What changed in 2008?

You're right to urge caution, Rona. This is a very, very risky time to buy a home in Massachusetts. Not only because a buyer may lose his equity or even go underwater next year. But every day, I hear of yet another person who has lost a job. Consumer sentiment unexpectedly plunged more than economists predicted; as retail sales show, the consumer is virtually disappearing from the economy. 2009 is going to be a very hard year. And no job is guaranteed depression-proof. Even if tomorrow I found a perfect house that met my own strict standards for a good buy, I'm not sure I'd go for it.

It is also not a good time to sell for exactly the same reasons...at some point, the supply will constrict as folks that can afford their homes and not truely out grown them (I love watching those housing shows, where a couple with 3 Brs, 2500 sqft and 1 kid say they need a bigger place, really!!!!) will stay in their homes...these will most likely be the most desireable homes...not many sellers are going to put a desirable home on the market knowing that sellers are demanding deep discounts because of economic reports...deals will be had for homes that need improvement or are priced as an "up in coming area" as they should, as opposed to already being priced as if the area is already at the new high fluent area...

Anyone that needs to buy house and is not buying at this time, is a fool. Not buying now is like needing a coat, going to Macy’s 50% off sale and saying “Gee these coats are too cheap I think I’ll come back when the sale is over”. If you are gainfully employed and plan to buy a house to live in for more than five years, now is the time to buy. Interest rate are a historic lows. Home price are not over inflated, but priced to market. In five year there will be a boatload of people saying, “Ya know I should have bought near the end 2008 or early 2009”. The secret to wealth is buy low sell high and don’t follow the crowd.

Jim - You will suffer at the hands of the other bloggers here for expressing that opinion! :) I give you 2 hours before the feasting begins, and I cannot wait to watch...

Personally, I like to see both sides of the argument, and I agree with the very last phrase you wrote, "Don't follow the crowd."

Other than tightening lending standards, the biggest change in 2008 were the quality of homes on the market. You have less people fishing their "flips" and more people who need to sell but never updated since the 60's. The quality really dropped but the prices did not for these homes. The problem you have is that when that one quality home comes on the market, its gone (and there's probably a bidding war). So I guess for 2009, keep your eyes open and your documentation ready.

I agree with Jim. I bought in May. Granted I do not plan to "trade up" in 5 years as I spent 7 years saving for this place! We might never see 4.875% again. I have no dissolution that the economy has hit bottom yet or that I will never lose my job, but I do know that over 15+ years that my home, in the very least, will have provided me safety, comfort, a sense of pride, and equity. Not as much as pre-2005, but some. It will be paid off before I retire as I am less optimistic about social security being there for me. I don't give a care if anyone thinks I'm crazy.

Jim, I'm sorry you're starved for commissions. Had you chosen to pay attention to data instead of puffery, you might be in a different position now. Instead, you cling to word-for-word quotes from thoroughly ridiculed NAR ads dating from 2006. I think Rona is a good example of how it is indeed possible to be a realtor without being disingenuous and unethical. You should follow her lead.

In any case, you're making your desperate sales pitch on the Internet, where a few clicks brings readers all the information they need to see what nonsense you are spouting. The latest Case Shiller numbers show house prices still well above historical norms. They are also above proper price to income and price to rent ratios. Calculated Risk has an excellent series of graphs from a few weeks ago showing why turnover is likely to be well historical norms for years, perhaps for a decade.

You're facing a long, slow attrition of the real estate business, and, as Martha Stewart would say, that's a Good Thing.

I was lucky enough to sell my condo in September and have been looking to buy a house for the last several months. I have made offers on three homes and have been unable to get an offer accepted. Brian C. has got this market pinned down. The quality homes are priced low and you need to get into a bidding war. The rest of the market consists of homes that people have lived in for 40 years or so and have not kept up with the maintenance. These are the sellers that are still asking top dollars for a house that will require $40K to $75K in improvements. I am willing to purchase a home that needs these improvements but not at the current asking prices. Until sellers are willing to start pricing their home in accordance to their current condition, I don't see sales picking up any time soon. Here is to the new year and hoping that a new crop of better quality homes come on the market. Cheers!

I don't think you can ever find a time that Greater-Boston area home prices were "affordable". Perhaps on a national level, prices are higher than their "historical norm" but it's not so, here.

It's dangerous to quote anyone in a market such as this. Mr Case himself said as recently as August that he felt the local real estate market might be reaching bottom. Then, the financial markets froze up, and he had to recant his opinion. Whoops!

Funny thing about economists, they are mostly just good about telling you about things that have already happened. Their predictions are often about as good as meteorologists.

Jones LaSalle Lang researched Greater-Boston area home prices and compared the ratio of median sales price to median household income from 1990 to 2008.

At no time was the ratio less than 4-to-one.

In 2002, the ratio was 5.32-to-one, about the same as in 2008.

To put it another way, buying a home today would burden the typical Greater-Boston area homebuyer about the same as in 2002.

Jim, though I agree with your cliches, I'd love to see some math to back up your point. Assuming the conclusion is not a technique that works that well on an even marginally sophisticated audience. Given that all reasonable observers think prices will drop, why is now such a good time to buy?

Rona, I think your words are very wise. I'm happy to pick on real estate agents who I think are spouting nonsense, but I think equally I have to express my admiration to you for being a credit to the profession.

Funnily enough, the 5 year rule (or 3, on occasion) was always the rule of thumb till recently. Amazing how many have forgotten it.

Jim, a last thought - the mere fact you need a place to live, doesn't mean you need to won it. I like owning, as I have a habit of ripping down walls for my amusement, but I can't say my luxury rental is causing me a lot of trauma. Whereas losing 10k a month would - I hat to lose money, its a weird thing of mine

Jim, you need to put your need for commissions aside and be objective. It is people like you (starving realtors) who have led many naive people to the slaughter. People want to believe their house will only go up, and that "it's a great time to buy". I can tell you after twenty years of successful real estate investing, this is absolutely NOT THE TIME TO BUY, we have a long way to go in terms of further price drops. Think 1998 pricing for a bottom, somewhere in 2012.

Home price are not over inflated, but priced to market. In five year there will be a boatload of people saying, “Ya know I should have bought near the end 2008 or early 2009”. The secret to wealth is buy low sell high and don’t follow the crowd.

JIm by what measure is home pricing not over inflated? How do you think the people who bought in the last five years feel, knowing their leveraged, illiquid, depreciating asset is far from a bottom? You can't possibly believe the biggest real estate bubble in history has reached bottom after two years or price declines?

For those of you who believe that there is actually a real estate market that goes up and down , you will always find some excuse not to act. Just line up with the other lemmings on their march to oblivion.
Those who understand real estate, understand that each property is independent. Although the values are effected by multiple factors, there is no market. There are good deals and bad deals available at all times. I am seeing more good deals than bad deals recently .This is a good time to buy if you are willing to work to find that good deal.
.I am not a realestate salesperson so you can save those comments.I am actively involved with buying and selling

The secret to wealth is buy low sell high and don’t follow the crowd.

I implore anyone on this blog to tell me what will be the engine for higher prices in the future? A logical, economic explanation, not brokerspeak that "real estate always goes up" and "they're not making any more land." Real interest rates have gone from 18% all the way down to 1% over the last 25 years, that can only happen once. Every subsidy to home-ownership has already been developed, what will cause prices to rise?

"The secret to wealth is buy low sell high and don't follow the crowd".

Wow Jim, that's some real groundbreaking advice there. I've never heard anything like that before. You should charge for that kind of stuff.

Jim - Are you a realtor or mortgage broker?

RE maven as an investor, what kind of cap rates are you seeing out there that constitute good deals?

Wow Jim, that's some real groundbreaking advice there. I've never heard anything like that before. You should charge for that kind of stuff.
Posted by sully December 31, 08 10:54 AM

'No need for the silly elementary school type sniggering. This may be old fashioned advice (and I didn't see that Jim said it wasn't, by the way), but many seem to have forgotten it.

If you need and want to buy-- and can actually afford it-- do your research and something worth buying may make itself known to you in 2009 (it also may not). Don't make the overly cautious, and sometimes greedy, mistake of waiting so long for prices to hit bottom that you actually wait either too long, or until you find yourself in a multiple offer situation that ends up driving the price higher than you would have preferred.

I know that there are some people who let others decide when it is a good time for them to buy. When my spouse and I bought our first house-- it turns out that it was pretty much at the bottom of the last housing slump-- people cautioned us to wait, that we were going to end up paying more than the house was worth. We are so grateful that we didn't. The place was in an excellent location, priced pretty good (as well as we were ever going to get, it turns out), and we could actually afford to live in it for the long haul, like we had planned. This month, our neighbor sold her house, which is "similar" to ours (except much older, and with half the property, and little sun), for two and a half times what we paid for ours.

We're not planning on selling, but if we find a modest priced place in an up and coming area, that makes better sense for us and our living situational needs (health and disability issues), then we will buy it. I am going to keep an eye on falling prices in 2009, always with an open mind as to whether something is appropriate to buy. If the economy swiftly continues to plummet, then we will act even more cautiously, and most likely hunker down and wait 'til daylight like everyone else.

Hung Wang- you don't make sense with all your blogs. If you claim that the future of housing prices will contibue to go down for eternity (I guess until they are free) then why with your 9 properties that you claim to own, would you not have sold them all in 2006 are even yesterday if they are currently at the highest prices they will ever be??? And you always knew this was coming? Please explain yourself. If you smarter than most, as you stated before, why didn't you sell????
There is such a thing as supply and demand curve. The prices will always be where those 2 meet. They go up, they go down. That is what happens when a market gets unbalanced.

One property is a primary residence, another is a second home (Turks & Caicos), three others are in Fort Worth Texas on top of the Barnett Shale where I received significant bonus payments and royalties from XTO Energy who is drilling for natural gas. One more is a piece of raw land on a lake in Sam Rayburn, TX (some of the world's best bass fising here), someday I may build a home there. The other four are properties in Hawaii, where the long term prospects are sensational (I bought all four in a bulk sale from the IRS in 1991). The last one is an 18 acre commercial parcel on Route 101 in Scottsdale, REO bought in 1997.

Hung, I thought you were living in Maine? You posted that a month or so ago? Do you own that property or rent it?

it has been settled...Hung Wang is the only person in America that has properties on 12/31/08 that will worth more in the future then they are today...the rest of the 300M Americans should all jump off a bridge...it over, pack it up, forget it, spend all your money now on sex drugs and rock and roll, because life is over...let's live in caves and call it a day...by the way, that is more than 9 properties which you claimed before...sounds like there could be some mistruths in your blogs...Hmmmm...let's face it, you are a 20 year old kid home from college and flipping through your Microecomic book as you write...

Hung - RE #17 - Cap rates are not my primary concern .The properties I buy are underdeveloped ,and I improve the values of these properties. That being said I purchased properties with cap rates ( at the time of purchase ), of between .53 and .14 in 2008. The .14 property surprisingly ended up as the best value.

I do live in Maine, the West End in Portland. Bill, you can just call me John McCain,
for you are correct that is more than nine properties, however the Fort Worth property was recently subdivided to provide a pipeline easment, so I believe that pre-subdivision that gets you to nine. I actually think most of these properties will go down in value also, I never claimed to be a "teflon" man. As I have said before I am only here to help people from catching a falling knife and ruining their lives as so many have in the last few years, but paying out the nose for an over-priced house. Nice word play on the Microecomic book Bill....

you found a property with a 53% CAP RATE??? The rent pays off the full cost in 2 years? I agree that is a good deal, Though frankly I'm amazed it exists in any market.

If you found a property with a .53% cap rate I'm quite a bit less impressed.

For me, in the markets I follow, I still haven't seen real cap rates. Doesn't exactly argue for undervalue