Inventory is down, but so are sales

I would think overall that sellers would have to blink first as they usually have commitments/life changes that will not let them hold out forever, wether its depleting their rainy day fund due to a job loss/salary reduction or starting/growing a family and having to little space or need to move to a better school system. For the most part the only thing qualified buyers have to get over is the emotional wear and tear of continuing to look and not see any price drops. Although emotions can be a very powerful thing and lead to bad decisions...

It's like when you go to a clearance sale. You think you're going to get the best deal in the world on prime merchandise. But when you get there, you see that the prime merchandise is only 15% off and the stuff that is 50% off is junk that no one else wanted to buy.

Although your comments are well taken, these statistics are way to general. If you look neighborhood by neighborhood, you'll notice that the fundamentals vary substantially. For instance, the Back Bay prices have remained relatively flat, while the South End has dropped considerably. If you're lumping in Dorchester, Roxbury, South End and Back Bay all together, the real estate story becomes highly inaccurate.

home owners need to accept the harsh reality that many people over paid for their home. Its unfortunate, but true. home prices have been out of line with incomes, that's a big part of this mess we are all paying for now.

I'm ready to buy, and happy to pay fair market value for a property, not $350k for a cramped, 90yr old house, with a tiny yard, and original wallpapering.

I am one of those "sideliners", happily renting until things get back to normal. And I have to admit, the inventory out there is downright depressing. I still watched my "favored" areas to see what is currently for sale, and very very rarely does anything even warrant clicking on the listing to see more information.

That being said, I still have no regrets not buying in the last 4 years, no matter what nice houses I could have bought. I don't care how prime the property is, it would not be worth sinking my money into a depreciating asset that traps me in one place if I were to lose my job.

I can't be the only one who isn't surprised by this. Why would anyone choose to sell in this market unless they have to? Lower prices are going to bring fewer options to the market. While I think plenty of sellers are unrealistic (still) in their asking prices, I also think would-be buyers are unrealistic. There may be more properties coming on the market in the upcoming year due to foreclosures, but those aren't always in the best areas or conditions. I think for the buyers who are serious about buying, and absolutely planning on buying for 5 years or more (don't buy otherwise!), should make certain they themselves aren't being greedy. Don't pass up on your ideal property in Weston, Newton, or the Back Bay because you think you'll be able to snatch it up for $100k less in 6 months. That is a big gamble to take.

Question: How do those numbers compare year over year? Yes, inventory is weak now. But inventory is always weak in February.

Either positive or negative winter numbers aren't that reliable. The test will be the spring market

I keep wondering if I’m alone looking for a house that is affordable on my income and not requiring 50-100k in required updates and repairs. I diligently look over every new house that comes on the MLS in my area and haven't seen a single house that I can even justify looking at in the past 4 months. I think it's very funny that I keep reading us "first time home buyers" are going to help clear the inventory and fix the housing mess yet the best I can find is a house that I can't responsibly afford that very well should probably be gutted and completely be redone. If this homeowner bailout is going to accomplish anything I think it will put us “first timers” on the fence for another year or more before we can have our chance to help lower the inventory. I’d love to help the economy but not at the expense of bailing out those that priced me out of the market in the first place.

Unsold listings in the greater Boston area plunged 25 percent during the last three months? Several factors need to be mentioned! The first is the difficulty with buyers getting a home loan for the past 6 months, especially for an expensive property. The second is the sale actually closing escrow and not falling apart due to funding or inspection issues. The third is that MA. is a seasonal market and people normally pull their houses off of MLS around Thanksgiving before relisting them several months later. The fourth is all the very real and terrible economic news, both in the United States and the rest of the world. The fifth is the huge jump in unemployment numbers and previously recession proof professionals getting pink slips. The last issue is that many developers will naturally hold out for as log as possible. However, the greater number of unsold properties developers, especially smaller developers, have is similar to a car dealer with unsold cars on his lot. The builder is paying construction loan costs, interest and many other carrying fees and many don’t survive a market downturn. When so many economists stating that homes will decrease in price by at least another 10 percent this year and with consumer sentiment so low, we will soon see the fallout from many sellers and developers in the coming months. It is what happened here between 1988 and 1992.

I wish more of the houses on the market were foreclosures. Foreclosures seem very easy to buy. I put an offer on a short sale and it's been almost 2 months and we just keep getting the run around. Has anyone bought a short sale that worked out for them? It seems like we are giving these banks all of our money because of these "toxic assets" but they don't seem like they want to sell anything. I tried calling Barney Frank's office for help but I was hung up on so I don't know where else to turn but I would prefer if our money wasn't going to these banks

MS entry #8 -

You said it perfectly. I've been sitting on the sidelines, and I know what I'll buy: something decent at 3.5 times my income, where I want. How is that metric is so hard for some people to comprehend. In the early 90's, the oceanside south shore town I grew up in had nice houses for ~300-400k, and at that time the ave income listed in the townpaper was ~95-100k. Flash forward to the present....people still think they can get 700k for their average house when the ave income in the same town has only increased to ~120k.

Sorry.....the tortoise is easily going to win this race.

I keep reading that "homeowners need to wake up" and "homeowners need to stop deluding themselves". Thats all well and good, but why should homeowners who don't need to move sell their houses at a loss just to help the economy? Why should they list their houses at bargain basement prices just to help everyone out? They'll sit and wait unless they have to sell, which may happen soon with the economy, but may not. If that means some first time buyers can't buy that 3000 sq footer in Wellseley for $400k, whose fault is that? So if the prices fall in an area, but there is nothing for sale, what does that mean? If gas costs only 99 cents a gallon, but there is none in the pump for sale, what does that mean?

I notice that many buyers these days seem unwilling to consider homes that need what I consider minor work (painting, landscaping).

When I bought my 2-family in 1984 (midway through another period of rapidly rising home prices) many people were willing to buy a sub-optimal home in exchange for slightly lower prices. They would gradually put in "sweat equity" and tackle minor work or even learn how to do substantial remodels (kitchen, bath) themselves, thus the rise of Home Depot and This Old House; or save up to have it done for them later. Is patience, delayed gratification, and the do-it-yourself movement dead?

I notice that many buyers these days seem unwilling to consider homes that need what I consider minor work (painting, landscaping).

Buyers are unwilling to consider skid row-quality homes on offer for luxury prices. Which is a huge percentage of MA inventory.

If you're going to inquire whether morals and DIY spirit are lacking, you should be addressing sellers. They are the ones responsible for those '70s kitchens and '40s bathrooms.

"Why would anyone choose to sell in this market unless they have to? "

We keep hearing advice to buyers not to catch a falling knife. But, what about the converse? Aren't sellers taking an awful risk by trying to wait out the downturn? Aren't they more or less guaranteeing they will find the bottom? Or are they expecting that as soon as the market bottoms, we'll be back to double digit price increases?

Forced to choose between renting where I want to live or buying where I don't, I've made an easy choice. Nobody expects sellers to sell for a loss if they don't have to. And sellers shouldn't expect buyers to pay more than a reasonable multiple of their salary (or whatever your preferred tried-and-true metric for responsible buying) if they don't have to - and they don't, with the less expensive option of renting. Right now, there is just a big gap between what most sellers can sell at and what most buyers can buy at, there is no "staredown." When something reasonably decent in my price range is available in a place I'd like to live, I'll buy - I keep looking and trying, but it keeps not happening. I don't have any expectation that I will be able to buy, or that the economy will recover, until sellers HAVE to sell or foreclose. If it happens, great - not for just me, but I believe for the entire economy and nation as a whole. If it doesn't, my guess is housing sales will be very slow for a long time, or else high or hyper inflation has overcome us.

My wife and I live in the Brookline side of Chestnut Hill and we've recently seen multiple homes go on the market and sell for close to the asking price. Perhaps this area is an anomaly, but we've seen prices flat but not declining. When you're used to 10% increases each year no increases make it look like prices have gone down - but they've just leveled.

The problem is that the media has provided too much negative hype about the real estate market, especially here in Mass. This sets unrealistic expectations on the part of buyers. Our economy is better than many, and the most desirable parts of Boston and the suburbs are pretty small geographically. Hence, there is still pent-up demand (as even shown by these comments!) for nice properties in good areas. Good properties priced well sell very quickly. Yes, unrealistic sellers may have to wait or lower prices. But too many buyers pass up on great opportunities waiting for a "price drop". If you see something nice, even if it is "overpriced", make an offer. The worst that can happen is you do not get it. But, you might get a scared seller and a good agent who can make it work. Supply IS limited so take some chances, with low mortgage rates, you will be hard-pressed to make a mistake.

to post 8 and 11,

prices are going back to 1997 , or 1940's adjusted for inflation.

sound crazy?

look at GM stock, GE, and other huge companies and imagine me telling you that 2 years ago ( or 6 months even for Bank of America)

hang in there :) .

to 17,

it just hasn't hit yet. imagine what 12% mortgages would do to the prices.

sound crazy?

You will see 10% mortgages in 6 months or less.

reb,
i'm curious, do you honestly believe that? it's difficult for you to envision a scenario where a person could make a mistake buying a depreciating asset b/c mortgage rates are low? why is it that every time a "professional" posts a comment here i immediately question their intelligence and/or integrity? would i then be wrong to assume that you are currently in the process of acquiring properties at fmv seeing as you would be hard pressed to make a mistake?

The reason that few homes are on the market is because no one wants to sell at today's low prices unless they absolutely have to. Folks are staying put if they can, in hopes that they may obtain a higher selling price a few years down the road when (hopefully) the economy improves.

Unfortunately, almost every projection for home values, employment, and economic activity for 2009 and 2010 is negative. Hang in there for better days ahead>

#18, I suspect you weren't complaining very loudly when the press was touting the ever-increasing home prices from 2000-2007. Shutting your eyes on a plane that is crashing does not prevent the crash...

The waiting sellers are apt to find themselves significantly worse off a year from now. After all, when you consider the prices you can get for a home at this juncture in the Boston area, it is at at or very near an all time high. To assume year to year increases in this environment is not just wishful thinking, it is folly.

i am a homeowner who would very much like to sell my very well-maintained, updated, needs-no-work (except maybe a paint roller if you don't like my color scheme) over-sized ranch on a corner lot backing up to conservation land on a cul-de-sac. we have paid every mortgage payment on time and are in no danger of foreclosure. we would just like to split up, and the house would be challenging (but not impossible) for me to afford on my own, and i would rather not have the burden of all this house.
but why should i sell it at a "discount"? and why would anyone want to invest money that they might not even have to update a kitchen or bathroom just to sell the house? (btw, ours are updated and mint). we had it on the market last summer, and our buyers could not get financing. and we had additional offers, with completely crazy expectations. to buyers -- there are good houses out there, but not all sellers of the good houses "need" to sell. and so you will bully the sellers, and they will end up saying forget it. what will be left are the crummy properties, that are going for cheap.

Among my pet peeves are the various "methodologies" that are used to calculate real estate trends. The main flaw I find with the HouseSavvy survey, that I believe leads to misleading conclusions in this blog, is that the most of the calculations are based on monthly year/year numbers. This is a common way to track retail sales, but the housing market doesn't move that way - it's just not a predictable as people shopping for pencils in August (back to school) or for Holiday Season gifts. If you want to see what the trend is, you are much better off looking at multi-month year over year data. HouseSavvy gets close with their 3-months prior (I believe 4 months is a better indicator, and 6 months is best). So let's look at that. That average is only 8.2 months supply of homes, not the 11 months mentioned here. The January number just tells you last January 08 was a better market than than January 09 (which is a big DUH. ). Further, looking at the MLS data, counting all SF, Condo, and MF, we see 34432 active listings and 35555 sales in the last 6 months, despite that fact that it was probably the worst 3-4 month stretch for transactions in a generation. (These numbers indicate less than a 6month supply of homes). I think a deeper look at the data is warranted, the picture is far more mixed than HouseSavvy's interesting, but simplistic methodolgy.

#13 - I think what you were able to do was great. Speaking as a first time buyer, I can tell you why I will not follow in your footsteps
a) Cost - home prices are so out of sync with salaries that I cannot afford to fix anything up. I will be on a doable but tight budget that includes saving money for future maintenance - things that MUST be done and not things I would like to change
b) Time - In order to buy responsibly I will have to have a very long commute to work every day which will leave me with little free time to enjoy my new home and take care of the basics. Time for projects just isn’t there. It has nothing to do with the willingness to do the work and everything to do with the realties of everyday life.

#8 I am right there with you. I think that more will come on the market but sadly at the expense of all those who have lost their jobs

#20 - You go that one right - interest rates will be skyrocketing very soon, as soon as the lenders start to percieve a decrease in inventory. All rates not just mortgages. Anyone with debt needs to get rid of it and fast

It is always funny how the market is never right for renters trying to buy a home. Reading the posts on this board makes me laugh. In down turns in the economy if you are willing to invest some time, some sweat and some money you can find properties that can be turned into great properties. With renters there is always an excuse however. During the boom it was houses were to expensive, now it is houses are not nice enough for them. Renters will always be renters because they always find an excuse not to buy. Being a home owner who does not have to sell that is fine with me.But as a renter keep giving your money to a landloard and see who gets rich.. Hope your savings are gathering a lot of interest at the bank at 1% ( not adjusted for infaltion) Where is your better investment?????

I have no problem with sweat equity. I expect, and look forward to doing some work on whatever house we end up buying. But what I won't do is pay top dollar for a house that needs immediate and intense structural work. And this is still what I'm seeing in my area (Watertown/Belmont/Newton). Houses that are little more than gut-jobs that are priced at $500k? Laughable.

It is very depressing. We are newly married and prospective buyers and want a single family in a good suburb (good schools). I think the sellers are still "anchored in" to what they feel is the value of their homes, and that they need to budge. If not, we'll just keep saving and waiting. The market is not going anywhere. And come spring, when all of these sellers come back into play....it will be worse for them....inventory will be high and buyers will still be cautious.

Location, Location, Location. The three principles of real estate have not changed in this market. Here are the 4th quarter, 2008 stats from LINK which tracks sales in downtown Boston.
Beacon Hill
Number of sales up 3.23%
Average sales price up 21%
Median sales price up 8%

I'm not trying to sell my house. We decided to stay put and renovate the kitchen. It's beautiful (I think) but our contractor couldn't believe we didn't go for stainless appliances. Short version: I don't like stainless. Too industrial looking for my taste. But the grief I got over it because some future buyer is going to hate that brand-new dual power stove because it's white.

Which made me think: what exactly do buyers expect, anyway? Perfect, showcase, catered to their personal taste homes with top-of-the-line everything sold at a deep discount?

Our house is on the market - job change for husband & I've been jobless for 5 years. We've been in the house (45yo) for almost 20 years, during the child raising years, money went to day care. We've put in 40k in a new kitchen 10 years ago and 15k in the last two years for new roof, outside painting & septic system. You buyers want to pay me the same price that I paid 20 years ago, and on top of that, make *me* pay your closing costs, want new carpeting or redo the hard wood under the carpeting, new appliances ( have to be stainless), and repaint the rooms to your colors, this is in your "offer". The house sale price is not even 75% over the original price. Do me a favor and wake up. I have and accepted the fact that my house will not sell for the accessed value which is 2-1/2 times my original cost. Oh yeah - when I bought the house I had a 10.5% interest rate (yes, I did refinance it years ago.)

That's the problem- you want a house that's either new or totally remodeled, valued at 600k, asking price of 400k, and want to pay only 100k or less.

Perhaps this is a stalemate. There is a relationship between home/condo prices and monthly rental rates. Look at rental yield. So long as renters waiting to buy homes are providing property owners with enough monthly income to cover debt service and other expenses, there is little reason for that owner to sell. Furthermore, if an owner has to relocate for work, but can rent their property for enough to cover mortgage and expenses and maybe even a little income for themselves, why not do so? That owner can rent at his new location until the economic outlook becomes clear.

I would like to sell my antique multi and get a single but frankly, I am raking in rent. I am also not sure that I will be able to find anything I want. I'll sit this one out.

#18 RealEstateBroker, I suspect your weren't complaining about the media as it was touting housing as a great inevestment, and ever-increasing values and outlandish forecasts from the likes of David Lierah, from 2000-2006? One more thing, if you are sitting on a crashing plane, closing your eyes does not prevent the crash from happening..

"Supply IS limited so take some chances, with low mortgage rates, you will be hard-pressed to make a mistake." I almost spit my coffee out on that one....

Prices are still out of reach for many buyers and financing is not easy to come by.Some guy on the Cape came up with a cool way to sell his house , very intesting concept.I just saw his site , agoraseto.com, t appaers he gives 100% financing.That should help sell the place.

Does anyone have a read on waterfront properties? Have they kept their value and to what degree? Are they a safe bet against deflation moving forward as an investment? thx

Sitting, I own two myself, many would like to believe waterfront is "special" but it isn't. The waterfront properties due to their relatively high price tags, make them more illiquid, and tougher to price overall. My feeling is they might not have dropped as quickly as the market, but they will surely catch up.

Of course sellers don't want to sell at a "discount". But there are enough forced sellers over time, and the price they, and the foreclosures, set, is actually the price.

No matter what you paid for it, or what you put into it. That's not how markets arrive at prices.

And yes, if rent will pay the note, sellers don't have to sell. But it is quite clear that rent will not pay the note in many cases. Which was one of the signs of the bubble to begin with

what it comes down to is that you're never going to get a great deal around here. Unless you go looking in Lynn or Lawrence. I've heard so many old timers tell me that, when they bought their first house back in 1973 (or whenever), they were sweating bullets and had to get a second job, and work Saturday nights painting, etc. etc. And then you ask them how much they paid and they say $40 K and you say "hey, that's not a lot" and they say "it was back then". Yeah, the 2006 prices were ridiculous, but the prices aren't going to go back down to 1997 prices in good towns with good schools. Well, maybe, but if they do, then we're all going to be in for a lot of hurt.

#29
Still can't believe that some folks are still using the "renting is throwing your money away" excuse. Now that's funny! Sounds like for one reason or another you don't want to admit that prices are still coming down and many folks were rsmart to sit on the sidelines.
I'm a renter (thank you very much) that is saving a lot of money as money. Why would I want to buy a depreciating asset that will continue to decrease in value for quite some more time?

Glad I didn't buy into your "renting is throwing your money away" mentality that all the RE bulls continue to use as and excuse even though it's been proven that renting right now is the far better option.

Signed,
Very happy renter

Janine, yes, I think prices will be going back to 1997 levels. The stock market did today, did you notice? So not so inconceivable the housing market will do so as well. Especially if you look at the math and data.

And yes, we are in for a lot of hurt. In fact, its happening now. Try booking a table at Excelsior. Or getting a job at Fidelity. Or looking at the open retail spaces in the malls...

It is looking like a reversion to 1997 pricing is in the bag at this point.

Charles. Ok, you are probably correct, unfortunately. But when prices go back to 1997 prices, then people will still be complaining that the houses are too expensive for the condition that they are in.

People in Mass love to complain, no doubt. This is the complain-iest state I've ever lived in. And I've lived in quite a few

Charles, I have to complain about your statement. We do not like to complain! :)