bostonbubble.com

[wjrmmer]

Based on new home permits and the actual building of home on the south shore, I can confidently say the worst of it is over folks. My town went almost 3 years with less than 2 new homes per year. In the last 9 month building is booming again. Houses seem to be going up in the surrounding towns too.... Now its not at the level of the peak, but prices have creeped up a bit as the subdivision lots sell down.

I have no idea what affect this has on the general market but its good to see people working again and subdivisions getting finished.

Just my 2 cents!

[admin]

[melonrightcoast]

i agree with admin (even though i just bought a sfh), and my two cents are that this is yet another false bottom, and when all the "Cash-for-anything-to-prop-up-the-housing-market" starts to get phased out and fed stops artificially keeping rates low, then prices will go down some more. i'm guessing they'll start phasing all that out in two years. rates probably sooner.

just as a curiosity, what type of housing is getting built in your area? condos/townhouses, sfh, 55+? and how big are they? mcmansions or 2 beds and smaller? i've heard/read that there is quite a bit of 55+ communities being built on the south shore.
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melonrightcoast ... are you?

[admin]

[melonrightcoast]

[admin]

[mpr]

This would all be quite a convincing argument (that a true bottom
hasn't been reached etc) based on fundamentals. The problem (well
actually its not really a problem - but thats another topic) is that
you're betting against the Feds who can print infinite amounts of
money and have shown a clear willingness to do so - both
monetarily and fiscally.

In fact the main lesson that's been learnt from Japan is that
one shouldn't stop printing and spending too soon.

It wont be necessary to have ever increasing goverment stimuli because
eventually inflation will take care of everything. I think
future *real* price drops are more likely than future nominal price
drops. Since your mortgage is in nominal dollars this is much less
of a problem to potential buyers/owners.

[melonrightcoast]

I hear what you are saying, just phrased my analogy poorly. I think that people WOULD notice when the Gov. stops increasing the housing incentives, but will that make them jump in or stay renting? I think jump in, because first-time home-buyers have incurred a lot of debt from college, it will take them a long time to save $8K, so they'll take what they can get for "free". When the Gov. stops increasing the housing incentives, will that effect your decision to jump in and be a homeowner, or not?

When they stop increasing the incentives, then maybe that will be the new norm, like 30-year mortgages became normal after the Depression, but 5-year mortgages were the norm before that (I don't remember where i read that). I'm surprised that hasn't happened more, moving to 35, 40 and 50 year mortgages. I read on a Canadian blog a few months ago that mortgages there are now 35 years. NOT that I think 35, or 50 year mortgages are a good thing, but it is a "solution" that has been used in the past and by others.

Regarding FHA, is there any way to find out how many houses are purchased through the FHA program for a particular town or county? Assuming that properties purchased for less than 5% down are FHA, I don't see them that often in Acton. Even the homes bought for $300K typically have 10 - 20% down ... not that I look up every closed property . But you do make a good point that the $8K FTHB credit is likely borrowing demand from the future, especially in the lower end where people are using it as part of their down payment.

And I agree that the FTHB credit, especially the new new "upgraded" version, will likely dwarf the "cash-for-caulkers" program. I think the $6500 that homeowners can claim will really juice things up this spring. Once the Gov. sees that, they won't want to end it. They gotta make sure the banks are still making plenty of money, after all. The "cash-for-caulkers" program could do a lot of good in the Boston area: providing work for tradespeople, saving homeowners money on utility bills, and improving the quality of housing. Buyers that are willing and able to do some "sweat equity", like Brian C., could get part of the improvements paid for. Because it provides lasting benefits by IMPROVING housing, i think it is a much better program than the FTHB credit. We'll see if Congress agrees, as I don't think it has passed yet.
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melonrightcoast ... are you?

[admin]

[GenXer]

I bet on something unpredictable. The jobless rate is still in question. Most of the so-called hiring is temporary and part time workers, who can get laid off in a second. There are still layoffs happnening. The reserts are still upon us within the next 2 years, and the government is still spending money with no end in sight, and in fact, no effect in sight. MA is a small part of the market and it is not isolated fromt he rest. When CA goes under, expect the ripple effect to do more damage. You can't bail out something that does not generate any revenue. This is the best recipe for a disaster.

[CL]

I agree with mpr - given the tremendous exposure the government has to real estate (both in terms of Freddie/Fannie and tax income), I find it very hard to believe government stopping/slowing down the support of the market until it is very clearly it can stand on its own. If anything, government will probably err on the safe side and withdraw support a bit too late rather than too early.

And I disagree with people who thinks government stimulus action has to end someday (probably soon). It does not has to be. Just look at how long mortgage interest tax deduction exist. If you look at past government action and recent 8K tax credit, one thing is very clear - once the government gives out something good and that has that broad an impact, it's very, very hard for politicians to say "No, we should stop now".

The result should be a too-monetary-easy environment prompting inflation and hurting dollars. But as mpr said, most of the homeowners are leverage which means inflation is not a bad thing (asset price inflate while debt nominal level stay the same)

[admin]

[CL]

- I do agree the increase in stimulus impact sales, and the deceleration of it will also have a potential large negative impact. What I do expect, however, given how important housing is to the government, is that stimulus will not decelerate (or at least government will try to avoid sending this signal to the market) until the market is ready. Since if there is a another housing crash, the biggest loser will probably be US government (in the form of bailing out GSEs). One can doubt their stimulus effectiveness, but I will not doubt their willingness (given cold cash for buyer is pretty aggressive and it shows how far the government will go to prop up the market).

- Rate is a very tricky discussion - the relationship between leverage, inflation and rate is not as clean as the logic dictates, since it's not only the current rate (driving availability of credit) but also the long term expectation (driving future value of asset) that matters. I have to admit I am no expert on this. But I do think Fed in large part drive the current rate and rate expectation. And I fear Fed will be less independent and the political pressure on them to act as congress please will get higher.

Now you know I am cynical. =P

[melonrightcoast]

[admin]

2008's version actually had some "free money" in it too, just not as much and in a less easier to understand format. That is, it was an interest free loan, so the free money was the interest savings.

- admin