July 25, 2006

‘Sellers Are Being Short-Sighted’ In Massachusetts

The Massachusetts realtors have the June numbers out. “Home sales in Massachusetts tumbled 16.6 percent in June, while condominium sales declined 14.3 percent, the Massachusetts Association of Realtors reported in its monthly report today on the state’s housing market.”

“While sales were down sharply last month, prices barely budged. The median house price, $370,000 in June, is just 1 percent lower than it was a year earlier, while the median condo price, $283,500, is 1.1 percent lower than a year ago. ‘Many sellers are being short-sighted right now,’ David Wluka, president of the association, said. ‘They don’t want to admit the market has changed and their home may not be worth as much as before,’ he said.”

“The problem for sellers, he said, is that with so much unsold inventory on the market, ‘There’s little urgency on the part of today’s buyers to act.’”

“Inventory levels continued to rise for a 16 consecutive month in June, with the number of active listings of single-family properties climbing 10 percent over the past year to 56,494 homes and condos listed for sale this June.”

From the associations ‘talking points.’ “The more moderate sales pace reflects a more cautious approach to home buying on the part of consumers brought on by rising mortgage rates, which have increased a full point over the past year, rising energy prices, and a more plentiful supply of homes for sale, which has enabled buyers to take a more relaxed approach to the home search process.”

“The supply of detached single-family homes on the market rose for a 16th consecutive month in June, climbing 7.9 percent over the past year from 35,820 homes for sale in June 2005 to 38,664 this June. Inventory, as stated in months of supply, also rose steadily from 5.9 months last June to 7.6 months of supply in June 2006. A large number of sellers took their homes off the market in the last month however as listings dropped from May when there were 46,019 homes for sale.”

“The number of condominiums for sale has increased 16.1 percent in the past year, from 15,362 units last June to 17,830 in June 2006. Similar to the detached home market, condo units are not selling as quickly as they did a year ago. The average listing time for condos has risen by nearly four weeks over the past year from 66 days in June 2005 to 98 days last month.”

“The statewide median selling price for condos declined for the second time in the last three months during June. The median price of $283,500 is just 1.5 percent below the record high median selling price of $287,900 set in July 2005.”

The Boston Globe. “Foreclosure filings in Massachusetts increased 66 percent in the second quarter, according to data released yesterday, a trend that is expected to continue over the next year. That 66 percent surge in filings compares with a 30 percent rise in first-quarter filings.”

“Jeremy Shapiro, the president of ForeclosuresMass, said he was alarmed about the pace of Massachusetts’ sharp recent increases. ‘The foreclosures in Massachusetts right now are skyrocketing,’ he said. ‘`This is a problem that’s going to extend through 2007 and 2008.’”

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Comment by Ben Jones
2006-07-25 08:45:09

The PDF file for the statistics and talking points can be found here, under monthly data, June.

Comment by beantowncrash
2006-07-25 17:35:55

Here’s a theory… with foreclosures up 66% in 2nd quarter maybe these poor bastards are overextended on their house from taking equity loans based on BS appraisals. Now they’re finding they can’t sell w/o coming up with a boatload of cash they don’t have so they figure “WTF, I’m screwed either way so I’m not going to lower my price. … But of coarse the realtors are blaming the sellers for not being flexible. Of, coarse it has nothing to do with appraisers, mortgage lenders, and realtors, not to mention the Federal Reserve Bank Cartel pumping way to much fiat currency into the economy but I won’t go there…

Comment by GetStucco
2006-07-25 08:46:06

“The problem for sellers, he said, is that with so much unsold inventory on the market, ‘There’s little urgency on the part of today’s buyers to act.’”

Seller’s conundrum: Drop my price now, sell for less than I *know* my home to be worth, and screw up the comps for my neighbors, or keep my price high, never sell, and watch the neighbors screw up the comps for me…

Comment by JA
2006-07-25 08:50:43

Prisoner’s dilemna?


Comment by snake_eyes
2006-07-25 09:36:18

An exellent analogy, but only if all of the “players” know where the market is going. Most players are still in denial, unfortunately for them.

Comment by Neil
2006-07-25 10:49:30

Actually, this is a perfect prisoner’s delima. In the prisoner’s delima, everyone knows all of the prisoner’s are guilty just as in the seller’s delima everyone knows there is a surplus of inventory.

Where the analogy breaks down.

If sellers don’t sell (e.g., prisoner’s don’t talk) than the sellers are hit with carrying costs.

Also, in this case, its like have thousands of prisoners where if only one “defects” all of the others will suffer.

Its a sellers delima where FB and GF’s want everyone to cooperate… but its not going to take many defectors to create pain. At that point, we go to stage two of the prisoners delima (from the Wikipedia link) where everyone defects to punish eveyone else. :)


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Comment by jim A
2006-07-25 11:42:12

In the prisoners dilemma actual guilt or innocence figures not at all.

Comment by snake_eyes
2006-07-25 11:55:04

Quite right. It is a model for analyzing the decision-making of various actors in a situation where each one has imperfect information regarding the intentions of the other actors.

Comment by MB Renter
2006-07-25 13:06:40

That is possibly the greatest comment ever posted on this blog, ever. It is an enlightening sort of statement– what if someone were to actually apply Game Theory to selling real estate in a neighborhood? According to von Neumann, there should be an optimal point at which your house is able to sell, based upon the perceived actions of your neighbors. Game Theory and Bayesian analysis would have us believe that there’s a “perfect” market for houses, the precise point at which the buyer gets the best house for the buck, and the seller makes as much money as they can. I wonder if anyone has bothered trying to run RE figures through a Bayesian filter to try to predict the future marketplace.

Comment by flatffplan
2006-07-25 08:49:18

apples to apples prices are off 10+ % in MA ,maybe 12+ on the Cape
the epicenter for 1990’s

Comment by sdrender
2006-07-25 08:59:40

What’s up with the ’seasonally adjusted’ or ‘medium’ crap? Lies damn lies and statistic… all we need to know are:

- How much are on the market
- How much sold in a certain period and for how much.

That’s it, simple, and the rest people can figure themselves. I am surprised to what degree the realtors and the “economists” feel they need to feed us by the spoon as if we were complete idiots. It is insulting.

The housing bubble is officially a hard crash… yet the stats are twisted to make it look rosy. Back in the days of kings and queens, the religious elite was a pawn used to tell the masses how logical it was for such and such to be head of state. Likewise today, economists and their derivatives (realtors, lawyers) seem to recite unintelligible mumbo jumbo to justify the greed and idiocy that characterized the housing bubble that just died.

Comment by Robert Coté
2006-07-25 09:00:17

‘Many sellers are being short-sighted right now,’ David Wluka, president of the [MA Realtors] association,

Translation: ‘Many sellers are denying my members their 3% comissions on lower prices. These selfish sellers are only thinking of themselves and not about keeping the industry going.’

Comment by flatffplan
2006-07-25 10:00:53

why do foks use realtors- it’s a simple deal
done it many times

Comment by destinsm
2006-07-25 09:04:39

Go to this site NOW and look at the headline chart on home prices…. OUCH!!!


Comment by destinsm
2006-07-25 09:05:17

Oops… or you can try this link for the story with the included chart… :)


Comment by turnoutthelights
2006-07-25 10:04:56

“WASHINGTON (MarketWatch) — The worsening correction in the housing market continued in June, with inventories rising to a nine-year high while price appreciation slowed to the weakest pace in 10 years, the National Association of Realtors reported Tuesday.”
What a difference a year makes!

Comment by Rental Watch
2006-07-25 10:33:12

Of course, that line is simply going to stop at 0% with a nice soft landing.

Comment by WaitingInOC
2006-07-25 09:09:45

“Shapiro said second-quarter filings are typically less than the first-quarter, when holiday bills, taxes and other obligations that come due can strain household finances.

“His firm’s data show 2006 year is shaping up differently: 3,762 filings in the first quarter and 4,292 in the most recent period.”

Yeah, I’d say that’s a little different. And since foreclosures tend to go up in Q3 and Q4, it looks like there is growing foreclosure trouble in MA. The total number of foreclosures is still not high from a historical basis, but it looks like it won’t be too long until those numbers reach and start exceeding the historical numbers. And, of course, more foreclosures lead to lower prices, which lead to more foreclosures.

Comment by Death_spiral
2006-07-25 09:56:07

I will enjoy watching these glassy-eyed flippers get corn-holed. Bring on the foreclosures!

Comment by Moopheus
2006-07-25 11:09:06

If only it were just the flippers getting it. Unfortunately, in many cases it will be the dumb [less than prudent] schmucks who bought from them. Any flippers still ‘holding’ at this point are in deep doo-doo, however.

Comment by turnoutthelights
2006-07-25 10:01:33

Over the last year, as sales have fallen prices have continued to rise (slightly) or flatten. This of course apparently due to a sales shift to a larger percentage of higher priced homes. The larger drop in sales of below-average priced homes and their portion of total sales values has been masked by this sales shift. The current foreclosure numbers are the spear point of the future - once sufficient numbers of these houses ( and especially the lower-priced portion) enter the market, YOY prices should roll off the table.

Comment by flatffplan
2006-07-25 10:02:13

anyone have a number on foreclosures from 1990 to 1994-5 ?
that’s a number that matters

Comment by catspit1
2006-07-25 10:41:00

I tire of all the ill feeling toward flippers/ RE agents/ idiot appraisalists/ Fed regulators. They are simply practicing capitalism as we embrace it hello, along with carpet salesmen, carnival barkers, politicians, and sellers of every commodity. Anybody who hasn’t figured out by the time they’re old enough to buy a house that one needs to practice due diligence when buying any sort of big-ticket item, deserves to be fleeced. Blaming the facilitators is like blaming the bartender. My dad used to say he was “overserved”.

All i’m saying is there are ethical and unethical people in every profession, and tarring a whole profession is just not nice.

No. I am in advertising biz.

Comment by Butch
2006-07-25 10:49:26

Let me guess, your clients are all RE agents/appraisers/politicians etc.


Comment by memphis
2006-07-25 11:06:28

If they are prompting the falsified “stated income”, pressuring the appraiser, etc., then they are decidedly not just practicing capitalism. “Everybody is doing it, and getting away with it” creep is epidemic. Later everyone is shocked, SHOCKED, that there were illegalities going on here.

When the really bad news hits the fan, the depth of the corruption will be outed. We didn’t get to this point by virtue of just few bad apples.

Regarding foreclosures:
Study indicates foreclosures linked to violent crime


…a recently released study shows there is a direct correlation between foreclosure rates and crime rates.

For every 1 percent of foreclosure there is a 2.33 percent increase in the rate of violent crime, according to a study released by Dan Immergluck of Georgia Tech and Geoff Smith of the Woodstock Institute. … The study indicated a couple of things:

• Foreclosures, particularly in lower-income neighborhoods, can lead to vacant, boarded-up or abandoned properties, which in turn, contribute to “physical disorder in a community that can create a haven for criminal activity, discourage social capital formation and lead to further disinvestment.”

• Using conservative estimates, Immergluck and Smith also concluded that each conventional foreclosure within an eighth of a mile of a single-family home results in a 0.9 percent decline in property value.

…which, of course, leads to more foreclosures, and so on.

There’s your correlation between white collar crime and the other kind, which tends to kick in the head the same people who got kicked the first time. No small wonder that lots of law-abiding, “unsophisticated” people would like to see the mortgage robber barrons drug out of their castles to an unsavory fate…and every century or so, that does happen somewhere, be it Versailles or St. Petersburg.

Wishing ill on no one, but turning a blind eye and “making hay while the sun shines” is not the same thing as being technically innocent, let alone ethical.

Comment by hd74man
2006-07-25 11:43:56

people would like to see the mortgage robber barrons drug out of their castles to an unsavory fate…and every century or so, that does happen somewhere, be it Versailles

I for one, would readily pull the guillotine cord on the innumerable POS sleazebag lenderswho have profited mightily from this coming debacle.

Comment by Oscar de low Renta
2006-07-25 11:31:43

Still quite a lot of new condos coming on the market in metro Boston.

I predict it won’t be as harsh a drop as in 1987-88, but prices will be dropping further. I reckon prices will drop down another 20% for homes and 30% for condos, between now and 2009. And that’s a rosy scenario which assumes neutral economic conditions — if the USA goes into economic hard times, then… Katie, bar the door.

Comment by Neil
2006-07-25 12:14:03


Boston is a great city, I love to visit there.

But with the job flight that’s going on is that region… I predict a *harsher* drop that 1987-1988.

Folks, we are about to enter a recession started by the drop in real estate prices. People do not have the savings to bail them out of trouble, so they’ll borrow more. But when credit tightens (as it must, even if its by market forces due to default rates), we’re going to be forced back to a positive savings rate. That’s going to hurt.

Note: I’m only predicting a recession. I’m well aware that the normal state of the economy is growth. We’ll have 2 to 5 bad years as industries shift jobs to where they’ll be profitable and people start new ventures that eventually begin to hire. Officially, wages will probably do ok. But those that have a commision based income… might have to tighten the belt a bit.

My aunt who is a real estate agent (for decades) always comments about how during the good years you need to put away money for the dry years. (She’s had near zero income years.) I’m prepared in case I have a year or two of unemployment. I’m curious as to how those with “bling” will pull it off.


Comment by hd74man
2006-07-25 11:33:15

The foreclosures in Massachusetts right now are skyrocketing,’ he said. ‘`This is a problem that’s going to extend through 2007 and 2008.’”

Helicopter Ben ain’t got a clue…

Comment by Mort
2006-07-25 11:53:00

Wluka, another NAR cheeze doodle:


A degree in sociology, wow, I’m impressed.

This gem brought to you by David Wluka:

It’s a balloon, not a bubble. Balloons inflate and deflate; bubbles burst.

A hole bunch of Wluka NARisms:


Realtors r smart.

Comment by NH_renter
2006-07-25 12:09:40

Personally I favor the “It’s not a bubble, it’s more a souffle`” line

Comment by Pen
2006-07-25 13:04:05

It’s a quiche! as in quiche your equity goodbye

Comment by Mort
2006-07-25 13:10:35

Was that him? How quickly I forget.

Comment by Mort
2006-07-25 11:54:51

Wluka, another NAR cheeze doodle:


A degree in sociology, wow, I’m impressed.

This gem brought to you by David Wluka:

“It’s a balloon, not a bubble. Balloons inflate and deflate; bubbles burst.”

A hole bunch of Wluka NARisms:


Comment by Mort
2006-07-25 12:48:45

I need to learn patience. Ben please delete this double post.

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