Convincing Sellers Of The ‘New Reality’ In Massachusetts
The Belmont Citizen Herald reports from Massachusetts. “Despite the proliferation of ‘For Sale’ signs, Belmont realtors say there’s nothing wrong with the local housing market. ‘It’s not a crash, it’s a slowdown,’ said Peter Boyajian. He said there are a lot of reasons for this occurrence, not the least of which is a dramatic increase in inventory, ‘probably double to triple what we were seeing a year and a half ago.’”
“Boyajian said his company refuses to take overpriced listings or to work with sellers who expect an unreasonable price for their home. ‘You have to take into account what you’re selling,’ he said. ‘Marginal properties won’t sell. There’s no room in this market for junk, unless the price reflects it. It used to be that you could look at the past six months for price comparison, but by now that information is out of date.’”
“And if an offer is made? ‘Grab it and run,’ (realtor) Gerard Natoli advises. ‘If it’s a reasonable offer, take it. The competition is fierce and you might not get a better one.’”
The Patriot Ledger. “The median single-family home price on the South Shore dipped 1.4 percent to $360,000, the Massachusetts Association of Realtors reported yesterday. The condo sales volume fell 6.2 percent on the South Shore, compared with the statewide drop of 8.9 percent. The median condo price fell 3.1 percent to $255,000 on the South Shore.”
“The sluggishness of the market is reflected in rising inventories of unsold properties. There are now 63,433 residential properties for sale statewide, a 27 percent increase from the second quarter of 2005. ‘There’s a lot of inventory out there,’ said Mary O’Brien, manager of Century 21 in Hanover. ‘Buyers are looking at 20 to 30 properties and they’re in no hurry.’”
“Steve Fuller, an agent in Hanover, said many home-sellers have unrealistic expectations of a selling price in the current market. ‘They always have it in their head about the things that sold last year. They won’t listen to what we tell them about prices,’ Fuller said.”
“David Wluka, president of the Massachusetts Association of Realtors, agreed that convincing sellers of the new reality is currently agents’ toughest job. ‘It’s very hard work to do current market pricing, and then to convince sellers what current market pricing is,’ he said. ‘The buyers are out there, but because there’s more inventory out there, they’re still not in a hurry.’”
The Boston Globe. “Brockton-area banks are banding together to slow a rapid increase in foreclosure filings in their community. The initiative is a reaction to soaring foreclosure rates in Brockton and across Massachusetts in the wake of a housing boom during which many homeowners took out loans with low introductory payments to buy houses they could not, in the long run, afford.”
“Brockton homeowners received 298 foreclosure notices from mortgage lenders between January and June 30, a 148 percent increase in two years. That exceeds the 88 percent statewide increase over the two-year period. ‘We’re headed toward crisis,’ which could hit ‘in the next six months to a year,’ said Carol DeLorey, who heads an affordable home project.”
“A variety of mortgages are causing the financial difficulties, including adjustable rate, interest only, and no-down-payment loans; but all had something in common: easy financing with low initial payments that made it possible to buy a house as prices were climbing. Now that interest rates are going up, monthly payments are increasing, causing some homeowners to fall behind.”
An editorial at the Republican. “Remember the housing boom? It won’t be all that long before someone asks that question, without the slightest trace of irony in his voice. The housing boom is over. It’s over in Massachusetts and it’s over across much of the nation.”
“Despite what some would have had us believe, the housing boom of recent years could not have been sustained. There are those who argue, quite convincingly, in fact, that the Federal Reserve created the housing bubble after the collapse of the stock market early in 2000. The hyperextended rally on Wall Street, of course, had some cheering that the old rules had been replaced by a new paradigm. They hadn’t.”
“Now, that movie is playing again, this time with the deflating of the real estate bubble. It is possible that the wild ride that the housing market had been on will come to a tamer end. What’s indisputable is that the once white-hot real estate boom is no more. And that there is no next bubble that is evident on the horizon.”
ot but a very good story about credit cards (7 per avearge family)
worth reading
http://immobilienblasen.blogspot.com/2006/08/us-familie-im-schnitt-mit-7.html
Some consumer advocates say these rising living costs have coincided with what they describe as predatory lending practices by credit companies. The way they see it, with fees and interest rates going up, increasingly easy access to credit and a general lack of financial understanding on the part of consumers, it’s not a surprise that more and more Americans are spending beyond their means. About 7 percent of credit-card holders make only the minimum payment each month, according to Bankrate.com, while the percentage of Americans who are delinquent in their payments by 30 days or more is about 4 percent, according to figures from the American Bankers Association. “Decades ago, you had to be creditworthy to get a card,” says Cunningham. “Now, credit offers are everywhere—and it’s because the industry knows that, as consumers, we will likely charge more than we can pay, and they’ll benefit by raising our interest.”
Predatory lending practices from credit companies???????
Let me see: I get about ten credit card offers in the mail every week, I read the offer and the fine print simply for $#!ts and grins then I shred it.
Why? Because I know I don’t need any more debt than I have and I’ve been down that “owing $10K in total credit card debt” road before and, once I dug myself out, I 1) analyzed how I f’d up so badly in the first place and 2) vowed that I would never get in that kind of mess ever again.
This couple had two frickin’ BKs???? And am I really expected to give a rat’s ass about them? I mean surely your first should be enough to make you change your ways.
Mostly I’m for these “consumer advocates” but gimme a break. There are some people who will simply never learn. These multiple ch.7/13 filers need to be in a 12-step program, forget the advocacy pass-the-buck bs.
These multiple ch.7/13 filers need to be in a 12-step program,
Along side with the banks that are providing them with the cards after multiple BK. Are there any standards?
You are so right in your analysis. Nobody puts a gun to their heads and says “take the credit and charge it up”. I have learned as well, no BK, but have vowed to live life the rest of my life on a cash basis, or at least as much as I can. Obviously many people have to finance home, but what about buying a new car every other year. If people quit trying to impress each other some d*mn much, then they wouldn’t be in the predicaments they are in. The funny thing is that the people they are trying to impress with all that conspicuous consumption dont have any money either, they are all just charging it or using the home atm and fronting for each other…
Ooohh! The Angel was hard at work early today. The Homebuilders really spiked up until 10:20. Then something distracted the Angel. And the stocks fell back again. But at 10:45 the Angel returned to the task and spiked the prices again. But it is so hard to keep the prices up when the prospects for the homebuilders are so dismal. So once again the Angel turned its head and the prices started down again. This post is at 12:30. Let’s see how the day finishes.
Go here and look at the charts for the homebuilders.
http://tinyurl.com/ovpm8
See how precise the timing is for homebuilders. See the strikingly similar patterns in the HB charts. Then look at FNM, LEND,FED, GG, GSS, SSRI and PAAS and see how different the non-HB charts are. I guess the Angel just doesn’t care as much about them.
Was that spike from the ’shorts’ covering their position by buying it back?
The spike was caused by concentrated buying. The startling aspect is that it happened to ALL the homebuilders at exactly the SAME TIME. That seem natural to you?
The intent was undoubtedly to scare those who are short into buying stock to cover their short positions. That used to work very well with the HBs but lately the shorts hold firm and short more when it peaks. I have done this several times profitably.
Massachusetts real estate market is toast. I’m in Essex County, and it’s hit a brick wall and the airbags failed.
I’m in Essex County also. In 01915 listings are modestly up according to realtor.com. Although lots of signs say “price reduced” or “new price”, I don’t sense that the market is at all like those in the overheated markets like Phoenix, San Diego, Las Vegas, etc.
What leads you to believe Essex county is toast?
Not just Essex county, make it the entire country starting in major urban areas and rippling out into rural areas. I would not read anything on realtor.com, that would like going into a car dealers website to see how business is. Look around, watch DOM and make your own conclusions.
‘The buyers are out there, but because there’s more inventory out there, they’re still not in a hurry.’”
And won’t be in a hurry again for a very long time. This is transition time from “god, I’d better get it now, before someone else beats me to it!” to “whoa, let’s just see where this puppy will land!”
That puppy just died from sudden deceleration!. Rember that it is not speed that kills, but the sudden stop!
What’s the last thing that passed through FBs minds when that real estate truck came to a screeching halt? Their buttholes.
The false image of sophisticated, discerning buyers just ‘not in a hurry’ is the current lie de jour of the RE industry. Peddled to give hope to sellers, and fear to buyers, the reality of massively bloated prices is beyond sound-bite control. I guess this media game will play out, but at some point the anger of sellers ‘losing money’, and too-early buyers wasting money, will be a sight to see.
You know, the print journalism bubble was popping just as the housing bubble was ramping up. I wonder how many desperate journalists bought thinking they could offset their declining career prospects with an appreciating house, and how that affected coverage of this bubble.
That’s an interesting point. Most journalists always go for the “next big thing”..it’s their nature to seek out whatever new concept the masses are latching on to, then inflate it.
“I wonder how many desperate journalists bought thinking they could offset their declining career prospects with an appreciating house”
News article … actually a promo next to a Google Ad on the subject matter….
Type in “Real Estate Bubble” and see how much advertising you pop up ….
Its an old trick like magazines… they feature an article (ex Sony DVD Player) and right next to the page is and ad for a Sony DVD Player… it pays !
The people who are going to get hurt for no good reason are the ones buying in the next six months — after a 10% drop some may think they’re getting a “deal,” when all they’re doing is jumping on the roller coaster. On the way down.
Frank,
Here in MA things are beyond 10% drops. A new colonial (2003) was listed for 699k and now they are asking 539k, thats 160k down. I’ve been thinking of offering 500k, even if it goes down a little more, I’d say I’m out of deep waters? I am speaking for Massachusetts luxury homes only, I don’t know about other states (like CA). I really don’t care to find ‘bottom’, I just care not to get hurt, and I think if one looks carefully there are already some deals out there in MA for luxury homes. I’m also seeing condos begin price reductions, but they still have a long way to go. I anticapate some people to respond in saying that 699k was ridiculous to begin with? I would agree, but the difference in this scenario is that homes were selling in that price range last year!
You will get hurt. Look at the price for the same house circa 1998/1999 for a more accurate price. You will be amazed.
You will get hurt. Look at the price for the same house circa 1998/1999 for a more accurate price.
350-400k.
There is no way it is going to fall this low. If we take What cost $375,000 in 1998 would cost $434,539.11 in 2005.
http://www.westegg.com/inflation/
Add another 2 percent per year compounded (normal housing appreciation,ie. non bubbly, is around 2 percent above inflation)and you are close to 500k. Best case scenario this house bottoms out at 450k the next couple of years, you lose around 50k. That’s money you’d have to spend of rent anyways. My point is that people who bought at 699k are the ones who have gotten hurt already. Caution is advised, as there are still sellers out there who haven’t realized the game is over, and are still asking 699k.
Ma in 1997 was overvalued compared with the rest of the country. You could get a nice palace anywhere else in the country, including California for that price.
Also, when corrections happen, they tend to over shoot the median, look at how much the NASDAQ is worth today compared to 2000. 40%?
The other factor was that in 1997 MA actually had an active job market, with lots of new companies being formed, new technologies, and new opportunities. There was at least a new hot startup happening every other week!. Now it is composed of aging hedge funds, some health care, very little tech, and a whole bunch of former power houses moving out like Fidelity. John Hancock now is a Canadian company, and Gillette is laying off in droves, so the circumstances now are grim, compared with a positive outlook in 1998-1999!
You’re wrong, Dimitris. It is going to go below $434K, just because you think it can’t. Same thing happened to the guys claiming they knew where bottom was in the stock crash.
Pinch Penny is right. Don’t touch that house now. In a year it will be priced at well under $500,000, maybe half that amount. Don’t underestimate the power of a bust following a spectacular boom. It will be so powerful it will take your breath away!
I agree with just about everything you said about MA, but my point is how much lower can this house really drop? If you log on to zip realty the MLS# is 70409642
It has been reduced from last year 699k to now at 539k.
There were people who paid 650+ for comparable homes the last couple of years, they are the ones who are going to get hurt. Buying today at 539, is not that bad is all I’m saying, especially with historically low rates. Sure, it can get a little more cheaper in the next couple of years, but don’t forget people, the dollar doesn’t have the same value it did 8-9 years ago (15% less).
Do you really think this house can drop to 400k in the next couple of years?
Dimitris,
Nice house.
At 2800 sq ft, that house would run about 325K to build (retail). Give the lot a value of 100K and your at 425K. So…maybe the house is worth the 500K. It may go down, but no one really knows.
If you choose to go forward…
Check the covenants.
Check the HOA rules/documents.
Check for easements.
Be aware that the listing on Realtor.com mentions “private road”, which may mean that the homeowners own the raod. Therefore you the other HOA members would be responsible for maintaining it, plowing it, etc. You could end up carrying the liability on it, as well.
If you move forward, make sure you get all the documents from the HOA.
GET AN ATTORNEY. Have him review the deed for anything that could hurt you later on. You may want to have someone look at the “engineering” for the road and any drainage ponds, etc. to see what’s what.
You need to be very careful when buying anything on a private road and/or with an HOA.
Thanks for the great advice Pen, greatly appreciated! The whole neighborhood is resposible for the road, I think the figure was 150 per year, if not mistaken. This house was bought with the intentions of making a ‘flip’. The builder was friends with the flipper, and I figure he’s in it for around 450 (not including his interest payments for the whole year he’s not been able to sell it).
$150 per year, per house will not mantain, plow, insure, etc. even a modest sized street.
Also, check the engineering for who owns the storm drains on the street..I have a feeling that this will will also fall under the HOA…
If you ever want to follow-up further, just post under “Bits” on the latest day. I usually check it in the PM-EST.
My experience in Essex county is that the same houses have been on the market on-again and off-again over the past 18 months with very few of those houses being sold and many price reductions.
What’s indisputable is that the once white-hot real estate boom is no more. And that there is no next bubble that is evident on the horizon.
I have faith: somehow, somewhere, a new bubble is forming. I hope the next one is a stupid as tulips though.
The next bubble will be precious metals…
I wish I could disagree.
Another flower bubble would be amusing!
I just dred the return of beenie babies.
This would have already been the next bubble if not for govt manipulation. Do I think something fishy is going on in this area? Heck ya! A run on gold signals panic to the markets. No way they want that to happen. Something is certainly going here. (yep….tin foil hat firmly in place)
There are two important issues concerning gold. Is there a massive short position in the metal? And will the dollar continue to erode in value? If you believe as I do, that the answer to both questions is yes, then you will be a buyer of gold with the expectation that the price will rise substantially over the years.
There is no bubble in gold.
So the textbook fundamentals of housing are something like:
1. Median house valuation should be a mulitple of median income. (Say 4x)
2. Mortgage payments should be approximately equivalent to rent payments, plus a small ownership premium.
If those two items are out of wack, then you know something is over/undervalued.
What are the equivalent fundamentals of gold?
The dollar will absolutely erode in value, silver will be a big winner( we are not producing much silver anymore, therefore demand will sky rocket considering theuse for silver in industries and technology)
Comment to dawnal
Are you suggesting that someone has the size to move the gold market like the ‘Hunt Brothers?’
I saw an article somewhere this past week about an “oil bubble”. It was a little OT and I thought about posting it here then forgot about it.
Okay , now I get to show you just how crazy I am. Where is Gold going? Well , back about 1980 , one once of Gold was about the same price as the Dow Jones Industrial Average. It would now take 18 ounces of gold to equal the Dow. This coming off a recent high of 44:1. Crazy. Things tend to overshoot their means by huge margins , especially in uncertain times (which is what I expect , to put it mildly). Can the ratio go back to 1:1? Who knows , maybe not. 3:1? Might be more realistic , say Gold $2000 , DJIA 6000. Think I may be a bit conservative on the gold price should out mighty fiat currency no longer find itself the choice of the reserve banks (and I think we are seeing that already , no? ) Yep , I got a tinfoil hat too. And a bunker. Supply of canned goods. Bucket o’ gold too.
Keep in mind that if I told you 15 years ago that residential real estate in the deserts of Arizona would soon be selling for a million an acre , you’d have had me committed. If I told you ten years ago that a company , never mind dozens of them , with nothing more than a website and a catchy name would trade with multi-billion dollar capitalizations , despite little revenues at all , and no chance for meaningful earnings , you’d have had me shot. So when people say that Gold could go to 5 or 10 thousand dollars and ounce , if this economy collapses under the weight of its debts , I don’t laugh . Why not I say? Stranger things have happened - do google search of Dow/Gold ratio for differing opinions and insights.
Any thoughts on what drives the fundamentals of gold?
for example, finish this analogy:
P/E is to stocks as X is to gold.
finish this analogy:
P/E is to stocks as X is to gold.
Gold can be viewed as a currency or a commodity, but either way it doesn’t make sense to value it like you would a productive asset.
Personally, I don’t think you even can estimate an “intrinsic value” for gold. It’s better to view it as the ultimate cash — the thing you own when you don’t trust anything else, and your only concern is capital preservation.
Twenty years from now people will ONLY care about preserving capital, and will hate stocks because they’re “so risky”, ignoring P/Es completely. IMO.
P/E is to stocks as Price/Rent is to real estate as “Supply/Gov’t and private hoarding” is to gold.
Gold is the only thing recognized as “Money” worldwide for more than 100 years. In fact, it’s been money for 10000 years. The current “reserve currency”, the Dollar, is under pressure, and may be replaced (as the Sterling was in my Grandpa’s time). If it is replaced, what will replace it? Could be the Euro, could be Gold. Probably Gold. Various gov’ts, including Russia and China, are increasing their reserves. If they change their mind, prices will drop. If they get serious, and bring along a few other big dollar reserve countries, then it goes up alot.
And of course, if confidence in the US Dollar collapses, paper loses value, things hold value. A collapse in confidence isn’t assured, but sure is more likely than last decade.
it doesn’t make sense to value it like you would a productive asset.
It would make sense, but we choose not to because of psychological factors like “It’s had value for the past 1000 years” or “people put confidence in gold”
Gold is the only thing recognized as “Money” worldwide for more than 100 years.
Again, it’s psychology. We could value it like cotton or pork, but we choose not to.
My bigger point is that gold’s value is manufactured by psychology, not fundamentals. Sounds absolutely ripe for creating a bubble, because the media can pounce on it and drive the perceived value up.
That’s certainly true, and it’s happened in the past, most notably in the late ’80’s, when it went over $800 an ounce, which is well over $2k in today’s dollars. It’s not unreasonable to think that it’s possible, though hardly likely, that it will go above $10k before this is all through, then crash back down to $5k (because of inflation).
But you also say:
To which I’d reply: and this is different than the US Dollar how? Or any other currency, really. Except, of course, that the US Dollar has stood on its own as money for only 40 years, whereas gold has had perceived value over and above it’s intrinsitc value for 10,000 years (not the “mere” 1000 you mention). I.e., all of recorded human history, and probably a great deal of unrecorded human history.
It’s safe to only say a couple of things: Gold has always, and will always, have a perceived value above it’s intrinsic value, and that that gap will fluctuate wildly. It’s also safe to say that in the event of the kind of economic crisis that many here beleive in, gold’s value is going to fluctuate even more wildly than previous recent (last 100 years) history.
I’m also somewhat confident in saying: We’re going to experience a remarkable (as in remarking “HOLY (*&^!!!”) amount of inflation within the next 10 years. When that happens, gold will gain in value at a rate greater than inflation. (The alternative is a depression, and they confiscated all personally owned gold during the last one.)
Gosh, looking over this I sound a little like a kook, but I’ve come to these opinions slowly over the last year, and I really do hope to be wrong. I want to lose money on my gold hoard, since that would mean that I’d still have a job and a strong country.
To which I’d reply: and this is different than the US Dollar how?
You will notice that I made no mention whatsoever of the US Dollar.
However, now that you brought it up: I think a fine case can be made for deflation as well as inflation. I believe that leaves a lot of room in the middle for how the economy plays out.
A crucial question will be how much pain we inflict on the Soc Security/Medicare recipients in the next two decades. Personally, I think medicine in the US is waaaay overrated.
Well, yes and no. Given current levels of debt in both the gov’t and private sectors, it’s pretty evident that the debt is going to get worked of in a fairly catistrophic manner. There’s two ways to do that, as you note - default (deflation) or inflate it away (inflation). So there’s actually not a lot of room in the middle - we either freeze or burn, we don’t stay comfy.
What’s missing from your speculation is that the gov’t and the Fed actually get to choose which we get - and I’m betting they’ll try to do a controlled burn via “controlled” inflation - which may or may not work as well as other “controlled burns”, like the one that decimated Yosemite a few years ago. The reason why is simple - once we enter deflation, they lose all control. Entering inflation actually offers them the possibility of maintaining control, though of course it can get out of hand if they’re sloppy. So I’m 80% certain they’ll choose inflation. (The other 20% isn’t that they’ll choose deflation, btw, its that they’ll be caught napping and deflation will choose them instead, as what happened in the 30s.)
The difference being that one is hindsight and the other is wild ass guessing.
Excellent discussion here about gold. Thanks to all. Someone asked for a mathematical formula for finding value , a gilded p/e ratio if you will , and I think the replies as they concern psychology are excellent answers. I’ll add only this is the way of mathematics. My formula is but a single number : +1 (yes , positive one , that’s all) - this , I believe, is the correlation coefficient between FEAR and the price of gold.
The next bubble might also be to buy foreclosures and turn them into rental properties (since many people will be looking for rentals due to foreclosures on their properties).
I think the next bubble or rise in America might be the suborbital space industry, you know, travel, expansion to other planets, or some exotic technology that will radically change how we do things, like travel, work, etc. America, being the superpower (although a declining one), will want to have that “new thing” for itself, to keep itself going just a little longer.
Stephanie Ellison
‘There are those who argue, quite convincingly, in fact, that the Federal Reserve created the housing bubble after the collapse of the stock market early in 2000.’
As this plays out, it is worth remembering Alan Greenspan told congress that he would make the same moves if he had it to do over again.
In fact he was responding to the dot.con and stock market bubble popping, and instead of leaving that one to die a natural death, he went and created the biggest, fattest, and most dangerous bubble in history. I wonder how many people will be utterly destroyed, how many families, productive members of society, all to save some stockbrokers from failure?
pinch a penny,
Uh, not ONE single stockbroker was “saved” so I absolutely do not know where you’re coming from there. Our industry is forever changed and I think for the most part, for the better. This bubble was designed to save the CONSUMER’s A$$! Custom tailored. Having your properties go up in value on a weekly basis doesn’t do much good if you can’t make the monthly payments? We’ve had our turn in the barrel, can’t wait to see all the realtors, funny money lenders and FB’s get their’s!
The bubble was designed to allow financial institutions and corporations to restore their balance sheets through the carry trade and to allow consumers to refinance their mortgages and free up more disposable income to offset the blow to the economy resulting from the decline in business spending and investment.
Yes they where. Maybe not individual stockbrokers, but how many large brokerage houses failed? What failed where the dot.cons, the Telecoms, and a lot of 401K’s. I never heard any brokerage get taken out in back and shot for promoting a dead horse. Oh, yes some where fined, and slapped on the hand and told not to do it again, but none filed for chapter 7 or 11.
You see who was being protected now? Who was left out to dry? ANd who is paying for all this? When this all ends we will have a whole generation of homebuyers (historically the most stable members of society) in eternal servitude in order to pay off their massive obligations, and yet again who made insane profits? The same banks and brokeages that where supposed to get it handed to them the last time, but didn’t!
What?????? I can think of 2-3 right off the top of my head who went bankrupt. Start with Gruntal.
This bubble was designed to save the CONSUMER’s A$$!
- Argeed
The con-sumer alone kept this bubble inflated….I know of so many folks that are totally overextended financially. They are toast. I was fortunate to sell my manhattan beach ca home at the top of the market in feb 1990. I took the profits and started a business that lasted 10 years. It has been long road to get back to where I am today with a lot of savings and NO debt. There is no feeling like being debt free.
The next bubble is the amount of REO’s and foreclosures that are going to happen as a result of really dumb decisions!
That’s more like a crater, a bubble with a minus sign in front of it
Don’t worry- incomes will catch up to housing costs and balance everything out- Just like what happened in stocks.
Jim Cramer 6/1/00
My notion is widely shared among professionals, including the professionals in the Federal Reserve. Chairman Alan Greenspan has often spoken about the need for earnings to catch up to stock prices. That’s what they are doing right now as we turn the page to focus on 2001.
http://www.thestreet.com/pf/comment/wrongtactics/950547.html
That sounds exactly like the infamous “premanently high plateau” theory that directly preceeded the stock market crash of 1929.
The Brockton program is interesting. Looks like the lenders realize that they aren’t going to be paid back on loan terms, getting some money is better than none. And, they are getting government help (uh oh).
This seems to be a response to the “prisoner’s dillemma” aspect of foreclosures. If all the banks foreclose, none will be able to sell at any kind of price.
It reminds me of LTCM, where the Fed brought all the financial companies together than demanded they all take a moderate loss, rather than any of them trying to get out and having the value of LTCM deals drop to zero.
We’ll see if this spreads as foreclosures do.
Brockton is an armpit. Places like Brockton and Lawrence will lead the way down in the coming foreclosure wave.
I agree with your “prisoner’s dilemma” analogy. However, I don’t think that Brockton’s plan is going to work because I don’t think that all of the surrounding areas will follow their plan. It’s just too hard to get that many people to go along. If other lenders/areas don’t go along, then the foreclosures will continue to escalate in those surrounding areas, which will effectively lower the price of the houses in Brockton (why buy for a higher price in Brockton when you can get an equivalent house in a surrounding area for less?).
In fact, it seems to me that this proposal only tries to delay the inevitable. As it does so, the lenders who participate (or those to whom they sell the loans) will be hurt more, as the foreclosures are pushed out to a time when the properties are further underwater.
“Steve Fuller, an agent in Hanover, said many home-sellers have unrealistic expectations of a selling price in the current market. ‘They always have it in their head about the things that sold last year. They won’t listen to what we tell them about prices,’ Fuller said.”
Well, can you blame them? These sellers were the ones who were convinced to buy as a result of a REIC that told them “Real Estate Never Goes Down. Buy Now. Prices are going up. Won’t last”.
Speaking of “Won’t Last”, how many of us have seen that line in a real estate ad and have been tempted to drop the realtor an e-mail or make a call to say “Don’t worry, it’ll last”. And last. And last. Oh, I have been SOOOO tempted…
Palmetto, I was tempted, and gave in to temptation.
Saw a house (in a nice gated community) listed for $500,000 recently on Realtor.com. Unfortunately, it was a 3 bed/2 bath STARTER HOME, built in 1999. I checked the tax records and it sold for a mere $175K in 2001.
“What kind of crack are you smoking?”, I e-mailed the listing agent. “500 large for a starter home? I need to find out who your dealer is!”.
I am not making this up, and that house is still for sale, now at an amazing $450K. “Won’t last at this price!”
How pathetic. Pretty good case of rookie RE agent buttering up the seller with an unrealistic price in order to get the listing.
Fl paradise, that “won’t last” phrase just annoys the snot out of me. I wish someone would compile a list of common real estate hogwash and what it really means: “Divorce forces sale, Light and Bright, Mrs. Clean Lives Here, Great Starter Home, Bring all offers, Bring you investor, Bring some crack, you’ll have to smoke it to live here.”
BTW, what do you think is behind the lower rental prices in Pinellas as opposed to Hillsborough? If I could stand the traffic, I’d move there. Seems like you get more for your money.
We all know that specuvestor are partly to blame for the bubble….but what about these affordable housing advocacy groups? The have been a force driving many folks with marginal incomes, spending habits and credit into the housing market. They have used the race card to force lenders to loosen lending standards. How long until someone does a study showing that minorities are washing out of this market at a much higher rate than the general population? I do not think it will be too long until Jesse and the crowd are pushing for ‘fairer’ foreclosure procedures.
I notice that the sellers in MA are still reluctant to bite the reality. Some of the houses I have been watching dropped slowly from around 350K to around 325K over the last 4 - 5 months. They reduce the prices by 5K each time. It is like watching paint dry. I am now willing to wait till 2007 summer to buy. In the meantime, I see plenty of rental vacancies around suggesting that there are not a whole lot of buyers left. So when the RE agents don’t see potential buyers at the open houses it may not be because buyers are playing a waiting game. There simply may not be many buyers left. Too bad for the RE investors who bought multiple properties in the last 2-3 years thinking that they can mint money. The dream is over, it is now time to face the nightmare!
Images of that opening the ark scene in Raiders - all angel dust until your head melts. Hopefully when its over, the housing bears are left standing, bounds burnt away, and the lid back on.
Banks, Mortgage Companies, the DebtSlaves, the MSM and Realtors can and will try tricks to forestall the RE Plunge into the Abyss of Debt and Foreclosures. Unfortunately, this shipwreck IS going Down and the real Panic starts when the Sheep discover that there AREN’T Enough lifeboats !
Banks, Mortgage Companies, the DebtSlaves, the MSM and Realtors can and will try tricks to forestall the RE Plunge into the Abyss of Debt and Foreclosures. Unfortunately, this shipwreck IS going Down and the real Panic starts when the Sheep discover that there AREN’T Enough lifeboats.
Take a look at this POS asking for $1.25M
It’s assessed at $851,900 by the city of Newton, MA which is already high.
Check out the pictures of the kitchen, living and family rooms.
This house should be lifted off its foundation and move to the Smithsonian to be a permanent exhibit.
Gosh! Looks like nothing was done to the house in 40 years!
My wife and I have seen many houses like these in Newton where we felt like we have walked through a time portal and arrived back in 1960’s or 1970’s.
Whichever idiot steps up to buy this POS will definitely be handing a winning lottery ticket to the homeowner.
Newton, MA 02467
MLS ID#: 70441409
$1,250,000
3 Bed, 2.5 Bath
2,014 Sq. Ft.
0.52 Acres
http://www.realtor.com/FindHome/HomeListing.asp?snum=4&locallnk=yes&frm=bymap&mnbed=0&mnbath=0&mnprice=1250000&mxprice=1250000&js=off&pgnum=1&fid=so&stype=&mnsqft=&mls=xmls&areaid=25649&poe=realtor&ct=Newton&st=MA&sbint=&vtsort=&sorttype=&typ=1&typ=2&typ=4&x=39&y=5&sid=071D2139AB18C&snumxlid=1066393014&lnksrc=00002
a
ah
aha
ahaha
ahahahhahahahahahahahahahahahahahahha
This place would be $155K in Omaha, at the peak, and will be $110K, or less, soon.
back to LMAO
Did that piece of sh$t really say $1,250,000? The world has gone mad.
damn, what are these people smoking.
But gee! That yellow kitchen is to die for!
This is typical of many homes in MA, but it’s nothing that a gallon of gas and match can’t take care of.
“Despite the proliferation of ‘For Sale’ signs, Belmont realtors say there’s nothing wrong with the local housing market. ‘It’s not a crash, it’s a slowdown,’ said Peter Boyajian.
That parrot isn’t dead, it’s just resting.
“This parrot is no more. It has ceased to be.”
Haha
Wait, here’s the URL
http://youtube.com/watch?v=2H6DSoqZz_s
I’ll tell you wants wrong with it. It’s dead, that’s what’s wrong with it.
‘It’s not a crash, it’s a slowdown,’ said Peter Boyajian.
No, he’s correct it is a slowdown, not a crash. The slowdown is grinding away peoples’ cash reserves, cutting off their flow of alternative income, and inverting the market psychology. It is also beginning to cause job losses and an economic slowdown. Homeowners and the housing industry are gradually losing their grip.
Then comes the crash.
I live in the area and have noticed a slowdown. But when will prices REALLY come down? I see here in Nashua NH(on the border with MA) alot less sales but homes still do sell at or near summer/2005(peak) prices. Any thoughts?
I just looked at moving to Nashua a month ago. I don’t know how people afford it when an MBA can only earn $40-50K there. Tight job market.
Jeez.
To Chad,
MSN recently had a list of the most affordle places to live and Nashua was on it! A national list list! I almost fell out of my chair. As you said there are few good jobs, outrageous property tax(try 3500-4000 or so on a dinky ranch) and as you saw awful home prices. I make about 40 or so and basically have no realistic chance of buying here. Don’t live in Nashua and commute to Boston. The hidden costs/commute aren’t worth it unless you get paid real well.
I think that it was Money Magazine. Unless MSN did something similar.
There are some very nice jobs in Nashua. But they may or may not be in your field. Or you might have to put in a fair amount of effort to find them. Or you may need contacts in target companies. We’ve lived here for 18 years on a single income and paid off our house in the 1990s.
My first job was cleaning an elderly lady’s grounds for 10 cents an hour when I was around 12. Things did improve over time. Nothing wrong with starting small and working your way up the ladder.
Don’t get me wrong, Nashua is not a bad town. But I started a family a few years ago. In the the 1990’s homes where reasonable. Now, a basic house is about 5-6 times the average income(around 55 for hillsboro county).I doubt you bought a home for 5 times your yearly salary. Me and my wife are honest, frugal folks but we will never be able own a home at these prices. nothing personal but your comment
is typical of folks who are older. You just don’t understand its changed for younger folks now. There is now “working up” and a young father’s working income can never buy a house for 240000 with 4 grand in property taxes. I imagine your a nice fellow but these problems are real and its bad for a young family here in nashua to obtain a middle class lifestyle. Mind you I already have decent job and my wife works hard as a nursing assistant.
Current sale prices can be a little misleading, as they only reflect sales to people who are willing to buy at current prices. If you think about the bell curve, there are always going to be some people who still have a bullish view of the real-estate market on the tail. Growing inventory in most cases indicates that the market clearing price is below the average transaction price.
I would give them $125,000 max for that POS. Love the yellow kitchen. Why would a real estate agent was their time/money listing that thing at that price?
……….His monthly payments started at about $1,800 and are now $2,500.
“When I bought, I didn’t speak English. I tried to get information but they were never open with me,” Rodriguez, 39, said.
———————–
This fellow should have said, “I didn’t know English. Some stranger held a gun to my head and forced me to buy the 3-family house so that I could become a landlord in this great country!”
It makes me nervous to know that Massachusetts Home Financing Authority is sliming its way into the potential crisis and stalling foreclosures by changing loan terms. So the honest tax payers have to bail out the greedy b***ards again! Same old story.
I had the same thoughts and as a Massachusetts resident, my first reaction was that my tax dollars are going to subsidize these idiots that will soon lose their properties. I looked at the website for the Mass Housing Finance Agency and, to my surprise, I found this. “MassHousing sells federally authorized, tax-exempt and taxable bonds to individual and corporate investors. The sale of these bonds raises private capital for mortgages that MassHousing loans to eligible borrowers. This money is loaned at rates below those of conventional lenders, making the housing we finance more affordable to low- and moderate-income households. Investors in MassHousing bonds receive a return on their investment that is supported by the monthly mortgage payments made by our borrowers.”
“Brockton lenders are trying to prevent foreclosures, because they do business in the community and because troubled borrowers often are their employees or customers, even though they borrowed from other lenders.”
They want to prop up home prices and bail out reckless borrowers at the same time. Guess we should just jump in and buy if the gov’t is going to prop this thing up. NHZ has posted about house prices in the Netherlands being propped up by gov’t policies.
When large numbers of homes are in foreclosure on a street or across a city, “All of us are affected because it deflates the real estate market,” said Stephen Pike, vice president of North Easton Savings Bank, a coalition member.
Sorry, bad cutting and pasting on that post.
Bailing plan from Fannie Mae:
NEW YORK, Aug 9 (Reuters) - Fannie Mae, the biggest provider of funding for U.S. residential mortgages, said it has launched a program with lenders that boosts its business by encouraging customers to refinance adjustable-rate loans.
The company expects the program announced to lenders last month will help it capitalize on refinancings of hybrid ARMs created over the past few years as their interest rates reset higher, it said in a regulatory filing on Wednesday. It said homeowners have already started refinancing into fixed-rate loans, or the “sweet spot” for the company as put by Chief Business Officer Rob Levin earlier this year.
The program known as “Streamlined Refi Plus” will help lenders retain borrowers by simplifying underwriting, Fannie Mae said. As part of that, the company will reduce the amount of documentation over what it typically requires, it said.
Estimates of the amount of ARMs, or loans with fixed interest for an initial period and floating rates thereafter, that will reset in 2007 top $1 trillion.
“We believe this process will help improve our delivery volumes during periods of significant refinancing activity,” Fannie Mae said in the filing to the Securities and Exchange Commission.
The announcement was made to lenders on July 17, said Janice Walker, a Fannie Mae spokeswoman.
How much more streamlined can it get ?. Since the application is a lie anyway we have streamlined it away. You ask and streamlined Refi loan will be wire transfered before you hang up the phone
Expect a run on Fannie Mae paper just like the bank runs of the 1930’s. We are in worse shape then Japan because the deflation is striking us as a debtor and we can not export to America to ease some of the pain. A break of the tops line since 1981 at the 5.25% area in the 10 year bond will herald a move up in rates to 6.5%.
….”‘They always have it in their head about the things that sold last year. They won’t listen to what we tell them about prices,’ Fuller said.”
Nothing infuriates me more than reading this filth. Just months ago all the Realtors were saying, “I’ll need a picture of your family to submit with your offer. Oh, probably should not have an inspection, and did I mention we need that escalator clause.”
You need nothing more than to read the quotes from papers to see how screwed up the real estate spin is. Disgusting.
The next bubble will be unemployment and bankruptcy filings.
…with a mixture of the 30s/40s; that den furniture looks like art deco. And will someone turn off the hella bright light in the kitchen? Oops…my bad. The light _is_ off.
Well, there is no accounting for some people’s decorating tastes, that’s for sure. A million dollar home? No. But one should always look past the seller’s decorating and style for furnishing (or lack of).
(That paneling would have to go.)
BayQT~
Hmmm…this comment was for Golf54’s post.
BayQT~
Agreed. It’s not a bad little house (nothing apparently wrong that fresh paint and decent furniture/decor wouldn’t fix) and the lot looks nice - but come on, that’s a starter house, not a $1.2 million manse. Especially not when there’s a brand-spanking-new McMansion on my mother-in-law’s street in Newton that’s been languishing on the market at about that price point for two years. Man, oh man….
Sweet quote…his show is funny right now. It sounds like the same song…don’t be scared…buy now! Buy now!
Sweet quote…his show is funny right now. It sounds like the same song…don’t be scared…buy now! Buy now!
Mass Housing is a great organization… I took advantage of one of their programs for a “below market rate”, low closing cost, no points loan to purchase a property. I was able to do this even though I wasn’t a “first-time buyer” because of the economic status of the city in which I bought. This type of program helps the low/middle income family afford housing, especially since they don’t do Option ARMs, Interest Only, loans.
Many of the borrowers in the article were taken advantage of by sub prime lenders and unscrupulous brokers in a town that is primarily blue coller, working class… these people were not greedy, they were trying to better themselves and their families.
Unfortunately for them, market economics are not kind to the lower rungs of society, especially when they are ill educated and barely fluent
When the puddle starts to dry from the blazing sun, I want to be in the middle where It will be wet (safe) the longest. Those towns are for example, Brookline,Newton,Weston & Wellesely. The places were it is already dry and you are burning to death are places like Brockton, Lawrence, Lowell, Fall River, Taunton and so on.. I live in Braintree and I am a little scared.
I think that you are right up to a point. There are places that are already in a steep decline like southie, or Mattapan, but you will see bigger monetary fallout in those “premier” areas. Maybe the people there have no need to sell, but the amount of buyers that have a million of two lying around in need for a house are diminishing every day, and they most likely allready bought. Yes, there will be a delta between Newton and Mattapan, but in terms of equity money “lost”, the amounts are going to be much bigger in Newton.
How many houses listed for a million or more in Newton have been listed over a year? Two? If they are lucky they will find a buyer in the mid 6-to 700’s now, and in the 400-500 in year, and so on…. Scary.
Fellow Mass residents, where are the jobs for our late great state?
Is it Akamai? Or Genzyme? Will these handful of places hold up an area which once had DEC, Gillette, Reebok, Putnam, Fidelity (now almost 50% moved out), MITRE, and a slew of other tech/blue chips?
See my comments yesterday. I have been arguing that there have been no new companies in MA since 2000. That we got hit extraordinarily hard, specially in the IT and Tech arena, and that there are lots of people that just gave up looking for a HI-tech or IT job. People from the West coast think that those that have been unable to get a job in IT or Hi tech are somewhat mentally challenged, or riff raff that should never have been in the industry in the first time. I counter that there are literally 300 submissions for every ***REAL*** job opening in MA. Specially if it is IT or Tech Related!
Yeah, I’ve been off this blog for a few weeks so I didn’t realize that another of like mind has joined.
The loss of all the big three: John Hancock, Polaroid, and Gilette mark the end of the blue chips for Mass.
Fidelity and Putnam, despite the headcount, are essentially lame companies in contrast and don’t really inspire confidence. I think losses like Reebok is more damaging since it once represented long term stability for the region. I hope that MITRE and the DoD money at least stays around because w/o it, we’ll never see another tech rebound for the rest of our lives. Silicon Valley type of pump ‘n dump companies (ala Genuity) don’t really germinate in Boston. We need govt-to-university collaborations which could result in new industries.
“Now, that movie is playing again, this time with the deflating of the real estate bubble. It is possible that the wild ride that the housing market had been on will come to a tamer end.”
Possible, but not likely. The IMF report (”When Bubbles Burst”) documents that housing busts typically have a worse effect on the broad macroeconomy than do stock market crashes.
I SAW A C21 REAL ESTATE OFFICE IN LOWELL, MA AND THEIR MARQUIS SAID,
WAKE UP
ITS A NEW MARKET
The Boston Globe. “Brockton-area banks are banding together to slow a rapid increase in foreclosure filings in their community. The initiative is a reaction to soaring foreclosure rates in Brockton and across Massachusetts in the wake of a housing boom during which many homeowners took out loans with low introductory payments to buy houses they could not, in the long run, afford.”
The banks are not “banding together” to assist FBs out of the goodness of their hearts. In their boardrooms, they must be acutely aware of the Tsunami of pure hatred — and demands for reform — that will be unleased on them as the housing bubble implosion gathers force. Trust me, they know full well the sheeple will be screaming for somebody’s head [it's never the borrower's fault, of course] and the bankers are going to be scapegoated, not without justification. After their predatory, utterly irresponsible lending practices of the past five years, bankers and mortage brokers will make desperate but doomed attempts to show that “they care” and forestall a tidal wave of bankruptcies that will pull many FBs under — along with their lenders.
The big difference I see from the late 90’s/early 2000 and today is that back then the demand for IT/tech was uniformly high. Today the demand is different depending on the skill set. The company I work for has openings for Java developers. Ten years ago that market didn’t even exist, but today there is a huge demand especially at the senior level.
Bottom line is you have to have the skillsets/experience that are in demand else your toast. If you’re a programmer, learn Java and/or .Net. If you’re a sysadmin then better have Linux. If you’re a DBA, it better be Oracle and you better have ERP expertise and RAC. If you don’t have the experience, get the certification and learn something cutting edge.
Just about every career I can think of you need to continually learn/train new things, whether you’re a mechanic, a doctor, or in IT. Why should IT be any different, especially when there are thousands of well educated IT’ers in countries like India, China, Mexico, former Soviet satalites, etc who have lower costs of living, receive lower wages, and would love your job.
:mechanic, a doctor, or in IT
This is actually not true, doctors, lawyers, and mechanics have stable work with very gradual changes over time. Their fields are nothing like IT.
You wouldn’t believe the number of Oracle DBAs who’d left town since ‘02, practically 70% of the ones I knew from prior jobs. The ones leftover, with the appropriate ERP experiences and backups utils, are in demand but that’s still a sliver of the total national need for DBAs.
I work in software engineering and we seem to be doing fine as far as getting projects to work on. We use good
old C.
Some of the premium in cities like Newton are due to the school system so you have some natural friction of people moving in and out for education (or end of) reasons.
I don’t think that Newton took much of a hit in the last
major downturn. And Lexington held up well (sister bought a house there for $250K 18 years ago; probably worth double or more now). I haven’t spent much time in the area for a while but I think that it’s still a nice place to live. Though I wouldn’t spend a million for it.
I don’t know if million dollar homes are worth it in comparison to sending one’s kids to a private or parochial school. I mean, really, are Lexington High or Newton South/North h.s.’s really all that special?
I mean Boston Latin alum trump both school systems’ students in many national and local examinations/brain power contests and it’s easier to rent a place in West Roxbury, Brighton/Allston, or JP for a working class family.
My theory is that a side effect of the MCAS is that middle-class parents are terrified of their children graduating from a recognized ‘bad’ school system. If you look at the scores there is a significant drop off from the top 30%.
Once I had two kids who were school age it made a lot more sense to rent in Brookline rather than own in Dedham (bottom 30% school system).
Are you guaranteed a spot at Boston Latin? I seem to recall a reverse discrimination lawsuit a few years ago with one of the elite Boston schools.
One thing that you do get in growing up in Newton or Lexington is contacts that may be useful later in life.
Newton has a very nice public transportation system for a suburb.
The Catholic Church has closed up a lot of Parochial schools over the past 30 years so I think that it’s less of an option. They have had a few financial problems locally due to the scandals too.
For private schools, you have say $30K per year for 12 years. If you have two or three kids, you can get to
a million over time. I have a friend doing this but he
makes mid to high six figures.
:One thing that you do get in growing up in Newton or Lexington is contacts that may be useful later in life.
Well… I’ve done it and all my contacts were from my first two jobs and college alum.
The snobs in those towns don’t share with the lower tier peoples there.
BTW, for those parents thinking outside the box:
NH Community College is $2,500 full-time per year. There is the Lifetime Learner tax credit ($2K per year per household) and an
educational tax deduction ($4k per year). If you can get your kid into
a community college or university that’s fairly inexpensive, you can
essentially get something like a Federal education voucher.
The Tax Credit phases out completely at $107K for 2005 and around $170K for the deduction.
Stop the press! I have found the absolutely most perfect poster child for all of this housing bubble stupidity. No its not in Mass or Fl or even California. It’s right here in lovely Nashua, NH. This fall a new condo building will be completed on the mighty and majestic Nashua river overlooking a low income neighborhoods, a half way house as well as lovely canal street(is there such a thing as a nice canal street?) These 1300 sq ft gems will go for 350000-400000 dollars. When an article came out in the telegraph listing the prices the whole city had a collective laugh. No California dreaming, no florida winters, no LV nightlife, not even a decent economy withen miles. There is no pool or gold but apparently must come with a ton of formica. This empty building in a crappy neighborhood in a very uneventful small city will soon be the perfect symbol of it all. The whole town said”what are they thinking?” in unison.