Next up: A double digit decline in home prices
OK, home prices have begun to fall again in Greater Boston, land of the million dollar fixer-upper.
Check out the latest numbers from the Warren Group, the Massachusetts Association of Realtors and Case-Shiller.
But so far, the declines have looked deceptively small for the Boston area, especially if you are focusing on the Case-Shiller numbers. It's been about a percent in each of the last few monthly reports.
All right, yawn, wake me up when it get's serious.
But don't be fooled. On our present course, we are on track to see a more than 13 percent decline in Boston area home prices by late 2011, notes economist Dean Baker at the Washington-based Center for Economic and Policy Research.
Let's also give credit where credit is due. The regulars on this blog - and in particular Lance - have been all over this one.
"Case Shiller showed another 1% drop month-over-month this morning for Boston MSA. This is similar to the rate of decline which occurred for the past 3 months. If this trend continues, Boston is on track to post double-digit price declines in 2011.
Fasten your seatbelt. It's going to be a rough ride."
Baker's comments are well worth reading closely as well.
Other markets that had also seemed to be bouncing back now also face a double dip in prices. Based on the rate of decline over the last three months, San Francisco prices are headed for a nearly 15 percent tumble, Baker points out.
He notes the lower end of the housing market is getting hammered the hardest - with more modestly priced homes leading the downward charge. In Boston, the bottome tier of the housing market is on track to see prices tumble more than 21 percent - compared to 16 percent in New York and 28 percent in Chicago.
Baker places the blame squarely on the home buyer tax credit, which helped fuel a short-lived rise in home prices only to see all the hot air rush out of this latest bubble when the credit ended on April 30th.
Recall the tax credit was rushed into law back when the Great Recession was looking more like another Great Depression. It was akin to hitting the panic button. I for one, to my chagrin now, was all for it.
The tens of billions in credits, awarded mainly to first-time buyers, briefly inflated the real estate market but delayed the day of reckoning for the real estate market as a whole.
The good news is the cure for what ails the real estate market is at hand, with more reasonable prices - and of course an improving economy - bound to eventually get buyers back in the game.
But no one said getting there wouldn't be painful.
