Slight decline in price, significant decline in inventory

I call bottom first...

Me, Lawrence Yun, Kim Blanton call bottom

I am about to close on a home and made a decision within 3 days of seeing the home because it was priced well. I bought it for slightly less than the seller bought it for in early 2001. It is priced under assessment and is in move-in condition. This is what I think most buyers are looking for especially in uncertain times. No one wants to put 20%+ down and see 10% equity eroded in a year or so. They want a home in good shape for a price appropriate to 1999 or 2000 to insulate themselves against some future loss. If you absolutely must sell your home now, you have to be realistic. If you bought at the peak (2005-2006), I'd say be prepared to write a check to the bank to settle up. If you bought in the boom (1999-2004), I'd say be prepared to break even or make a slight profit. If you've been a long term owner then you will make money, just not as much money as you thought. Obviously every situation is different , but in general this would be the rule. Lastly, I'd say that many sellers have been pretty stubborn about price reductions. This is especially suprising when you're selling a home that is 20 years old and needs a new roof and furnace shortly and maybe a paintjob too. The market isn't like it used to be. How is your overpriced, undermaintained home going to appeal to anyone?

I had / have a property on the market. It belonged to my uncle - he was run over while crossing a street. He is inacpacitated & will spend the rest of his life in a nursing home. I was made his legal guardian by the state. His condo was in very bad shape. I saved up his income (pension) & rebuilt the place. putting over $30,000 in the place making it mint. I then placed this property on the market. It first drew interest 2 weeks after hitting the market. I Went thru all the hoope - two days before it was to close - it was cancelled! It was a veteran loan. Turns out all federal loans have new rules. In this case the condo docs had a provision that said the condo association had right of first refusal. VA said that was discrimatory - never mind that it had been that way since 1972, Never mind that half the residents of the condo association are african american & 1/3 are asian. Madness. It feel thriugh . Now six month's latter it has drawn interest again but at $11,000 less. Hopefully it will sell this time - I am just trying to resolve his affairs before my uncle passes away.

The Case Shiller index remains the gold standard of pricing data -- and for the last six months Boston prices have been up-- I repeat up. this index tracks transactions of the same homes over time so it avoids the trap of sales "mix" affecting median data ( if more lower priced homes sell the median will decline even if all the homes are selling at higher prices) The Globe ususally falls for this error and the Times did the other day in a big way on NYC data. Most owners do not need to sell and in good neighborhoods there are no bargains.... The world has not ended -- just the papers report it that way...

In response what Joe posted about his new home: "It is priced under assessment and is in move-in condition.". Ultimately that is a fallacy. It might be priced under what the previous assessed value was, however, that is only a guess made by the town. The actual value is whatever someone is willing to pay for it. Now your home is not worth anything more than what you paid for it. The upside is, hopefully you can file for a tax abatement in 2009 :)

I find Paul d's comment interesting in that while it is factually correct, his analysis misses a major point: Boston has shown month-to-month increases in the Case-Shiller index during the summer & fall months consistently following the crash of the 1990s; which is why individuals such as myself have implored the Globe to use year over year numbers (and to the Globe's credit, in the past six months, the Globe has been using year over year numbers). What is newsworthy is that the year over year numbers have shown a consistent decline over the past three years - which was not seen in over 15 years. Month to month increases are normal, year-over-year decreases are not - which is why they are newsworthy!

I am both a licensed (current but non-practicing) realtor and a mortgage loan officer for a responsible community bank on the South Shore. I am seeing FAR too many homes on the market still priced WAY too high. No traffic, no offers. No offers, no sale. There are plenty of good, quality buyers out there who refuse to be taken advantage of - they have learned from the mistakes of others, and plenty of sellers who are too arrogant and shortsighted to understand that. There are also too many realtors afraid to tell them! My buyers/borrowers know what they want and will not overspend. The first-time homebuyer market is the key to unlocking this mess - and they KNOW it. Good for them.

RE: JD…. I had / have a property on the market. It belonged to my uncle - he was run over while crossing a street. He is incapacitated & will spend the rest of his life in a nursing home. I was made his legal guardian by the state…..

1st sorry to hear about your uncle. Before you proceed you should become familiar with Mass. General Law CHAPTER 202. SALES, MORTGAGES AND LEASES OF REAL ESTATE BY EXECUTORS, ADMINISTRATORS, GUARDIANS AND CONSERVATORS. Especially Sec. 22 and 38.

Though the master deed has language regarding a first right of refusal, your duties are simple… highest and best and or what is in the best interest of your Ward (Uncle). I had a condo listing where the association also had a first right. The seller informed them of the offer and was quickly informed by the management company that the association had never executed that right and would likely pass. Reason being they would have needed to come up with a whole lot of cash vs. financing the purchase and done so no later than when the offer to purchase was to close. We received their waiver verbally and then in writing 1 week prior to closing along with the 6D. Even if they had, the buyer or for that matter any buyer could have come back and upped the offer.

So in any event, I do not see how the first right of refusal could have been considered discriminatory. It was a restriction that was in place when your Uncle purchased the property and as it is still in the deed, is enforceable today. But keep in mind, when you petition the court for a license to sell, the laws pertaining to the sale of your Wards property will likely trump anything else. I recommend dropping the price and informing all interested parties that offers will be reviewed on a specific date. Go back to the highest 3 for their final and best. Then when you do accept an offer, do so with a statement regarding your fiduciary…. You might want to attach an addendum that contains the two sections referenced above plus any other wording your attorney might want to inform the buyer of. This way just in case a higher and better offer materializes, you can act without delay.
luck

Yeah ,,, we are at the tipping point ,, good communities are doing well while marginal ones suffer ... this is MA, it's a well known dynamic ... exceedingly hard to to create generalities ... the borderline buyers flock to the good while the borderline properties languish, skewing even Schiller .... it's where you decide to buy that;s the determinate ... outside 95 is dropping fast whereas inside 95 is highly localized... generalized stats are proving useless

People like Paul D will go through their entire life completely oblivious to what is going on around them. First off, he is quoting month over month numbers which are meaningless. You have to use YOY numbers to attempt to draw conclusions. Second, I guess he's been living under a rock for the last year and doesn't know what's going on in the economy and financial markets.

Despite the fact that we have been in a recession for probably the last year, the government still has not acknowledged that fact, and will not acknowledge that fact for another couple months as we await the 4th quarter GDP numbers. Once it becomes official that we are in a recession, housing will take a further hit.

Banks do not want to lend to other banks, and they certainly do not want to lend to tapped out consumers. Tough to buy a home when you can't get a loan. The party is over. We managed to con the rest of the world into lending us money for the past 10 years so we could buy over priced homes and SUV's, but those days are over. Stagnant wages and lack of savings mean we have no way to continue our consumption binge.

Let's also not forget that there are still two big waves of mortgage resets coming down the pipeline. Prime resets peak in 2010, while option adjustable rate and Alt A peak resets occur in 2011.

Sorry Paul, but the real estate market will continue to see significant downward pressure on prices.

Graphs of Case-Shiller numbers are all over the Internet, and only a click away (e.g., http://www.bostonbubble.com/forums/viewtopic.php?t=1348). All show that Boston prices follow a sawtooth pattern, bouncing downward. Prices peak in the summer and bottom in the winter, but each peak and each trough is lower than the last. It is astounding to me, at this late date, that we still have to repeat the explanation of seasonality.

Sellers have been boycotting the market, but that is about to change. Local layoffs have been announced at companies like Fidelity, MGH, Avid, biotech firms, retailers, shipping companies, the state--pretty much every sector. And there are more to come. This is where we enter the vicious circle of unemployed home debtors being forced to sell while fewer buyers can qualify, adding to inventory and depressing prices faster and faster.

Scott, I agree, the home assessment is not a great gauge. I guess my point is that many homes I saw were still priced above assesment. It is possible that the town has under assesed a home, but I'd say in general many towns took full advantage of the escalating RE values over the last few years to extract the maximum tax income. In my case, the town valued the home almost 150k above the selling price. So I offer that concept of paying less than assessed as a ballpark indicator. Yes the home is worth what I paid and yes, I'll be filing for an abatement.

I signed the P&S on my first house this past week. We waited a very long time to place our offer, mainly because sellers haven't been realistic about valuations. This has started to change. There are many qualified buyers waiting on the sidelines and will leap at a nice house that is priced along the lines of the 2000-2002 valuations.

"People like Paul D will go through their entire life completely oblivious to what is going on around them." --John

That insult was uncalled for. You don't know Paul (or people like him, for that matter), and knee-jerk stereotyping him, just because he posted something that you disagreed with, was unfair and unreasonable, to say the least.

We just bought a home for just a little over what it sold for in 2000. (~330k vs 310k). Unfortunately for the previous homeowner they took out home equity loans up to 500k and were forced into a short sale. I feel that home prices are going to dip below the 99-01 territory and then stablize around those levels as Joe had suggested. I also expect interest rates consistently in the 7's before Q2 09.

The bottom line is you're either buying or you're not. If you can wait then wait. Prices are going to keep falling. If you are buying, know that you're probably not at the bottom but you are no longer at the top either. Remember, you control what the house is worth not the list price. We paid over 50k less than list price. Good luck.

MB,
As far as John's comment is concerned everything he said was in line. Like they say... If it walks, talks and looks like a duck then it must be a duck.

John, I agree with MB, but I'll go one step further.

You're mean.

When you insult people, we stop listening to what you have to say. If you can't play nice, stay off the blog. Please give your OPINIONS without insults and demeaning language.

There may be many buyers on the sidelines, but many of those buyers have no interest in catching a falling knife and are waiting for prices to fall further. Problem is, while buyers are waiting for home prices to get back to 2000 levels or lower (they are already at 2003 levels), many sellers still think it's 2006 and the value of their home is still going up 10% a year.

Mostly I brought this data to the blog because it quantifies the real estate weather, which is what I am reporting here. The real estate climate is a whole different matter. I agree there are far better measures of that. Month-to-month statewide data is pretty useless if you want to talk about long term trends.

I think what Rona posted accurately reflects what is happening now.

But I think this is the calm before the storm. The low inventory is a classic sign - those with options are waiting, only the forced sellers are out now. But eventually the rest will be forced out. No reason to think the spring market will be improved, should be a lot worse.

And at this point, I have to say I tend to think anyone who uses month over month data is actively trying to mislead. No one is that naive anymore.

At the end of the day, prices will reflect the underlying fundamentals. They still don't do that. Especially in central Boston (where I've lived on and off since 1996, btw)

It seems to me that there is a magic breaking pint at $399k. Home that were once priced at $500k, $475k, $425k are coming down, but homes that went on the market in the $399-$375k range refuse to budge. It's like they can't bring themselves to lower the price anymore. So you have homes on the market at $399k that accurately reflect the market depreciation (would have gone for 10-15% more a few years ago) and homes on the market at $399k that would have listed there anyway- market depression or not.

My husband and I are preapproved for $350k purchase price. We have excellent credit scores (his is over 800!) and steady jobs with good salaries. And yet, we are seeing nothing in the single family market south of Boston. This market depression has done nothing for us. When will we start to see some correction for houses in the $399-369k market?

And real estate agents are not helping. They don't want sellers to lower prices because it lowers their commission. And it potentially lowers future commissions in the same area. So who exactly is going to tell these people that their homes are overpriced?

I have to disagree with MCW ("And real estate agents are not helping. They don't want sellers to lower prices because it lowers their commission. And it potentially lowers future commissions in the same area. So who exactly is going to tell these people that their homes are overpriced?")

RE agents don't make any money if a property doesn't sell, so they certainly will try to get a seller to lower a price if that's indicated. Some sellers won't and some can't, but (most) agents will give the seller periodic updates on their home's competition and pricing trends.

And, I just took a quick look at some of the SF homes listed south of Boston. In my sample I see 166 homes listed for sale between $349k and $399k, and 103 of those have had at least 1 price reduction. Of course, I don't know where you're looking or what you're looking for.......

Pricing a house correctly is always important, and houses that are priced well ARE selling (but we're seeing more buyers have trouble getting a mortgage even after being pre-approved.)

I echo Taylor, I know our agents would love to present lower prices to get things moving, but the sellers don't see it that way. We can only advise, ultimately it is the seller calling the shots. Good real estate agents generally don't care about the price as long as it is accurate. It's volume that makes us money, and you can only have that if sellers and buyers are agreeing on price and entering into transactions.

3 bedroom homes in the 5 south shore communities we are looking in are either $389-399k or above or are in such bad shape, it's not worth it (concrete front yards, horrible neighborhoods, etc). Have you visited those homes Taylor? Beacuse I've probably seen at least 60 of them. In one town a house under 1200 sq ft still thinks it's going to garner $400k? Come on. Wake up to the down turn.

NF- that's just the problems- buyers and sellers are not agreeing on prices- hence the standoff. And in a housing market depression with the buyer supposedly in the driver's seat, who blinks first? I'm betting it won't be the first time home buyers who saw what overextension did to the market.

Agents do not want places to sell for much less becasue it depresses the sales in the immediate area- a real estate friend who manages an office outside the city said this to us a few weeks ago over dinner. I didn't just make it up.

Also, see today's blog article on the continued delusion of home sellers who seem to beleive that the housing downturn doesn't affect their house which has- of course- increased its value.