“The Shakeout Continues” In Massachusetts
The South Coast Today reports from Massachusetts. “The shakeout continues in the housing market in SouthCoast and throughout Massachusetts, as many owners, mortgaged to the hilt, face foreclosure at a rate double that of a year ago, which was in some communities double the year before that.”
“‘I don’t see homes in the $250,000 range falling 30 percent. They’ll fall 10 percent, and they’ve already fallen,’ said Patrick Sullivan, CEO of Sovereign Bank. ‘But you’re going to see a hit in the upper market, with homes in the $700,000 to $800,000 range falling 150 grand,’ he said.”
“Roger Stanford, an attorney in New Bedford who handles many bankruptcies, said the rate of foreclosures he is seeing ‘has tripled, easily’ since last spring, when there were dire predictions about a tidal wave of adjustable rate mortgages being recalculated, always recalculated upward. That wave has indeed materialized.”
“The Standard-Times legal advertising volume for foreclosure auctions has doubled over last year, with a dozen properties listed on any given day.”
“The reasons differ from place to place, said Mr. Stanford. In the cities, many people bought multi-family homes as investment properties at inflated prices. In the suburbs, many people refinanced to draw out so much cash that they can’t keep up the payments when a point or two is added by their adjustable rate mortgages.”
“Mr. Sullivan said ‘a lot of people have overpaid for multifamily houses in traditional cities. And they’ve really overpaid. In many cases they’ve gotten their mortgages from sub-prime lenders. They didn’t get them from the banks. And if there is any kind of movement in adjustable rates, or if there’s a loss of a tenant, they’re in trouble.’”
“Mr. Stanford said, ‘Part of the problem is all these new mortgage products out there, especially one called an 80-20 mortgage. They’re horrible, just horrible. You’ve got no equity, so when the property goes down in value, you’re upside down right out of the box.’”
“‘I’ve had a number of cases where people are walking away from houses,’ Mr. Stanford said. ‘The trouble is, if they owe $220,000 and it’s auctioned for $180,000, they still owe $40,000.’”
The Boston Globe. “As the housing market cooled, foreclosure filings rose 40 percent in Massachusetts, from 10,026 in fiscal 2005 to 14,079 in fiscal 2006, said court officials. There were 4,930 filings in the first quarter of fiscal 2007, indicating that the pace has quickened.”
“‘I don’t want you to say we’re overwhelmed,’ said Deborah Patterson , recorder for the Land Court. ‘It is strained, certainly.’”
The Boston Herald. “Today marks the start of the holiday shopping season, but it’s also the end of the fall real estate season, leaving would-be sellers like Fran Adams in a bind. The quandary: Whether to leave unsold properties on the market all winter, or pull up ‘For Sale’ signs and start again next spring.”
“‘It’s a tough question, said Adams, a real estate agent who’s trying to sell a $419,000 West Roxbury Colonial. ‘The longer a property sits unsold, the greater the chance a buyer will offer less. But if you take the place off of the market, there’s always the risk that you’ll miss the buyer.’”
“With the Bay State housing market in a funk, thousands of would-be sellers face Adams’ dilemma this post-Thanksgiving weekend. According to the MLS Property Information Network, there are currently 44,817 unsold houses and condos on the Massachusetts market, up 15 percent from this time last year.”
“Unfortunately for would-be sellers, the market is entering the year’s slowest period. For sellers, few want to keep homes sparkling clean during the holidays, and often figure they’ll get a better price in spring anyway.”
“Agents add that keeping a house on the market all winter long can make a property look defective or the seller seem desperate. That can attract ‘low-ball’ bidders, not just in winter, but also the next spring.”
Okay, so the inventory is on the way up but this is a good thing? The Austin Board of Realtors is a shill group I’m sure but they must think everybody is a dope:
Wednesday, November 22, 2006, 09:29 AM
A news release from the Austin Board of Realtors
The latest Multiple Listing Service (MLS) Report from the Austin Board of REALTORS® indicates the local real estate market continues to be productive, with single-family home sales posting an October record.
Single family homes sales increased 8 percent from the previous year to 2,073, a record for the month. At $175,000, the median price for these homes increased 9 percent. Sales from single family homes contributed $479,167,731 to the economy, up 19 percent from the previous year.
The 7,947 active listings represent an increase of 4 percent from last October; the number of new listings increased 12 percent to 3,074. October homes spent an average of 66 days on the market, down one percent from one year ago and a record low for October.
“These numbers indicate that the Austin real estate market will remain strong for the foreseeable future,” said ABoR chairman John Rosshirt. “The local ABoR figures coincide with the 2006 third quater Metrostudy report that points to job growth and new developments downtown as indications of the Austin housing market’s sustained productivity.”
Single family homes were not the only properties to experience gains this month. Multifamily home sales increased by 36 percent to 133 and contributed $26,112,156 to the local economy, which is 41 percent more than they did one year ago. Sales of townhouses and condominiums increased by 25 percent to 266. These sales collected $51,085,300 in aggregate revenue, up 50 percent from October 2005.
October 2006 - Single Family Homes 2,073 was the number of single family homes sold in October, up 8 percent from one year ago and an October record $175,000 was the median price for single family homes, an increase of 9 percent from October 2005 and a record for the month $479,167,731 was the total dollar volume of properties sold, up 19 percent from one year ago
Wow - austin has the healthiest housing stats of any market i’ve heard about in quite a while.
Mugsy, are there any economic trends in Austin that might help explain this? I did a quick google and it seems the unemployment rate is low at 3.8%, the economy is very diverse and benefits from gov’t/university employement, as well as lots of high tech. The population also appears to be growing pretty rapidly.
Other than saying “they drink too much koolaid”, “they’re just 6 mos. behind”, and “they must have more GF’s than anywhere else on the planet”, does anyone have an explanation for why austin may be different? Hopefully, I’ll hear from txchick.
Eventually, i think Austin too will be impacted by the popping of the bubble. But Austin, with its strong economy and favorable demographic trends, may fare better than many other large cities. According to the wikkipedia Austin page, from 2000 through 2005, house prices in Austin went up 35%, which is far from bubbly.
To me, it will be interesting to see which areas come out of the experience with less damage than others. I’ve heard numerous people on this board state that areas with no land, restrictive goverment, and “everyone wants to live there” mentalities (SF, Boston, NY) will be less impacted than other areas. However, my personal theories are that these are the areas that will experience the most depreciation just as they experienced the most appreciation.
I nominate Austin as the city that will be least impacted by the popping of the housing bubble.
I’ll bet it’s in the top 7-10%
Recent articles suggested that 30% of the homes purchased in Q2 2006 were purchased by “investors” (Californians)
Biggest employers are Dell, UT, and the State of Texas.
Mugsy - 30% seems like a TON of speculators. Maybe I’m all wrong about Austin - maybe the speculators got there later but are fixing to make up for lost time.
Please keep us posted on Austin happenings. Thanks for the info.
According to Bureau of Labor Statistics, Austin lost 2200 people in the workforce in Sept. Could be more people moving out of Austin than coming in? That could be a major negative!
workforce #employed #unemployed rate
2006 Jan 814367 779488 34879 4.3
2006 Feb 817963 783593 34370 4.2
2006 Mar 820651 787118 33533 4.1
2006 Apr 822817 790702 32115 3.9
2006 May 826197 793157 33040 4.0
2006 Jun 834202 797277 36925 4.4
2006 Jul 837314 800285 37029 4.4
2006 Aug 836166 801464 34702 4.2
2006 Sep 833977 802221 31756 3.8
Atascadero. Hey, are they trying to sell the lot and trailer home where L. Ron Hubbard died?
“‘I don’t see homes in the $250,000 range falling 30 percent. They’ll fall 10 percent, and they’ve already fallen,’ said Patrick Sullivan, CEO of Sovereign Bank.
Will these guys keep calling a bottom every month for the next 3-5 years? Or do they become unemployed at some point during that period and no longer quotable?
Will these guys keep calling a bottom every month for the next 3-5 years? Or do they become unemployed at some point during that period and no longer quotable?
Both.
Where do you find a $250K home in MA? BTW, I generally
like Sovereign Bank as they’re one of the banks that hasn’t
sold out to the majors. We used to have over a dozen banks
in our area and now we have two or three. The only way
to avoid the big fees at banks these days is to go with a
credit union or an online bank with low fees.
In the early 90s, I saw houses drop 50% so never say never.
But a lot of buyers would look at $250K houses in MA
absent an economic crash.
The article points out that the local banks haven’t been making the crazy loans and aren’t seeing the defaults.
they haven’t, it’s the option ones of the world that have all the “gems.”
Yes, but have they purchased any questionable MBS?
They seem to be correct in predicting that the lowest-priced homes will be the last ones whose list prices will fall. IMO fall they will.
Good point. There is strength here in the “first time buyer” market and will be more if prices come down a bit. Good homes for newbies are very hard to find; no one builds nice little houses anymore, just ugly condos because land is so expensive. As long as apartments of equal quality are so much less expensive, as is the case right now, condos won’t move. I am already seeing the hit in the upper end of the market where I live (Andover); the houses in the $700- $1M range are staying on the market *forever*. Just not enough people can afford to move up. There are homes on our street that have been on and off the market for over a year now. Lower prices *have* to happen if anything is going to move.
“The shakeout continues in the housing market in SouthCoast and throughout Massachusetts, as many owners, mortgaged to the hilt, face foreclosure at a rate double that of a year ago, which was in some communities double the year before that.”
It sounds on the face of it that the Massachusetts foreclosure rate is increasing exponentially at an annual doubling rate. Prices sure are not going to go up as long as the number of foreclosures is doubling each year going forward.
“‘I don’t see homes in the $250,000 range falling 30 percent. They’ll fall 10 percent, and they’ve already fallen,’ said Patrick Sullivan, CEO of Sovereign Bank.”
10 percent is already in the bag. 30 percent sounds conservative. JMHO, of course…
Massachusetts prices are already down 13% from the peak when you adjust for inflation. See: http://www.bostonbubble.com/forums/viewtopic.php?t=153
“Roger Stanford, an attorney in New Bedford who handles many bankruptcies, said the rate of foreclosures he is seeing ‘has tripled, easily’ since last spring, when there were dire predictions about a tidal wave of adjustable rate mortgages being recalculated, always recalculated upward. That wave has indeed materialized.”
This tidal wave’s arrival was forecast many hours in advance. Instead of moving to higher ground, many tourists drove down to the beach to get a better look at the advancing wave…
“‘It’s a tough question, said Adams, a real estate agent who’s trying to sell a $419,000 West Roxbury Colonial. ‘The longer a property sits unsold, the greater the chance a buyer will offer less. But if you take the place off of the market, there’s always the risk that you’ll miss the buyer.’”
I am perpetually amused by this Realtor’s urban legend that says there is some kind of stigma that attaches to homes that sit on the market too long. Sitting on the market for a long time will not reduce the chance the home will sell unless (1) it is overpriced and (2) the overpricing gets worse over time due to rising inventory and dropping market values. The trend is not your friend when foreclosures are rising and prices are falling.
My favorite part is this;
‘But if you take the place off of the market, there’s always the risk that you’ll miss the buyer.’”
THE buyer. Not A buyer, THE buyer, just one. That’s right, how do you find the one fool to dump this overpriced POS on.
Unfortunately, GS - I think there’s some truth to this Realtor chestnut. (I think of it as an aspect of human nature, not anything attributable to Realtor “smarts”.)
The same thing can be seen on new car lots. Even when there have been no changes in a model, an “unsold 2006″ model next year will have a stigma. People think “If nobody else bought it… there must be something wrong… I won’t take the chance either.” It sells, after the dealer makes a series of deep price cuts.
If I see a property sit on the market for a year, it’s hard not to assume there’s a problem. Maybe there are repairs to be made that are not visible in the photo. Maybe the seller has some unreasonable expectation like a 3 month escrow or something.
This kind of thing is more prevelant when inventory is high. If you have lots of choices available and can look at houses all day long, why waste time on something you already suspect would not be conclusive?
The car thing is a little bit true… When you go to sell a used car, the year determines the price you can fetch. Two identical used cars with the same mileage, but one being a year newer (based on model) *will* fetch more money.
“If I see a property sit on the market for a year, it’s hard not to assume there’s a problem. Maybe there are repairs to be made that are not visible in the photo. Maybe the seller has some unreasonable expectation like a 3 month escrow or something.”
How can I tell whether a new listing has repairs that need to be made? I don’t see why this is much different between new or used homes.
Unreasonable seller characteristics, as signalled by an unreasonable listing price, are my leading suspicion about why homes sit forever — why would I want to deal with a fool who seems unaware that comparable homes in the same neighborhood as his are selling at $50K less?
Getstucco - I respectfully but 100% disagree. Houses that do sit for a long time do develop a stigma. Furthermore, houses that start out overpriced, but eventually are lowered to “market” price, tend to stay on the market longer, and eventually many will even sell for less than they would have if they had just started out priced correctly. Part of the reason is the stigma that attaches to houses that have been on the market for an extended listing period.
“Houses that do sit for a long time do develop a stigma.”
Are you a Realtor? Or do you just have divine provenance? I am curious how you “know” that I am wrong. Because I never heard anyone try to explain this “theory” about the stigma of a home staying on the market too long. One possibility is that Realtors start to ignore listings that are unreasonably priced relative to the value, but then that would fall under the umbrella of my explanation, which is that homes sit forever if they are priced wrong, wouldn’t it?
I know that the last home I owned had been on the market for a considerable length of time (bankruptcy, lender tried to sell it for more than the market would bear without bothering to repair the damage inflicted by the PO’d former occupants, etc.). Then they made a major effort to repair the place, and also dropped the price, just a bit before my wife and I looked at it and decided immediately to buy it.
The thing I don’t get about the stigma theory is that it presumes that buyers care about how long a home has sat on the market, which I personally doubt. I think buyers care about price and quality; why would they care about whether the home went on the market yesterday or last year, if the value is there for the price tag?
Come now, GS, this is basic human psychology… especially as it relates to bubbles & busts. If lots of people want something, it must be good therefore others will want it, too. OTOH, if little interest exists in something, others are automatically dissuaded.
For example, attractive older singles are immediately suspect. Is he a jerk? Is she a bitch? If they’re such a great catch, why hasn’t someone already “caught” them?
Of course, smarter people delve a little deeper into they “why’s”.
“Agents add that keeping a house on the market all winter long can make a property look defective or the seller seem desperate. That can attract ‘low-ball’ bidders, not just in winter, but also the next spring.”
Oh, trust me, the low-ballers will be out in force next Spring regardless of when the house went on the market. And when the much-ballyhooed NAR Spring Revival fails to materialize, and a tidal wave of distress selling begins in earnest, lowball offers will be as good as it gets.
Low-ball beats no-ball
Lets just say that the strike box is ALOT bigger than these hitters are used to. I’m betting alot of called strikes here.
What’s surprising to me is that the investment craze hit multifamily units. In general, I think that a multifamily unit
where you can keep an eye on things is a good idea except
when you grossly overpay and that’s what it sounds like happen
here. I wonder what the net effect on rents will be.
Michael, in my market, Chicago, the small multifamily market has had unbelievable appreciation over the past five years, moreso than the single-family or condominium market. These small two to four unit buildings are perfect for beginner real estate investors, and we’ve had so many of these beginners pile into the market over the past several years. It’s highly unlikely to find a property that comes close to positive cash flow.
With larger multi-family properties, the prices have been distorted by the hyperactive condo converters, who pay much higher prices for units on the assumption that they profitably be converted to condos.
I wonder if Eric the rental houses mogul from Seattle had been foreclosed on yet or is he still preaching his brand of Religion?
had=has
http://seattlerei.blogspot.com/
He is still posting. The guy actually gets close to making a few good observations re: RE, so I find myself hoping he will get the overall picture, but then he goes on to buy more properties! Yikes.
Folks need to sell their homes and buy the homebuilders.
Pretty funny to see the homies today: HOV, LEN, TOL all have
those nice 45 degree intraday patterns.
I know you are kidding, Sure, go ahead & BUY the homebuilders, take a look @ HOV, the CEO says the 4thQ earning will be negative! or CTX where the 3rdQ was DOWN 72% (it missed the predicted earning too), … AND STILL THE !@#$% things goes up (I am 1 frustrated short at the moment). The problem is the put / call ratio is very high at the moment. IMFO eventually logic & losses will overwhelm the bulls, but when ?
“… the CEO says the 4thQ earning will be negative!”
Whatever happened to the mantra(s)?
– Real estate always goes up…
– The homebuilders will be able to profitably sell all the way down for years and years…
I’m glad to see Ben adding articles from my neck of the woods recently.
Realtors are definitely telling people to take their homes off the market and relist in the spring. I’ve heard it several times now, but these people are in for a huge surprise, the soft real estate market will create layoffs in construction, mortgage lending and many other jobs.
The lack of jobs or the mere uncertainty of jobs will create more softness and more bankruptcies. Attitudes to rush and get yourself into debt are changing. After all no job no paying the bills.
There are regular articles on New England here but obviously LV, FL and CA are much
bigger stories given that their populations
are much larger than the bubble areas in
New England. I enjoy the local aspects as
well.
In the old days people felt overwhelmed by the number of Mass. articles. Then the local press got quiet. That’s actually a familiar pattern, IMO.
I wish we’d see more stuff from the real high dollar resort areas like Jackson Hole, Aspen, Vail, etc. More out of curiosity than anything. Are they crash proof? I would think moreso than most places since houses in those places are owned by the REALLY rich people.
and here’s the answer!
http://www.usatoday.com/money/perfi/housing/2006-11-24-luxury-homes-usat_x.htm
Years ago I visited the Prince Bandar house in Aspen when it was under construction. It’s not a house, its a log cabin masnsion. I have friends who work at the architectural firm that designs these multi million dollar homes. Many have moved out of Aspen to Basalt, as did their firm due to real estate costs. So once again you have a case of locals forced to flee the market they serve.
Then the local press got quiet.
Too much ad $$$ from the RE hacks and development dough in the overhyped urban condo mkt.
Any negative reporting on the and the RE agency principals & developers go to the editors and/or chairman of the board and say cut the crap.
Free speech indeed.
Well, look at the reporting out of Arizona lately.
I guy I know holding a spec house and his realtor partner were considering taking their house off the market until spring bounce. When I pointed out a scenerio in which a bunch of inventory comes online all at once in the spring and drives prices further down his response was: ” I hope not.”
That’s it now. All they have is hope.
“Hope is not a plan.”
BTW, anyone notice the US dollar is hitting yearly lows. Wont surprise me to see commodities start perking up again, gold and silver are up nicely today. But food, oil and other neccessities will be going up again. The fed wont be cutting rates, they’ll have to defend the dollar.
I had a co-worker get really pissed at me when I made a similar observation in response to his hypothesis that the Fed would almost certainly reduce rates to 4.5% in 2007. My response was more along the lines of “We’re 10X more likely to see 6.75% (1.5 point rise) than 4.5% (0.75 point drop).”
I am interpreting the yearly lows as a vote of no confidence in the Fed’s support for the dollar from the ForEx markets. Too many rumors are circulating about the Fed’s plan to drop rates next year the moment the economy shows any signs of weakness.
“here are regular articles on New England here but obviously LV, FL and CA are much bigger stories given that their populations”
Good point, I’ve only been reading this blog for about a month and have only seen about a half dozen or so that I can remember anyways. Its really no big deal the same dynamics taking shape there are happening here as well so I can extrapolate from that. Although, I think California had more time to get ahead of itself, so the bubble is bigger.
I just checked the mls in the mass area and the number of single, multi and condos are 50,948 not 44,817
Ohhh how the lie
Good time to take a vacation if your in the business.
“Mr. Sullivan said ‘a lot of people have overpaid for multifamily houses in traditional cities. And they’ve really overpaid. In many cases they’ve gotten their mortgages from sub-prime lenders. They didn’t get them from the banks.
LMFAO…And you can bet these sub-prime lender used only the best, brightest, independant, honest and ethical appraisers for their deals.
Bob Carpenter wrote:
“California had more time to get ahead of itself, so the bubble is bigger.”
You have a gift for understatement, Bob. I nearly bought a 730 sf 2/1 on a 3000′ lot with 1 car garage + 2 spaces for $190k in 2001. In late 2004, a 700 sf 2/1 on a 1750′ lot right next door, with no offstreet parking in a beach area where there’s no available street parking, was offered at $550k, and sold for $500k. The new owner/investor has it on the market, originally at $579k, but now is down to $499k and offering $10k cash and owner financing. Last Sunday’s open house had 3 visitors and no offers, even though a fence was torn out and the 5′ space between the house and alley was paved for one parking space. Oh! the house is 1922 vintage, and you can see from the street that the foundation is crumbling.
This is in San Diego, not the bay area. In 2005, 78% of San Diego buyers used the 80-20 low,low introductory interest-only loans, and most will adjust sometime in 2007. If that investor doesn’t bail soon, he’ll take a bath by Summer. Incidentally, both houses would have sold for under $100k in 1998.
Compared to that, Mass. prices are downright reasonable. My sister is looking for a place in Westport/Dartmouth and thinks all she can afford for about $250k is a condo. I’ve told her to wait for late next Summer, and she can find a house for that. Am I misleading her?
No.
But never mind next year if a house becomes the goal. Better off waiting until 2008 - if she can “hang on” that long.
I think it’s worth waiting. The market is extremely volatile here right now; prices are definitely coming down and I suspect that there will be a flooded market in the spring, which will bring them down further. But “starter” SFHs are hard to find in MA so she’ll have to be willing to look hard and be patient.
As an example of prices coming down, friends just bought a home in Quincy for just under $300K. The home had been offered at $340K last summer and there were no takers; the owner pulled it off the market and sunk some cash into necessary renovations and put it back on for $305. Friends were able to bargain him down over the cost of some finish work he hadn’t done. It’s a nice little house, 4 BR/2 BA on a good sized lot in an OK but not great neighborhood. Friends bought it with the intention of staying put for at least 5 years, so I think they will be OK.