bostonbubble.com

Former Arlingtonian · Joined: 23 Oct 2013 Posts: 141

House Hunters episode last night was a couple seeking a big home in the suburbs of Boston. The Boston area home shoppers were able to look at 3 uninhabited homes. Doesn't anyone find it unusual that the real estate market is super hot and yet every potential home owner on house hunters has three unoccupied homes to look at!

Talk to every body you know about their home buying experience and you'll learn that most home buyers look at occupied homes (with the exception of new construction and then it is usually in the process of being built).

The best part is this Boston area couple doesn't even recognize that the should be making a true low ball offer. But, the house they decide they must have has an asking price of $850K and they the home for $830K (if my memory serves me well).

When I bought my last home I didn't look at any unoccupied homes, how is it possible that every one believes that the market is tight when there are so many empty and unoccupied homes?
http://www.hgtv.com/house-hunters/show/index.html

admin · Posted: Fri Nov 29, 2013 1:34 am GMT Post subject:

I've seen quite a few unoccupied homes in my search, which started around February. I don't think it has been the majority, but it hasn't be unusual. I think most (but not all) of the unoccupied ones have been estate sales. I don't know that this is necessarily at odds with a tight market, if what is being choked off is the supply of sellers who have discretion over whether to sell. Those who have a choice over whether to sell or not may be staying put because they have golden shackles of ultra low mortgage rates that may not exist again in our lifetimes. I would think that should choke off some demand too, from move-up buyers, which could make the market much more volatile as the inflection point in inventory may have moved lower. Time will tell. I think things could get interesting soon when inventory goes higher YOY.

- admin

Former Arlingtonian · Joined: 23 Oct 2013 Posts: 141

Admin,
It is unusual when a single buyer can find multiple empty homes (for whatever the reason) . Think about the math and the tight market is a short term illusion because of the biggest housing bust since the great depression.

I think their is a lot of psychology at work making people feel the pressure to buy when if in fact there is more and more inventory sitting in the wings.

Ask anyone you know who is over 40 what it was like when they searched for their first home and how many empty homes did they find?

Regards.

admin · Posted: Fri Nov 29, 2013 1:55 am GMT Post subject:

Oh, I agree that the inventory crunch of 2013 was temporary. I don't know when it will end for sure (I'd like to think that it is ending now), but it is a blatant outlier.

- admin

CL · Guest

Admin - Am I missing something when I saw your link? When I see the inventory time series graph the annual peak goes from 40000+ in 2007, then 35000 in 2008, then 27000+ in 2009-11 then 24000 in 2012 and 19000 in 2013. Why you think it's just a temporary crunch?

I am thinking with interest rate going down from 6%+ in 2007 to 3% in 2013, more and more people have locked down ultra low fixed rate mortgage and those serve as big disincentive to move, thus drying up the inventory. Once interest rate moves up, inventory maybe even tighter.

admin · Posted: Sat Nov 30, 2013 3:00 pm GMT Post subject:

Former Arlingtonian · Joined: 23 Oct 2013 Posts: 141

I have no idea what's going to happen the future.

But, I'd make the case that there are lots of marginal buyers/mortgage holders. For example, that horrific case in Arlington recently were home owners/mortgage holders. In the crazy days of today credit is very loose and everybody is joining the party.

But, the same old story of limit supply and if we travel back to 2004 what were they saying about Real estate supply. In every bull market tight supply is the rallying cry from every corner.

https://www.tbf.org/~/media/TBFOrg/Files/Reports/2003%20Housing%20Report%20Card.pdf

http://iris.lib.neu.edu/cgi/viewcontent.cgi?article=1016&context=dukakis_pubs

gdma · Guest

Well, you also have to realize HH and other reality shows are usually staged.

In HH, the house hunters usually have already purchased/decided on their house. Then 2 other houses are put into the show.

I believe the market is tight in some areas, not in others. Probably price range specific too. In my area, I'm too far from Boston (outside 128 unfortunately) so nothing is selling. Yet you'd think developers/sellers will drop their asking, but I see only minuscule price decreases if any.

Former Arlingtonian · Joined: 23 Oct 2013 Posts: 141

gdma,

Yep, I agree house hunters is stage- it is a television show. But, House Hunter always has empty home waiting to be shown. It's an indication to me that there is loads of inventory sitting in the wings and will appear on the market some day.

Yes, tight markets and you'd better buy real estate today while interest rates are low! Its the same tale in every tight market in the country and there are lots of other booming markets besides Boston.

Why are all these special markets booming while places in the country don't sell. Many of the urban settings have industries that thrive in our current distorted economy. In Boston you have BioTech (source of funds government and equity markets), Education (source of funds cheap financing for people buying $40K-$50K a year to send children to College)(lots of Govt support to Colleges), the Mutual Fund Industry.

So, the question for someone who is considering buying what happens to our world when interest rates are rising for years to come? Can Education keep raising prices on a college education when financing costs are rising?
Can houses go up in price when financing a mortgage gets more expensive?

Markets can trade illogically for a long time with market players trading on false information. Look at the Income statements of many of today high flying stocks and you'll discover that their income is often the same as 2010.

I'm not sure how or when the madness will end, but it will end one day. Mortgages today are sold because the Government is the Secondary market and buys up 98-99% of all mortgages that are sold. That is not a normal real estate market and only a shorter term illusion.

Here is a presentation by Freddie Mac- making my point that the Feds are the Mortgage market:

www.freddiemac.com/investors/pdffiles/investor-presentation.pdf

Go to page 10 of the above presentation to see Government entities are 98% of the secondary market.