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Months of supply points to lower prices
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Renting in Mass



Joined: 26 Jun 2008
Posts: 381
Location: In a house I bought in December 2011

PostPosted: Tue Aug 31, 2010 12:17 am GMT    Post subject: Months of supply points to lower prices Reply with quote

I posted this in one of the news threads, but I thought I'd post it here for more discussion. What do you think? Am I missing something?

Quote:
The inventory of single-family homes as of July 31, 2010 increased 10.0 percent from July 2009 (28,740 listings in 2009 to 31,685 listings in 2010) which translates into 9.9 months of supply in July 2010. This is up from 6.4 months of supply last year and up from 6.1 months in June 2010. This was the fifth straight month of inventory gains and the first double-digit increase since November 2006. There were also more homes for sale this past July than any month since October 2008.


Source

Combine that with this chart and it's clear which way prices are heading.

Short summary: when months of supply is over 6 months, prices go down (with the exception of distortions caused by the tax credits).
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Renting in Mass



Joined: 26 Jun 2008
Posts: 381
Location: In a house I bought in December 2011

PostPosted: Tue Aug 31, 2010 12:22 am GMT    Post subject: Reply with quote

Obviously another tax credit could further distort things. Here's some commentary related to the likelihood of more tax credits.
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balor123



Joined: 08 Mar 2008
Posts: 1204

PostPosted: Tue Aug 31, 2010 2:41 am GMT    Post subject: Reply with quote

But if we just bailed out Lehman Brothers, just think of all that we would have saved! Every catastrophe looks profitable to prevent with myopic vision.
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CL
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PostPosted: Tue Aug 31, 2010 11:49 am GMT    Post subject: Reply with quote

Number of months supply (inventory/monthly sales) is a tricky stat since one data is slow moving (inventory) but sales is very volatile, thus you have a very volatile months supply number. If you plot absolute inventory and sales through time separately, you got a better idea how things evolve and what is the driver behind.

As for the market supply, I don't know which town you are looking at, but for the towns I was interested in and continue to monitor after I bought, I don't see a sharp spike in supply. If anything, in the segment I am interested in, I find reasonable listings to be less than it has been in 2009. I have friends who are all-cash buyers sitting on the sideline because the supply is not there.
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GenXer



Joined: 20 Feb 2009
Posts: 703

PostPosted: Tue Aug 31, 2010 12:29 pm GMT    Post subject: Reply with quote

That's absolutely right. The pain is not distributed evenly, and that's a fact. People end up overpaying for a perception that the schools are good in the town, and the schools may be good, but that would not be worth paying an extra $500k for. If you want a good school, buy in Marlborough for $300k and send your kids to the charter school there. From what I hear it is much more difficult to get financing for those $800k and up properties (though I can see that some people get the financing just fine - at least the ones who bought).
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john p



Joined: 10 Mar 2006
Posts: 1820

PostPosted: Tue Aug 31, 2010 1:29 pm GMT    Post subject: Reply with quote

It does look like quite a big spike.
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GenXer



Joined: 20 Feb 2009
Posts: 703

PostPosted: Tue Aug 31, 2010 2:08 pm GMT    Post subject: Reply with quote

Combine it with this chart:

http://bp2.blogger.com/_pMscxxELHEg/SDb_za_dmYI/AAAAAAAACBg/Pfx_L_TW8Vo/s1600-h/MOSApril2008.jpg

We see this in economics all the time - variables don't behave 'normally', and spikes are unfortunately much more common than we would expect. The last one was in 1982, another big recession. This is more of a 'normal' behavior, and we can yet overshoot the 1982 numbers. Everything today is more correlated, and because the banks and the government seem to only making things worse by inflating this crisis (by subsidizing it) there is no way to tell where we end up in 5 years.
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CL
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PostPosted: Tue Aug 31, 2010 2:16 pm GMT    Post subject: Reply with quote

One can use Trulia website for some simple trend graphing -

http://www.trulia.com/real_estate/Brookline-Massachusetts/market-trends/

http://www.trulia.com/real_estate/Newton-Massachusetts/market-trends/
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wherezmyhome
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PostPosted: Tue Aug 31, 2010 2:32 pm GMT    Post subject: Reply with quote

[/quote]As for the market supply, I don't know which town you are looking at, but for the towns I was interested in and continue to monitor after I bought, I don't see a sharp spike in supply. If anything, in the segment I am interested in, I find reasonable listings to be less than it has been in 2009. I have friends who are all-cash buyers sitting on the sideline because the supply is not there.[/quote]

Count us among those waiting for a decent supply to enter the market. I agree that there are fewer decent houses now, than when we started looking in 2007...yeah 2007. Still thanking the lucky stars for not buying in the last 2 years. Hope it only gets better......for the buyers!

About buying in a place like Marlborough, the charter school has great reviews, but is only offered from grade 6.....how would you handle elementary school. Marlborough elem. schools are not all that great. Neither are Hudson's, Clinton's or Maynard's.
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GenXer



Joined: 20 Feb 2009
Posts: 703

PostPosted: Tue Aug 31, 2010 2:48 pm GMT    Post subject: Reply with quote

I guess if you buy in Marlborough and put $500k in your pocket you can afford to homeschool your kids, especially if you have several. That's a great investment too. The more kids - the more justified you are in doing this, as expenses mount for daycare and babysitting. Up to grade 6 they don't learn anything you can't teach them anyway. There are actually many people doing this now (some possibly due to the recession), but many are doing just that - they buy houses very cheap in places where schools are not considered good, and one person stays home. If you are not carrying an $800k+ house, its not necessary to have 2 jobs. Its possible to also work from home part time and homeschool your kids. Too bad many parents cling to their jobs/careers. If they actually saved enough money to be financially independent without having to work for some time, they could solve many problems at once. But you'll need to do it to grade 6, by which time your kids would probably be much more advanced than grade 6, as well as motivated. After that you may be able to go back to work if necessary.

This approach will not work for most, but for those who plan accordingly, its viable. Then you can always dump that house, even at a loss, as its better to take a 25% loss on a $300k house than on a $800k one.
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balor123



Joined: 08 Mar 2008
Posts: 1204

PostPosted: Tue Aug 31, 2010 10:13 pm GMT    Post subject: Reply with quote

Yeah but then you have to live in Marlborough. That's pretty far from Boston. I've got a coworker who lives in Mount Holyoke and commutes to Waltham for work. Where does it end? I've heard of people who commute 3 hours to NYC daily. Anything more than a 15-20min drive is really pushing it, at least by my Texan standards Smile Also, Marlborough isn't a nice town.
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GenXer



Joined: 20 Feb 2009
Posts: 703

PostPosted: Wed Sep 01, 2010 11:42 am GMT    Post subject: Reply with quote

Many companies are in the 495 belt, so Marlborough is quite well positioned, btw. As far as proximity to Boston, we almost never go to Boston for anything. Being a 'nice' town means exactly what? If you have a nice house with a big back yard, what else do you want? I'm sure its a small price to pay for mortgaging your future. Besides, you can sell that house in a heartbeat and move on. That's the whole point! You dont get stuck in a house just because its impossible to sell it for what you paid for it. Also, it may be possible to just rent a house for a little while without having to buy it. I don't know what rents are in Marlborough, but aside from having more amenities (tennis courts, playgrounds, walkable parks), I don't see how a 'nice' town is better. And all of that depends on where you buy/rent - I'm sure its possible to get a bare minimum and be just fine.
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JCK



Joined: 15 Feb 2007
Posts: 559

PostPosted: Wed Sep 01, 2010 1:30 pm GMT    Post subject: Reply with quote

Gotta agree with balor here. I work downtown and my wife works in Somerville. No way am I commuting in from Marlborough. At least I could take the train. My wife would have to drive, which I assume would be a complete nightmare. Google maps puts that current drive time (with traffic) from there to her office at 1 hour 4 minutes. And this is post rush hour (9:30 AM). Sounds delightful to be facing that every single day.

Her commute right now is 8 minutes.

GenX, it sounds like you work out of your own office and your wife doesn't work (or would prefer not to work). I work at someone else's office, and my wife is pretty committed to her career. For my situation, your plan of "move really far away to save money" is simply not sensible, unless you actually enjoy spending hours a day in the car. If my characterization of your situation is correct, you are, by contrast, pretty flexible on location. I'm not.

Not spending an extra hour or two hours commuting each day is worth A LOT to me. I'll gladly pay the extra dollars to afford a place closer to work. There's a reason places closer to the city cost more.
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CL
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PostPosted: Wed Sep 01, 2010 2:26 pm GMT    Post subject: Reply with quote

I think going to Marlborough is trading location (commute time/proximity to jobs) for a nicer/larger house. I don't think it makes sense since house depreciates, location typically does not.

I am not sure if Marlborough house, even when affordable, can sell in a heartbeat. You need huge demand for quick sale, and structurally I don't see why there should be a persistent high demand, unlike a town like Brookline or Winchester.
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JCK



Joined: 15 Feb 2007
Posts: 559

PostPosted: Wed Sep 01, 2010 2:42 pm GMT    Post subject: Reply with quote

CL wrote:
I think going to Marlborough is trading location (commute time/proximity to jobs) for a nicer/larger house. I don't think it makes sense since house depreciates, location typically does not.

I am not sure if Marlborough house, even when affordable, can sell in a heartbeat. You need huge demand for quick sale, and structurally I don't see why there should be a persistent high demand, unlike a town like Brookline or Winchester.


I think GenXer's point is that you're not going to get yourself into trouble paying $300k for house in Marlborough, rather than paying $800k for the same home in Newton.

But more many of us it's a moot point, as the commute would be unbearable.

I was just visiting some family (wife's) in very rural location. You can get a house there for $40k. But you probably won't have a job much above minimum wage. Might be a good environment to home-school your kids, I suppose, if that's your thing.
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