Buying in unsettled weather

I continue to not see fast sales in Somerville, Cambridge, Medford, and Arlington. I continue to see actual data from the registry of deeds showing plunging sales figures. I continue to see price-chopping in MLS at the most expensive and renovated homes in Davis Square. I continue to see a pileup of 65 SFHs for sale in Cambridge and only a handful of sales.

I think it makes no sense to claim as long as one sees a tiny handful of homes in a given town still moving, the market in those towns is still "immune." You know, in the Great Depression, more than two-thirds of the labor force still had jobs, and some people still bought and sold homes. I think some of the "immune-towns" proponents want to refuse to recognize a general real estate downturn until each and every homeowner in Massachusetts runs out his front door screaming. That's not going to happen, and it's not needed to prove sales and prices are falling.

Marcus - The "immunity" is not binary - it comes in shades. Some towns are really being hit by foreclosures. Others have very few. But here is a reality check...

I recently read that to buy a 5 million dollar condo in Manhattan, the buyer needs to have 3X assets in the bank if the condo is to be financed. That is, a net worth of 15 million in bonds, stocks, and equivalents. If the value of the Manhattan condo went to zero (which, of course, it never will), the buyer/owner could pay off the 5 million and still have 10 million in the bank.

On the flip side, the family that just paid 500k for a single family home in Natick (a good town, by the way) is 95% mortgaged, probably with $40,000 in a 401K and $10,000 in credit cards. If their home goes down in value by even 20%, they are completely wiped out.

Middle, you bring up a great point that a friend and I were discussing just this weekend. It is not that the buyers at the high end of the market are immune - that's not the case by any means. But the buyers in the middle or bottom of the spectrum might be much more sensitive to the current home value fluxes that we're experiencing. Perhaps those at the top have more to lose in terms of dollar value, but those in the middle and bottom may have far more on the line in terms of the full spectrum of their financial wellness.

Rona, I have a question for you somewhat related to the local weather idea. I own a condo in the Union Sq area of Somerville, and there seem to be a lot of plans in the works for developing the area: adding more public art and space for artists to work, new pedestrian-friendly development, easing of commercial restrictions, and especially the creation of a T stop.

The starry-eyed hopeful in me sees Union Sq. becoming hip and pedestrian friendly in the next 5-7 years, following Davis Square's lead (with comensurate property value increases). The cynic thinks these types of changes are measured in decades and not to hold my breath.

So my questions: How long does development like this generally take? And does that type of thing matter to potential buyers? Would you mention something like the city's plans to put in a T stop if you were advising a Union Sq buyer?

I live in the South End and have been seriously contemplating selling my condo within the next 6 mos in preparation for attending grad school in central Atlanta.

Since I only bought a few years ago, I've been keeping a keen eye on the market. The price I purchased was about 10-15 % below market at the time as the person I bought it from wanted out asap. Currently , the South End market appears to be flat...prices not going up or down. I don't see alot of homes on the market and I don't see whats on the market sitting for long periods of time unless they are in undesireable areas or have qualities about them that are not very attractive to people. (when I first looked around the south end I notice there were many of those types of places given the older architecture, etc).

The neighborhood associations seem to be getting stronger and more organized. I don't know...the sky doesn't seem to be falling here. Knock on wood...I hope it holds out so that I can go back to school! :)

Rona chiming in:

Marcus, you are not seeing fast sales because you are not shopping. There are plenty of places sitting stale on the market, but there are just too many competitive offer situations happening right now, considering that I was hoping for a real buyer's market during a recession. Many buyers are bitterly disappointed with the lack of opportunity. This is the experience of my buyers in Somerville, Cambridge, Arlington and Medford. I am not talking about total number of sales, or average time on the market. I am talking about the day-to-day experience of the house-hunters I work for.

Accidental landlord, I will write about Davis Square development in some depth soon. It is a good example. My short answer is that I think "selling" potential development in Union Square is premature. First of all, I won't count on the T stop until it is almost built. Secondly, the Davis development was slowed by the recession in the late 80s, early 90s (the stop opened 1985.) So, yes, I think you are being overly optimistic about seeing price inflation in that area in the short term.

I have been told "there is a lot of interest" quite a few times and it has never resulted in a quick sale. I sometimes think agents say that to make the buyers feel pressure. Maybe that isn't the case for a every area. I can't help but be reminded of the annoying car salesman in the comercial that says "HURRY DOWN!" .

Jim - I don't think you have anything to worry about in terms of selling your South End condo. The market in the city center area of Boston has proved to be immune from price drops that might be occurring in the lesser areas of Massachusetts. The inventory is just too small and demand far....FAR exceeds supply. You're sitting in one of the best neighborhoods on the eastern seaboard. I don't think you'll have any trouble whatsoever.

If you're looking for blog ideas. I'd love to hear about watertown condos/sf. How are those large condos (repton place,galen st, etc) doing?

I live in one of those condo buildings in Watertown and I have been eyeing sales in this (established, not new) building - the units here are still going pretty fast though prices have dropped a bit since last year. I think it has to do with the location. On the other hand, there's a "newer" condo building down the street which I believe was way overpriced initially, it just got taken off the market and relisted at about 20k cheaper to regenerate some interest. JM are you only looking at new construction?
My understanding is that Repton is still pretty vacant.

The market in the city center area of Boston has proved to be immune from price drops that might be occurring in the lesser areas of Massachusetts. The inventory is just too small and demand far....FAR exceeds supply.

LOL. I like the Panglossian humor.

http://www.boston.com/realestate/news/articles/2008/05/02/condo_sales_in_boston_drop_off/

Repton Place looks like a ghost town over-looking...well.. ..nothing pretty- the 3 people who bought when that first went up must be trying to hang themselves from their lousy balconies.

Yeah every time we cruise by Repton on the way to Russo's we wonder what those people were thinking. "an oasis... in the middle of an industrial park... ?"

There's not even public transportation nearby to soften the blow.

Marcus - As much as I commend and have always enjoyed Ms. Blanton on her very fine work at the Boston Globe, the story you posted as been thoroughly debunked by the erstwhile and ever-ready (and if I may be so bold, extremely cute! LOL!) Anthony Longo from the Boston Condodomain Blog.

Please see here for a more in-depth exploration of the story you pointed at:

http://boston.condodomain.com/blog/damage-control/

Sunshine, thank you for the continued hilarity. I especially enjoyed this snippet:

I mean I hate being negative about anything…but this is ridiculous and irresponsible! How can we have a large drop in transactions but only a “1% median price decline anyway?”

In most industries, being quoted as a market forecaster requires at least a passing familiarity with simple math. Thank the stars our real estate friends are unconstrained by such petty concerns.

Properties of similar size and quality are selling for about the same in 2008 as they were in 2005, 2006, and 2007 in the downtown neighborhoods including the Back Bay, Beacon Hill, Midtown, North End, South End, Seaport District, Waterfront, and in The Fenway. Also, South Boston, more or less.

So, accounting for inflation, you could argue there is a drop.

Beyond that, there has been no drop in value.

Value doesn't mean price, by the way.

Yes, S&L, you are right, the data in the Globe article has been debunked. Not as "inaccurate"; "misleading" is a better term.

Those who are actually buying and selling residential real estate understand they need to do more research than read an article in the newspaper or (to be self-critical) a blog.

There seems to be alot of new construction in Watertown. I'm looking in the area casually. The town's got an odd mix of housing stock, expensive small SF's, converted 3 deckers (potential HOA nightmare), several large complexes, and some new construciton.

Seems like there's a bunch of new construciton though. I'm just curious.
Repton place might be ahead of it's time. Nice location if they added a bus line. The only draw righ now is proximity to Russo's.
The new construction on Galen across from the Bus terminal looks nice but traffic at that intersection is a mess.
Several office building "loft" conversions on Pleasant st are have been sitting for a long time. Lousy pictures online. Looks like a bad set up.
Urbanica looks nice but small and pricey
I like the two large buildings on Grove St. overlooking the Charles but several units have been sitting w/ several reductions. I'm wondering if there's a large assesment in the future.

While it's always illuminating to read or hear a realtor talking his book, there's a remarkable paucity of a single shred of data to reassure us that a market where sales have dropped by nearly a quarter is still hot! hot! hot!

But I'm grateful for the link to condodomain anyway, where I did find this eyebrow-raising tidbit:

Today we got a feature on the front page of the Boston Globe Real Estate section on what you can get in the city for under $300,000; otherwise known as the affordable market. Our new friend Kate Jackson who is a Boston Globe Correspondent gave a buzz last week

My 2.5 cents-
Watertown is a mess, the only thing great about it is it's proximity to the city-just go to the Arsenal and Watertown Mall- those are the people who live in Watertown. Repton is definitley not ahead of it's time. It was put in a bad location and was a bad idea in general just like living in the cube farm lofts down the street in that office building that never happened. They have windows that don't open- enough said.
What are people thinking?

John,

Are you implying that the downtown market is strong? according to data provided on your own website the market is teetering on the edge...

"Inventory levels have been
relatively consistent relative to
sales. Despite the fact that there is a
relatively high amount of available
inventory, this Buyer’s market is
still seeing prices move higher.
Given inventory levels, these price
conditions are relatively fragile. If
the market cools off further, the
price trend is likely to reverse."

Not implying. Stating as fact.

'k, thanks.

Yeah, the housing stock here is a weird mix, that's for sure. but I like this town, and I enjoy living here. It meets my needs.
We looked at a townhouse a few blocks from the bus terminal that was only a few years old but it had a bizarre setup in that there was no HOA association. "You just work out repairs with your neighbor" we were told. Umm... yeah, that will go over like a lead balloon. "There is a lot of interest" we were also told. Here it is sitting, a month and a half later, with 20k in price reductions.

Marcus, good catch on that condodomain blurb about "their" story. It certainly read like a shill, with prominent quotes from real estate blogger/broker types telling the poor, "affordable"-end of the market buyers that, surprisingly, there are some condos available for under $300,000, and that they're a great investment. It was condescending and transparent, so I wrote a letter to the paper.