In Housing Market, Uncertainty Reigns

By Anthony Brooks
May 11, 2011, 3:50 PM
15 Comments

(haglundc/Flickr)

In recent days, we’ve been a hit by flurry of reports about an increasingly weak housing market and falling home prices in the Boston area. Just Tuesday, a new forecast projected a drop in Massachusetts home prices by as much as 6.5 percent.

So how bad is it? Are we heading toward a double-dip? Or has the market hit bottom? Some analysts say we can expect the market to begin to recover in the coming months. Are they right?

As the spring home sale season heats up, many prospective buyers and sellers are caught in the middle of a market in transition. Is it a good time to buy? Should owners be looking to sell?

We speak with housing experts on the state of the market.

Do you have a question about the housing market in Massachusetts? Are you looking to buy or sell a home? Do you rent because you’re too scared to buy?

Leave your thoughts and questions in the comments or on our Facebook page.

Guests:

Scott Van Voorhis, real estate blogger and columnist, Boston.com.
Karl Case, retired Wellesley College economist; co-founder, Case-Shiller Index
Patty Knaggs, real estate agent based in Beverly
Curt Nickisch, business & technology reporter, WBUR

More:

Boston.com: Cambridge, Davis Square buck a down market. But can it last?

Other stories from this show:

M_landers

I’ve been trying to sell an affordable housing unit since October 2009. Even with $10,000 in assistance from the town for a downpayment for a qualified buyer, I’ve had no offers.
It’s a great place, good location, but buyers feel no pressure to buy in this market. Add in the additional income restrictions for my unit and it feels like I’ll be stuck with this it for eternity.

Anna (RB Intern)

We haven’t brought up affordable housing yet – this is an interesting comment! What town are you in?

M_landers

Amesbury. When I bought the unit in 2004, there was a lottery because there were so many more buyers than units available.

Anna (RB Intern)

What a change in 5 years. Seems like your experience is shared by a lot of the listeners who are calling in today.
Richard

Are you listing with agencies, housing non-profits, etc — outside your Town but nearby? Does Amesbury network closely with handicap, disabled adult groups and parents? Am hearing a lot recently about how creatively families are trying to deal with adult children and housing needs. They may have obtained housing vouchers (which are portable) but they may have no idea there is a great place available in Amesbury if they live in say, Lawrence. Find ways to cross-list your property outside of the immediate locale…

M_landers

It’s listed with CHAPA and some other orgs. Some of the sites will only allow the town to list the site, not the buyer, so I am at their mercy. I had it listed exclusively through those sites until last year when I also go a realtor. The biggest issue is that that if a buyer has the credit to get a mortgage, they can probably find a place that is similarly priced but doesn’t have the deed restrictions that an affordable unit does.
Richard

I thought the restrictions greatly reduced price — are you saying the entire market is so low, that your affordable unit no longer distinctly “cheaper”? Anyone who qualifies for affordable terms, I thought, had to be very low income themselves?

Even so, would think some parent, whose adult child can function indepently, and has a decent dds/ssi/housing voucher income stream, might see that as a possible long-term solution if the location is good. Would help if very close to public transportation…

BB

No dip in the Brookline market…. I am seeing many overbids
Richard

The trends are interesting but all sales are “local” — if you want to sell now, you should already have listed. First, do ALL the fix-up and pre-sale prep, staging, etc. Next, pick a very realistic $$ and know what your carrying costs are — what is the cash cost of an older, higher rate on your mortgage? Are you heating too big a place for your needs? If you can stomach waiting 3 months, you will know exactly how marketable your place/price is, and then realign, or pull it back off the market.

Don’t be afraid to sell for less — what might look like huge lo$$ may only be a 2-5% “discount” — think about it htat way, or amortize the loss over the time spent in house, and MOVE ON! It is a great time to also obtain the place you know fits your size and wallet with rates so low…
rwo

Prof. Case, I don’t think the lower price on a second home will be a net benefit for the caller as you suggested. He was able to buy more than usual back in 2005 because of the loose credit markets, so it would stand to reason that this time he will be trading down, so it won’t help if his old home and new home went down by the same percent.
Realestatecafe

Some in the real estate industry are pointing to the return of bidding wars on well priced properties in high demand communities as evidence that the housing market is rebounding. However, if one looks more closely at the data, that is not necessarily the case. Here are two quick calculations comparing upper end condos in Cambridge, priced $800,000 to $1.2 million, between 2005-2011:

1. The first $1M condo to sell in Cambridge during 2009, went off the market on March 9 or nearly 70 days into that year. By contrast, three properties went off the market by that date last year, 2010, and five upper end condos went under agreement in the first 70 days of this year. While that’s a sign the market is improving, it does not compare to 2005 when 11 properties — or more than twice as many as this year — were off the market within the first 70 days.

2. The big difference this year is not the number of upper end condos under agreement, but the speed at which some properties are selling in Cambridge. More than half of the 15 units under agreement or sold during the first 125 days of 2011 went off the market in LESS THAN 3 WEEKS. Last year half of the sales in the 1st 125 days ALSO went off the market in less than three weeks, but the number of quick sales has DOUBLED this year. Still, we’re only talking about 8 upper end condos in Cambridge, and that number is still below 2005 before the housing market began to slide.

Looking beyond upper end condos to the entire market in Cambridge, Trulia.com says that median sales price in Cambridge is up 3.6% or or $15,000 over last year but sales are down a WHOPPING 23.2% in Cambridge over the same period. If demand is way down but prices are up in Cambridge, that suggests that pent-up demand for well-priced properties is causing them to sell quickly, not that the entire market is recovering.

As bidding wars begin to return, hope industry regulators learn from the housing bubble and look seriously at ways they can protect home buyers from being manipulated into OVERPAYING for properties, whether through misguided incentives like the housing tax credit or blind bidding wars. For more information, see guest Scott Van Voorhis blog post Boston.com entitled:

Only fools rush in? Buyers again ensnared by bidding wars
http://bo.st/BidWars

Richard

Well-priced is key. But so is “high end” — those capable of making offers on the latter (and the speed with which those buyers can settle) often reflects very strong resources (either fungible funds or big stock stakes against which to borrow).

If sales way down in Cambridge, then one might look more closely at whether the bulk of the “3.6 increase” in prices reflects skew to higher-priced condos. No canary in the coal mine if it is primarily those with resources, to me. But I am not expert…

rwo

Regarding the Realtor’s claim that the market hit bottom in 2009, that sounds like a misreading of the data. Remember we had the home buyer tax credits artificially stimulating the market until around the end of 2010, so any hint at price stability since 2009 merely reflects government life support, not a bottom. Similarly, now is not a good predictor for next year given that the government will be ending support for larger mortgages at the end of this summer.

Patty

Re:rwo I am the realtor on the show and my statistics for Essex County re: 2009 are first quarter median price, $269,900 (prior to government stimulous), totally unregulated. The two first quarter price medians since then: 2010 ($300,000) which was artificially stimulated by the government and 2011 ($290,000), totally unregulated have both shown higher median values then 2009. We may be “bouncing around” on the bottom. , totally unregulated have both shown higher median values then 2009. We may be “bouncing around” on the bottom.

darren

The experts are pretty clueless. The housing market are recovering for the buyer, prices are recovering to their true market value. The housing price and sale number are out of wack in 2005/2006 (way, way, way too high). The demand was artificially generated by sub-prime.
The market is not crashing, it is recovering to where it should be.Sales are still low because housing price are still too high. Let hope the housing market recover to where is should be at 1999 value.

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In Housing Market, Uncertainty Reigns