bostonbubble.com

[Guest]

We need a Predict the Percent Decline Thread.
And a Predict how long it will last!


In the last Boston Bubble, prices peaked in 1988 and did not recover
til 1996, I think. And they declined about 25% from the peak.

The Globe used to weekly run a graph from Case Shiller of all the housing prices around 1995. But I haven't seen it in years.
I wish that was back.

My prediction is decline will be 20% and duration will be 6 years.
But I'm not an expert. This prediction is based on last bubble and fact economy is stronger here than it was 17 years ago.

[admin]

Actually, I think that would fit in well with the "Economics" section. In fact, I'm going to move your post there since you did indeed make your own prediction. Also, there is an existing thread with the subject "When will it burst in Boston" where people have made some predictions as well.

By the way, you can always start your own new thread with the "New Topic" button.

- admin

[Guest]

[OccamDude]

I know that 40% in three years sounds nuts, but, as I posted elsewhere, the only two homes on my block that have actually sold came down 20% from original asking.

The last crash dropped Boston prices by 30% in three years. Economist Paul Krugman says this crash will be worse - interest rates were high at the beginning of the last crash, so that prices could be propped up by lowering interest rates. Rates are already pretty low now, so we've lost that mechanism to control the crash.

Sadly, I think that this is going to be very, very ugly.

[rc]

If you go back to 1980 and chart the actual appreciation (less inflation) of the Boston housing market, you will see that it is less than 2% per year (over 25 years). RE has actually been a poor, long term inverstment.The fact that it has surged in the past 5 years is strictly based on historically low interest rates. The market will stablize or drop somewhat just like the stock market does when it gets ahead of itself--but a "crash" is not going to happen--unless The Federal Reserve makes it happen by raising interest rates to the point that mortgages are no longer affordable.

[admin]

rc,

While I do think that historically low interest rates have been a strong contributing factor and possibly even the initial catalyst, this has fed into a herd psychology which may have surpassed the low interest rates in terms of impact. If low interest rates were the only contributing factor, then one would expect affordability using fixed rate loans to be relatively the same as before, but the ratio of median income to median mortgage payments is actually at its most daunting since 1989. Professor Shiller's fantastic book Irrational Exuberance: Second Edition offers compelling evidence that prices in markets (including real estate) are often disconnected from underlying fundamentals and that this is due in large part to herd psychology. I think that a crash is certainly a possibility given that 1) a mere return to fundamentals would entail a significant decline and 2) the herd psychology can just as readily work in the opposite direction on the way down.

- admin