Flying houses, why?

The selection of inventory is poor, and the quality of homes worse.

Houses that "fly" are testaments to the unsophistication of Massachusetts buyers. Considering the age of the housing stock, it's amazing how few Mass. citizens seem to know what it costs to renovate an old house. I looked at a house in Cambridge last year that the eventual buyer told me he could fix for $40K. I got an estimate from a contractor for $250K. So far, the hapless high bidder has had to borrow an additional $150K after purchase, something he clearly didn't plan for.

So why do they fly? To be blunt, Rona, I blame buyers' agents. Your posts indicate you're a decent sort. Many of your peers are not. And they pull the same scam over and over to move a house.

In early spring, a lot of buyer's agents collude with seller's agents to pick a few "cream puffs" in each neighborhood to move quickly. Then the buyers' agents put out whispered alerts to their clients: "123 Any Street is coming on the market. It's not in MLS yet, but here's the picture from the tax database. There's a lot of interest in this place, it's really great. You should see it before the open house."

In this way, buyers' and sellers' agents work together to generate interest in a particular pre-selected house. There really isn't special interest when they start, of course, but they can move the crowd by claiming that there is.

Any moderately alert buyer can spot this trick after a while. But most Mass. buyers don't meet that description.

Yep, this is the point a lot of us are making. The crash won't actually be over till we have a real buyers market. Which I'd say is next spring, late.

We lost in 3 bidding wars this spring (in Brookline and Newton). Though, tell we the truth, all bids we submit were somewhat below asking price. On the other hand, all winning bids were also below asking.

This article is accurate and reflects my experience looking for properties (condos) under 500k the last 6 months. Anything that was desirable to me in terms of location (brookline, back bay, cambridge) and condition of the unit, etc has had multiple people interested and sold pretty quickly while other places have sat on the market the whole time. It's one thing to look at listings on MLS and compare them, but my experience has been - when you actually go physically walk in the properties they are often completely different than what you think. There really aren't that many "good" properties for sale in this price range, so I can understand why the more desirable ones have a lot of interest.

We were in a similar situation but not in that price range (far from the 'upper six figures')!

We've seen a lot of homes that went under contract on the first day of open houses, all of varying quality but lately, most of them have been OVER asking price.

I wouldn't discredit the possibility of 'pocket listings' - sellers who already have a buyer lined up but have to list their house on MLS because it's a rule.

We have bid on 4 properties in the last year and were finally successful on the last 1 in Somerville. The first, an agent selling his own condo, he raised the price after we bid on it (the day of the open house). We balked, walked away and said forget it since he was so bold. He eventually lowered (to below what we offered!) and sold it below that. We decided we were not interested after taking a closer work at his handicraft.

Another condo we bid on had 4 other offers within 2 days of being listed. We bid at asking and were told we'd have to go up significantly to catch the higher bidder!

The last condo, we bid below asking, won the offer, and now it has appraised more than $20K below what we agreed upon and we are having to renegotiate.

This market is NUTS !!!!!!!!!!!!!

Inventory in Grafton between 300-400K is thin and turning, at least the better quality stuff is. As soon as our condo sale went under agreement, we wanted to get out and see several properties we had been tracking. Seemingly overnight, 3 of 10 targeted homes had gone under agreement. All 3 were nicer homes with good prices. Most of the homes that were left on the market either needed significant work or were priced too high for their age/location/condition. Ironically, we ended up buying a nicer house that was at the bottom of our search range. Another good value buy.

So the tide hasn't turned, but seller's with good value propositions seem to be doing better. The bottom is still to come, but don't wait too long for it. By the time you notice it, it will be past and you'll be buying on the upswing again (paying asking price instead of $20-30K under). FWIW I am not a realtor nor do i have any business related to realty.

We lost one bidding war in Acton about 2 months ago. We went 10% under ask and they ended up selling for 5% under ask, we were not willing to go higher. We are currently under agreement at 4% under ask, and we are elated.

The number of homes in the area of town that we wanted and the price range that we were looking for is very limited. We made an offer on our "soon to be" home the day that it came on the market, and we feel so fortunate to be getting this house. We truly feel that if we had let it stay on the market, we would have lost out. For us, it's a once in a lifetime opportunity.

We were looking for four months and only found two homes worth bidding on. I aknowledge that there are some areas experiencing a significant downturn, but there are still communities and price ranges that are still in high demand.

Maybe the houses fly off the market because they are good deals to the buyers. Not all realtors are snakes, and not all buyers are idiots that can be duped into overpaying for a house. My condo sold in three weeks, and I used a non-local realtor, so there was no subterfuge going on. The buyer was someone who attended the open house, and was already working with an agent. I priced my condo to move, and it did. Not certain why some people are so hostile and suspicious of realtors and the real estate market in general.

Jeremy, I agree with you. I think the people who are most suspicious of the real estate "game" are the ones who keep getting outplayed. Research the market for several months, decide what;'s important to you, what range you would like to pay, and make the right decision for yourself. I also agree that you shouldn't time the market. If you are buying for he long term (5 years or so), and are an educated buyer, you will do fine.

Alisa, why do you feel you should get to renegotiate? Not trying to be rude, I am just surprised that the seller would even entertain that. I

Funny how there is so much pent up demand and there are bidding wars, yet, inventory continues to swell, foreclosures continue to surge and prices continue to drop.

I suspect that since there is much more supply than demand, buyers can pick and choose and are only interested in the most desirable properties unlike a few years ago when many people probably settled because they wanted a piece of the American Dream and what they thought was the easy street to wealth.

Regardless, prices have much further to fall, so I can only laugh at those buyers who think they are getting a great deal. A great deal will be several years from now when prices are down another 30%.

I think the real problem is that there is so little real estate (in general) that is affordable by those making a moderate/upper moderate income - and by that I mean those who earn $50-80K per year.

First, banks have become extremely conservative and are not pre-approving for amounts that allow the average buyer to realistically even shop for a home unless the down payment the buyer holds in enormous. Let's face it, even if the buyer can put down 20K, a pre-approval for $275K still isn't going to allow the buyer to find something liveable, especially in the metro Boston area.

Second, I don't necessarily agree with all the comments about sellers who are stubbornly refusing to sell for anything less than a stupendous profit. Sellers who bought during the market heydey most likely have very large mortgages and/or little equity ; and as prices decline, it's their equity that declines. They may not be able to sell at current market prices and cover their mortgage balance, so they list at a higher - and possibly unrealistic - price in order to pay off the loan. This contributes to the problem mentioned in the previous paragraph, the lack of home affordable to someone who earns a respectable, but average, income.

Finally, buyers may be a bit unrealistic about - and ultimately disappointed in - their chances of "snagging" a great home at a fantastically low price. Homes where the owner has either paid down quite a bit of their mortgage and/or has a lot of equity in the property are the only ones that may be able to be priced realistically, since the owner has more leeway. This also contributes to a lack of realistically-priced housing stock.

I also am not connected to the real estate industry - just one of those average-income folks who, despite being on the " upper" end of the average income and having little debt, is still priced out of most of the housing stock.

As Rona posted, asking prices are really pretty irrelevant. The only issue is what the property is worth. A property priced below what it is worth will sell quickly in any market. A property priced above what its worth will sell slowly in almost any market.

As an aside I'm completely bemused by posts that implicitly assume that once the real estate crash is over, it will be replaced by another bubble like the last 8 years. Amazing how many people seem to think that, against all facts and history. But its a good data point - the market will not stop falling until that attitude is gone - or capitulation as it is called in econ speak.

Oh, and before I see a stream of "no way prices are going to drop 30% more", I suggest you do a little research. What you will find is that the fundamentals of income vs. price are still out of whack and prices are still well above the historic mean. Every boom ends in a bust, bringing prices back to the mean. This one is no different.

Then there is the credit crunch. This year will see twice as many subprime loans resetting as 2007. The peak for resets for prime loans will not occur until 2010. The peak for resets on option adjustable rates and Alt A will not occur until 2011. On top of that, credit is being tightened and long term interest rates are overdue for a spike, which will only cause prices to fall further.

Anyone who thinks we are at the bottom for real estate and the credit crisis is only fooling themselves.

well, I don't know that anyone expects another boom in real estate, but I do expect prices to stablize, and eventually begin to rise again at a more normal, historical rate.

30%, well, I don't think prices being 30% lower five years from now, especially in Boston. Boston is still a small city, and the real estate market will become more competitive again. This entire blog was about how some properties still move quickly. There is a large buying population right now that is out there looking and willing to buy if the right property appears.

We just bought a house in the burbs after looking for quite a while. I think part of the problem with a discussion of this sort is that a lot of the data is just about Boston (meaning the Greater Boston area). But people are looking in very specific areas. The areas with the greatest demand, places like Winchester, Belmont, Lexington, etc, (sorry South Shore...don't know you too well), will not drop 30% further. Granted, there are some communities in which you may see that, but even within those communities, there are neighborhoods that are more sought after than others in the same town. Those desired locations (hmmm, do I throw out the oldest adage in the RE book? nahh, too overdone, even if it's true!) are in high demand, and will hold their (relative) values. And for no other reason than simply because this is Boston, i.e. where are you going to build new supply to mitigate the demand and bring prices down?

Rona here for a word about "the burbs." NewNWBurbsGuy has a point. Real estate is very local. I have asked my buyer broker colleagues to report in on their market areas. I only know, for sure, what I am seeing with my buyers.

I hope to get a wider viewpoint for you all.

Winchester, Belmont, Lexington, etc, (sorry South Shore...don't know you too well), will not drop 30% further

Can you present the data and analysis that backs up your point?

Sales fell 34% in Manhattan. But then, Manhattan isn't Belmont. Everyone wants to live there.

Marcus, I think he was talking about prices not dropping 30% more, not sales activity.

Its all about the monthly payment... If interest rates go way up prices will go down proportionately.... A 1% interest rate hike = 10% price reduction to have the same monthly payment. So If the Federal Reserve ever gets back to doing its job (which is to keep inflation at bay) then we will likely see 7.5% interest rates on mortgages and that means prices will go down because... say it with me now... Its all about the MONTHLY PAYMENT.

It is a bit surreal to be quoted but thought I'd add some comments on our experience.

- Houses we were looking at were new to 10 years old
- Resales we were looking at were homes of mostly empty nesters, divorces, and relo's.
- We looked at over 35 homes across 8 towns, only 3 were new construction, none being sold in financial stress (foreclosure, near foreclosure)
- We sold our house the first day on market for full price - our agent was not from our area. No bidding war, just right price with the right buyer. Our buyers were empty nesters and downsizing.
- We talked to 8 agents to determine who should list our house. Our choice did not give us the highest price for our house, but they didn’t give the lowest either. We decided to take off 10K from their suggestion but still higher than the agent that said 40K less that this.

All agents are sales people and do what they do to sell. It is not good or evil. In fact, while something like working the network as a house prepares to go on the market is said here to be distasteful, I actually think that is smart and what we actually looked for in an agent – ability to network. That is what agents should do!

Personal opinion: At least in the towns we looked in, the market is being driven by life changes rather than economic. Foreclosures are low or are declining (not assumption, based on data). I think the lack of inventory may be that people in these towns are overall financially stable and a) don’t want to move, or b) may want to move but are upside down. So you are left with big life changes forcing a move. This actually sounds to me like in these areas things may have come close to leveling out – healthy market rather than speculative buying.

Does anyone have data on a town my town basis in MA showing home price indexes and income that could also be put up against the foreclosure rates? I would love to test this theory.

I read last week that, according to the Mass Association of Realtors, "affordability index" in the Greater Boston area is at the same level as 2001.

Meaning, based on average / median incomes and average / median home prices, the same number of people could afford to buy, in 2008, as could afford to buy, in 2001.

I'm not saying it's true or false (trust me, I have a problem with NAR/MAR etc., too), but what if it is? Does that mean anything to people? Do you feel housing is "cheaper" than it was one, two or three years ago? (Will we ever feel housing is "cheap"???)

Mish, I think you're right on the money with the 'life changes vs. economic' drivers of real estate at the moment. If you don't need to sell a house right now, why become a seller? People are waiting to sell, and as a result inventory of outstanding properties is low in some desirable 'burbs and hot neighborhoods in Boston proper.

A good friend of mine lost out on a 2BR South End condo recently even when her bid was over asking - she had excellent financials and was pre-approved for a mortgage by a blue chip bank - but another buyer offered considerably more over the ask, and she wasn't willing to jump that high. She was upset, but her Realtor advised her that she did the right thing, because the price the final purchaser paid was, based on the neighborhood data, far over market value.

I think this 'flying off the market' scenario is very real for highly desirable properties in the most tony locations. And for the people who own these kinds of properties, I'm with Mish - they're waiting to sell until they need to, so they can reap top dollar, which is tough in this market UNLESS you're willing to risk it and hope for a bidding war...

Kudos to Binyamin and Rona for a fantastic blog - love reading this stuff!!

Rona,

"In the towns I work in, there have been 103 properties which have gone under agreement in seven days or less this month."

Utterly useless anecdotal statistics. You need to put your numbers in some semblance of order. It would be a start if you would list the towns and total inventory compared to sales.

Oh, my goodness.

QUOTE:

"So why do they fly? To be blunt, Rona, I blame buyers' agents. Your posts indicate you're a decent sort. Many of your peers are not. And they pull the same scam over and over to move a house.

In early spring, a lot of buyer's agents collude with seller's agents to pick a few "cream puffs" in each neighborhood to move quickly. Then the buyers' agents put out whispered alerts to their clients: "123 Any Street is coming on the market. It's not in MLS yet, but here's the picture from the tax database. There's a lot of interest in this place, it's really great. You should see it before the open house."

That's the most outlandish thing I've ever heard of! Paranoia!!!

My wife and I had been looking houses in Lexington. Many of which were in poor conditions but because of schools and location, many were priced on the high side. We did bid on 2 properties, one was a fix up home in a great location. We offered asking price but guess what, 20 offers came in and a person offered 50K over the asking price still did not get it.

We did not participate in that crazy bidding game because we knew it would take about 200K to fix the house up (of course it could turn into a over million dollar home after that). But we did run into this home which we are under agreement now. It has bigger land for my kid and larger house.

The location is not as ideal but good enough in Lexington. We did have to offer asking price and at the end offered 15K over asking price after a short bidding war. Guess what, Lexington and a few other towns are still seller's market.

That's the most outlandish thing I've ever heard of! Paranoia!!!

Lots of exclamation marks. Not much market savvy.

"I read last week that, according to the Mass Association of Realtors, "affordability index" in the Greater Boston area is at the same level as 2001.

Meaning, based on average / median incomes and average / median home prices, the same number of people could afford to buy, in 2008, as could afford to buy, in 2001."

It's good to know that I couldn't have afforded a decent starter home in 2001 without putting myself and my young family at risk should our financial situation change. It makes me feel oh-so-much better about not being able to afford a $350,000, 1000 sq. ft, run-down-box of a cape or ranch, or a $350,000 glorified-hotel-room of a condo.

Yes, housing is obviously overpriced. And I have 10% down, a salaried job I've been at for a long time, OK credit, very little debt, and I'm not buying, cause I cant afford a $400k house, and that's where the things I see that are worth buying are.

They just shouldn't be priced there, and are only priced there because of a bubble and were bought too high. I'm exactly who the government wants to own a home, but I'm not biting until it makes sense, and until I'm not getting robbed!

John, I don't know if those numbers are correct, but yes, homes are more affordable now than they were a few years ago, but from a big picture, historical perspective, homes are still overpriced. The ratio of median price to median income in Mass is still around 6:1. Historically it is on the order of 3:1.

We had been looking for over a year when we finally found a place in a "desirable" 'burb, and had our bid accepted. We felt it was fairly priced and there were actually multiple offers. Other good places we had seen in the past few months also had multiple offers/bidding wars (which we did not participate in).

But through our experience it became clear that despite all the talk about it being a 'buyers' market', the truth of the matter is that a well-priced house in a town with good schools, good reputation and good town services will always be in demand.
Real estate is definitely local. I'd be curious to hear more first-hand accounts from buyers who were specifically looking in the 'burbs, because the markets differ quite a bit from metro boston.

I don't work in real estate, but my parents did pretty well from the 70s to the 90s in the real estate market and my wife and I began buying and selling real estate in the mid-90s until finally settling into our current home to raise our family a couple of years ago.

From what I've seen of the market, expectations of 30% or more depreciation in real estate values is a wild exaggeration in MOST Massachusetts communities. I would expect potentially huge reductions in certain communities like Lowell, Brockton, Lynn, etc - communities with poor schools and public services which saw massive appreciation in the last decade or so only because of the demand in the surrounding communities. Towns like Belmont, Wellesley, Newton, Brookline, Hingham, Marblehead - I expect continued high demand and an overall stable market (after perhaps another year of slight declines) because of the strength of the schools and public services, as well as the convenience to the city, etc.

A rising tide lifts all ships - and the rising real estate market lifted several communities far out of proportion to what could be sustained. On top of which - check out the foreclosure statistics from these places - it's a veritble bloodbath in Brockton and Lowell.

My father always told me that you make your money when you buy a house - not when you sell it - so you have to spend months and months researching the market, get a good inspector, go over your finances and make sure you're staying well within your means. In other words - bargain hunt. Shop with your head and not with your heart. Never buy just to own something - make sure it makes good financial sense, and if it doesn't there's absolutely nothing wrong with renting.

I also think that people who blame real estate agents for the problems in the market are off base. You have to first understand that the RE agent's first job is getting a sale done. Period. Yeah they should look out for unsophisticated buyers, but they are trying to put food on the table. It is up to the buyer to educate themselves as completely as they can before making any moves. I mean, this is hundreds of thousands of dollars - your biggest investment. The absolute least you can do is go online, read articles, study the market and what has sold recently, the price per square foot, school systems, everything. Educate yourself and THEN make a decision. And if it doesn't work financially, again, absolutely nothing wrong with renting. You've always got someone to fix your plumbing at 3 AM.

Sorry this was so long-winded.

Houses are a bit more complicated than pure commodities because they are our homes, but still, I think the general principles of economics are pretty good guidelines. If there is demand for a certain product in a certain location, but no new supply of that similar product, then the prices will increase and stay there until the supply of that similar product increases. So I'll ask again, where in Greater Boston, do you place that new supply of desired product? Does the situation then become a giant game of chicken, in which seller's try to hold on to their price as long as possible and buyer's don't purchase until they get their price? Life goes on, people have to sell, people have to buy. Others have the luxury of waiting. So on individual properties, it makes perfect sense that some will fly (the desirable ones) and others will sit (the undesireable ones). Ultimately, the market will determine the right price for a given house in a given location.

If you're looking to buy, know your market really well, i.e. see every house that's for sale in the town/neighborhood (even if it's one that you know you don't like). This will give you a terrific idea of the value (if not the price) of a given property in relation to everything else that's on the market. Then when a new property comes on the market, you'll know if it's over or underpriced relative to the others, and then be able to jump on it and be aggressive, or lob in something less aggressive. This may sound like a lot of work and effort, but be realistic, this is going to be your home...it's something that is important and should be something you're willing to put a lot of time and effort into. And I'd give the same advice to sellers too, to know you're market cold, especially if you're motivated to sell. This will also help you in dealing with an agent who is supposed to know all this info anyway.

J.P., great post. Like it or not there is a huge wealth disparity between have and have not towns. RE value will likely decrease slightly or be stable in the well off towns and will drop significantly in low income areas. Households with high net worth households can easily withstand an economic down turn. The houses that are price correctly in these high end towns get snatch up quick or even get into bidding wars. In towns/cities like Lowell or Lawrence, you would have to think twice even if the list price is 50% of current market value. Believe it or not majority of buyer are very educated. If you look at percentage appreciation for the last 7/8 years, cities like Lowell and Lawrence appreciated much more than towns like Weston percentage wise.

People love to compare the differences of Weston (avg household income of $500k) to Lawrence (avg income of $29k) and say the Haves vs. the Have Nots... That comparison is the Have Everything/Set for Life vs. Poverty/Just Surviving....

Most of us 80% fall in the Middle... Towns like Natick, Westwood, Burlington, Northboro, Norwood, Norwell, Beverly these are the towns were they are Middle/Upper Middle with some Rich people living there as well that really matter... when discussing the Real Estate Landscape in Eastern Mass...

Weston, Wellesley and Lawrence, Brockton are the Outliers.... Focus on the ones in-between!

"Most of us 80% fall in the Middle... Towns like Natick, Westwood, Burlington, Northboro, Norwood, Norwell, Beverly these are the towns were they are Middle/Upper Middle with some Rich people living there as well that really matter... when discussing the Real Estate Landscape in Eastern Mass..."

This is a good point - although my earlier point about the scary statistics in places like Lawrence, Brockton, etc - is that the foreclosure figures from those towns completely skew the economic picture. You have home prices getting pummelled in those cities and towns and I think this leads to a little bit of a chicken little mentality. The reality is that the Natick/Westwood/Burlington/Northboro folks might see some tough times in terms of property values - but it's all relative. A decline of 10% or so from the historic highs of a couple of years ago is certainly a reasonable expectation - but those WERE historic highs a couple of years back. It's just a reflection of the fact that 8-10% annual appreciation was completely unsustainable.

Also, this article is more about places where property is still flying off the market. That doesn't apply to the majority of cities and towns in Mass, where prices will likely stagnate for the near term.

Natick, Westwood, Burlington, Northboro, Norwood, Norwell, Beverly all have certain sections within each of those towns that are more desireable than other sections of those same towns, right? If a good house comes on the market in one of those nice areas, does it fly off the market as well?

For the purpose of illustration my point, I took an extreme case (Weston vs. Lowell). But even within that 80% band you are talking about there are great disparities. And the houses that are "flying off the market" are mostly at the top of that band. It's obviously subjective as to what is a more desirable town than another but majority of us probably could agree. My point is that the houses that are getting snatch up are in the more desirable towns and the pricing in those towns will likely be more stable going forward. It’s an important consideration for any buyer. It’s better to buy a lesser house in these “desirable” towns then a “perfect” home in one that’s less desirable. That statement might be true regardless of what type of RE market we are in but it’s even more important now that the market is heading down.

"It’s better to buy a lesser house in these “desirable” towns then a “perfect” home in one that’s less desirable. That statement might be true regardless of what type of RE market we are in but it’s even more important now that the market is heading down."

I agree with you 100% on that statement!

Have a Great Holiday everyone.

When the dust finally settles on this bust, homes will be viewed as what they have always been, a liability that serves as a roof over your head.

You can make the case that real estate is local all you want. The fact is, the credit crunch is nationwide, the recession is nationwide and rampant inflation is global.

High energy and food prices mean people have less income that can go towards housing cost. A recession means many people will loose their jobs and people will have to cut back. The credit crunch means people will have a harder time getting loans and the coming surge in interest rates will make debt service more costly. All these factors point to lower prices.

I make $40,000 a year. I put in an offer of $600,000 for a home that was listed at $400,000. I got into a bidding war with 10 other buyers and had to drop out. I think the place sold for like $1.5 mil.

What, we have one disgruntled seller posting different "bidding war" stories in a vain attempt to stir some interest in real estate?

"For the purpose of illustration my point, I took an extreme case (Weston vs. Lowell). But even within that 80% band you are talking about there are great disparities. And the houses that are "flying off the market" are mostly at the top of that band. It's obviously subjective as to what is a more desirable town than another but majority of us probably could agree. My point is that the houses that are getting snatch up are in the more desirable towns and the pricing in those towns will likely be more stable going forward"

Is that so? the numbers don't support your argument but why let facts get in the way. So far in Weston for the month of May there have been 11 sales vs. 40 in May 2007. None of the sales have approached asking price. Think again if you believe buying in a "desirable" town will protect you from price depreciation;

29 Stony Brook was purchased for 1.8 million in February of this year and sold this week for 1.675....

"29 Stony Brook was purchased for 1.8 million in February of this year and sold this week for 1.675...."

So let me get this straight - a house in Weston recently sold for 93% of what it sold for in Feb of this year and it was most likely sold by a distressed buyer (who else holds a house for 3-4 months??) and you see that as a sign that the market is tumbling? Oooook there buddy.

Regarding home prices and incomes, being at 2001 levels , the harsh reality of Greater Boston real estate is, if you couldn't afford to buy in 2001 and can't afford to buy now, I am not sure things are ever going to go your way.

Regarding sales volume and prices, listing vs sales prices are so unimportant as to be laughable. Sellers list their homes at what think they can get; if they have to lower those prices in order to attract buyers, that doesn't mean the buyers are getting a bargain, and it doesn't mean the sellers aren't making a profit, obviously.

Very few sellers are taking losses; unless there are life changes (job losses) then most owners are sitting on the sidelines. "Price depreciation" isn't happening, for most owners. They aren't selling, they are waiting. This also is the prime reason that average and median prices are dropping. Different price ranges may be going down, which affects overall numbers. Others are staying strong.

And, yes, differences remain by city and town. That's logical.

Let's face it - I'm never going to own a place in Lowell or Brockton, nor will I ever live in Weston or Newton.

I'd be interested to hear about the middle-of-the-road towns in this blog. Great site! I love checking in to see the new posts.

J.P,

What part of 11 vs 40 do you not get? distressed or not, you don't lose125k in three months in a stable market...

John,

"Very few sellers are taking losses; unless there are life changes (job losses)"

Let's just say your premise is correct (which it's not) why would anyone choose to buy in this market knowing that a job change could cause them to lose hundreds of thousands of dollars?

FYI,

For the 12-month period ending March 31 32,349 Massachusetts homeowners experienced "life changes"...

Lisa, for middle of the road towns, I stand by my earlier advice, there are some sections within those towns that are more desirable than others. Within those desirable areas, some houses are more desirable than others. Those houses, if on the market now, would be priced higher than the less desirable ones. Of course, if this market were the same as it was 12 months ago, even the less desirable ones would be priced pretty agressively.

Buying a house is a very complicated process that touches economics, psychology, sociology, and just plain old luck. It's easy for everyone reading and writing in to try to simplify it down to a soundbyte or catch phrase. But with hundreds of thousands of homes in the greater boston market, how can one ascribe a catch-all answer as to why one house sold faster or for more than an other (and sometimes right across the street)?

So, rather than worrying about "price," the question should be reframed asking about a given house's value (price is just what two parties agree upon, whereas value is subjective and relative to the other houses in the market).

Then to further that line of questioning, is the house being priced to its value? If there is a bidding war, then yes, the price is how the market (or at least more than one buying group) views the value. If a house has been sitting, why? Well, there are a thousand variables, and the only way to get a good sense of a house's value relative to the rest of the market is to know the market. See the houses that have sold. See the ones that are under contract. See the available ones...new to MLS and those that have been sitting for 784 days. Get data from a broker and break out the excel. Chop chop chop that data. Throw out some assumptions, build new ones and then go see more houses in the market. After so many houses, how can you not know your market?

My wife and I were looking for a house for about a year and a half, and I'd say we finally felt comfortable understanding the value of a house in our market (for what our family needed and wanted) after about a year of looking. When new houses popped up on the market we could see them for what they were relative to everything else and determine (in my opinion) whether they were overpriced or underpriced (obviously more of the former than the latter ha ha ha ha).

So beyond knowing your market, you really have to know what you want in a house for you and your family. That's a tough thing to really know if you're a first-time home buyer (we're on our third, but didn't know what we really needed or wanted until this house...and even then, as our kids grow, those requirements will change again!). And, yes, while the credit crunch is real and national, the banks are just starting to clear their paper, so that by this time next year, they'll (fingers crossed) be issuing new debt at a regular pace.

So, when a house comes on the market, you can assess it as something to pursue or kill, and if pursue, do it either aggressively to win if its a house you really want or passively and just take a shot and try your luck with a low-ball offer. Regardless, even if you don't win the bid on the house you want, (and you really have to believe this...it will really help...trust me) there will always be another house out there.

In those 12 months, 32, 349 homeowners sold at a loss?

I don't think we're talking about the same thing.

Few people who are selling now are doing so at a loss over what they paid. Because, they bought two, five, ten, or thirty years ago, and have built-up equity.

Those who have to sell now who maybe bought in 2005 or 2006, may have to take a loss, since the market in their city or town has leveled or dropped. But, selling your home within 24-months of buying is not typical. Only those who have "life-changes" usually sell that quickly.

Thanks.

John,

"Few people who are selling now are doing so at a loss over what they paid. Because, they bought two, five, ten, or thirty years ago, and have built-up equity"

Thirty and ten I'll give you, five is pushing it. Almost all buyers in 2004, 2005, 2006, 2007 and now in 2008 have negative equity.

"The [Case-Shiller 20-city index] fell 2.18% month-over-month, continuing its now 5-month streak of greater than 2% monthly home price declines. Bought a house last October with 10% down? Congratulations — you’re now underwater"

The bigger question is why would someone choose to buy now with prices declining so dramatically?

"“‘In the early 1990s - during the last big housing slump - prices fell in 42 of 48 months,’ CEO Timothy Warren Jr. said in a statement. ‘Since March 2006, when prices first started to fall in this current slump, there have been price declines in 20 of the 26 months. But the early ’90s price declines weren’t as dramatic as the drops we’re seeing now.’”

Thanks....

A lot of these stats are for averages over the whole Boston area, right? Are there pockets in which the index increased during that time? Also, in the last big slump...the 42 of 48 months, to what degree did they drop? A decrease of 0.0001% is still a decrease.

Look, I'm not here to debate the stats...I just don't think the sky is falling in general. In some towns it may be, but in others, things are rosy. And I think to the initial comment about some houses flying off the market, there are a lot of "glass is half full" people out there pulling the trigger.

With such a complex thing as a house purchase, and with a lot of data at one's fingertips, I get the sense that we can over analyze certain aspects of the process. In my previous post, I advocated breaking out the excel, which I did, but forgot that my wife nearly beat me over the head with my laptop, arguing that our daughter is not going to walk to school in excel. Ultimately, we bought now because of a life change (family outgrew the existing house), but also because we, like Sam Zell, believe that a house is a place to live, not an "investment". So we didn't try to time the market, and bought into a town that we think is rosy long term, not just for the next couple of years.