Real estate chat transcript

Kimberly Blanton, the residential real estate reporter for The Boston Globe, was our chat guest on Wednesday, Sept. 19.

Kimberly_Blanton: Thank you for joining the chat. So: what do you think of the housing market? How about the mortgage meltdown or the subprime industry bust? I'm here to chat or answer questions if I can.

JN__Guest_: I was wondering if you think home sellers will see more action now that the Fed cut the interest rate.

Kimberly_Blanton: Thanks for the first question JN! The Federal Reserve rate cuts influence short-term rates, but the Fed's hope is that it will, first, calm the credit markets and, second, inject liquidity. That all can tend to push down long-term mortgage interest rates eventually, so the answer, in short is yes. The Fed surprised some who thought it would reduce interest rates only 1/4 point, so a 1/2 point reduction is more beneficial to the housing market. But a question remains: How much pent-up housing demand is there after a five- year boom?

Lucy__Guest_: Hi Kim, My husband I bought a house in May outside of Boston. We got it at a great price because it needed a lot of work - yard was trashed, walls needed paint, doors need to be rehung, china cabinets don't open. In your opinion, what are some of the most valuable things we can do to improve the value of our 2,200-square-foot, 100-year-old Colonial?

Kimberly_Blanton: That's a tough question for me, since I mainly cover the housing market and don't know about home repairs (full disclosure). However, I do think real estate agents would tell you, first, that if you've just moved in, do things that you, as an occupant, would enjoy. For example, renovate the kitchen the way that you want to, especially if you plan to live in the house a long time. By the time you sell, the buyer may want to change it again anyway. Structural improvements are always a good bet. Also, I believe that some interior renovations have a better "pay back" when you sell, and some experts in that field have taken the time to calculate that. So you might want to research that. Wish I could help more.

sf_girl__Guest_: Hi kim, love your work. What kind of advice would you offer a first-time buyer?

Kimberly_Blanton: Dear sf_girl,

Kimberly_Blanton: I'm glad you asked that question. One of the primary reasons for the subprime mortgage problems was that first-time homebuyers unfortunately got into buying a house without understanding their mortgage. There are lots of places to get educated about this: parents and friends who've bought a house; first-time homebuyer seminars put on by the city of Boston and non-profit organizations all over the city. And go to a mortgage calculator on the Internet and play around with different loan sizes to see how the payments can change. It seems to me it's pretty straightforward for a new buyer to know what they want in terms of living space and location. The finances are the tricky part. Also: remember when you're buying a house that it's not just the mortgage that you're going to pay, but also the insurance, the condo fees, the plumber, the lawnmower. Good luck on your search.

big_o__Guest_: Where do think is the best place to start a home search in this market?

Kimberly_Blanton: The best place to start is price. It'd be nice to say here's what I want and here's where I want it. But the overriding theme in the Boston-area market is: what's affordable. During the boom earlier this decade, prices shot up -- doubled in many cases -- and homebuyers, due to their budgets, are immediately shut out of many neighborhoods. Unless they want to live in a matchbox.

Kimberly_Blanton: Second, do you want a house or a condo? The advantage of a condo: no maintenance. The advantage of a house: no condo fee -- and these fees can be high.

Kimberly_Blanton: As for location: downtown Boston's been discovered, but Chelsea and East Boston are becoming more popular. Newton's discovered, but many homebuyers are looking at less obvious suburbs -- and building new communities -- in places like Billerica. There's a whole big metropolitan area out there, with lots of inventory to choose from in the wake of the 2006 housing market downturn.

jl07__J_E__: I've heard condos in the inner-ring suburbs like Somerville and Cambridge near universities aren't being hit as hard by the real estate crash (?). Is that true - how are those areas doing?

Kimberly_Blanton: I actually haven't looked, specifically, at prices in Cambridge and Somerville. Cambrige's single family market, I believe, went down last year but is doing pretty well. I can tell you that your logic seems on target. The downtown Boston market was very strong in the second quarter -- in contrast to the state overall. Also, Cambridge and Somerville (full disclosure: I live in Somerville) certainly get spillover from downtown of people who want to live inside the city but can't afford it. It's going to benefit from the downtown boom more than an outlying suburb.

johnny__Guest_: So are there any bargains out there? With all of this talk of a downturn in the real estate market, I don't see any bargains. And what about being able to make money with 2+ family homes. I still can't get the numbers to work.

Kimberly_Blanton: In Boston, there aren't a lot of bargains anymore, given the spectacular price appreciate in recent years. The general rule: the farther from Boston the better the prices (well, except when one gets to the Cape, the South Shore, the Berkshires). Although the market dropped in 2006, real estate data show prices in July were just 5 percent below a year ago.

Kimberly_Blanton: However, if you find a house you want, agents tell me sellers are eager to negotiate. That's where buyers have some leverage.

Kimberly_Blanton: Another place for bargains is probably neighborhoods hard-hit by the subprime-market collapse, which are wrestling with foreclosures. Some homebuyers are trying to buy in foreclosure, though that takes a lot of homework and legwork.

seeker__Guest_: Can you explain how reverse mortgages work? I've heard of them but not sure what it means. Do you have to own your house outright to do it? And what is the advantage? Thanks.

Kimberly_Blanton: Honestly, I've never written a story about reverse mortgages so I haven't dug into the nitty gritty. As I understand it, people who have owned their homes a long time, have equity and need a source of income are the best candidates. The basic idea is that the lender doing the reverse mortgage becomes the home's owner and the person who's living in the house starts collecting payments. Beyond that I can't say what the pitfalls are. And given all the newfangled mortgage products out there, anyone who heads into a reverse mortgage should check it out from all angles to make sure it's legitimate and make sure it doesns't have surprise consequences down the road. If a lender or broker can't answer a question or waffles, find another one who can.

Jela__Guest_: How do seller's agents feel about buyer's agents?

Kimberly_Blanton: That's a good question, because there's an interesting tension between the two. First of all, sellers' agents like to hear, themselves, from house hunters to whom they can show properties listed in-house or refer to fellow selling agents with listings on the market. Buyers agents are only in the way.

Kimberly_Blanton: Second, I interview buyers agents, and they are very savvy. That means their clients become savvy and are better at bargaining.

Kimberly_Blanton: On the other hand, a selling agent helped me find my condominium, and she was highly professional and very helpful. Because I was a first-time homebuyer, she watched out for my interest and took good care of me.

Kimberly_Blanton: It's just best to be aware of who's working for whom in any transaction.

Issy__Guest_: Hi! My husband and I have been married for 2 years, in Boston for 4. We've been steadily paying down some debt and plan to be debt free early next year. (Yay!) We plan to also have enough money for closing costs by mid-2008. However, a downpayment is out of the question until 2009. We both have credit scores over 700 now, even with the debt we are paying down (never been late or any bad marks). But I hear 80-20 loans no longer exist, is this true? Ideally, our first home will be $225-$300K, we both make $93,500+ a year in stable industries (government & higher education). Should we even try to buy in '08?

Kimberly_Blanton: Paying down debt is never a terrible idea (unless the loan rate is 1 percent). As for the downpayment, what you seem to be asking is: are mortgages for 100 percent of the purchase price still available? They are but not from as many sources. A 700-plus credit score, first of all, is considered a good score so that expands your options. But what's happened to 80/20 mortgages -- a primary mortgage for 80 percent of the purchase price and a smaller, often adjustable-rate loan for the 20 percent remaining -- is that Wall Street investors have largely pulled out of those, at least temporarily. As a result, some lenders who sold loans to Wall Street aren't providing them anymore. But not all mortgage funding comes from Wall Street: some commercial and community banks, for example, are still offering 100 percent financing, as are major lenders. It takes research and phone calls -- call up the bank or credit union where you have a checking account and ask to talk about a mortgage or check in the interest rates they're offering. You don't have to commit. Just get as much information as you can. That's a start.

Casey__Guest_: When you say eager to negotiate, is there a current % they expect to work with?

Kimberly_Blanton: I'd say, no specific percentage. Sellers don't have that detail in mind. They and their brokers are making a best estimate of what the house is worth. But if they want to move a property that's been sitting on the market, their ears are open. Keep that in mind.

xyzbuy__Guest_: How many days does a pre-qualified mortgage approval last? Does it make sense to do it now if we won't be buying likely until spring?

Kimberly_Blanton: I really have no idea how long they last. During the mortgage meltdown, a preapproval for a mortgage one day was often worthless the next if a lender changed its policy. You should ask the party you're receiving it from. If you're not buying until the spring, this is a perfect time to get a preapproval -- just to see how much you'll qualify for, what the rates are etc. You probably would have to get a new one in the spring, but you'll be that much wiser. They're free! Put that lender or broker to work.

rr__Guest_: If this is not a good time to sell, as the market is down, when will it be a good time? My wife and I are new empty nesters and thinking of moving. Conversely, is it a good time to buy, if we were to move locally?

Kimberly_Blanton: This is a complex question, and I make no pretense of answering correctly. I've pondered the question personally, too. First, an agent would say if you have a new baby and live in a studio, it's probably time to buy regardless of what the market's doing -- lifestyle can dictate moves. Here's another way I've looked at it: If you're selling a property to trade up to a more expensive property, it's true you'll take a hit on what you're selling, which isn't worth what it was back in December 2005. On the other hand, that higher-priced property is also better priced now and perhaps more affordable. Let me know if you figure this question out. It's definitely a tough decision in a slower market. Interest rates are another factor.

Kimberly_Blanton: One more thought: If you've owned your house for 20 years, and you have lots of equity, and you want to buy a condo, maybe it's time to move. What's a few thousand bucks less, given the prospect of no more yard work?

discouraged__Guest_: After 12 months on the market I am taking my home off until spring. Wise move?

Kimberly_Blanton: If I had a crystal ball, I'd consult it for you. Global Insight, the economic forecasting firm, predicts a possible turnaround in the housing-market sometime in mid-2008. The first thing an agent would say is: "Is it priced right?" But you've probably been over that countless times.

Kimberly_Blanton: There's also the psychological strain of keeping the house clean all the time in case someone wants to look at it. Good luck in your difficult decision.

derek__Guest_: Hi Ms. Blanton -- foreclosures are at a record pace... do you see this trend continuing?

Kimberly_Blanton: Unfortunately, yes. The experts who track foreclosures said that initial filings of foreclosure by lenders this year are expected to exceed 2006 filings, which were also a record. On the other hand, more than 1,000 foreclosure auctions are advertised but there's some indication that may be slowing. It's too early to tell. Experts are pessimistic. But remember: Massachusetts' downturn started earlier so we may come out of the woods a bit earlier. But Fed decisions, the economy and bigger issues will play an enormous role in the turnaround.

tt__Guest_: What about the suburbs around Worcester? Any hot towns on the rise?

Kimberly_Blanton: Worcester was booming during the housing surge, but given its distance from Boston it's probably slowed down quite a bit. Wish I could say more. Long-term, though, I've heard prospects for Worcester, which has excellent public transportation to and from Boston, are excellent.

acaclib__Guest_:How do you think the high end markets in Weston and Wellesley are and will be effected by market correction?

Kimberly_Blanton: Sorry folks but this is the last question I can answer. I've received many, many questions and hugely appreciate your interest.

Kimberly_Blanton: About Weston and Wellesley: I've heard those markets are doing well, despite the downturn. Stay tuned...

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