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Too many buyers
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PostPosted: Sat Jun 03, 2006 7:24 am GMT    Post subject: Too many buyers Reply with quote

I am waiting for more homes to become available in my price range. I am noticing more properties with price changes in the MLS listings now falling into my price range for a condo. Places in areas where there were none before.

However, if all potential buyers are waiting as well will they all be out looking at the same time? Won't that drive the prices up again? So many buyers that it will again become a seller's market. Confused
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PostPosted: Sun Jun 04, 2006 12:36 am GMT    Post subject: Reply with quote

As rates rise I assume the amount of potential buyers will be restricted in kind.

Also, as rates rise the assumption is that more houses will go into foreclosure due to creative financing.

Also, also... as rates rise and propery values flatten or decline, there are less "flippers" in the market looking to make a quick buck.

Granted, "authentic" real-estate investors will probably be gobbling up bargains and hold on to them, but this is probably but a small percentage of the recent real estate investment frenzy
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PostPosted: Sun Jun 04, 2006 10:12 pm GMT    Post subject: too many buyers Reply with quote

That would be great. If a buyer only had to compete with people who just want to buy a home to live in instead of investors looking for a way to get rich then there will be less competition overall. Very Happy
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PostPosted: Mon Jun 05, 2006 9:01 pm GMT    Post subject: Reply with quote

I'm not at all convinced that there is a horde of "buyers" waiting to snap up properties as soon as prices decline. I think there are a lot of "shoppers." The evidence is simple, sales are way down (= decreased demand) and inventory is way up (= increased supply). And it is simple economics that to increase actual buyers, sellers will have to lower prices.

When prices are lowered to bring buyers back in the market, there will still be a huge oversupply and new inventory coming on to the market (particularly condo developments) so I am not worried about prices snapping back up. As previously posted, interest rates look like they will continue to increase, which will also limit prices for the next few years.

BTW I don't blame greedy investors, brokers or agents for the inflationary environment in the Boston market. They are all playing their role in the free marketplace. IMHO the blame lies squarely with the ingorant home buying public ready to believe that prices will always go up and that they could pay as much as a bank would loan them to buy into the American dream. The rest of the blame I would place with the educational system that does not prepare students for the very important economic decisions they will face including home purchasing and retirement saving.
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PostPosted: Thu Jun 08, 2006 10:42 pm GMT    Post subject: Reply with quote

Quote:
However, if all potential buyers are waiting as well will they all be out looking at the same time?


Not necessarily. Some people who are waiting, myself included, aren't waiting solely for prices to fall to a level that they can afford - we're also waiting for prices to fall to the "correct" level. My current plan is to wait until all of the following are true at the same time:

  • I can afford the prices. Specifically, 30% or less of my income would go to a fixed rate mortgage each month.
  • It is cheaper to buy than to rent for a holding period of 7 years.
  • The ratio of the median house price to median income has to returned to historical norms.
  • The ratio of the median house price to median rent has to returned to historical norms.

I get the feeling that the first item is the only one that buyers have been paying any attention to for the last several years, but unfortunately not enough attention. Creative financing has given many a mirage of something close to affordability, but that house of cards is collapsing with rising interest rates, falling prices, and the tidal wave of ARM resets coming in 2007.

Getting back to my point, not everybody is waiting for the same set of triggers, and even those who are will enter the market at different times because they have different incomes. Herd psychology will also work on the way down in the opposite way that it worked on the way up in that people will be spooked away by fear of loss rather than drawn in by dreams of easy wealth. In short, I don't expect there to be a wall of waiting buyers ready to dam up a crash.

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PostPosted: Sat Jun 17, 2006 8:30 pm GMT    Post subject: Brookline inventory levels headed down(?) Reply with quote

Question on inventory - specifically have been tracking Brookline. I'm intrigued, because inventory levels seem to be coming *down*. Is this substitution, where people who couldn't previously live in a nice neighborhood have cashed in and are moving into the nice hoods? What's going on???

5/24/2006 645
5/25/2006 648
5/29/2006 641
5/31/2006 653
6/3/2006 661
6/6/2006 660
6/7/2006 670
6/16/2006 657
6/17/2006 652

BTW, these numbers are from ZipRealty, just searching for all properties, all sizes in "Brookline, MA". Now I wish I'd been tracking inventory for longer, have only been keeping track for 3 weeks. If anyone has a longer history would love to see. I'm sure this is way up from last year, but I don't have any data...
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PostPosted: Sat Jun 17, 2006 9:39 pm GMT    Post subject: Reply with quote

Quote:
I'm intrigued, because inventory levels seem to be coming *down*.


I'm not sure that the numbers that you gave indicate that inventories are coming down. The average of your numbers is 654.11 and the standard deviation is 8.95, so the most recent data point (652) is well within the average range. The time period is also probably too short to draw any conclusions.

As you gather more data points, be sure to consider the seasonal variations that normally occur throughout the year. I would expect that inventory normally peaks in the spring and is at its bottom in the winter. Ideally, you could compare the percent change from one year earlier, but given that it will be awhile before you have enough data to do that, maybe you could adjust for the time of year by looking at the historical data from the MAR for Massachusetts in general.

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PostPosted: Mon Jun 19, 2006 12:16 am GMT    Post subject: Absolutely agree Reply with quote

I have way too little data, and what data I have is inconclusive. Today's is down yet further, but that's not the point...

The question is, is there any way to get retrospective data on inventory from MLS? It seems sad that such a rich data source can't be leveraged (not that it's in the brokers' interest to let us leverage it...). I guess that's why we do things like tracking ZipRealty #'s.

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PostPosted: Tue Jun 20, 2006 12:01 am GMT    Post subject: Reply with quote

Quote:
The question is, is there any way to get retrospective data on inventory from MLS?


I'm not aware of anywhere that historical MLS inventory levels for Brookline in specific would be publicly accessible. You are absolutely right that this would be very useful data to have. You may have more luck if you're willing to broaden your scope a little.

This site has been tracking the Metro Boston area since 08/14/2005:

http://www.benengebreth.org/housingtracker/location/Massachusetts/Boston/

Brookline is part of the data, but it doesn't look like you can limit it to just Brookline. Still, it's probably better than nothing.

This site has been tracking the number of Craigslist postings with price reductions for a little while now:

http://www.theburstingbubble.com/pages/charting.php?marketid=3

You could write and ask that they also start tracking total postings so that 1) there are numbers for the total inventory and 2) the reductions can be viewed as a percent as well.

This site (currently down, hopefully temporarily) just recently started tracking inventory for any requested town in the US, and providing historical analysis is reportedly on the agenda once there is enough data:

http://paper-money.blogspot.com/2006/06/tracking-bubble.html

You could also go to the library and go through the back issues of newspapers, counting the number of real estate classifieds. That sounds incredibly tedious to me, but maybe you could get a good approximation by counting pages and only looking at the first Sunday in each month.

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PostPosted: Thu Jul 06, 2006 2:33 am GMT    Post subject: Ok, I know I don't have much more data but... Reply with quote

I swear, things look strange to me... I would never have expected to see this. Now, the new low is only a week after a new high... but my sense (also spoke to a couple sellers this week) is that things are beginning to move again. Prices are down a little (read naybe ~5-7% off highs from June 2005) but condos and houses are being snapped up by people if they're priced at about "zillow reasonable". I'm not a huge booster for the market, and I sure would love to know what Brookline inventory levels were like 1-2 years ago, but this is not what I expected to be playing out in July.

5/24/06 645
5/25/06 648
5/29/06 641
5/31/06 653
6/3/06 661
6/6/06 660
6/7/06 670
6/16/06 657
6/17/06 652
6/20/06 654
6/21/06 664
6/22/06 660
6/25/06 675
6/28/06 649
7/5/06 622
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john p



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PostPosted: Thu Jul 06, 2006 6:18 pm GMT    Post subject: seasonal trends Reply with quote

When you do your analysis of inventory you need to remind yourself of the seasonal adjustments and then add or subtract the surcharge of the market bubble and for interest. The normal market brings a certain amount of buyers during certain months, so if you're selling a home you'll see more people show up during the springtime than during the holiday season.

A seller can't really recognize the ratio of buyers to sellers. They see what seems to be adequate traffic coming to their house and then scratch their heads when offers don't come in, other than what they feel are "lowballs". Meanwhile the buyers make very low offers until they find the seller that has had enough. I've watched enough houses drop their price very significantly. The clear message is that time is on the buyers side.

We went into the spring season with a large amount of inventory (a surcharge beyond the normal level). The activity level picked up due to standard seasonal amount of traffic. Sellers gained new hope. Now, we are going into a slow period of activity during the hot summer months and most of the families that are trying to align themselves with the school schedules have already made their deals. The ones that haven't are beginning to be desperate and fear being one of the unlucky ones to have their home sit until the next selling season like so many that made the 360 day orbit.

The surcharge of inventory will consist of: impatient, worn out people, some that have relocated, some that are paying two mortgages and expenses, etc., many that have already bought a house and are trying to sell theirs, many that were held up by deals that fell through due to contingencies, many early babyboomers retiring and cashing out while they can still get ahead, young people moving from the state, families that need to get their kids enrolled in schools, many with bridge loans, many who got caught overextending with adjustable rate mortgages, your standard divorced couples, investors that want to cut their losses, and banks unloading foreclosed properties. I have never seen so many listings with the work "MOTIVATED" in them. If you're not motivated, you're in the minority, and buyers will say "Gee, nice home, great taste... and see you in 8 months..."

Now, factor the interest rate premiums. Interest rates have risen steeply since early last year. If a person is living in a home and would like to buy a different one, but has a nice low interest rate, it makes it difficult for them to say, hey, I'm going to walk away from this 5 percent cost of capital to buy a new house for more money and a much higher interest rate. The magnifying effect of lower rates, climbing prices created the inertia for people to move. The inverse does the opposite. Sellers that do not discount their prices in step with the interest rate premium will chase the spiral down. Some houses went on the market when the interest rate was in the mid 5's. It didn't sell then because, gasp, it was overpriced. So if it was overpriced with the lower interest rate it needs to discount the original amount of it being overpriced, the overall market decline, and the interest rate premium amount. The interest rate factor is getting bigger, the market decline is becoming more pronounced etc.

Lastly think about the balance of the monthly nut and the cash reserve needed to pay for a house. Most starter homes are older and are not energy efficient. The price of gasoline and oil is out of control, and the MBTA, commuter rail is not an alternative to save on gas because their costs are rising as well. If an older home needs repairs, a buyer needs cash reserves on hand to cover them. What were most people thinking with the decor of the 70's. You need to pay to rip up the orange, urine soaked carpet and have the hardwoods restored as well as for the new roof and new windows. If buyers don't bring much equity from the sale of their own house, they will have less cash reserves to cover the transaction costs and pressing repairs, let alone personalize the house. That heating bill is eating into the cash reserves so much now... Think about all of the speculators in the market who didn't do any maintenance on their properties and think about the disrepair on many of them. We've got lots of new options with the new housing developments in the pipeline in East Boston, South Boston, etc.

The party is over.
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PostPosted: Fri Jul 07, 2006 1:01 am GMT    Post subject: Don't disagree at all Reply with quote

I agree, the party's over John. My question is really about islands of calm amidst the storm - those neighborhoods that are more "protected" by dint of the usual reasons, e.g., great public schools, strong tax base, low general turnover in housing stock, few desirable rentals, well-maintained parks, strong social services, few(er) units redone in the orange shag carpet that you mention, high price point = high income and lower % of income devoted to housing, etc. My point is that there are the neighborhoods where many people typically salivate at "getting in" and those places may be where people trade up when prices slip overall, thus keeping prices in those neighborhoods from slipping too much. I agree, this is a complex dynamic to believe - and I don't know exactly how to evaluate it.

Caveat: I might be slightly self-delusional (bought in the last year and trying to rationalize it). However, my contention is that there are going to be "marginal" neighborhoods full of option ARMs that folks can just barely afford and overall gross housing stock, and then there are going to be those with people with good jobs and plain vanilla 30-year fixeds which will weather the storm better. For instance, I think Newton may fare worse than Brookline, because it's full of people who just traded up to the house they could just afford "for the kids' sake". But what do I know... Would really be interested in your thoughts on the question of how the coming storm will affect different areas.
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PostPosted: Fri Jul 07, 2006 3:43 pm GMT    Post subject: response to question Reply with quote

The knee jerk reaction to your question is that the market is fickle. The calm in the storm pockets as you describe will be a sanctuary to some degree.

Brookline is quiet, close to Boston, was built during a time when there was a great degree of craftsmanship, design, and old world discipline which brought incredible performance and composition... Many of the houses are gorgeous, and the city didn't allow itself to get wrecked with poor zoning decisions and enforcement.

That being said, it will grow, like Newton and tower above other surrounding towns until it reaches a point where the contrast becomes too unrealistic. I see Brookline like a "vintage" town. I see it like I see Harvard. Lots of those kids wear vintage clothing, the old style vintage sneakers (even though they perform like crap). There may be more affordable colleges with the same quality programs, but these students want to invest in the old name. A name that gets doors opened for you. When you tell people you live in Brookline, they step back and make assumptions about you (like I am now....) Also, there is a kinship for this culture for people that are also very gifted and cultured. Is it a place for "people in the know"? When the Kennedy's lived there maybe, but the Dukakis's... I wonder if the movers and the shakers are still from there or if it is now filled with want-to-be's, and me-too's. A lot of times, when the want-to-be's take an area over what gets lost are originality and risk. Soho is not the neighborhood that it was. People go to Block Island to get a sense of what the Cape was like 40 years ago... Like in the movie "Revenge of the Nerds" one kid who was baked asked "is it better to live in the ascendancy of a civilization or in its decline?" There is a certain segment of young people that are gifted that live their lives in a programmed template. They tend to follow the same track. There are enough promising people on this track, and that track leads to places like Brookline, Wellesley, Weston, etc. The same goes for Harvard. The old name draws new gifted people so until the performance fatigues, the deal from one generation to the next breaks down, or other institutions or towns start to blossom, they will maintain the standard.

There was an article I read about some guy who moved 20 years ago outside Scottsdale AZ and bought tons of land. I'm thrilled for this guy Wink , except that he needed to live out there for 20 years to get the return on his investment. What's 20 years living in a place that you don't love?

Lastly, think about the argument for a college athlete to finish his degree before going pro. At a certain point, the education wasn't worth it. Let's face it, most "Liberal Art's" major’s end up joining an institution somehow and living the template. What if a pair of parents lived cheaply, saved their money, didn't send their kids to a 40k a year college, invested it in a trust fund and let their kids become Paris Hiltons? What's the alternative, to send them to study Plato only to have those three years later working 70 hour weeks at Morgan Stanley? This is what is going on; the working rich is being broken apart from the ownership rich. Think about it, if you had enough income stocks and bonds, you could get enough cash flow to retire. Why would you bother to live in Brookline then? Lots of rich people got rich by living and buying cheap, investing their money wisely, making good decisions, and getting people to overpay for their assets. Brookline will have powerful people living there for a long time, but I think the dynamic up and coming people live elsewhere. Mitt Romney used to talk about what a great company Staples was. I think the chain to success is: up and coming, creative achievers (founders of Staples) to working rich that seek them out (Mitt Romney) to ownership rich that provide them all the capital (Warren Buffet). I think you need to asses where you want to be and where the action is for what you do. If you're pumping the ground in China or India, maybe being near an airport makes the most sense. Brevity is not my forte....
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PostPosted: Fri Jul 07, 2006 10:34 pm GMT    Post subject: Why Brookline? Reply with quote

What about those of us who not 'working rich' and not 'ownership rich' in other words not rich at all? Many bright, hard working people, myself included, have no wealth and are just geting by. I work in human services. I love my work but it is not lucrative.

Those of us who are working class, have good credit and have managed to save a little for a down payment can not afford to buy a home anywhere near Boston. I must rely upon public transportation and nearly bought a condo in Haverhill. After much thought I realized that 5 hours of commuting and waiting were excessive so am still renting. I work in Brookline. I would have to move miles and miles away from my job to afford anything decent and I do not require a luxury home, just a place with some trees, some space and maybe a small porch or yard for my grandson.

I can't afford, Everett, Waltham, Revere, Malden, Chelsea and certainly not Dorchester where I am currently renting for $1100 per month. Maybe I can find a place in Lynn which is where I am currently looking. Only those with some wealth can afford to buy anywhere. Many people in order to afford overpriced homes have gone for adjustable rate mortgages and are now going into foreclosure.

I don't need to live in some snobby upscale yuppie community in fact would prefer not to. I just would like a nice little place on a quiet street and every place is out of my reach unless it is overly small, on a major highway, or kind of ramshackle. By the way I make $32,000 per year and that is if I do lots of overtime. Working class people are priced out of the market everywhere even with first time homebuyer soft second mortgages and such.
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PostPosted: Fri Jul 07, 2006 11:50 pm GMT    Post subject: Financing Drives Values in ALL Towns-Brookline or Chelsea Reply with quote

There are many bright folks who have purchased in Brookline or Newton. But, the cause of increase home prices is the same that has caused prices in Chelsea to go to the Moon - Financing. If the Real Estate Market corrects- as it has many times in the past. Does anyone remember the early 1990s or the early 1970s?
Banks will have trouble with there balance sheets (bad loans and paper bonds backed by bad mortgages) and this leads to Banks closing - remember, the Bank of New England. This leads to Banks being more restrictive in their lending practices, and this leads to further decline in prices of homes everywhere.
Unbridled financing has gotten us in this mess and it won't be over until you see the impact on the Banks.
Even really gifted people on the right track will have trouble borrowing the obscene amounts of money that get lent out today.
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