Case-Shiller: Moderation?

perhaps prices in boston are so overvalued that they needed to drop significantly and started much faster than the rest of the country... I do not see a recovery for at least 2 more years and these articles that say prices are "starting to level off" is false. Look around and see the amount of days listings are staying on the market and the re listings on the mls... things will not pick up unless prices become affordable. I have managed to save 60k the past few years and will continue. Once housing is resonable I will purchase otherwise I will just continue to save

When prices of SFH are priced reasonably then I will jump in to buy. Like the previous poster, I have saved some money and waiting for reasonable prices. I am not looking for bargains. The word is REASONABLE. If prices are reasonable and affordable then market will turnaround. I think most buyers don't want to be fooled by here's the bottom and buy now or you will miss the boat.

Ditto....sellers start cutting your prices or be prepared to sit on that property for a while.

Just an FYI about the Case-Shiller Index as noted on the S&P/Case-Shiller Home Price Indices - Frequently Asked Questions document released February 2007 by Standard & Poor's.

Question 2. "What types of homes are included in the index calculations?"

"To be eligible to be included in the indices, a house must be a single-family dwelling. Condominiums and co-ops are specifically excluded. Houses included in the indices must also have two or more recorded arms-length sales transactions. As a result, new construction is excluded"

It seems to me that this “Frequently Asked Question” is not asked frequently enough. If it was most people would not use the Case-Shiller index as a basis to identify trends in major metropolitan areas where Condominiums and Co-ops are the vast majority of sales (i.e. Downtown Boston and New York / Manhattan).
http://www2.standardandpoors.com/spf/pdf/index/SP_Case_Shiller_Home_Price_Indices_FAQ.pdf

Looking at a small bracket of the numbers to determine a trend does not tell the whole story. If you look at a graph of the Case-Shiller index for Boston from its inception, THAT tells the story. There is a huge run-up, and we have only fallen slightly from the top. There is a very very long way to go until we have reservsion to the historical mean of housing appreciation.

I have seen one house purchased for 1.0 mil in 2005, resold for 765k in 2007. Another was purchased for 1.4 mil in 2005, resold for 1.18 mil in 2007. These are good towns - Hopkinton and Southborough. Dover too. Lets stop putting a positive spin on this, its not a good market. Whatever your home was worth in 2001/2002, that is what it is worth now. There are tons of houses on the market that are not moving. Lower your prices!!!

This real estate slump is being driven by the subprime mess. Which means you really have two different market segments for existing SFH (new construction is a function of demand, no demand no construction). The first segment is the vast majority of homeowners who are secure and even if they were contemplating selling they can ride this out for a couple of years. The other segment is all the properties that are currently (or soon will be) being held by financial institutions. If you are saving for a house and are waiting for a bargain/"reasonable price" this is where you need to focus. These institutions want these distressed assets off their books and they will negotiate. Good luck.

I believe that houses on the north shore are now beginning to level off and we are near a bottom. The north shore was also one of the most overheated as well so has prices have come down just as hard. I am seeing inventory dry up from a year ago and homes that were selling for $775K are now selling for low $600's. I just purchased a home and there is also room for negotiating that was never there before such as extended closing terms and significant amounts of cash back at closing.

I've been trying to sell my home for some time - and have also drastically dropped the asking multiple times, I can tell you that I'm done reducing the price. I literally can't afford to drop it anymore. Therefore, I'll just sit on my property and ride this out. Why should I continue to drop my asking price, only to have potential buyers come in, lowball me even further (who's being greedy then?), only to find out later that they can't even qualify for the loan! Anecdotally, I'm starting to hear many fellow sellers out there say the same thing. I don't think I'm being "greedy" for trying to sell my home for the assessed value (in my case, CONSIDERABLY less than the assessed value) - I'm just trying to get by, same as everyone else. Once the rest of the sellers out there get fed up with this situation - and see that houses aren't selling even when they make large price reductions - they're also going to stop dropping their prices. Then this market will finally bottom out.

Trying to time the market for the lowest home price and the best interest rate may be a fool’s prospect. Buyers looking for a long term investment, which homes should be, should seriously consider buying soon or they may be looking in the rear view mirror again.

I'm with the posters above ... saved a good-sized downpayment, but I feel like we're waiting for the dam to break on price reductions ... not really waiting for the "bottom" but I suspect that given how far home prices have deviated from incomes, we could see another 10% dip by this summer. So, if you don't have to buy and risk it, why would you? Several folks in their 30s that I know are the same way. Heck, we even made a lowball offer on a house in December. (40k below asking) ... was based on comparables with a little price drop built in ... what happened? They rejected and 4 weeks later reset the price for what we offered (which of course, for us, meant it was probably worth even less and were secretly glad our offer hadn't been accepted). Not sure whose fault the poor pricing was ... agent or owner, but one of them has got to be pissed

I'm looking for a place in downtown Boston. I keep hearing that prices are dropping in Boston but I don't see it downtown (back bay, south end, etc). I don't see them going up, but I don't see them going down either. Any chance of that? I would really love to get out of the burbs and into the city.

For properties within 5 to 10 miles of Boston, the bottom is here and now. There is no rush because prices are likely to stay put for another year. However, waiting for better mortgage interest rates is the only reasonable reason to postpone looking. Another might be trying to find just the right home. However, Inventories in these communities clearly have dropped and the choice of home type and location will be limited. I feel sorry for those who are waiting for the absolute bottom to make a first home purchase, because by the time they see it , it will have passed. Most sellers of existing homes are simply not going to reduce their prices that much more. They would rather pull the home from the market.

Tim, welcome to our world.

Yes, as of yet, we haven't seen any price drops, at least in the popular neighborhoods you mention.

Making it worse is that inventory is limited - we just don't have a glut, pretty much in any price range.

If you can wait it out, you should see things loosen up this spring. Of course, you'll be competing with more buyers ...

The Case Shiller futures index still predicts an uninterrupted slide downward for Boston. And, of course, the number of home sales continue to cliff dive year over year. We've had the bottom called a number of times now, and prices still continue to fall. What was that famous definition of insanity?

Oh, and this thread illustrates the shaky grasp many sellers have on the basic economics of the housing market. If a bank is refusing to finance the purchase of your home at its current price, it's unlikely that holding onto that price will turn out the way you hope it will.

Real Estate in my area, Salem, seems reasonably priced and three properties in my neighborhood sold in about six months...inventory of condos are up...they seem to be selling...according to Zillow my house @ 3500sq ft would go for about 500k. Sounds fair...come here and buy...it is a sweet city.

As much as you home sellers would like to believe otherwise, home prices remain about 30% above the historical norms due to the housing bubble caused by the availability of cheap credit and the securitization of mortgages. Banks and other lending institutions are returning to more traditional standards, wherein they actually limit the monthly payment to 30% or so of gross income and require a down payment. Buyers with credit scores under 650 are having a very hard time finding a mortgage at all. Traditional lending standards means traditional, non-bubble pricing. The bottom of the market is nowhere in sight.

Just a note that the assessed value of a home is based on the sales of homes two years ago. Hence 2008 tax assessments are based on sales in 2006.

Prices in downtown Boston hasn't dropped by much if any. I can't recall seeing many foreclosure in downtown. Anyone who could afford a 400-800k+ property probably had a good enough income to qualify. Do a search, there was an article a few months back that said the downtown market was getting stronger, not weaker.

Banks are refusing to finance because the borrowers are shaky. Lots of those stated income loans are gone now along with the banks. Some brokers now call the bank to make sure pre-appropals are real pre-approvals.

Inventory is very high. I am seeing more million dollar homes every day be added.

I got a word to the home sellers out there - your home is only worth what somebody offers you. That is the way every single asset is priced. You can think your ranch is worth 1 million, 3 million, 10 million - you can think what you want. But if after 6 months the best offer is 400k, then that is what it is worth. I too am a homeowner, and will be seller this spring in 2008.

Lowering prices 10% from the absolute 2005 peak is not really lowering. Today's home sellers have to get it out of their heads that they "deserve" that artificial money their homes were "worth" in 2005/2006. Homes were never really worth that much.. it was an accidental blip in the economy, a temporary bubble... let it go!

My family is moving from one town to another this summer. We *will* be selling our home this spring, and we *will* accept the highest offer, even if it is a 2002 price. We have been smart, and did not own a home beyond our means, and thus we have savings on the side. We *will* move the town we want to, and if nobody there lowers their price to a correct 2008 level, we *will* rent there instead or buy a very small condo so we wont lose our shirts this year. We *will not* overpay. Home seller's can wait for months, years... its your call. If it really is worth a 5k/month mortgage plus taxes, totaling hundreds of thousands of dollars, to sell your home at a higher value 4 years from now, then by all means go for it. The stress is on you.

I'm actually on the flip side of this situation and am benefiting. Question, what happens when all you "savvy buyers" out there decide to wait this out and, "rent instead or buy a very small condo so we wont lose our shirts" - landlords like me are increasing your rent (again due to supply and demand), and laughing all the way to the bank. I hope the mortgage mess goes on for years- I'll put my kids through college on your rent money!

Not on this thread to argue, but Middle you're going to be in for quite a shock this spring. Best of luck to you.

The S&P/Case-Shiller Index for Boston will be down (strongly down) at least through to Feb.

In Arlington, December brought us only 18 single family sales 16 of which where priced significantly below list.

In January it appears the number of sales will be closer to 10... that would be the weakest sales month for Arlington (most other metro towns will inevitably reflect the same weakness) in at least 18 years... almost 1/2 the sales of the slowest month seen during the 1990s housing bust.

We are now seeing the full repercussions of the credit meltdown (no Jumbos or no docs, tighter lending standards requiring actual deposits) and further, the weakening of consumer confidence in the face of the now obvious recession.

A message to sellers... inventory will likely jump significantly this spring season (possibly to the levels seen during the 2006 season or beyond) as home who attempted to wait out the storms of 2005 and 2007 finally throw in the towel.

Do yourself a favor, price your home 10% under a reasonable nearby comparable recent sale (and be honest with sq footage, interior features and the like) and get out quick.

Whoa.

Wait a minute ... if anyone is so blind as to think home prices are going to come down so far as to be considered "affordable", I'm sorry, you're mistaken.

You live in the Commonwealth of Massachusetts, where housing has always been "expensive".

Please don't fool yourselves. The only ones who are being hurt by this slowdown are those who bought beyond their means. The rest of us will face the same problems, six months and six years from now. High home prices.

landlords like me are increasing your rent (again due to supply and demand), and laughing all the way to the bank.

Frankly this comment sounds suspiciously like many posts in the forum that have turned out to be written by panicked home sellers unable to unload their properties.

In any case, supply and demand dictates otherwise. Rents are not like home prices. They are constrained by incomes, because nobody takes out a mortgage to pay rent. Incomes are not rising, and in fact--since we are entering a recession--they will head down, and the available pool of renters who can pay top dollar will shrink.

Now is a great time to do some budgeting for the year ahead and plan your belt-tightening.

I hope Jack and Dan are hungry, because you guys are going to have to eat some words this fall. LOL!

I am looking daily in Hopkinton, Southborough, Northborough, Framingham, Natick, Sherborn, Dover... mostly A+ towns... the inventory is swelling. New listing being added that I saw over a year ago. Its ridiculous. I have friends close to the city in Arlington that are seeing the same thing.

WIth 20% down, and standard financing only, affordability has sunk. People moving out of the state doesnt help either.

Hey, I am not saying prices are going to go down to zero. This is a great place to live, and good jobs and great schools. Its worth the premium. But seriously, get over it. I see several thousand building lots in Berlin alone, right on 495. A few thousand more in Hopkinton. Thousands more in Ashland, Holliston, Dover, and so on. There are more lots out there than you can shake a stick at once you start looking.

Add to that hundreds of old factories across the state that are poised to be turned into condos.. then start adding the swelling inner city inventory of foreclosed homes for people who are willing to deal with it.

Prices are going to stay high in our Commonwealth, but 2001-2002 high (3-4x salaries), not 2005 high (5x salaries). The gains in your homes, much like the gains in mine, were phantom wealth. My family was smart enough to live modestly and not HELOC our way to prosperity. Hopefully, you sellers are the same.

BTW, I am seeing great rent prices out there. So many homes for sale, that you can rent for some real bargains. You can then take your existing home equity and put it into a high yield savings or other investments, and easily ride this one out and even make money. Or, you can refuse to sell now, and and let the dead equity in the home you refuse to sell fester. Again, the choice is yours. I am going to sell, take the hit, and move on with my life.

The analysis here is misleading. That the year over year numbers seem to flatten out has more to do with what happened in 2006 than 2007. In 2006, prices dropped only 1.3% over the first 10 months of the 2006 (avg .13%/month), and then 3.1% for the last 2 months (avg. 1.55%/month). So the 2007 drop appears to be slowing near the end, when the effect was really due to a comparison against the faster fall at the end of 2006.

If you were to compare each month of 2007 against the last month of 2006, you would get the following percent changes: -1.2, -1.3, -1.1, -.4, .4, .6, .9, .3, .2, -.6, -1.7. So it shows a drop, a slight rise, another drop, finishing with the biggest drop of the year, relative to the end of 2006 number.

The down/up/down of 2007 brings up another question about any claim that any drop might be over because a curve is flattening. What makes you think that even if it does flatten, it won't just accelerate downward again? or accelerate upward? or go up then down, or down then up? The shape of the curve in the past tells you nothing about the future.

I'm considering taking a job in Boston. Has anyone figured out what the current rent multiples are like? For example, if a home rented for $1500/month and would cost $300k to buy the rent multiple would be 300k/1500 = 200. This is really the only number you need in order to figure out whether you'd be better off renting or buying.

Phil,

The price of a house or condo in the Boston area is about 250 months rent, which should make it a no brainer for you. Your landlord will substantially subsidize your living expenses and will continue to do so until prices fall very substantially or rent shoots up.

yep. I owned a lot of real estate in downtown boston and sold it in 2005. Clear the market was going to drop, by all the numbers - this really isn't the guesswork some people try to make it out to be.

I rent in Back Bay now for much less than the cost of owning the same place. And I will continue to, at a guess until summer of 2009. (note, once again, I have plenty of cash)

There's a lot of dropping left in the Boston Real estate market (including downtown) to bring Boston back to norms of (expensive) rent/own and income/price ratios. I'm not saying this because I WANT it to be the case - it's basic economics. What I want or don't want, or what the above want or don't want, has nothing to do with it.

The sellers above are demonstrating some pretty profound ignorance. Which is typical, and why I think it'll take till summer of 2009 - 2 spring markets - to shake them and there prices into reality.

In fact, I expect there will be overswing on the bottom, just as on the top. So eventually some money will be made by those of us with cash in hand

I love the Internet, it really doesn't matter if you're discussing Sports, Politics or in this case Real Estate

Everyone is an expert. Everyone is so confident especially the "*will* / *will not*" guy.

Almost everyone "made all the right moves".

For me, a seller and a buyer in 08, I think the market probably will decline again this year. How much, I don't know. When will it bottom? No idea.

For those of you with all the answers, it must be nice. Seems like you have it all, well except a bit of humility and restraint.

I wonder how you speak to someone face to face. I'm guessing a bit different than you do here.