I am NOT arguing with Robert Shiller

I don't think there's a serious national bubble either. But ask local economists in CA, NV, FL, and even MA if they think there's a serious housing bubble in their own state -- I'm sure the number will be higher than 29%. This all goes back to real estate being local.

There is a lot of local opinion here that we are headed for a soft landing, not a crash. Send me dissenting views by email. I'd be more than willing to read them and comment.

Sorry Rona, I didn't mean we will be have a crash. I also believe we'll have a soft landing (but who can predict the future anyways, right?) What I meant was even with the soft landing, Boston is in for a slightly higher price correction than the nation as a whole. Yes, maybe only 5 percentage points compared to say, 2% for the nation (I am making these numbers up), but still slightly higher nonetheless. Do you agree, or do you think Boston will be on par w/the nation?

Okay, I just did some research and maybe I don't have the same perceptions as the general public. Here's some evidence about what the public perceives. It's people putting their money where their mouths are.

Here's the Case-Schiller Futures Index for Boston:
http://futuresource.quote.com/quotes/quotes.jsp?s=BOS&t=Future&ref=

Now here's the Case-Schiller Futures Index for their 20-city composite:
http://futuresource.quote.com/quotes/quotes.jsp?s=CUS&t=future%2Cindex%2Cforex

I'm wrong, you're right -- that's a 12% drop for both Boston and the 20-city composite from Nov '07 thru May '10.

Hi Rona, it's me again. Here's a story I just read about an analysis conducted by Moody's (you know Mark Zandi right?).
http://money.cnn.com/2007/09/19/real_estate/steep_home_price_drops_coming/index.htm?postversion=2007091915
Moody's is projecting an average price decline nationally of 7.7% on average, from peak to bottom. They're also projecting a price decline of 9.4% for the Boston-Quincy area and 9.0% for Cambridge-Newton-Framingham. I guess this 1.5% difference is negligible, but just giving you some more data. Take it however you want; I'm just throwing data at you to see what you think about it.

Along w/my earlier post about the 12% drop over the next 3 years from the Case-Schiller Futures Index, would you consider that a significant drop? It's basically in-line with what we've already seen in the past 2 years. Every 6 months, it seems like economists are pushing the bottom of this soft-landing farther and farther down. First it was supposed to only last 1 season, then 1 year, then 2 years. Last month they pushed the bottom back another year. Today it's another 2-3 years. One thing that has remained the same is the rate of decline -- it has always been just a soft landing. Only a few percentage points per year. A few percentage points per year for 1 or 2 years would have been fine for a price correction. But to have this drag out for 5 years might spark a national recession. I don't know what to make of all this! I bet you think I'm obsessed. My wife thinks so too.

Hi, Rona. Nice to meet you. Let me be frank: you're biased. You're a broker who represents "buyers," so your goal is to get people to "buy." If people think prices will slide, they won't "buy." If they don't "buy," you don't get paid. Thanks.

Mike is doing some good research. Y'all should look at what he is looking at. He's no more obsessed than lots of folks out there.

My caution to all readers is that predictions are just predictions. You need to make educated choices based on your needs and risk tolerance (and, in Mike's case, the needs and risk tolerance of his wife, too!)

Dear antigravity,

Of course I am biased. Everyone is biased. I do not need to write here at Boston.com just to somehow protect my income. It is simply not that simple. Readers should be aware of my biases, however please do not feel free to write me off because of them.

I have been successful at making a living during buyer's markets as well as seller's markets. The drop in sales volume (number of sales) doesn't affect me much -- I'm an established broker. Falling prices make it possible for some people to buy, which increases my business. I'm all for it!

Homes are investments that people get to live in, so buyers will buy in most market conditions. When it is a person's time in life to buy, and they can afford to, they do. Unless there is a catastrophe in Greater Boston, I am not concerned about my income.

I guess my URLs got cut off since they were too long. Of course everyone's biased. Everyone has their own opinion and the point of a blog is to express one's opinions. I don't understand what the bashing is about.

It's the zip codes,ladies and gentlemen. Averages don't tell you anything, nor do metro areas. It' all in the zip code!!

Rona,

You wrote, "When it is a person's time in life to buy, and they can afford to, they do." I agree with that sentiment. But right now, most people cannot afford to buy. The statistics are very clear on this matter. The median household income in Massachusetts is $52,354 (2005 statistics). According to the Massachusetts Association of Realtors, the median cost of a home in August 2007 was $357,000. That means the median home costs SEVEN times the median income.

That is not even remotely affordable. Homes are considered affordable when home prices are three times the median income. So, either incomes are going to have to rise dramatically or home prices will have to drop dramatically. The latter seems far more likely to me.

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