[Boston] Housing prices in hard landing

[ckramer]

There’s now an eight-month supply of condos on the market — just short of the 8.5 months that officially constitutes a buyers’ market, according to a MAR spokesman.

There’s also a 7.6-month backlog of houses listed for sale.

link

[Conservativesux]

1. Its that great economy we have at work. Everyone can afford housing.

Not!

[MannyGoldstein]

2. Yes, It's Bad. Or Good, Depending...

Houses in my neighborhood just outside of Boston are selling for 20% or so lower than asking - when they sell, which ain't too often. Prices were utterly ludicrous - we're still in need of some significant adjustment, but 20% is a good start.

[newblewtoo]

9. Yes, it could be good for some

This is actually a good thing for Northern New England. The 'Mass Exodus' of real estate rich Massachusetts's residents has forced property values out of sight in New Hampshire and Southern Maine. 'Massholes', as they are affectionately known by locals, blow into small communities in their SUV's to live the rural life. They exponentially increase the traffic on I-93 and I-95. As they demand the same services they left behind taxes go up. Older locals are forced out of family homesteads owned for generations. Pretty ugly to watch.

[zann725]

18. Same thing in L.A. Think I read sales down 20% last 2 months.

AND an additional 15% down since last June. (Foreclosures are also up 15%, I think...last few months. And the 15% Foreclosure rate is national too, right?)

[The_Casual_Observer]

3. A few months ago there were a number of DUers who argued

that this would never happen. "Demand is bigger than the supply and will always be that way".
Right.

[Tandalayo_Scheisskopf]

4. Blinded...

By greed. Even here.

[Boomer]

10. Mistaking "want" for "demand"

Just because people want something doesn't mean they can afford it. Almost everybody WANTS a house, but that doesn't mean they're going to be able to buy it when the prices are sky high and effective income is shrinking.

[Tiberius]

25. I have a friend who claims

... that since the population is always growing, housing and land are always a great investment. It's not so much greed in his case as simpleton thinking.

[xchrom]

5. this is one of those markets where demand was supposed to stay strong.

for all that economists{some} and the admin crow about the wonderful economy -- people are still very worried.

you'll see bush talking up the economy in the run up to the state of the union speech.
the econonmy is one thing the admin feels like it can begin to regain momentum in the minds of the voters.

[Gormy Cuss]

6. No, Boston has been on the short list for most likely to correct

at least in the analyses I've read written by housing economists and housing market analysts. Generalist economists have been more optimistic. The PMI Group publishes a well regarded index on this every quarter and Boston's been near the top of the risk list for some time.

PMI's analysis has also assigned San Diego and Nassau/Suffolk NY as highly likely to see an end to high appreciation and a smaller correction in median price.

[xchrom]

7. why does that always happen to poor san diego?

i've never figures it out -- of course they lost the major employer down there -- years back.

but i've thought they would have solved that problem by now.

but they seem to continually get hit with employment problems, housing, extende sluggish economic periods, etc.

[Gormy Cuss]

8. One guess

The lack of a solid labor market makes the area more vulnerable. It used to be too heavily invested in defense but the real estate prices were cheap compared to other coastal areas. I don't know what drives the market now since no one's paying me to analyze it these days. ;)

[Deja Q]

14. When you offshore and offpeople and not give a fuck about infrastructure,

people won't have money to buy.

Even Bush can't be THAT naive/ignorant/whatever.

And Bush will only say and spin anything to say how great everything is. Even if people still like the twit for "national security" reasons (which means those people are bigger twits), I can readily see they're not happy with him for economic reasons. (of course, they may still be pro-coporate and have drank enough k00l-aid to last them 30 years...)

[cliss]

11. I think around February of next year,

we're going to see a serious softening of the market. This downturn started in October of 2005.

The shift has already begun: people are seeing that it takes longer to sell their houses. They stand empty for longer and longer periods of time. People get nervous.

In particular when the interest rates start going up. This makes people panicky. They'll come down on the price in order to sell.

In the meantime, the neighbors are watching this and are getting really nervous. They decide to sell while the market is still hot. Suddenly, you have lots and lots of houses on the market. That's what is happening in my neighborhood. It looks like every 3rd house is for sale (Portland). I'm going to go for a walk & count them & report back on this thread.

Upshot: you suddenly have too much supply and not enough demand for houses. This could start a price avalanche if too many people decide to sell.

[joeunderdog]

17. People sell into declines, buy into increasing markets---panic.

That's why the industry insiders don't want people to know that the decline is already in full gear. They'll say it's off 4,6, maybe eve 8% so that people don't start bailing.

I live in MA and saw a house for $525K and the realtor said she could "get me into it for $5." Gee, thanks. Five months later it's under agreement for $425. It's still overpriced, but getting more realistic.

Lower wages, no Big Dig, foreclosures on the rise, interest only mortgages kicking up, interest rates increasing, harder ceiling on debt (credit cards) and the lack of buyer's panic...all point to a correction.

[Barkley]

12. Boston Pops

I wonder how this may impact the wider economy; housing construction employment, raw materials, and real estate agents?

[madmark]

13. lower housing prices means lower cost of living

[customerserviceguy]

20. Not necessarily

Yes, the housing prices will drop, but their effect will be masked by higher interest rates. If a household can only afford, say $1,500 for a house payment, and the interest rates rise, it means that more money goes to pay interest, and less is available for a payment on principle. That lowers the amount of a loan someone can take out, which lowers the amount they can buy a house for. Payments don't get changed a bit.

Also, as less people are able to buy (and overfinanced sellers cannot afford to sell, they'd have to dip into their pockets to pay off the difference between the amount realized on a sale, and the outstanding mortgage balance, folks move into rental housing. In fact, the rental housing market has been held to relatively cheap rents because of the former easy availability of home mortgages. Watch rents rise as house prices fall. It happened in the early 1980's, it will happen again.

[madmark]

26. If housing costs drop in the aggregate (including interest service)

then cost of living drops. Long term rates have yet to move up, and I don't think that rates are linked to inflated residential real estate values. I do think rates will eventually move up, but for other reasons (such reversal of foriegn capital inflows). I agree that we will see a lot of people shifting into house renter mode.

[rox63]

15. It figures...

I bought a condo in eastern MA in April '05. First-time home-buyer, of course. I hope I'm not totally screwed. :(

[msongs]

16. if you can afford the payments you are fine - it's only a paper loss

unless you freak out and try to dump your property. If you can afford what you are paying, the decline in perceived value
is meaningless so long as you continue to live there. Over the long term real estate values fall, and rise again. Speculators,
on the other hand, are screwed, as they might well deserve to be depending on their reasons for speculating.

Msongs
www.msongs.com/political-shirts.htm

[BlueManDude]

21. no reason to fret

as msong says as long as you're making your mort payments (and like where you live and don't need to sell) then ignore the macro market and go on as usual. the cycle will eventually turn and the paper value of your property will grow.

[Codeine]

22. Depends.

Do you view your home as a place to live or a short-term investment? Over the long-haul you'll be fine, though the days of making gobs of cash by flipping your house every year of two is over. And the main reason for a home, which is a place to keep the rain off your stuff, is unaffected by price concerns.

[rox63]

23. I was hoping to sell in about 3 years

so I could buy a house. That plan may be screwed.

[customerserviceguy]

19. And just wait

until the foreclosure properties hit the market. It normally takes about six months to a year to completely foreclose on a mortgage, depending on the local laws. There are a hell of a lot of people out there on adjustable rate mortgages with initial "teaser" rates that are about one percent lower than the terms of their note would normally require. By the time the first year is up on them, the increase in interest rates, and the disappearance of the teaser is going to bump up their rate by 2-3%, and when you're talking about borrowing $200-300 K, that's a fairly hefty increase in one's mortgage payment.

Sure, this sort of thing has already been happening, but it has been finessed by borrowers running over to a new lender, with a new teaser, etc. Rising appraisal values have let them fold the costs of the refinance into the new loan, with only a modest increase in monthly payment.

But the shit hits the fan when appraisals come in lower than the amount needed to be borrowed to cover the existing loan and the refi costs. There are going to be a LOT of people this year realizing that they owe more on their house than it is worth, and many will just walk away from it, often because there is no other choice. I worked in the title insurance business back during the last really big crash 25 years ago, and 1979 looks exactly like 2005 did. The big thing is, everything you see around you that was built in the last quarter of a century was NOT part of the last bust, but will be this time. The baby boomers don't need four bedroom houses any more, like they did when they were raising families in the early '80s, they can easily cut back to two bedroom places, including rental apartments.

This is going to effect other areas of the economy, you can bet on it. And this problem is NOT just going to be in the most overheated markets, but will spread over the entire USA. The bright side is that the economy will look like hell for the 2006 elections.

[dapper]

24. I'm selling

I have a cape and it has increased in value 100k since I bought the house 5 years ago (NY). My taxes have gone up about $2k and I'm really at the point where it was costing too much.

I also think like an investor and I know that my house costs me more than 4x what it would cost me elsewhere. I sold into a strong market and I'm moving to a place in which the market may not be too strong but I'm also not going to lose too much in the way of the price i paid for the house.

I also check the foreclosures on a daily basis and I'm amazed by how many are listed or being listed.

..and the enconomy is super great! :sarcasm:

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