Housing has its worst monthly price drop in 20 years

Its about time the market corrected itself. I'm sorry for all the people who bough into their homes when they were an over inflated cash win-fall, but now its time for the prices of massachusetts homes to come back down to earth. There needs to be some sort of uniform pricing across the board for homes. For the price of a small 2 bedroom home in MA, you could almost buy a mansion in other states.

What about the idea that the other reason home prices have declined is because of the lack of inventory in many towns across the state? If the product isn't available for buyer's to buy, then you won't have the sales to go with it.

With homebuyers actually having to put money down now(20%), you're going to see these prices continue to slide as more and more people or no longer in the qualified buyer category and inventory continues to rise. Alt-A's and Arm mortgages will be resetting in 2009, it will get even worse as the non sub-prime mortgage holders will start to default.

My wife and I are one of those would-be homebuyers. We have more than 20% to put down, and as soon as we find the right house we're going to buy. It seems to us, however, that these data have NOT yet hit-home with sellers. We are looking in Southern New Hampshire, and northern part of Route 3 and you see houses that have been on the market for over a year with no reduction in price. Meanwhile, twice the house goes on sale down the street via foreclosure for LESS. I cannot see how we can be anywhere near the bottom, when this is the case.

Also, 300K seems to be some kind of "magic number" in New England real estate. All the houses we see at or around this price in our area are generally attractive, livable, and perfectly fine homes. Homes in and around the $250K mark are all "fixer-uppers" or close to.

Last, We've seen several homes go from over $300K as a re-sell to less than $250K as a foreclosure a few months later. We really want to buy but probably won't until the difference between resale price and foreclosure price becomes reasonably narrow. Until then I'll continue to believe resale homes are still way overpriced.

So we intend either to wait, or consider only foreclosed homes.

This is a blessing in disguise for the folks that could never afford to live here. Now we can buy a home in a great place to live versus the hellholes like Nevada, Arizona and Georgia!!! If you have some cash and have a stable employment BUY NOW!!!

Maybe if the prices fall a little more I could actually afford to move back to MA. I got forced out 4 years ago since I could not afford a 2 bedroom condo for 300k.

Almost anywhere else you can get a descent single family house for 150k.

November 2007 to November 2008 is not a "monthly price drop" It's an annual change. October 2008 to November 2008 would be a monthly price drop, however the article doesn't mention that being a 20 year record. Too bad "annual" doesn't grab headlines like "monthly" does, and too bad the Globe doesn't worry about getting the story straight, as the 20 year record is for home sales volume, not prices.

Whatever happened to that quaint notion that the primary purpose of housing was to provide a place for people to live? Housing prices became unaffordable because so many people were buying and trading them like pork bellies. I've owned my home for 30 years and I couldn't care less if the market value goes down.

Susan Renfrew's statement that "We need a vibrant housing market to help get the economy moving" should be translated into: "We need a vibrant housing market so that realtors like me can make lots of money without getting a real job."

Housing prices are going to decline for quite sometime, maybe we'll see them stop in 2010. Things need to get back to realistic levels where homes are affordable for people.

Chris Reidy, poor lad, doesn't understand the difference between a "monthly price drop" and an annual price drop. Therefore Chris shouldn't be writing on this important issue until he is more in control of his subject matter, ort least in control of the person who wrote that silly headline.

would someone please stop using median sales price as an indicator of overall housing prices...it is misleading to the person interpreting the data who may not understand that certain segments of the housing market may be having a disproportionate share of the sales occurring. for example, the starter homes, and some bank owned properties are comprising the bulk of the sales in Massachusetts. Conversely, the higher end and trade-up homes are not selling at as high of a rate. The result is a dramatically lower median sales price. This one measure (although important) should not be solely used as a barometer of the housing market in general. Ask anyone in the market for an entry-level home in Greater Boston and they will tell you that the buyers' interest for these homes is healthy. it is not that all homes are depreciating at a rate of 14% over the past year; it is an indication that the lower priced homes are selling and the higher priced ones are not

I keep waiting for housing prices to become more reasonable and they just aren't there yet for me. A 2 bedroom condo we looked at in Watertown (36 Paul St) just sold YESTERDAY for $325k! It was only on the market for about 4 weeks, I was shocked! Some communities are not dropping in price

Dear Susan R. Renfrew,

"We need a vibrant housing market to help get the economy moving and the recent steps by the Federal Reserve to reduce interest rates combined with affordable home prices are the type of action we need."

In your lifetime, the housing market will never be as "vibrant" as is has been over the last decade. Ultra low interest rates merely spread out the pain while enabling people with ARMs to refinance. When housing prices become aligned with incomes and people have money to invest in creating new small businesses instead of getting preyed upon by the financial and real estate services industries, then hopefully our economy can return to something vibrant. Alas, the consumption of granite counter tops and stainless steel appliances do not equal sustainable economic progress.

This is an epic housing crash. I would wait until Resolution Trust II is formed, and then give it another year after. We are headed much, much lower. Don't even think about buying now, you'll be catching a falling knife that will take your hand off.

I am one of those homeowner's who was deceived by corporate greed. Now, I owe more on my loan because the value of my home has decreased. I was a proud homeowner when I brought my house in 2005 but now I am regreting it each and everyday. I knew it was to good to be true to buy a house with no money down. The broker and banks made it too easy for people like me to own a home. I relied on my broker's advise so he put me into a ARM mortgage when he could off put me into a fixed mortgage. The bottom line was profits and money.

So much for using the equity in my home as a nest egg for my children's college payments. I guess I will be paying PMI for the next 5 years just as I was on the verge of getting rid of it. Wouldn't it be great if I could get my property tax bill to decline by this same rate? I wonder. Maybe if I sell now at a loss, I can write off that loss against capital gain and then buy back my house at a cheaper price. Better speak to a tax attorney about that scenario. Lets just make sure that all real estate property tax rates are adjusted at an equitable rate that is not based on the initial purchase price of a home.

Now I can't wait for my property tax bill to go down.......

Can I now afford a home in good towns like Carlisle, Concord, Acton, etc.
Or are those areas still hovering at 500K?
keesh

1) Jason, are you sure you understand the difference between the "mean" and the "median"? I'd rather the agencies report on the median than the mean, as the mean tends to inflate compared tot he median.
2) A big reason for this housing mess is that people didn't want to wait for the house of their dreams. In contrast, I saved 12 years to buy my house. I put 20% down and I chose a house I intend to live in for a long time. Because I was willing to wait a long time before buying, I now have an affordable mortage, still have equity in my home, and can now refinance, which is going to save me around $400/month. Think before acting.

and am

All this data does not even seem close to reality when I see new condos (townhomes and apartment) still going for a very high price. You can find condos in places like burlington and waltham or even southborough for close to 500,000. I don't see much price decline at all in GOOD properties. I am waiting for them to come down and that would be the sign of trouble spreading to good properties.

Gee Tony, less supply for a given demand results in rising prices, not falling prices, as more dollars chase fewer good. Last I knew, there was probably 10 months or so of inventory in Mass. That is not a lack of supply (many people say 4 to 6 months is a balanced market). Obviously some towns have more supply and some have less, but the point is your logic is flawed.

Maybe you should Google "supply vs. demand curve".

I gotta live somewhere and am not going anywhere soon. Doesn't bother me. May be huge for others though.

We all should be thinking about paying off our mortgages. Something tells me that rates will continue to drop and we'll be collectively refinancing again soon. Just keep up that credit rating.

I was forced out of Massachusetts in 04 because of the housing prices. Now I live in that "hellhole" Arizona. jeffd, while you we're shoveling snow yesterday, I got in a quick nine.

Sorry Ms. Renfrew, but we are not going to buy the party line from realtors, let alone a house. Prices in much of the state are far from affordable. Prices are still well above long-term trends relative to rents and incomes. My wife and I are actually out looking now, and we are not seeing anything in our area that looks worth leaving our apartment for. We waited through the whole bubble and saved our money, knowing the bubble would burst. We can wait a little longer if we have to.

Higher priced homes aren't selling because the rich are insulated from the recession and have no need to move out of their McMansions. They're sitting tight waiting for further drops so they can go on a buying spree as investment vehicles or 3rd and 4th holiday homes.

The best decision I ever made was moving out of that hellhole of a state. My home has APPRECIATED in value about 10% in the last two years (this is not a guess, it was just appraised for a refi), up to 408k from 368k. And that is for a 15 year old, brick, 4,000 sq. foot house, 4 bedrooms, in ground pool, etc. etc. etc. Move the hell away from there while you still can, if you can.

Ted is right on target.

Sales numbers have dropped so much because sellers are so detached from reality and in deep denial. They need to come to grips with the fact that their homes never had the actual inherent value which prices suggested during the bubble, that they ought to have sold back in 2005 or 2006 to lock in the paper gain, and now they've forever missed their chance to sell at an inflated price. By the time prices rise again, it will be due to natural growth, not a bubble induced by reckless financing.

We're likewise shopping with 20%+ down available. All of the houses we've been looking at in the $400k range along 128 are fixer-uppers or tear-downs. But eventually those nice, ready to move in $5-to-600k houses will be down another 25% and we'll snap one up.

I think the overall 25-35 year old age bracket has grown up with the credit card debt no saving mentality and this will put pressure on entry home prices because who is going to have $60k-$80K cash for a downpayment? This will put pressure on the next tier of homes because people will not be able to sell theirs and move up.

This is a good start, but the price has to fall further to match the fundamentals.
Unemployment is expected to rise, and this will further depressed the housing price.
What is wrong with the title? If Chris has stated: the worst month to month price drop, he would have been wrong.
The case-shiller S&P index will give a better indication on where the housing is going.
Also, are the scum realtors run by Madoff. Aren't they the one responsible for the housing ponzi scheme? Why are medias still quoting realtors? Isn't that the same as asking Madoff if we should invest in his fund?

I love it how people are heralding the drop in home prices because now they'll be able to afford one. Of course, that assumes they'll still have a job in 6 months, a bank will actually give them a loan, and their savings wasn't invested in the stock market (to hedge against inflation). But just wait until they are homeowners - then they'll start singing a different tune, lamenting the stagnant home prices. And as far as entry level homes go, as soon as the market starts to turn, it's going to turn quickly. The economic stimulus package that people are talking about will almost certainly cause inflation, or at the very least the fear of inflation. Potential buyers will want to get their home before the threat of inflation starts to push interest rates back up. Home prices will bounce - they always do.

The South End and Cambridge are next....the higher end always falls last....hold out for at LEAST 1.5 years before purchasing there no matter what realtors and professional "guessers" tell you! 550K for dumpy condos...use common sense people!

Jason - nice job understanding the shortcomings of using median sales price as an indicator of housing prices.

People should read "How to lie with statistics" before believing the numbers that are being thrown around out there.

Susan Renfrew's statement that "We need a vibrant housing market to help get the economy moving" should be translated into: "We need a vibrant housing market so that realtors like me can make lots of money without getting a real job."

Actually, think... furniture, appliance sales, all types of hardware for renovations, carpeting, paint, , lawn mowers, snow blowers...etc... all driven by people moving into houses.

You could look at Case-Schiller data if you're concerned that median house price value is skewed to the downside due to lack of activity on higher end homes. I believe the Case-Schiller (put out by S&P) data tracks resales of the same house. It still will not capture the conjectured lower rate of sales of high price vs. low price homes. So if only low price homes are selling AND low price homes are decreasing in price the Case Schiller will be shown to be decreasing. But the data will show that the same house is actually decreasing in price, not just a median value shift. My feeling is that Jason is correct in that the higher priced homes are not yet decreasing in price, and therefore are not selling. I work in a job where I see the daily transactions at the Suffolk Registry of Deeds, so thats where my belief comes from, but I haven't really applied any sort of rigorous methodology to discerning the make up of Mass home sales. I can tell you that multifamilies & condos in Revere/Chelsea/Roxbury/Dorchester being sold in 2005 for 500k, foreclosed & auctioned off with no one but the bank bidding back the property at around 150k in early 2008 and finally being sold for less than 100k in late 2008. When the alt-a & prime adjustable start resetting in 2009 & 2010 and the job losses start mounting in the financial/ higher income jobs, some of the higher priced (450k-1.5m) inventory will start being sold for less. The cash sales for the +1.5 million will still probably be unaffected though, unless they invested with Madoff

This and other articles understate the size of the bubble increase in New England house prices, especially within the 495 belt. Jason #11 makes a great specific point about the figures in these articles and the difficulty of using the housing numbers in NE in general.

Real prices adjusted for inflation and prices measured by Case-Shiller (price compared to income) have risen since the '90s. Prices need to continue declining until they reach Case-Schiller historical norms, at that point a healthy and robust housing market will resume without 'creative' financing and overstretched buyers in danger of default. Once the market does that it will probably stabilize with price increases later on.

#4 Foreclosures are the place to look if you want to buy now, be sure to budget for repairs as there's often neglect or simply damage from being empty. You can fix moderate mold and mildew from having the heat off but it's more work than you think. You need to rip out/sanitize stuff more thoroughly than you'd expect until you've dealt with it.

Ted [#4],
You aren't being fair or realistic. If you want a deal on a fixer, owned by a bank that cares only to get back the money they loaned, then go for the foreclosure. If you want a home that has been loved, improved, and maintained, then you want a resale home. Many resale homes are for sale for the usual reasons - time to move on, downsize, upgrade, etc. If you have "more than 20%" to put down; I don't understand why you have waited so long. Perhaps you are looking for an investment but resellers are selling homes, places to live. Choose carefully.

people, people!!!! house is the place to live in. It's not up, down, median price...etc. The question is, how many people can efford buy a house without owe too much money and will finally end up at foreclosure? Please I do not want to buy a garage and call it a home

now is a terrible time to buy, keep your powder dry for at least another 2-3 years, you haven't seen anything yet....

Real Estate is local. If you want a starter home within 30 miles of Bosotn then be prepared to pay 250k and up. Some people may like it some may not. The market for Somerville, Cambridge, and Malden is still very strong. The same for many areas along Rte 128.

I have a buyers list so that many of my listing never hit the MLS system. So that all of the people looking to buy a house may not eve see the properties that put under agreement.

The other item that MANY people are forgetting is that the first time homy buyer gets an $8,500 tax credit when they purchase their home.

Mr. Winters - THANK YOU. A house is a place to live in. I have been in and out of the market the past four years and echo those who say prices are still far too high. I understand that Massachusetts is a desirable place to live but $250K to $300K is an awful lot for a home. To echo what others have said, you should be able to get four bedrooms/two bathrooms for that price rather than some rink-a-dink home that needs a lot of work. Some of the outer suburbs are starting to look reasonable (Framingham) but for the most part will continue to be a renter for the foreseable future.

Ah Tony....prices dropping are a sign of too much inventory...builders have stopped building because buyers have stopped buying...we overbuilt for 10 years and are now paying the price.

We bought our home in 1987, and within year a year or so it was worth 25% less than what we paid for it. A couple of years ago it was worth more than three times what we paid for it. Now it's value is coming down. Prices will come back up if you can wait.

But not everyone can. If you are a homeowner the value of your home affects you:
a) if you must sell; or
b) if you have an emergency and must borrow against your equity.
The big story is not just that prices are falling, but that there are so many who are forced to sell now because they have ARMs they cannot afford or have lost their jobs in the current recession (which is exacerbated by the unavailability of home equity loans to keep consumers spending through the hard times).

Hang on, everyone.

Regardless if the Globe can't tell the difference between a month or a year and never lets silly things like facts stop them from reporting a story, I am super glad to hear about the price drop. in 2000 I was looking at a two bedroom condo in Revere. In May 2000 it had already risen to $85,000 but I could easily afford that. By September of the same year, it skyrocketed to $135,000 and sits in the mid 200's now. Needless to say, I didn't buy and continue to rent. I have the money to put down, but won't even bother to TRY and make a purchase until the prices drop back down to realistic levels. I agree with an above poster, these price drops have not totally hit the people currently selling. I am sorry you bought your $150K house for $350K. Not my fault and not my duty to overpay so you can minimize your loss because you couldn't say no. When your houses are back down to $150K call me. Take that $3000 capital gains loss write off for the next 67 years and think twice before you buy a house that is obviously grossly overpriced. Lesson learned. I was just smart enough not to make it a lesson I had to learn the hard way.

saw a news report on TV LAST NIGHT SHOWING CALIFORNIA HOUSES IN WARM AND SUNNY STOCKTON CALIFORNIA FARMING AREAS. FOR 55,000, AND NO ONE EVEN MENTIONED THE REDUCTION IN DEMAND CAUSED BY THE CREATION OF BIRTH CONTROL METHODS IN 1970 ................................. 3BD 3 BTH.2CG

Jason, The Case-Shiller index is what you are looking for. It is a house by house look at the market. Surprisingly though, the Case-Shiller index is showing that all homes are seeing roughly the same % drops that the median sales price stats are showing.

What is the right price for housing (single family)? Take the Median family income for an area, multiply it by three. That gives you an idea what size mortgage an area can handle. From my quick Google search, that would be about $250,000 in the Boston area, and $180,00 for the entire state. These numbers (250K, 180K) are also an indicator of how far the median price could go in an area hit by a deep recession with no real recovery (for example: Japan's lost decade). But these numbers may be too high, if the median family income falls.

Hey jeffd;

I hope people like you you stay in a socialist rat hole like Massachusetts and leave the Southern and Western states for the real Americans!

Hey Patriot,
I went all the way back to find JeffD's comment and there was nothing socialistic about it. In fact, he reflects my thinking exactly and I certainly am not a socialist....not even a democrat.
The prices of homes here in California are STILL outrageous and not worth half of what is being asked for them. I cannot wait for them to fall another 50% so I can buy 2 or 3 of them. Nothing unpatriotic about that, just good old American capitalism. If you got stuck, it's your own fault.

I think now is a good time to buy in Mass if you are OK with living in the smaller cities, Lowell, Haverhill, Framingham, Worcester. At least I hope so cause I just signed!
I bought a house in Lowell that costs 3x my yearly income, which is modest by Massachusetts standards. It's old, but it's sound and was priced average for the other houses in the area. The mortgage is comparable to my rent for a much shabbier, not maintained and smaller apartment that I have stayed in cause it was cheap. Very sadly, it was purchased for 260K in 2004, I bought it for 140K. The previous owners actually took pretty good care of it, and left it nice. I feel badly for thembut I think they got schamoozled by realtors, bankers, and everyone else who kept saying the real estate prices always go up....in the rushof wanting your own place it's easy to get carried along...