2007 Real Estate market

Bostondotcom: Welcome to the Big Move chat with Doug Azarian, 2007 President of the Mass. Association of Realtors. He'll be online to answer your questions about the 2007 real estate market at noon. Please submit your questions now!

mydogmel__Guest: Well, the obvious question is whether you see the spring turning the tide toward a seller's market?

Doug_Azarian: The first quarter results have us feeling optimistic. Across the state, single family home sales rose 2.8 percent over a year ago. The median sales price did decline but only 1.1 percent. Inventory levels are about 9 months worth of supply, down from about 15 months last fall. This is a real sign that the market is stabilizing. With interest rates still historically low and sales prices down somewhat it is a great time to buy.

mps__Guest: Just today, the front page of this website had an article on a FOURFOLD increase in forclosures in Boston. It goes without saying that the issues with these forclosures and the subprime loans and prime ARM's that will adjust will have an effect on the market over the next year or two. The question is, how much impact do you see this having on prices?

Doug_Azarian: Some home buyers have had trouble with the subprime loan product. These are loans that start off with discounted rates and then move up to current indexes. When this happens payments climb to levels the homeowner can't afford. In some cases the homeowner did not realize this would happen. With prices stabilizing there is no equity build up similar to what occurred over the last decade leaving the homeowner with no place to go if they can't afford the payment. This results in an attempt to sell, and with prices dropping, if they are unsuccessful a possible foreclosure proceeding.

Doug_Azarian: This type of loan is about 10% of the mortgage market and only about 15% become delinquent leaving about 1.5% of the total market with this problem. Because the market is stable many of these properties are still selling for close to their market value and are not having too much of a negative effect on the overall market.

chd__Guest: Hi Doug, I feel that there is a fundamental flaw in the costs of housing in the Boston Metro area. I've been told that a rule of thumb for the cost of a house you should buy should be around 3 times your gross annual salary. That being said, even a family that makes $100k, well above the median, could only buy a $300k house. There are very few houses in the area under 300k, and many more people make less that 100k per family. What do you think?

Doug_Azarian: Hi, It has typically been the case that the debt service related to your home should be 26 to 33% of your income. Many lenders then want to make sure that any additional debt you have does not exceed 38 to 40% of your income. Therefore a $100,000 income would result in a monthly income of about $8300 and a mortgage payment of about $2750 a month. Depending on how much someone has to put down this should cover a mortgage of $300k or more with todays interest rates

Moving__Guest: I live behind a new development project. I am thinking of selling; Is it better to wait until construction on the new condos is finished before I try to unload my place?

Doug_Azarian: In a new development project you will always be competing with new units as they come on the market. The advantage you have is that if someone needs or wants to move in today, your unit is ready. Given the stabilization of the market I don't see large fluctuation in unit sales or prices occurring in the near future. If you wait too long and many units become available, buyers will typically choose a new unit over an older one. Again is you are ready to sell today you will have less competition because the other units aren't ready and you would be able to buy something else in the current market with low interest rates and at today's prices where some sellers are more motivated.

mhead__Guest: I find it a little scary that most of my friend who have purchased homes over the past 2 years have had to use ARM's to be able to make the payments. These are all people making over the median income of the state. How is that sustainable from a home price standpoint. If people can't afford a first time home without fancy financing how can the market keep up?

Doug_Azarian: The demographics are favorable for the real estate industry. US population continues to grow resulting in an increased need for housing. In Massachusetts we are dealing with the problem of having affordable work force housing. Regulation continues to move the cost of housing up and until we are in a position to keep the younger generation here we will be dealing with a cycle of problems around services, taxes, and housing demand. If there is no one to buy the starter homes then those homeowners won't be able to move up and if costs of services climb we will have higher taxes resulting in more people wanting to leave. The Massachusetts Association of REALTORS is working diligently on the issues related to Smart Growth and Quality of Life.

marketwatch__Guest: Hi, I just bought a place recently in Brighton and I noticed that prices do not seem to be going down much. What is your view of where condo prices in places like Brighton are going?

Doug_Azarian: Hi, The most recent statistics show that condo sales in the Greater Boston area are very strong. Unit sales for the 1st quarter in Greater Boston are up 15% over a year ago and median sales price is up alightly 1.6%. I would expect if the demand for condos in the area continues prices will hold or rise slightly throughout the remainder of the year.

DorchesterBuyer__Guest: I've been on the market for a condo in Dorchester $225-$325k for the past six months. Nobody is moving in prices. No new inventory is coming on the market. The market is completely stagnent and the new listings just aren't there. I'm seriously ready to start offering 25-30% below asking prices because these places are just sitting around with empty open houses. Any suggestions?

Doug_Azarian: I would suggest finding a respected REALTOR in the area you are looking to buy. Have them do a market analysis on some of the units you are interested in. Discuss a strategy for offers and you may be pleasantly surprised with a good purchase.

mhead__Guest: So unless the Smart Growth and Quality of Life initiative take hold it CAN'T keep up. Is that what you are saying?

Doug_Azarian: There are many groups working on variations of this initiative. They are discussing these issues with our legislators across the state. For more info you might go to our website at MAREALTOR.com andget an idea of the materials around this issue.

B_Mack__Guest: Hi Doug, Our financial advisor tells us not to spend more than three times our annual gross on a home while our lender is offering a loan for eight times our gross. Who should we listen to?

Doug_Azarian: I would suggest you understand what the total debt service you can afford is. If you have a financial advisor or a friend who is one you might get some suggestions as to how much debt service you can handle. Sometimes it might be a good time to stretch but you need to make sure you can handle the debt.

DC_bound__Guest_: My husband and I are planning to move to DC next spring. The housing market down there is very high, and we were wondering if you thought the Boston market may improve by then. If not, we may hold onto our home here and rent it until our market improves.

Doug_Azarian: All indications are that the market here is stabilizing so I don't expect large fluctuations in price. Waiting to sell here may not get you more. while I am not sure where the D.C market is headed there is usually good demand which would keep prices up. You could sell here and plan to rent there until you find the right home. If you see the market decline somewhat in D.C. you will benefit by being ready to move. If the market continues to climb there you will see it and step in before it is out of reach.

Jeannie__Guest: Doug, My house has recently gone on the market through a Realtor, what are your thoughts on Open Houses?

Doug_Azarian: Open Houses are one component of marketing a home. I believe they can be used effectivel but many times are overused. They can be very time consuming for your agent. Your agent can't be using other tools to help you sell if they are alway doing an Open House. In many ways it may be better for your agent to be making phone calls, working on other marketing methods, expanding their network in the community and with other REALTORS. In today's market it is very important to have significant internet exposure as 80% of buyers and sellers use the internet.

johnnyboy: Good afternoon Doug, I was wondering if lending standrads are tighening will that have a large effect on demand?

Doug_Azarian: I believe that lending standards are tightening up somewhat with all the issues around subprime lending. There are other ways to create opportunities for buyers and sellers and help the market to continue to move. In many cases a seller can buy down the interest rate for buyers allowing the buyer to afford more and the seller will end up with more, a win win for everyone.

scoop__Guest: Hello. How realistic do you think it is for us to sell our house in the next four months if we price it at its assessed value? We are in Norton. We listed

Doug_Azarian: I would suggest you sit down with your REALTOR and ask for an analysis of comparable homes looking at assesments as one measurement. It should provide some insight as to your current market.

Brigtoncondo__Guest_: Hi Doug, I am thinking of putting my Brighton condo on the market next Spring. Do you forsee any major changes between now and then?

Doug_Azarian: The current market is stabilizing so I don't see that we will have significant change between now and then, however, there is no crystal ball as to where interest rates will be then. This could affect what you can buy but more importantly whether the buyer for your unit will be able to afford it at the price you will ask. With interest rates still relatively low, now is a good time to buy.

Doug_Azarian: I would like to thank Boston.com to provide some insight on the current Real Estate market and should you have additonal questions please feel free to email me Doug@CapeCodDreamHomes.com Thank You

Bostondotcom: Thank you for all your questions. For more 2007 Real Estate market updates, please visit http://www.boston.com/realestate/bigmove. Thanks Doug for your helpful advice!