will be, but it doesn't sound like they're going to go quietly into the post-bubble world.

(FYI, the MLS# is 70861184)
Also note that seller bought the house in 2003 for $475k. With realtor fees and eventual selling price, im sure it will be a break even transaction.


That's a really good point. I think this is why prices remain high in places like Arlington. Anyone who bought in the last five years or so probably stretched themselves financially -- now they *can't* sell for less or they'll owe money. Most people in this situation will just sit tight and not put their house on the market. But if they must, for some reason, they need an asking price that will cover the costs. Then Realtors can point at it and say "Look, prices are up!"

I'm standing by my prediction from last year: in generally desirable towns prices will not decline much at all because people cannot and will not sell their house at a loss. Eventually, real prices will come back into line, but only as a result of inflation eating away at stagnant nominal prices over many years.
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john p



Joined: 10 Mar 2006
Posts: 1820

PostPosted: Mon Jan 12, 2009 4:10 am GMT    Post subject: Reply with quote

Sellers set prices at what they hope to get (out fishing) and sometimes what they need to get to break even, but sometimes the market won't even pay for that, so people won't sell unless either they can't pay their mortgage or, they can sell their place for a signifcant loss because they can trade up to something much better at a much better value.

Job losses and investment losses will provide supply at all price points. Before, it concentrated on the lower price points.
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john p



Joined: 10 Mar 2006
Posts: 1820

PostPosted: Mon Jan 12, 2009 2:13 pm GMT    Post subject: Reply with quote

I was thinking about the subject that lots of homes within the 128 Belt have fatigue and are outdated. Some of course are not, I am wondering how that skews the numbers.

Further, with the Big Dig, lots of tradesmen coud charge top dollar for services because there wasn't enough competition to bid on your kitchen renovation because there was so much work taking away the workers. So not only was the place too expensive to begin with, but any needed repairs were going to cost you a fortune.
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Booba Kastorsky
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PostPosted: Mon Jan 12, 2009 4:48 pm GMT    Post subject: Reply with quote

Prices in MA are still rediculously high and far beyond affordable level.
The median price for a single-family home in September 2008 was $295,000.
The median household income in MA is around $60,000, in Greater Boston - around $64,000.
Finance advisers will tell you that you can SAFELY afford a house that costs no more than 3 times of your annual household income.
Now do the math: 3 x $64,000 = $192,000! Razz
In order to be affordable, prices must fall to the level no more than $200,000 in MA!
What can you buy for $200,000 in MA now?
One bedroom appartment in shitty neighborhood? Dog house? Shed? Shocked

In the areas where median household income is $65,000 or even higher average prices for descent houses are still over $400,000!
Just look at the post above: a guy is selling a house in Arlington for around half a million bucks.
Is Arlington a place where most households are millioners? Who in the world will buy a house for half a million bucks, huh? Millioner with enough cash or... idiot?
And don't forget that unemployment is rising every month! Sad Unemployed people ofpeole that fear to be laid off don't buy houses!
And don't forget that era of "zero down" and other "creative" mortgages is over!
I'd say 10% fall is very very optimistic scenario!
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JCK



Joined: 15 Feb 2007
Posts: 559

PostPosted: Mon Jan 12, 2009 4:57 pm GMT    Post subject: Reply with quote

Booba Kastorsky wrote:
Prices in MA are still rediculously high and far beyond affordable level.
The median price for a single-family home in September 2008 was $295,000.
The median household income in MA is around $60,000, in Greater Boston - around $64,000.
Finance advisers will tell you that you can SAFELY afford a house that costs no more than 3 times of your annual household income.
Now do the math: 3 x $64,000 = $192,000! Razz
In order to be affordable, prices must fall to the level no more than $200,000 in MA!
What can you buy for $200,000 in MA now?
One bedroom appartment in shitty neighborhood? Dog house? Shed? Shocked

In the areas where median household income is $65,000 or even higher average prices for descent houses are still over $400,000!
Just look at the post above: a guy is selling a house in Arlington for around half a million bucks.
Is Arlington a place where most households are millioners? Who in the world will buy a house for half a million bucks, huh? Millioner with enough cash or... idiot?
And don't forget that unemployment is rising every month! Sad Unemployed people ofpeole that fear to be laid off don't buy houses!
And don't forget that era of "zero down" and other "creative" mortgages is over!
I'd say 10% fall is very very optimistic scenario!


Housing prices in Boston, even during the last downturn, never went below about 4x income. In addition, you really need to focus on who is buying in Arlington. If the median income of the people looking to buy in Arlington is $120k, then $500k would be 4x income, and would not be unreasonable, by Boston standards.

Also the 3x (or 4x) income figure only really applies to first time buyers. If you bought a place 20 years ago, you probably can afford something at a higher multiple, assuming you didn't borrow heavily against your home.

I agree that unemployment (and fear of unemployment) will likely drive prices down. But I think you'll be waiting a long time before houses are 3x median income.
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JCK



Joined: 15 Feb 2007
Posts: 559

PostPosted: Mon Jan 12, 2009 4:58 pm GMT    Post subject: Reply with quote

And even if places do fall more than 10%, do you think it's all going to happen this year? (which is what the poll is asking?)
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john p



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PostPosted: Mon Jan 12, 2009 8:05 pm GMT    Post subject: Reply with quote

The babyboom are still in the workforce and they have quite a bit of the share of the homes within the 128 Belt.

Because we had rent control for so long up until the early 90's, nobody wanted to develop more housing. We got a condo bubble in the suburbs in the 80's but you didn't see a lot of new supply within Boston until rent control ended. Look at all the new housing in Cambridge, Somerville, South Boston etc. All that supply should have come in in the last few decades not just this past decade. Rent control hurt affordability because nobody wanted to build a place where a deadbeat could have the law behind them and put the screws to the developer. Right after rent control you saw a lot of conversions of old brick manufacturing buildings into condos like the old bread factory near the Bank North Garden, but the new condos buildings are mostly in the past six years.

What is frustrating is that hiring too many chair warmers back in Dukakis's era, who are now retiring hurt us, rent control hurt us and hurt affordability because it reduced supply. Beyond that, because you had rent control and they empowered deadbeats, if people who lived close to the city had to have their kids share schools with these deadbeats, they said to hell with this area and moved out to the leafy suburbs. So if you were a young family in say, Somerville and you started to save a little, you'd move to Melrose or Wakefield before you remodelled your kitchen. That is why we have a lot of tired housing stock. Since, however, people have rediscovered these cities like Someriville and they have gone through a rebirth, but again, some houses are totally updated and are great and others are left over Archie Bunkers, to use Steverino's line. The community reinvestment act encouraged subprime lending which helped fuel the bubble hurt affordability long term. These social, well intended programs have not yielded the results they aimed at, and if we spend the money they're proposing using the same mentality, we'll see tax rates like in socialistic Europe. If a young family has to make projections of say, 40 percent of their income for Federal Taxes, there will be no way people will be able to afford 4 times their income on a house no matter or not if it is a "superstar city".

Guys, look at these charts on government spending, this will have a big impact on earning potential and therefore limits what a younger person can oblige themself to pay:

http://upload.wikimedia.org/wikipedia/en/c/c6/Debt_to_GDP_Forecast_Chart.png

http://www.heritage.org/research/features/BudgetChartBook/images/fed-rev-spend-2008-boc-T4-The-Top-10-Percent-of-Income.gif

http://www.weeklystandard.com/weblogs/TWSFP/FS_Obama_Tax.jpg

http://www.heritage.org/research/features/budgetchartbook/images/fed-rev-spend-2008-boc-S11-Total-Government-Spending-Has.gif

http://www.moneyeconomics.com/images/imgInflationRate.gif

http://www.atlanticblog.com/archives/household%20debt.jpg

If we have a stimulus now that long term bonds future earners to higher percentages of their income to service our debt, we'll end up like the less competitive nations:

http://alansmoneyblog.com/wp-content/uploads/2007/12/income_taxes_by_country.png

People hate Bush, but the overall personal tax rate went down almost 4.5%, which obviously gave people more money in their pockets to buy houses.

http://www.heritage.org/research/features/budgetchartbook/images/fed-rev-spend-2008-boc-T1-Income-Tax-Receipts-Stay-Constant.gif

If Obama reverses this, everyone who based their projections for earnings assuming the 35% tax rate will be screwed. If Obama overspends we either devalue the US Dollar and get massive inflation or we get taxes at 40% plus. What we find out in the next few months will have a big impact on people's outlooks on the future. These outlooks are fundamental to the housing market.
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PostPosted: Wed Jan 14, 2009 1:08 am GMT    Post subject: Prices headed lower in 2009 Reply with quote

IF we get the usual pattern, prices should be down roughly 18% nominally from the peak by February-March of 2009 (the Feb-Mar reporting period of the S&P/CSI will come in April and May ... two months later) and likely about 10% year over year.

On the other hand, as the economy sinks deeper into recession and unemployment climbs there is a really good chance that we could end up seeing prices collapse in a disorderly way ... more like what occurred in Boston during the 90s bust....

There was one period in the 90s bust where as unemployment was steadily climbing, Boston area home prices declined for something like 24 consecutive months... in spite of the typical seasonal pattern.

So it didn't matter which month it was, prices fell.

I think we could be nearing that point.

Also, there may be a 20% decline factor.

It's possible that once we reach a 20% peak decline (which is sure to be reported as an notable event), it may carry some significant shock value.

It took many years for people to "learn" that there houses were vehicles to (false) wealth ... it will take people years to unlearn as well but these key points (20% decline from the peak... eventually 20% YOY) are sure to shock many into learning much faster.
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Occamboy
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PostPosted: Fri Jan 16, 2009 1:45 pm GMT    Post subject: Overall Tax Rates Down 4.5%? Only For The Rich. Reply with quote

John P. - the chart that you purport to show a drop in overall taxes is, as far as I can tell, just a graph of the marginal federal tax rate paid by the wealthiest Americans.

Here's what's up: Under Eisenhower (and when both houses of Congress were controlled by Republicans), the highest marginal earned income tax was 91%. Capital gains tax was lower than that, so, all told, the wealthiest Americans paid 50% of income in taxes. Median Americans paid something like 10%-15%.

Today, because of dramatic reductions in top marginal tax rates and in capital gains taxes, the wealthiest Americans pay 17% of income to the Feds, vs 33% or so for a median American.

So, since Eisenhower's administration, taxes on the rich have dropped by two-thirds, while the average American is paying three times as much. The rich are now taxed at half the rate as is the middle class.

Reagan, Bush, Clinton, and Bush simply stuffed cash into the coffers of the rich, grabbing it from the middle class.
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