Keep waiting for that rebound

I don't think the NAR's predictions warrant any comment. They've been wrong ever step of the way, and it's clear they are just cheerleading in hopes of changing the momentum of the market. Must be a thankless job.

I'm skeptical of the NAR's numbers given their self-interest, sure. But by what metrics does Feldstein base his projection? I don't find "some guy from Harvard says so" overly compelling, either.

Anyone who looks at the mounting job losses, on top of the astronomical derivative losses on Wall St., and thinks that:

A) Consumers want to take on additional debt
or
B) Banks want to/can lend money on overpriced assets

is completely delusional. Debt is not wealth, unless of course you are AIG or Goldaman Sachs. When residential RE prices come down to historic ratios relative to incomes, we'll see things begin to plateau. Until then, dream on.

Who is to say who is right, NAR or Bloomberg? If anyone had a crystal ball, buying and selling real estate would be a lot easier. I think that we must take our real estate needs on a case by case, location by location, and motivation by motivation situation because every transaction is different.

I appreciate your real estate posts Scott, but you also do not know where the market is heading, so infusing your post with your personal opinions (saying "Bloomberg gets it right") is unfair to us, your readers.

Obviously I'm not going to proclaim surprise at that...

Did NAR mention anything about what happened to its last few predictions of rebounds? Or is that conveniently forgottten?

I own an apartment I rent out, so I have skin in this game. I started out cautiously optimistic that the value of that property would drop some, maybe 5 or 10 percent, but nothing crazy. Then things started looking worse, but still I thought "give it a year, sell in spring 2009."

Now? Now it's beginning to sink in that Boston area house prices will continue falling, probably through late 2009, maybe into 2010, and we'll be lucky if it stops at a total of 20% nominal (I'm still not in the "another 30% to go!" camp). It could easily overshoot. Why wouldn't it?

I even used to have faint hopes that the government, with its mighty printing press and a willing and able Congress and Obama administration, could do something to put a bottom under housing prices. No longer. They have as good a chance of stopping a winter storm.

What's left then? Nothing. I'm not underwater yet, so either I try and dump it this spring at a price someone will buy at, or I hunker down for the long haul, 5 or 10 years, and hope that the various numbers at play (rent, adjustable rates, etc) work in my favor so that I don't lose my shirt.

What a mess. And yet....as crap as my situation is, I count my blessings that I didn't buy a home for my family that I couldn't afford, in Arizona in 2006. Things could be worse.

I feel badly for all involved...it is only going to get worse...this is the truth. Look at all the layoffs, Citi = 56,000 - Fidelity = 1500 + - GE closing plants - GM closing plants, the list can go on and on. The economist which Washington has "hired" have all deduced that by 2010, if we are lucky, things will turn around....so bunker down and get ready for the ride!!!!!!

No one believes NAR anyway. They are just a bunch of liars. They don't have any credit, at least on housing market prediction. The only phrase they know and say all the time is "This is the best time to buy!".

Um, this price drop IS the rebound, and the angle of incidence looks like it's equaling the angle of reflection - 180 degrees. Once the energy of this rebound runs it's course, prices should settle around normal historical levels of incline/deline. In other words, we'll see but I wouldn't count on a rebound of the rebound that will in any way resemble recent bubble prices any time soon unless there's another real estate bubble around the corner .

Ho - hum. The downturn that started in 2006 keeps on going, just like the energizer bunny. My original plan was to list my Boston condo in 2009 and try to sell it. After much thought and revisiting my plan - with the gloom, doom, and dismay of the economic landscape right now -- I'm sitting on the bench until 2010. I will be renting the property out instead. There is no incentive to try and sell right now unless it is a forced sale situation (which I’m not in): more price drops, insincere buyers who really are just kicking tires, waiting for the "bottom" to hit; months of frustration and waiting to move my life forward, with very limited Boston inventory to trade up to. 2009 will be a repeat of 2008 (although I generally believe the worst is behind us).

The only winners here are first time buyers: low interest rates, lots of inventory, and the lowest prices since the early 90’s. Enjoy the real estate banquet 20 and 30 somethings!

At what point will the press begin putting NAR statements in context? It is absolutely inconceivable by now that the name NAR is not introduced by adjectives like "discredited" or "wildly inaccurate." Local blog Paper Economy has done a lovely job of chronicling NAR's hilariously unrealistic predictions and puffery over the past year, declining from over 6 million to under 5 million units--with each decline spun with press release burbling about "healthy price gains" and "momentum" and "stabilization."

All this, in the face of new data showing an eye-popping increase in initial unemployment claims. The economy appears to be simply stopping. And this is the setup for a rise in home prices next year?

Really, how often does a source have to BS the press before it stops quoting them?

the realtor's associations always give these rosy predictions. they have truly become the boy who cried wolf, and anyone who actually places faith in their reports deserves to lose every penny they are likely to.

Don't be fooled by the NAR's idiocy. Sales volumes is way down and will not pick up until prices FALL FURTHER.

Real estate is local. The real estate market is dreadful in CA, FL, AZ, MI and in just about every other boom & bust state. How about looking at Massachusetts. For that matter, look at each individual town in MA. What is happening in Santa Barbara, CA isn't necessarily what is happening in Wellesley. What is happening in Wellesley isn't necessarily happening in Manchester. Look at the MAR numbers and then the Warren Report.

Scotty Boston,
Lowest prices since the early 1990's.... Have single family home prices fallen to $160k in Metro West? Those same houses are still trying to get $350k and up in towns like Natick, Southboro, Northboro, Westboro, Hopkinton.... Instead of paying $400k I can pay $350k... This spring when everyone is selling cause they waited for the spring season coupled with job loss sales... There is going to be tremendous amounts of inventory for a small pool of buyers... That when you will see prices for a 3 bed 2 bath cape go for $250k and thats when I and people like me will buy. The magic number is $250k in this area because if you are married your prolly making 50k each and 100k combined x 2.5 - $250,000 and at 5% with 5% down your payment is gonna be about $1,300/month plus 300 for taxes.

NorthShore - (not picking on you in particular, just making a point because you addressed the issue) be careful with the generalizations - the "real estate market in CA...is dreadful". In many inland areas it is (as is probably the case in towns 60 miles west of Boston), but there are few bargains in places like Santa Barbara or San Francisco. In fact, I'd say Santa Barbara and Wellesley are in very similar situations at the moment (sellers still asking their 2005 prices plus a little to cover transaction costs). Prices aren't down much if at all, but transactions have fallen off a cliff. In both areas you have houses that were bought when credit was easy and the economy was strong.

The funny thing is, here in CA, people make statements like "well, at least we're not getting pummeled like they are in Boston". All states right now are in the "boom and bust" category, trust me, MA (or CA) is not immune, but it helps people to think it's much worse somewhere else. And people in all above mentioned areas can list a whole bunch of reasons why "it's different here" (weather, well maybe not for Boston, various industries, etc.), nobody thinks the current economic environment will touch them.

Matt:

In my posting, I did not say "prices are where they were at in the early 1990s" - I believe I stated "the lowest prices SINCE the early 1990's." We have been on an upward trajectory since about 1993 or 1994 (at the tail end of the last market correction), when I purchased my first home for $240K. Prices will not revisit the levels where they were at that time, but you can certainly try to keep holding on to the dream. If I were a first time buyer, I would be planning on making an offer on a property over the next 6 months. Good luck!

If I we trying to sell my house I would drop the price to market level so it would sell in 30 days and get out.

Seller should not hold on to their dreams. Prices will not revisit the levels where they were at that time, but you can certainly try to keep holding on to the dream

NAR economist Lawrence Yun qualified the projections by saying, “Price projections are challenging in an environment with so many variables and divergent local conditions,” Yun said. “The home price correction to date has brought prices in line with fundamentals, but buyer pessimism could cause prices to overshoot downward, resulting in further economic deterioration.”

The affordable housing portion of the market in my New England town saw a 22% downward correction in the median sale price this year from peak prices the previous three years. A very modest price gain in 2009 is certainly a possibility.

"Real estate is local"??? I didn't think anyone was still spouting that nonsense.

As I've posted here a zillion times (I might as well set it up as a cut and paste) "local" is just one of the variables driving the real estate market. It matters, but so do other variables like demographics, salaries, employment, and credit.

Focusing on just "local" is misleading enough to almost be lying. At this point, I assume no one could be ignorant enough to say it seriously, so there must be another agenda.

Only a group like the NAR can get away with making a FORECAST for 2008 with only 3 weeks left in the year. You make a forecast for 2008 in 2007. Once 2008 rolls around, you see if the results confirm your forecast.

Mark, you don't need a crystal ball. You just need a basic understanding of economics, finance and a whole lot of common sense. It's really not that hard. The simplest explanation is probably true: Ockham's Razor.

When home prices historically appreciate at roughly 3 to 4% a year and suddenly are appreciating at 20%, the simplest explanation is fundamentals are out of whack, you are in a bubble and like all bubbles, it will pop. When people with $30k incomes are buying $400k homes, the simplest explanation says that they will not be able to afford the home and foreclosures will surge. When you have an economy based upon massive amounts of debt accumulation and consumer spending (e.g. U.S.) the simplest explanation says that the economy is phony, cannot be sustained and will ultimately collapse. When you have an economy that is contracting, unemployment that is rising and consumers who are cutting back, the simplest explanation is that real estate prices (along with most asset prices) will continue to fall.

Ockham's Razor.

Hi. I really enjoy coming to this blog. It repeats the same information, over and over again, so that the same commenters can respond, over and over again.

Does Boston.com get paid by pageviews, or what? Because, if it does, you guys are going to be "in the black", next quarter. Congrats!

I appreciate your real estate posts Scott, but you also do not know where the market is heading, so infusing your post with your personal opinions (saying "Bloomberg gets it right") is unfair to us, your readers.
Posted by Mark December 11, 08 10:03 AM

I couldn't agree more, Mark.

Why the 'tude, Scott?

And I agree with John Keith; this topic is for the most part just another replay of the usual blog rants and remarks.

So I gotta ask, did y'all read the Bloomberg article, or are you just bashing it reflexively? Because what they do, in fact, get right is a much more balanced view of the real estate market, with opinions and forecasts and inputs from a variety of sources. Sounds like a more objective approach to me.

Besides, this is a blog. Since when do we come to blogs for pure, unadulterated, unbiased journalism? Personally, I read blogs precisely for the author's outlook and opinion. If I wanted pure reporting without opinion, I'd be reading somewhere else.

"Hi. I really enjoy coming to this blog. It repeats the same information, over and over again, so that the same commenters can respond, over and over again."

"And I agree with John Keith; this topic is for the most part just another replay of the usual blog rants and remarks."

Panic in Realtor world...

Ahhh it wouldn't be a blog post if John Keith didn't chime in with his trademark smarmy snidery, usually on display whenever a posting is made that realistically portrays the market as in the dumper.

Hey John - If you don't like it, feel free to stop reading and stop posting. You can return to your own blog where everything is all sunshine and lollipops, prices only go up, inventory only goes down and bad news is good news.

I have to agree with John Keith and Hard Rain on this one.

Look no further than the last post from Charles who wrote, "As I've posted here a zillion times (I might as well set it up as a cut and paste) "local" is just one of the variables driving the real estate market" Perhaps if you've said it a zillion times it doesn't need to be repeated over and over and over again.

Ah yes John Keith, it is so much better to get your news from the MSM, politicians, Wall Street pundits, etc. The same group of people that couldn't spot the real estate bubble. The same group of people that said sub prime was contained and our economy was healthy. The same group of people that have been calling the bottom in real estate for the last 3 years. Much better to listen to them than to listen to people like myself and Marcus who have been essentially spot on in our analysis for years.

Some people just can't be bothered with facts. It's much easier to spout off canned nonsense like "it's a great time to buy", "a home is your greatest investment" and "real estate is definitely bottoming".

John, some of us repeat indeed. Because it bears repeating.

How often have I been wrong, and you been right, over the last year?

I'll change my tune when the music changes. At some point, I'll actually be a big believer in buying real estate again. But not when it is obviously over-priced and the fundamentals are going into the tank

I'm baffled as to how anyone could think scott's views are anything other than reasonable. And this blog has actually had a tremendous amount of useful information since starting, which is why so many of us who are serious about real estate keep coming here.

no rebound here.....

“Soledad, a rural California town known for its wineries and the nearby prisons where many of the residents work, experienced explosive growth during the boom. Four different builders had projects under way, each with long buyer waiting lists, seven real estate offices were open to accommodate frenzied buyers, mortgage fraud was rampant, and people stretched to purchase properties they couldn’t afford, said Gloria Ledesma, broker in Soledad.” (California)

“It crashed hard. ‘You can now get a house that originally sold for $610,000 for $275,000,’ Ledesma said. ‘Now people can really afford them.’”

huhu

No the complaint was over the comments, not the writing. I have always enjoyed Mr Van Voorhis' stories, so much so that I quote from him, all the time!

BTW, the person who said, "go back to your blog" ... I don't have a blog, I just write for one.

And, Charles, I don't know if I've been "wrong" or "right". I never make predictions, I only report on the past. Makes it easier.

Perhaps I mis-remember your critique 6 months back or so of when I was pointing out that rent/own in the south end was still out of whack. And our discussions of what the spring market would hold.

Connel - if people are still saying "location, location, location", pointing out what aspect of this is nonsense bears repeating equally. I don't bring it up out of the blue, but neither am I capable of watching people try to mislead without putting out a counter.

coming soon to the Boston area...

The San Francisco Chronicle. “Bay Area home values plummeted to an eight-year low in November. The median for existing single-family homes in the nine-county region fell to $350,000, a 47.8 percent drop from a year ago and the lowest level since September 2000, according to MDA DataQuick. Nearly 50 percent of the houses that sold during the month had been repossessed in the last year.”