‘Roof Collapses’ On Massachusetts’ Housing Bubble
The Boston Herald has the latest from Massachusetts. “Massachusetts house sales plummeted 21 percent last month, stoking fears that the housing bubble may have burst and could send shock waves across the economy. It was the biggest year-over-year sales drop in almost 11 years, as Realtors recorded the slowest January since 1996.”
“What’s more, one of the worst fears of homeowners appears to be coming true: House values have dropped nearly 8 percent since August.”
“The MAR reported yesterday that only 2,345 houses changed hands last month. That’s down more than 20 percent from January 2005’s volume and an even steeper 34.4 percent from December levels. ‘Higher mortgage rates, increased inventory levels and bold predictions of major price corrections’ kept buyers on the sidelines, said MAR President David Wluka.”
“The MAR also said median house-sale prices fell to $345,500 in January, off 0.1 percent from January 2005 and 2.4 percent from December. All told, median prices have dropped 7.9 percent from August’s $375,000 peak. Wellesley College economist Karl Case said the latest figures show ‘evidence of a bubble, but housing-market bubbles don’t unwind the way stock-market bubbles do.’”
“The MAR said median condo-sale prices hit $270,000 last month, down 1.8 percent from December but up 1.9 percent from January 2005.”
The Boston Globe. “The number of ‘active listings’; homes being offered for sale, for both single-family homes and condos in January rose 41 percent from January, 2005, the realtors association said. ‘It’s a balloon, not a bubble,’ Wluka said of the local housing market. ‘Balloons inflate and deflate; bubbles burst.’”
“‘For the last few years, buyers often outnumbered the supply of homes for sale, allowing prices to escalate rapidly, but that’s no longer the case,’ said Wluka. More recently, activity has picked up because of mild weather and ‘more realistic pricing on the part of home sellers,’ Wluka said.”
Thanks to the readers who sent in these links.
‘one of the worst fears of homeowners appears to be coming true: House values have dropped nearly 8 percent since August’
A little exageration? With prices having risen so far, how is 8% a worse fear? It isn’t blogs like this that practice ‘doom and gloom’, but rather the MSM. Prices could fall 40% and most homeowners wouldn’t lose a penny. Check out this rattled broker in MA.
‘Don Baker, owner of Don Baker Real Estate, said the downturn starts with the overall state economy and ultimately impacts the housing market. ‘We have a governor that’s never here, and a president who is never here, either, and of our two senators, when was the last time one of them was in Washington to vote on anything? So that kind of behavior sets the tone for the whole state. Nobody is watching the ship,’ said Baker, adding that Lynn is fortunate to have a mayor who shows up for work each day.’
Funny, I don’t remember anyone giving praise to the Governor, the president and the two senators during the last 5 years of double digit appreciation.
I guess that means when house gain value that must be the result of smart people buying houses, when houses decrease in value it obviously the fault of politicians.
I wouldn’t classify them as “smart.”
Sorry I should have used quotes. There was a level of sarcasm around “smart people”.
In reality its just a combination of dumb luck and stength of the herd.
“The MAR also said median house-sale prices fell to $345,500 in January, off 0.1 percent from January 2005″
I know, it’s small, but— A YOY DECLINE!!
No more ‘RE only goes up’ BS. Who’s your Daddy?
Inflation adjusted they are now in the hole- YOY!
When word starts getting out to the herd that prices are not rising maybe it will finally stop people from chaseing appreciation gains. I feel the sentiment changing here in az but it takes time. I read on the az republic website that luxury homes are still moving. The declines are a start of the herd actually thinking they might lose money.
:)
The new 4Q 2005 OFHEO Number are out. The numbers will be easily used by the housing industrial complex to say the ‘boom’ continues. Ouch.
David
Bubble Meter Blog
Bakersfield is still in the top 20. Ugh. The spin will continue here!
Remember the lag of this report. Last fall/winter we were seeing and talking about a whole different market than we are now. The next report should be a better read. And Bakersfield? They can spin Bakersfield all they want but it’s still just…well..Bakersfield.
Don’t knock Bakersfield. Oh,and you love SF with all the limp wristed wackos. Sorry I was personal. I take that back. I meant it that way.
House price appreciation by state in the last 5 years. (David - we win
Hopefully that means we get to go first down the other slope. Unless it’s a permanent plateau).
1. District of Columbia 127.05%
2. California 117.29%
3. Hawaii 109.18%
4. Florida 107.24%
5. Nevada 103.64%
Just remember that right before a missile goes into a nosedive, its trajectory is often vertically up…
http://patrick.net/housing/calhouse4.gif
Here we go with more econospeak. Whether it leaks slowly or bursts suddenly, the net effect from all the financial pain inflicted will be the same. Besides, balloons can burst too, when in contact with a pin.
Yes, and balloons make a lot more noise when they’re popped.
This economist is overlooking the rise of ARMs and interest-only loans. Americans have been having a grand old time with all this free money courtesy of uncle Greenspan. What happens when the bill comes due and they can’t raise the funds to pay it?
BK
This is not “econospeak” but rather “RE industry speak.” Don’t confuse the two.
The RE industry better hope for a popping bubble rather than a deflationg balloon. If real prices have to fall 30% to align with fundamentals, then this is about ten years worth of flat prices for inflation to erode the value. During this time, buyers are not in any hurry to buy a stagnant asset, and they will happily rent.
If, however, there is a quick but painful pop, then after a two year bloodbath, prices can actually begin rising at historic rates and there will be many more transactions. Since RE agents get paid on commission, they should hope that we see a popping bubble.
It’s the same mass psychology, whether econospeak or realtorspeak or wallstreetspeak. The way their (brokers, economists, realtors) mindset progesses as reflected in the press is exactly the same as a crisis develops. I just call it econospeak because economists probably get a bit more press. There is really no difference.
“There is no bubble/mania/problem.”
“There is an issue but it is isolated to a few areas/regions/companies/banks/bad loans/rogue traders and will not affect you personally.”
“There will not be a crash, but we’ll have a soft landing/price flattening/more balanced market/orderly market.”
fantastic post.
Yes, volume is all important to the RE industry– Much more so than median prices.
It’s a bird, it’s a plane, it’s a bursting balloon!
Looks like the Baby Boomers will have a harder time downsizing and moving to Florida to join the “Mini-Bloodbath” we are currently experienceing.
Hopefully it will slow the slimers from invade us to the north.
Found this on the Bubble Meter blog
http://tinyurl.com/l9nj8
Interesting that the last line is for subprime being almost 10% delinquent. That is a major factor, as most of the funny loans in the last 5 years have been subprime. That is huge!
Look how crazy people have gotten with debt. This site allows strangers to loan money to other strangers. Crazy!
http://www.prosper.com
That’s a breeding ground for fraud.
That’s a cool idea, it combines Lloyd’s of London (syndicate insurance) with a credit union (managing credit risk through group affiliation). Most of the people do the same thing with a minor intermediary an underwriter (who has seemed to let almost anything through the door over the last few years).
That site hurt my head,
“thanks a lot”
=)
I spoke with my RE agent, she is also a good friend, that sold my homes in Boston. We discussed the current market and how I could purchase more home for my money than what I sold my homes for last year. She also stated she suggest the sellers to stop digging their feet in and be more realistic on pricing. She stated they are in a chasing down the market phase now (so another words place you home on the market 5% less than the comps and it will sell).
She also mentioned a home to me that the sellers have already reduced over 100K and looks like another reduction will be coming soon.
A view from a RE Agent that has more than 25 yrs of experience
—AL
Can you clarify the last two points? (Not meaning to nitpick at all, I’m sincerely interested.) Is she saying that anything priced 5% under comp listings will sell? And how does that square with the report that another major reduction is in the works? Which sellers have already reduced over 100k — sellers of multimilliondollar homes? or sellers of $500k-700k homes? And are these the ones who are getting buyers or are these the ones chasing down the market? Thanks for the details …
Sometimes reducing the price works agaist you…buyers wonder why it can’t sell. Starting out with a price below the comps is a better strategy then starting really high and then cutting the price. Not sure that answers your question.
The home that was spoken about was original listed at 699K and now they are at 579K.
She is saying to drop below the comps and this will give you more of an advantage in the current prices and if this is done at the start your more likely to get close to your price within a very short time unlike if you price to high you may end up with less due to perception from buyers of the price reductions, as we know most anything will sell if priced correctly
–AL
Thanks both, that clears it up. And $699 –> $579 is outstanding. Burn baby burn.
Comps mean nothing to the buyers. Buyers care about what they can buy, not historical prices.
Best approach to selling now is price bellow all your competition in current inventory.
You must price to be the next to sell. If not, some new seller following the above advice will step in line ahead of you and while you are screwing around with a $10K reduction the market will fall $20k. You will still be for sale and overpriced.
BeaConst, please come out from under the bed and tell us what MIT geniuses are saying about this MASS Crash!
I’ll second that motion.
“She stated they are in a chasing down the market phase now (so another words place you home on the market 5% less than the comps and it will sell).
She also mentioned a home to me that the sellers have already reduced over 100K and looks like another reduction will be coming soon.”
The listing price for the home must have been $2 million, if it was marked down $100K or 5%. So why didn’t it sell if that’s all it takes, why is it going to be marked down again? She’s lying.
Well as we know most people did not list per the comps… as with this one who shot for the sky and listed per above previous sales and no current sales…
a CMA is comprised of 3 items (sold listings, listings under agreement, and current homes on the market) What you need to look at in this market is current sales on the market more than anything,,, it was ok a year ago to look at sold listings and then add 5% above that,,, I sure did and sold fast,,, but some people added 10% above that and it took sometimes longer,, but this is becoming a different market now and some seller just don’t want to awake to it..
—AL
“It was the biggest year-over-year sales drop in almost 11 years, as Realtors recorded the slowest January since 1996.”
This date is historically significant, because it predates the start of the current bubble runup in prices, and also because it is over five years into the last crash, after everyone who ever read a newspaper or watched TV news would have been informed about what a dumb investment residential real estate turned out to be. We are just getting started with the re-education process, and it is already worse now than at the end of the last bust.
That’s right.
Leave it to Massachusetts to “give us” the new reality!
God Bless Massachusetts. 8% decline may not be much and we’ve got a LOT farther to go but it’s a darn good start.
If we can keep up with 8% a month by summer we’ll be down by 40%.
Stranger things have happened- as all of us know who have watched this thing shoot up into the stratosphere.
Found this amusing listing on ziprealty in MA, while browsing their reduced listings, and thought I would share the love.