Are buyers all dropping out?

cue the usual responses . . . half will say that now is an absolute terrible time to buy, the sky is falling, boston continues to be overpriced, you're an idiot with no financial sense if you buy now, etc. The other half will say that things aren't that bad, they or someone they know is looking to buy soon, a house is a home more than an investment, etc. What am I seeing? Same topics and responses over and over and over again.

When this financial storm hit, we prepared to take our house off the market and rent it to tenants we know and trust. (We're in Northern Rhode Island along the Mass border. We're relocating across the country.)

Then the calls started flooding in. In the past 10 days, 12 people have toured our home. We had one ridiculous offer ($15,000 below tax assessment), that we rejected. Our realtor thinks is preparing herself for multiple offers by early next week.

I have no idea what's happening. With the "world is ending metality," you'd think buyers would sit it out.

Not so much.

Really I feel that Boston while not immune will fair much better than the rest of the country. I know sunshine and lollipos was joking in some of his comments but really it is different here. Boston's proximity to New York and more importantly and often forgotten Europe, make it a Financial Power city. The fact that we have so many people tied to the finance sector which will improve after the bailout is signed makes the cites on the "T" very desirable and unlikely to drop at all in my estimation. As credit eases following the bailout and the next president inspires a revitalization of the country, I feel that the economy will rebount in Q1 of 2009. Anyone who is thinking of buying should be looking and identifying houses. I think right now some buyers are a bit shaken and will accept offers 1-3% below asking price. For those home in the X-urbs I do not see much more of a drop as the greed of the beginning of the century fades and people seek a more balanced life away from the cities so children can be raised in a better environment.
We have gone through a tough time for sure and Rona I think the best advice is what my finacial advisor said this January "hang in there and be in for the long term" This is the only way to succeed

We are still planning to buy hopefully within the next 6 months. We'll see how the housing bills, bailout bills, etc, etc affect what we can/cannot afford.

I am certainly in 88% group. For Boston market, price is still too high given the condition of the properties.

However, I noticed that suddenly there has been increase in pending or sold status for the homes I was tracking in past few weeks/days. The sold houses were sold close to asking price. I am not sure why is that.

If you were a fence sitter with money in the market 15% off of
assessed value wouldn't seem like such a bargain. When many
financial instruments offer secure yields just under 10% and
most real buyers are cash based, some really nice digs can
be rented for the same cost as that 300Grand fixer-upper's
expense. The bailouts net effect on real estate values in the
next few years will be zero. Higher taxes, slower economy, loss
of income will continue to reduce homebuyers to bargainhunting only.

"However, I noticed that suddenly there has been increase in pending or sold status for the homes I was tracking in past few weeks/days. The sold houses were sold close to asking price. I am not sure why is that."

Simple, buy before the bailout and you too can have your principal paid by the Government and taxpayers...

I am in the 88%. We have been renting since we sold our house in 2006. It's so much cheaper to rent than to own a comparable place that we can't see the sense in buying. Everything's a fixer-upper and we're not interested in that.

I've been trying to buy for the last year, but I keep getting outbid. I put in an offer on a home a few weeks ago. It was a fixer upper in Dorchester. The previous owner paid $150,000 for it in 2002. Their asking price was $650,000. I offered $700,000, but got outbid by someone that offered $800,000. Massachusetts is definitely immune to the downturn. Lenders may tighten standards for loans in other states but not in Mass. The easy credit will continue to flow. Mass has a strong job market and we will definitely see job creation moving forward. The US may go through a deep and painful recession but not here. We are definitely immune. Anyone who thinks home prices are going to continue to fall are just bitter renters. I think we are getting ready to see double digit gains in prices within the next year or so.

Did I mention that Mass is immune?

Sorry to bore you same old thing, but yet you keep reading these blogs and taking the time to post. Here's the difference, those of us that say now is still a terrible time to buy are the same one's that called the bubble, called the downturn, called the problems in the credit markets, called the downturn on Wall Street, etc. etc.

The people saying that now is a great time to buy are the same one's that have been calling the bottom for the last 3 years. Kind of like when Bernanke, Bush, Paulson et. al. were telling us a year ago that subprime was contained or 6 months ago that our economy was strong.

Ah, Sunshine are you aware that the financial center in New York and the entire US for that matter is imploding? Hong Kong and Singapore will supplant New York and London as the world's financial centers.

The bailout will do little to ease credit markets because the problem is not liquidity, it is solvency.

There will be no rebound in Q1 2009. By Q1, even the government will likely finally acknowledge that we are in a recession.

As for the next president revitalizing the country, are you serious, are you for real? The Obama presidency will make the Carter presidency look like a day in the park (no, I am not a McCain supporter)

Today, in a televised speech on the floor of the House of Representatives, a Member of Congress announced that the White House has stated that a failure to pass the bailout would require the imposition of martial law.

But now is a great time to buy.

It doesn't look like the govnmt. drew a line in the sand at Nov 3rd.
Even if credit frees up temporarily , a lot of the opportunists will
" buy " properties and ignore financial responsibilities instantly.
If the penalty for foreclosure is nothing, why shouldn't every
American experience two or three years of expense free living.
What is the lesson learned from this financial crisis ? Buy now,
Cry later, Pay never!

Henry - there is an element of cause and effect. Bankruptcy happens when people / companies run out of cash. Lack of liquidity has led to fire sale of assets which has in turn led to asset deflation and insolvency.

I am convinced that in the last 2-4 years across the United States there have been two very different economic experiences. Well to do have continued to do well and that's why Newton/ Brookline /Cambridge / Back Bay / Beacon Hill prices are hardly lowered. In fact, Wellesley and Weston, two richest suburbs of Boston are the only two towns to witness a non-trivial increase in median prices. At the same time there are less well to do parts of the Metro where prices have been in free fall.

Housing prices are highly dependent on the job market. We are now seeing significant job losses across all spectrums. If those losses hit the upper end of Boston workforce, you will see a reduction in prices, else not.

My opinion- not all of Massachusetts is immune to the downturn. This also is an indication.. yes. that all Real Estate is local. I am a Realtor in Southern New England. My office is in Easton MA. My selling areas are Taunton, Dighton, Rehoboth, Swansea, Seekonk.. I should just say Bristol County and surrounding areas. There are a few homes in Taunton priced in the low 100's or less!
All of the above areas lost value year over year since 2006. It doens't matter the location anywhere in the country, homes that are priced to sell will receive multiple offers.

A fixer upper increases in six years by $500,000 and you have your answer as to why we are in this mess...greed all around. Imagine the rents one might need to cover the mortgage and what happens when your tenant doesn't pay?

We added more liquidity into the banking system. What happens when banks won't lend? We are going back to the "old days" when you needed a downpayment for a car or a house. The days of free money are long gone so I don't know where you are finding "easy credit". If you think the subprime was the root cause, sorry, wait until the credit cards, student loans, and auto loans get added into the mix.

.

More questions than answers. No one can say what will happen with the economy in the next year, but it's not going to be pretty.

Goldman Sachs revised their unemployment estimate through 2009 upward from 7% to 8%. Are they right? What effect on house prices, the root of many of the problems? Not good.

Will the bailout package return bank-to-bank/bank-to-business/bank-to-individual lending to normality? Maybe. I would assume it would go some way toward getting money flowing again but who knows what shattering event will occur next, and if that will seize everything up yet again? The day after the bailout passed Krugman was asking if it had already failed and predicting "Bailout 2" before the next president takes office.

Will this mess of a bailout package help put a floor under house prices by pressing Fannie/Freddie to restructure at-risk mortgages and preventing a significant number of foreclosures? Well, I wonder how they'll really accomplish this in practice. Lots of mortgage holders out there. Do they have the resources to identify the "right" folks and re-structure on a large enough scale to make a difference?

Despite obvious volatility which could send us spinning off in any direction, I'll stick with my prediction for Boston home prices dropping another 8% nominal, for a total of roughly 20% drop peak to trough, with the bottom coming next spring. (The audience would appreciate it if the cynical would muffle their laughter...thanks. ;-))

People just can't leave politics out of it... "The Obama presidency will make the Carter presidency look like a day in the park." The Bush presidency has made any previous presidency a day in the park. It will be pretty hard to top this. Perhaps McCain-Palin will be able to.

Anyways, all I am waiting for is to be able to pay not more than 30% of my take home income for housing. If the numbers work I'll buy and if they don't I won't. I am not waiting for any "housing recovery" or for any further fall in housing prices. One exception to this rule, if somebody is still willing to give a subprime loan I'll
take it. It turns out to be a pretty sensible strategy. And I am not being sarcastic here. I think I missed out on the opportunity to own a home by turning down an adjustable interest no down payment loan two years ago. I would have been far better off than I am now sitting on my cash and watching it being eaten by the inflation.

Hard Rain, the bailout is for the banks, not for the homeowners!

I'm frankly surprised by all the comments I've seen here (and in other postings on this blog) about house prices in the Boston area being inflated. I recently moved to Boston from Canada (Montreal and Toronto) and must say that prices here are relatively low compared to other markets we were looking at! Of course the downtown area here (i.e. condos over $5M) is a little inflated respective to the size and location one is getting, homes (single family and condos) are well priced outside the downtown core. Homes in areas such as Brookline, JP, Cambridge, etc. are all decently priced when you look at the population size, proximity to downtown/businesses, and quality of homes. Have home prices come down here? Yes, a little. Will they go down more? I don't think so, as the prices seem fair compared to elsewhere!

Just my two cents' worth.

I moved to Boston in 2007 and have been renting while fence-sitting with the rest of the 88% (hoping for a further drop in prices and watching the market carefully). Moving from the South, I am aghast at the housing prices even with the recent decreases (half of a house for $300K is a good deal??) I so far have determined that I have a better quality of life renting and saving the $1250 difference. Anyway, I have also noticed an uptick in activity these past few weeks, but I think we are seeing the product of the recent drop in interest rates (the rate drop pre-financial crisis but post Fannie/Freddie rescue) pulling people off the sidelines. With the recent further tightening in credit, It probably won't be pretty in a few weeks.

I am new to Boston, from California. I thought California was the most overpriced market in the US. I was wrong. My guess is that there's a world of hurt coming to the Boston RE market. Unless everyone here is making enormous amounts of money, they cannot really afford the prices for nice places.

I suspect that the downturn in the financial services industry will be the trigger that pushes prices down over 10% in the next 12 months. That, and tougher mortgage requirements. If a place that sold for $150K in 2002 sells now for $800K, then I can see some declines of well over 50% here over the next 5 years.

Guess it must be where you live (I"m in southern NH) - my house has been on the market for 2-1/2 years now (been through 4 agencies) and I've had no showings thru most of the summer and only one last month. They put in an offer which we accepted but then told their agent that they now can't buy for the next 6 months because they messed up their FICO score. (My husband has relocated already and I'm just waitng now.)
The house asking is almost 100k less than the tax value and I can't go any lower on my asking price. By the way - during the 2 years "buyers" have torn paper off the walls, riped carpeting in corners & stolen items. I am now present for all viewings.

I am closing tomorrow. Got a great deal on a nice family home. $30k below tax assessment. 4 years ago the same type of house was selling for $30k above assessment. Am I worried about if we are at rock bottom, NO. I got a good deal on a home that I can afford and we do not plan on moving any time soon. Markets go up, and they go down. A lot of people will be upset when things turn. And they will. When?who knows, but life goes on, we (and our children) grow older... The market may be some where in the middle right now, BUT it is better than having bought 4 years ago...

I don't know if we qualify as "potential buyers" because we already own, but I think one segment of the population is being over looked. We originally expected to be getting a bigger house in 2-3 years and to move out of our 2 bedroom condo, but the way things have been we are really quite happy with our smaller mortgage and controlled cost, so a freestanding 3 bedroom house is something we are putting off purchasing until entirely necessary. We will hopefully be having a baby next year, and when that happens i will have to purge most of my books and extras to make room for the crib and changer. Don't get me wrong, this is hardly a sacrifice and I am not bellyaching, but I am just indicating that it wasn't what we expected to be able to achieve, and I am not the only one. I expect that there will be a sudden resurgence of children sharing bedrooms in communities where each child having their own bedroom used to be a given, as parents decide that a smaller mortgage payment is a more divine luxury than a bigger house.

I went to 4 open houses yesterday--we are seeking in the closer to $1M range in the city--the open houses were not poorly attended, simply put they weren't attended! We were the only ones who signed up at our first place and the prices had already taken a 5% hit overnight. We were the 3rd and last people at the 2nd place and while it was nice it was way over priced for this market
We were the only ones at the third place and this thing has been on the market for 9 months with two price drops and still no takers. We were one of two people at the last place. The listing agents were admitting it's slow and were bored. I saw two othere places last week and those are still on the market with further price drops. Things are changing atlest in the hi high priced downtown areas.

Todays events aren't really looking all that good for real estate... Or the finance business in Mass.

Personally I think if there is a recession, the result will be higher prices in downtown city center markets. While price declines are happening in outer ring towns, the net result is that suddenly people can afford more than they could before, causing them to look closer to Boston than they would have before. The closer you get to the city, the more the process repeats itself. Hence demand for inner-ring and central city properties will only go up, especially in supply constrained areas such as downtown Boston.

Did anyone see the article about the Mandarin Oriental in the Globe recently? Incredible! As we can see, the wealthy are still wealthy and can still afford prime properties. I personally think that the second it opens, any property within a half-mile circle of the Mandarin will see its price/sqft valuation go up by $100, if not more. As we always hear, it's location location location. Regardless of the state of the stock market or credit markets, that law still holds true!

Immune? It's not a game of survivor. Why would Boston be immune? Do we not take part in the US and world economy? Are our businesses not international with offices across the US and world? Is our real estate market not seeing a slowdown? Are prices still ridiculous compared to salaries? Not too long ago there were articles stating that new med school grads were leaving Boston because of the cost of living and many others have moved to warmer climes that are cheaper as well. Sunshie and Lollipops talked about "Far-off New York." That should be a clue right there. NY is not very far away and has the same companies that we have here.

Even if some buyers think prices are going to come down more, there are probably plenty of buyers who are willing to spend a little more now just to get settled in and start living in a new home.

Right, cause when the DOW is at 7500, unemployment is 10%, long term interest rates are over 8%, lenders require a minimum 10% down payment, etc. etc. homes will be flying off the shelves.

wait, wait, wait - don't listen to the realtor's - they are hoping, praying, and scratching for commissions - all the positive peeps on this site are... realtor's or... their cohorts.......wait, wait, wait.

They said last year was the best time to buy...wait, wait, wait.

Sunshine, IT IS ALL ABOUT THE CREDIT MARKETS NOW. Contraction in credit is called deflation, deflation leads to lower asset prices. If people can't secure loans, homes will not sell and prices will collapse. Period. So what if the the 2% of the population that can afford to pay cash will not be affected. Great, so that minority of the population can buy and sell homes to and from one another and they can enjoy a continuation of their own mini bubble. Their actions are meaningless to the other 98% of the population that need a mortgage to buy.

Everything is a-OK.

Brokerage Asks Sellers to Cut 10% off Home Prices
By Reuters | 06 Oct 2008 | 06:29 AM ET

One of the largest U.S. real estate brokerages Monday said it is asking its sellers to cut listing prices by as much as 10 percent to kick-start U.S. home sales in a market plagued by a two-year price slump and near-record unsold supply.

Coldwell Banker Real Estate said some 25,000 sellers listing homes with its brokers will cut prices during its first national, 10-day sales event starting on
frFriday that aims to lure potential buyers off the sidelines of the worst housing market since the Great Depression.

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Most owners still are unrealistic when pricing their homes, and a reduction of 10 percent or less would push the properties "over the tipping point to a sale," according to Coldwell Banker, which is based in Parsipanny, New Jersey, and is part of Realogy Corp.

"The main driver is to bring buyers and sellers together and to increase the activity in the marketplace," Jim Gillespie, president and chief executive officer of Coldwell Banker, said in an interview.

The good new for MASS just keeps coming....

Mass. asks about federal loan amid market worries

BOSTON - The treasurer of Massachusetts has asked the federal government about lending Massachusetts money under the same favorable terms it has given banks and firms during the financial crisis.

Treasurer Timothy Cahill's requests to the U.S. Treasury and Federal Reserve Bank of Boston this week were prompted by the state's inability to borrow from the short-term debt markets, The Boston Globe reported Saturday. The financial turmoil has caused credit markets to stop lending, or to charge prohibitive rates.

California has made a similar request, saying it would run out of money by the end of the month if the short-term debt markets do not ease. The state asked whether it could not obtain loans from the Fed.

Massachusetts has enough money to cover its expenses for the coming weeks, Cahill said. But a low-rate loan would ease a cash shortfall if the credit problems persist.

"That's all we would ask them to do: Treat us like the investment banks," Cahill said.

Federal officials have not responded to his request, Cahill said Friday.

The state's borrowing problems come as it deals with a $223 million shortfall in projected tax collections during the first quarter of the state's fiscal year. On Thursday, Gov. Deval Patrick announced the first of what could be a series of cuts to programs and operations to deal with the sagging collections.

CondoBuyer, apparently such a good comment you had to post it twice?

Things are certainly different from two weeks ago, according to word on the street. Agents have told me that they have seen a drop-off over the past ten days. No doubt, continued uncertainty is making a lot of people wait. Sellers as well as buyers, of course. If you were a seller, would you list your home for sale for any reason other than you were moving out of the state or lost or job or some other life event (birth of quintuplets)? Oh, so quiet. That doesn't mean prices within Boston will drop, though. No buyers, no sellers, they offset each other, no?

For us, we've decided to stay on the sidelines for the time being to see whether home prices drop more closer to Boston. We want a certain type of house and would rather get it closer to Boston than Worcester. Prices have dropped like a stone near 495 but not so much on this side of Natick. Maybe that changes, maybe it doesn't, but it certainly seems worth waiting it out, especially given that renting in Boston is still comparatively cheaper.

The other factor is down payment requirements. If you want me to put down 20% rather than 10% then basically you take away my cash reserves. Which makes buying a house seem like an even BIGGER decision, that further induces caution.

Finally, there's the unemployment picture. This impacts not only my ability to carry a mortgage, but also location, since I am less apt to buy further away since I don't know if I'll have to be commuting to Boston in a new job. Plus, my wife is a teacher and not anywhere near public transport. Also, I personally believe the only thing that has really tempered the bubble bursting in Mass has been a relatively stable and benign employment rate. If that starts to change, and people get laid off or displaced, the I suspect the snowball effect will be quick and significant. Many people who would LIKE to sell their homes are prudently deciding to wait. Force them to sell, however, and the ballgame starts to change. We won't see declining prices in those areas that are poor, or where gentrification failed to significantly take hold, but you'll see it everywhere.

I'd rather be prudent and be one of the guys sitting on the sidelines waiting to see how things shake out than be left holding the bag if I got laid off. It's not so much about making sure the market has reached bottom, but knowing that even if it has bottomed out, it's not going to be taking off anytime soon. So, all things being equal, then why not just wait and see what happens?

Sunshine "Location, location, location" is something you only hear from real estate agents who are trying to pull the wool over buyers eyes.

As I've described more than once on this blog, yes, location matters. But its just one variable amongst many. Over focusing on it makes it look like you are trying to sell people something...

John K - if there are no willing sellers, than houses will trade at the price that forced sellers are willing to take. This will bring the whole market down as real estate prices are set by the transactions that have taken place - real estate econ 101

Charles,

I agree with you. I think developers might have to start slashing pre-construction too since their lenders will operate with tighter rules. People typically buy pre-construction b/c they anticipate prices to rise when the bldg closes. These days it's the opposite. The only exceptions might be the ultra wealthy (Mandarin) or very high priced units at 45 Province, etc.

I am a buyer on the sidelines for now. I've been actively looking since January, have bid on two properties--one seller owned and the other bank owned. Neither worked out and we are in a new lease. I figured it was probably just as well when the market started going nutty these past few weeks. So in retrospect, I'm glad both bids didn't work out.

Earlier this week I saw a house online that blew the other two I'd bid on out of the water by a ton. The home, in Fairmont Hill/Readville Hyde Park, was built in 2000 and puchased in 2006 for $580,000. It is now a bank-approved short sale for $350K. It is practically new construction and the home is very attractive and has features like central AC and is a good size (about 2200 square feet). I would say it is worth considerably more than $350K, although $350K is our budget.

Unfortunately, I won't get to see the inside because in less than a week there are multiple offers on the table, with at least one willing to close within 30 days. The selling agent and seller have suspended showings. Now that we are back in a apartment lease, we need to provide a minimum 60 days notice--so its not like we can compete with the offers already standing even if we could take a peek.

So, I think my personal take is this---I'm betting we'll find the right place next year, and that's probably better because I'm not really up for moving again after a 3 month tenancy anyway. However, I'm keeping my eye on listings daily. By and large, most are still crappy, located somewhere crappy, and overpriced or all three. But, there are exceptions out there, even in this market if you keep your eyes peeled. This one may be the one that got away, but I'm hoping there will be others to follow.

As for sellers who might be sitting there wondering where all the buyers are---they are out there, but they frankly aren't going to pay top dollar in this market particularly for properties that haven't been maintained.

no area is immune from the deteriorating economy. with 60 trillion dollars of future liabilities, the enormous trade and budget deficits something has to give. to you boston area and other yuppies that means no pension, time to face reality. add peakoil or the inability to pay for it to the mix.