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Boston and the Case-Shiller numbers

Posted by Scott Van Voorhis  May 28, 2009 09:00 AM

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It was certainly a jaw-dropping decline, the 19 percent decline in home prices in the nation’s top 20 metro markets.

But buried in the Case-Shiller indices’ first quarter report was some pretty interesting news about the health of the Boston area market.

And how you view it depends where you stand on the spectrum from housing market bear to housing market bull.

Boston was one of just a handful of cities to avoid a double digit, year- over-year decline in price.

Home prices in the Boston fell 8 percent during the first quarter, putting in league with Cleveland, Dallas, Denver and Charlotte, all of which also experienced middling declines.

After all, 8 percent looks pretty good compared to the 25 percent wallop home prices in Detroit took over the last year and the 31 and 36 percent shellacking endured by Las Vegas and Phoenix respectively.

If you lean towards the bull side of the spectrum, you are thinking that the Boston area may avoid plumbing the depths of the housing market downturn as vast tracts of foreclosure ridden California suburbs are.

There’s something to be said for this view as well. While we’ve had our share of foreclosures, it’s not on the scale of a Miami or a Phoenix or other hard-hit areas, where 50 percent or more of all sales are foreclosures.

That will bring down prices, and in a hurry.

But if you are a housing market bear, all this means is that we still have a long way to go before we hit bottom.

For the bears, there are some stars that could be aligning in your favor.

One key factor is the recession, which appears to have hit the Boston area later than the rest of the country.,

That means we could be stuck in the economic doldrums right through next year, even as the rest of the country begins to grope towards recovery, according to a recent estimate by the New England Economic Partnership.

Home prices could keep on sliding through 2010, the forecasting group contends.

Now take that, housing bulls.

This blog is not written or edited by or the Boston Globe.
The author is solely responsible for the content.

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42 comments so far...
  1. Seems we have this same discussion every month. Prices in the Boston area are still unaffordably high, and will fall at least another 30% until they are supported by fundamentals.

    I have heard the current anemic market volume characterized as a “showdown” between buyers and sellers. Who will be the first to blink? Well, I can tell you it won't the the buyers. And there is a good reason for this. Compare local incomes with local house values and it is clear people (in aggregate) simply don't have enough money to buy houses at current prices. The price run-ups we saw in the past 10 years are the result of a credit boom and speculative mania, plain and simple. The credit boom has now turned to a credit bust. Banks are clamping down on reckless lending and scuttling deals left and right. Although many people still want to buy homes, they can't because they don't have the resources to get financing. Let me say that again, because it's important:


    Consequently, deal volume is way down and prices are plummeting. (Note: this problem is particularly acute in the $750,000 and above market due to extremely tight “jumbo” lending standards.) Banks have veto power over buyers who would otherwise make foolish purchase decisions. They will continue to kill deals until prices realign with incomes. This is already happening on an individual basis and over time it will occur in aggregate. As an economy, we simply cannot support more than a 2.5-3.5x median home price to income ratio.

    I appreciate the sentiments of sellers who think they can hold out. But holding out for higher prices only works when: 1) you have buyers that can afford what you're trying to sell, and 2) when your neighbor isn't willing to sell the same thing you've got for less. Good luck with both in this market...

    Posted by Lance Stapleton May 28, 09 09:47 AM
  1. Any graph of the Boston CSI is a good tool for forcibly shutting the mouths of realtors babbling about upticks in the spring market. It displays strong seasonality, with upticks each spring that nonetheless do nothing to halt the steady downward March in the CSI of nearly 20% since 2005.

    We had about two and a half years of home price declines with the unemployment rate still below 5%. That changed last year, and now unemployment is around 8%. The worst declines in the last housing downturn occurred when unemployment peaked around 9%. We're not even there yet with the jobless figures, but the price drops are already bigger than the last time. Just wait to see what happens as unemployment worsens.

    Oh, and when comparing Boston to other markets, try to compare apples and apples. Everyone thinks CA is having a state-wide half-off sale. In fact, higher priced areas along the coast have looked a lot like our tonier suburbs: a frozen market where sellers resist lowering prices and nothing moves. Only now are the richer sections starting to melt.

    Posted by Marcus May 28, 09 09:54 AM
  1. I used to cling to any positive thought on this I came across. But I've been driven to beardom. Here's how I'm thinking of Boston house prices at the moment:

    No matter where you are in the country, housing prices have to come into line with historical averages on price-to-rent, price-to-income, and real prices.

    Unemployment, foreclosures, falling rents, and large inventory will continue to put downward pressure on prices. On inventory I'm thinking there are a lot of people just waiting, holding out. That shadow inventory will keep inventory high for awhile.

    According to Calculated Risk, in every housing recession two things happen: First residential investment bottoms, then prices bottom. And the gap between the two could be many months. Nationally we may reach the bottom of residential investment this summer, which would suggest prices will fall for awhile yet.

    Prices could easily overshoot the average, as they often do with popping bubbles.

    There is absolutely positively nothing anyone can do to prevent the dropping of prices. All a homeowner can do is wait for the nightmare to end, for a bottom and stability, then assess their position and make the best decision they can.

    Posted by accidental landlord May 28, 09 10:00 AM
  1. Where are the housing bulls?

    Posted by Nick May 28, 09 10:09 AM
  1. Boston is lagging. That is all. The Boston area is desirable. But not desirable enough to sustain housing prices that are a lot higher than the rest of the country.

    Posted by julio May 28, 09 11:32 AM
  1. Same people , same comments, same agenda.

    Same little playground you always want to play in.

    Same drama you beg to star in.

    Posted by maninthemirror May 28, 09 12:34 PM
  1. What ever will not sell through the end of June (end of the main selling/buying/moving season) will have to come down in price. That will drug the market farther down. The unemployment is still on the rise but incomes (except those on the welfare and in government) are not. We'll see another 2 - 3% drop in Boston housing prices by fall/winter. And God forbid the economy will tank again at the end of 2009 or early 2010 under the Obama's uncontrollable spending, deficit and taxes. Then.......... Well then perhaps people will get their wits together and kick the spenders out of the office in 2010 and the main Spender-in-Chief in 2012.

    Posted by gb May 28, 09 12:46 PM
  1. My analysis of the Boston CSI data points to the same forecast: the downward correction started in September 2005 will reach the historically normal price trendline around Summer 2010. Of course, every new monthly data point could make slight adjustments to the date (which is dependent on how quickly sellers want to get the market moving again). News reporters should learn to place the new numbers in that historic context--showing the trajectory of the correction and how the prices of sold homes are approaching the historic trendline--instead of myopically comparing them to last month or last year only and then feigning shock and awe at prices being "lower".

    Posted by Glen May 28, 09 12:55 PM
  1. One thing people shouldn't forget....During the housing boom, almost none of the large publicly traded homebuilders (except for perhaps Toll Brothers) had any material business here in Massachusetts. Because of more liberal zoning and development regulations, they were all building in the W, SE and MW [which, not coincidentally, are suffering the highest delinquency and foreclosure rates]. So, unless the supply of homes in the Boston area magically increased, I doubt an additional 20-30% correction from current levels to "catch up" with the rest of the nation will occur. We're in the market right now and believe me, I wish such a scenario could play out, but I don't think it's realistic.

    Posted by evgong May 28, 09 01:10 PM
  1. Right here Nick, closing on a property tomorrow!

    Posted by Phil May 28, 09 01:12 PM
  1. For the bulk of the middle class buyers, housing prices in Boston outpaced incomes in the last ten years, by a lot. And those were the days that folks had some expectation of 3-6% raises. The Big Boston institutional employers (Education, Health Care and Finance) have reigned in salary increases this year and appear to plan to continue that trend for atleast the next couple of years, as they cry over their dwindled endowments (They seem to care less about their employees dwindled retirement account).
    So Boston housing will get it's turn, as the housing prices are out of reach of the buyers.. simple.

    Posted by Rick May 28, 09 01:17 PM
  1. Lance, Can you apply for a blogging position with the Globe. You seem to be more informative on the housing market than most news sources...

    Posted by Brad May 28, 09 01:21 PM
  1. Went to an OH last weekend and it felt like I was in a time warp.

    5 or 6 other couples in the house and the realtor said they already had 2 offers. This was a Sunday and the house went on the market on Friday.

    Great house, great neighborhood (in a top town), decent price. Not a fire sale, but reasonably priced.

    We are looking for bargins, not a bidding war. My sense from house shopping is optimism from potential buyers is way up.

    Posted by Jack R. May 28, 09 02:20 PM
  1. As usual all the housing experts are on board with quotes such as:

    "Prices in the Boston area are still unaffordably high, and will fall at least another 30% until they are supported by fundamentals."

    The simple fact is, nobody can predict where this market is going. As for me,. I am seeing sales. Lot of them. Drive around Essex county in towns such as Ipswich, West Newton, Newbury, Haverhill etc and there are a lot of sold signs lately. Does that mean the market has bottomed or stabilized? I have no clue but somebody is buying. And im not talking foreclosures either.

    I wish them luck.

    Posted by Fred Quimby May 28, 09 03:06 PM
  1. Boston has always been insanely overpriced for the shoeboxes in square footage you get. It's laughable to realize that we're shelling out half a million dollars for condos with "2" bedrooms when the second bedroom is smaller than your pinkie! I say: "Buyers, laugh at the real estate agents who tell you that people will jump on their property and say you gotta be kidding me!"
    it's about time property around here becomes reasonable!

    Posted by Vespa May 28, 09 03:35 PM
  1. Of course we have smaller percent declines than areas like Phoenix, Las Vegas and Miami. We didn't have the same run up in prices that those areas experienced. Many of those areas saw home prices double and triple over the span of a few years, while prices in most areas of Massachusetts "only" saw 50 to 80% gains. Take a home in Phoenix that went from $100K to $300K and is now back down to $150K vs a home in Mass that went from $200K to $300K and is now down to $250K. The person in Phoenix is still up 50% while the person is Mass is only up 25%. The bottom line is home prices are reverting back to their levels based upon fundamental prior to the bubble. In most parts of the country home prices are back to 2002-2003 levels and need to get back to 1998-2000 levels to be price based upon fundamentals.

    Posted by Lou May 28, 09 03:44 PM
  1. Can only report on personal experience: we're professionals in our early 40s working in non-profit higher ed, combined income > $120k, bought our first home in November, purchase price in desirable part of nearby NW suburb = $400k, been saving for many years and had full 20% dp + some for repairs, put in some sweat equity, already refinanced last week for 4.75, required appraisal indicated house "worth" $410k vis a vis comps, mortgage payment is only a few hundred more than rent for 2bd apt in Cambridge, we're planning to stay put for at least five years, don't view the house as an investment and expecting that at worst the whole thing will be a financial wash compared to cost of renting. Deluded?

    Posted by Indiana Jones May 28, 09 04:58 PM
  1. Brad (#12): Thanks for the kind words. Appreciate the kudos!

    Fred Quimby (#14): “The simple fact is, nobody can predict where this market is going. As for me,. I am seeing sales. Lot of them. Drive around Essex county in towns such as Ipswich, West Newton, Newbury, Haverhill etc and there are a lot of sold signs lately. Does that mean the market has bottomed or stabilized? I have no clue but somebody is buying. And im not talking foreclosures either.”

    Compare the sales volumes in these towns in 2009 with 2008, 2007, 2006, etc. According to the Warren Group, sales of MA single family homes in 2009 are down around 40% from their peak in 2005. This implies a massive decrease in demand which inevitably leads to falling prices. To me, this theory fits pretty well with the reality I see every day. But if you have a different perspective (one that is not based on conspicuously placed “sold” signs and other forms of propaganda from Realtors) then I'm all ears.

    Furthermore, I dispute the assertion that nobody can predict where the market is going. I will save my philosophical rant on this topic for another day. But I will say this: I stand by my predictions and the logic behind them. Feel free to call me out if I'm wrong.

    Posted by Lance Stapleton May 28, 09 05:03 PM
  1. The so-called housing "correction" that's taking place in the Boston MSA is largely driven by price declines in the foreclosure heavy areas such as Dorchester, Brockton, Worcester, Lowell and Lawrence.

    In top towns, prices continue to increase because demand is nearly infinite. Massachusetts is a wealthy state and there are many buyers with the ability to pay.

    In my nabe, consisting of the downtown city center markets of Back Bay, South End, and Beacon Hill, the housing correction is essentially a non-event. Prices here continue to escalate, open houses are absolutely crammed with desperate buyers. The recession has pretty much passed over us here with no ill effects. Inventory is low and demand is massive. Places are selling at or more frequently above peak pricing.

    Boston is blessed with multiple sources of high income jobs: healthcare, finance, education, high tech. Remove any one of those legs and the table still stands firm.

    This, coupled with the larger demographic trends which favor downtown living over the environmentally unfriendly "big box" suburban lifestyle, results in demand for city center urban housing which is nigh unquencheable. Just too many people want to live here and there's not enough space for housing.

    I'd say anyone who bought in the past 3 years in downtown Boston is sitting on healthy gains right now, with few exceptions. The 2009 real estate market is shaping up to be one of the most successful ever here in downtown Boston. Recession? What recession? If this is a recession, bartender... make mine a DOUBLE!!

    Posted by Sunshine & Lollipops May 28, 09 05:06 PM
  1. Although there's likely pent up demand here in the Boston area given the weak economy and the tough financing environment, there's also almost certainly pent up "need" among sellers. That is, there are a lot of folks out there who might like to sell and trade up, but can't do so under current conditions -- typically because they don't have enough equity because of slumping values. So, any modest strengthening or uptick in the real estate market in this area will probably attract a lot of "fence sitters" to list their homes. And this, in turn, will translate into significant new supply as soon as the market begins to strengthen. In other words, this process is likely to exert downward price pressure for many months -- perhaps several years -- to come. I think this process is going to take a while to unwind, and people shouldn't count on a "hot" sellers market again any time soon -- my guess would be not before at least 2013 or so...

    Posted by Louisio May 28, 09 05:11 PM
  1. As usual all the housing experts are on board with quotes such as:

    Commenters like Sunny Jim and Lance and others have the grace to back up their statements with numbers and data, which takes time to find, and time to post. I'll take their analysis and hard work over snip and sneer.

    The simple fact is, nobody can predict where this market is going.

    That's not a fact. It's an opinion, and not one that accords well with reality, either. Plenty of people predicted our current situation. Predictions are never easy, but a problem doesn't become unsolvable just because you can't follow the math.

    As for me,. I am seeing sales. Lot of them.

    Tell us more. We are eager to hear about all these sales that never show up at the Registry of Deeds, whose data shows a continuing collapse in sales.

    Posted by Marcus May 28, 09 05:24 PM
  1. Other than wishful thinking and hoping for the best, can anyone tell us why home prices will not continue to fall and why shouldn't they continue to fall? It is a known fact that the new wave of foreclosures are hitting the professional classes in the upscale towns. Huge losses in pensions, 401K's and savings accounts for everyone have been huge and in light of all this, we're supposed to run out and buy a home?

    I can't understand why it is that so many R.E. writers for major newspapers, in addition to Realtors, continue to press buyers to buy a home in this economy. They should be pressuring Sellers into lowering their prices and to align them to the state of the economy.

    I guess it is easier for them to gin the numbers and work on people's emotions than it is to influence Sellers - who control the market - to get realistic.

    Comparing Phoenix of Miami to Boston is like comparing apples to oranges. However, the same hiring freezes, pay cuts, unemployment numbers, difficulty in obtaining a mortgage and removal of exotic and liar loans which fueled the housing bubble apply throughout the country.

    Posted by Ward May 28, 09 06:50 PM
  1. Housing prices are declining for the houses no one wants. I'm currently looking in the suburbs south of Boston in nice areas. Houses are selling within 3 days at the asking price! There are no declines in the nice towns. All this talk about being a buyers market is junk. No one is selling their houses, because everyone is saying the market is horrible. That's causing an decrease in the supply of nice homes, which is increasing the demand. I have seen prices go up in the nice towns in southern Massachusetts the past year. By nice towns I'm talking about a decent commute into Boston, a strong school system, and a good neighborhood.
    I may not be looking in Boston, but #19's post appears to be what is going on in the MA market in my experience the past five months.

    Posted by Never ending house hunter May 28, 09 07:52 PM
  1. Just read the article, Is Your Home A Good Investment? (It is not). In addition to "Why Your Mortgage Won't Make You Rich", both in today's Wall Street Journal on-line.

    I also watched tonights NBC Nightly News about the sad state of the housing market and how it is now engineers, Doctors and people with graduate degrees who now find themselves either behind in the mortgage payments or going into foreclosure.

    Posted by Harry May 28, 09 07:58 PM
  1. Soon Boston, soon. if you are selling, take a reasonable offer. Don't be one of those stories. If this is the case at 4.75 %, REALLY, what will be the story at a still historically low 7%? Stop thinking there is something magical about Boston. Its just denial keeping asking prices high. ALSO, buyers are asking for it. just because you hear bad news on a national level, RE is local, wait for people you know crying..then its a good time to buy.

    Posted by f.F.C. May 28, 09 09:09 PM
  1. People talking about increased sales and bidding wars are likely just that, talk. You have to take posts which provide no data or facts to back their claims (which are most of the bulls on this blog) with a grain of salt, especially posts which contradict what the data shows. It's easy for someone with an agenda to make bogus posts of a real estate rebound.

    Posted by Henry May 28, 09 09:51 PM
  1. I just read an article about people in Phoenix "averaging down" on real estate.

    "I bought too high a few years ago," said Jason Fischbeck, an entrepreneur who lives across the street from Mr. Jarvis and is one of his clients. "It cost $225,000. Now it's worth $110,000. So I just paid $80,000 cash for another. "

    Never mind that it will take roughly 18 years of a very generous 5% appreciation for Mr Fischbeck to recoup the $115K nominal loss on his primary residence, this is just another case of people thinking that we are at the bottom and bubble will be re-inflated (which it will not).

    Posted by Steve May 28, 09 10:27 PM
  1. "Furthermore, I dispute the assertion that nobody can predict where the market is going. I will save my philosophical rant on this topic for another day. But I will say this: I stand by my predictions and the logic behind them. Feel free to call me out if I'm wrong" - Lance Stapleton

    Since you seem to know better than Krugman, how about calling a month and year when we reach bottom? I'm sure a lot of people out there would love to be able to time the market bottom like you. Krugman's date of "someday" was not very useful to us everyday folk.

    Posted by Fred Quimby May 28, 09 11:10 PM
  1. It's all neighborhood by neighborhood. Good places in good locations will always be snapped up. I bought a new place in Arlington and sold my place in Cambridge in the space of a couple of months last summer. Both places got multiple offers immediately following the open houses. I was amazed. Based on everything I'd been hearing about the down market, I had expected that my place would take 6 months before it would sell. Don't believe everything you read.

    Posted by Pinhead May 29, 09 08:02 AM
  1. Fred Quimby,
    Jan-Apr Data indicate that:
    Haverhill had fewer sales than any year since 1992.
    Ipswich had fewer sales than any year since 1992.
    Newbury had fewer sales than any year since 1988.
    W. Newbury had fewer sales than any year since 2004. Sales are so low (13 total) that a trend is difficult to discern.

    Maybe the data will show as pike in May sales?

    Posted by lama May 29, 09 08:03 AM
  1. I don't think any of us that have been spot on in our analysis of the downturn have ever ventured to call an exact bottom. We've said things like homes need to fall XX% to get back to historical norms based upon fundamentals, but I don't think I've never heard an exact date for a bottom uttered on this blog. And that's because you can't call or time a bottom unless you get lucky.

    Looking for a bottom is not the point. It's looking for value that is important. If I buy a home or stock that I believe to be fairly valued based upon fundamentals and it drops another 10% in price, meaning I missed the bottom, I will not care. The point that we keep making is home's are still over priced and not fairly valued.

    As for me, my "bottom call" is home prices fall back to 1998 levels or lower, which means roughly another 20 to 30% haircut and that will not occur until 2012 or later.

    The date, however is not what is important. If I found a home that was fairly valued, I would be a buyer today. Fact is, there are very, very few fairly valued homes on the market, so it's not worth my time to seriously look now, when in a few years, after sellers have thrown in the towel, most homes will be fairly valued.

    Posted by John May 29, 09 08:15 AM
  1. Never Ending - Thanks for supporting my claims with actual on the ground evidence of exactly what I'm saying.

    Prices in high demand areas are not declining. In fact they continue to increase. The recession is not really affecting high wage earning individuals. Supply is tight and demand is huge, so in nice neighborhoods you're not going to see declines.

    Ask anyone trying to find a bargain in Brookline, Cambridge, or the Back Bay. It's a seller's market!

    If you think you're going to find a nice, 2 bedroom 1000 sqft condo in the South End for anything less than $650,000 then you're absolutely dreaming. A few years ago people were breathless at the prospect of condo prices hitting $600/sqft in the Back Bay/South End. Now? I routinely see asking prices upwards of $750 or more.

    Low supply + massive demand = high prices. That law has not been repealed and never will be. Sorry buyers!! I feel for you and wish I could help but that's just the state of the world.

    Posted by Sunshine & Lollipops May 29, 09 08:29 AM
  1. There is a huge difference between a house going "under contract", and actually closing. I have seen many nice houses in Newton go under contract within days of listing. Many are not closing, which confirms the poor numbers.

    Posted by LynnLs May 29, 09 08:51 AM
  1. I'm sure a lot of people out there would love to be able to time the market bottom like you.

    Now you're just making stuff up. The only people who talk about "timing" the market are bulls like you. The bears are talking about value.

    I'm going to make a prediction: You're not going to be around forever. But since I can't name the day or the hour, you should definitely ignore my prediction and sign up for that 100-year mortgage.

    Posted by Marcus May 29, 09 09:26 AM
  1. Fred Quimby (#28): “Since you seem to know better than Krugman, how about calling a month and year when we reach bottom? I'm sure a lot of people out there would love to be able to time the market bottom like you. Krugman's date of "someday" was not very useful to us everyday folk.”

    Sorry to disappoint, but I'm not going to guess specifically when the market will bottom. There are way too many variables involved. But that is not to say all market predictions are bogus. Think about it like this... Predicting the housing market a lot like predicting the weather. Specific future predictions such as “it will be exactly 54 degrees and sunny on April 23 of next year” are nonsensical. There is no basis for making this claim. But more general statements such as “average temperatures will increase from February through August of next year” carry much more substance. They can be supported by historical precedent, logic, and common sense. Not surprising, they also usually turn out to be right.

    My repeated assertion that the Boston prices will fall further resembles the latter (general) statement, not the first. People can not afford to buy homes at current prices because banks will not lend them money to do so. And without capable buyers, sales volume will dry up and prices will fall. Look around. This is exactly what is already happening. Adding fuel to the fire, we are clearly suffering a global economic contraction. It is not the first of it's kind in history, and there are many lessons that can be extrapolated from the past. The most relevant one: severe credit contractions kill real estate prices.

    My assertion that prices need to fall at least another 30% in the Boston market is based on analysis of several different market fundamentals. (I have detailed all of these in the past if you care to review my posts). All point roughly to the same conclusion-- down 30% or more. Sure, I could be wrong and the market might hit bottom 20% below where we are now. Or it could be 40%. But I can tell you this for sure, we are not at the bottom yet. Not even close. That's the big point I'm trying to make.

    Now back to your original request. The best advice I can give to “everyday folk” is to study and understand economics. Pick up a copy of Robert Kiyosaki's “Rich Dad Poor Dad” book (make sure you get the original one by Kiyosaki, not one of the many “Rich Dad” branded knock-offs by other authors). It's an easy read and a great place to start. Then check out Benjamin Graham's “Intelligent Investor”. I also recommend reading “The Economist” every week... Avoid “news and analysis” from sources with obvious conflicts of interest such as the NAR. Seek to understand how money and banks really work (a topic completely misunderstood by most). Pay attention to what policymakers are doing. Study past economic cycles. In short, the best advice I can give to “everyday folk” is to turn off the TV and become informed. My two cents.

    Good luck!

    Posted by Lance Stapleton May 29, 09 10:20 AM
  1. Case Shiller futures predict the Massachusetts market bottoms in November 2012. That's 1 to 2 years later than most other parts of the country which are projected to bottom in late 2010/mid 2011.

    Posted by Dave May 29, 09 05:17 PM
  1. #36 There's a blog I follow called Boston Bubble, and the admin there posts the Case Shiller futures. The latest have Boston nominal prices having reached bottom and remaining flat through 2013. Of course real prices would decline as long as there was inflation.

    Are the futures correct? Dunno.

    Posted by accidental landlord May 29, 09 11:02 PM
  1. #37 -- Interesting. What does this mean? Is lance right about the 20 - 40 % drop or is this right? Or is this just a place for staunch bears to say that the books have been cooked and the data is (yet again) skewed and staunch non-bears to say the worst is over?

    Posted by bv May 30, 09 09:14 AM
  1. Accidental Landlord, welcome to the bear side! I know you don't want to be here.

    Fred, you might take a look at various predictions on this blog, and see how accurate the were. I can't remember when I started posting here, but its been years. And Marcus and I have been predicting this on this blog for a long time. Not claiming we predicted, but recording our predictions.

    As for how it works, as I think Lance above recommended, there is nothing better than Ben Grahams "The Intelligent Investor" to sum it up. Add basic economics, statistics, and Kindleberger and you've got a pretty good basis to make economic predictions. Precise ones? No, that's a straw man. But its really useful to know its going to be hot in August and cold in January before we get to either...

    Posted by charles May 30, 09 01:45 PM
  1. I would not place too much emphasis on the futures because the components of the composite CS Index (e.g. Boston) are illiquid. In fact, there are no sellers in the market this morning for the August 09, November 09, & February 09 contracts. (I stopped checking.) The only open contracts are for the Nov 12 settle.

    The information in prices of illiquid contracts - especially when there is no 2-sided market - is suspect when using in multi-factor models. The price is simply theoretical until someone trades it - kinda like MLS list prices.

    Posted by WSJevons June 1, 09 10:19 AM
  1. More on the endlessly fascinating and horrifying question of how far house prices have to fall...

    Lot of mentions on the blogosphere about this T2 hedge fund report on housing. I don't have time to read something like that, but some of the charts were posted and discussed on a blog called Mish's Global Economic Trend Analysis (sexy title). It shows the Case/Shiller and another index called Lawler. Both say that nationally housing has another 5-10% to drop before reaching "trend line", meaning the historical pricing trend.

    So that would be good news right? But the bad news (obvious from the graph) is that "there has never been a bubble correction in history that stopped right at the trendline." They always go below, then stay flat for a bit before turning up again. And that process takes like ten years. So that suggests another 10% drop, plus another 5% dip below trend, meaning 15% furthur drop nationally, with prices remaining flat until 2015 or 2016.

    The other bit of bad news (I think) is that this is a national number, not Boston. I tend to think (without proof) that national numbers might get dragged down by distressed sales in Florida, California, and Las Vegas. So if you're someone who thinks Boston's mere 20% drop thusfar just means it's lagging behind the other areas of the country, it's not hard to envision another 20-30% drop.

    But if we did only go down another 10-15% I'd be thrilled.

    Posted by accidental landlord June 2, 09 05:01 PM
  1. #35 Lance....
    Interesting stuff. So let's say the Boston market sees a 20-30% price drop as predicted. With the glut of foreclosures and distressed properties on the market and on the horizon, is it possible to see a price point separation that would support your analysis yet offer little relief to those seeking properties in desirable areas? April's numbers showed that 45% of home sales were distressed properties/foreclosures. Let's say that this number hits 50% in the Boston area. So what if distressed homes see a 40% price drop, yet the more stable clientele sees a mere 10% decline in prices to reach your 20-30%?

    Posted by Eric June 9, 09 07:22 AM
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Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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RE by the Numbers
Find Out How Much You'll Take Home From Your Home Sale
Today we're unveiling a new tool we've created for our readers. As we sit in one of the hottest seller's markets in recent memory many...