December 26, 2006

“Housing Market Continued It’s Decline In November”

A housing report from the Boston Globe. “The Massachusetts housing market continued its decline in November, with sales of single-family homes and condominiums dropping by double-digit percentages and sales of single-family homes reaching its lowest November tally since 1992, according to a housing report issued today.”

“The Warren Group said the single-family home median sale price fell 6.5 percent, decreasing to $315,000 in November from $337,000 in November 2005. Last month’s median is down more than 13 percent from the $364,000 peak registered in June 2005, and has now dropped in eight of the last nine months.”

“Condominium sales fell by 10.1 percent from November 2005. Statewide, the condominium median sale price dipped 1.8 percent to $269,900.”

“Through November this year, all 14 Massachusetts counties have seen single-family home sales decline. The declines were most pronounced in Nantucket County (29.6 percent) and Barnstable County (22 percent).”

“It was the Boston market’s worst year since the early-1990s housing bust. Reversing a spectacular run-up that made the Hub one of the nation’s most expensive housing markets, the median price last year for existing homes plunged 19.3 percent between the first and second quarters, according to Global Insight. That second-quarter decline was the biggest since 1991.”

“With the glut of suburban homes for sale nearing records, by October it took homeowners on average four months to sell a house. Boston condominium prices slipped 7 percent in the autumn quarter from a year earlier. Foreclosure filings soared as homeowners with adjustable-rate mortgages were hit with higher rates.”

“But prices haven’t fallen enough to ease economists’ warnings that exorbitant housing costs remain a huge drag on Massachusetts’ economic growth. ‘The worst drops are over,’ said Larissa Duzhansky, Global Insight’s economist. ‘Are we going to see every quarter lose? No we’re not, because Boston is still a desirable market.’”

The Boston Herald. “The once-hot condo market has cooled in Boston. City and business leaders are soul-searching about how to spark job growth in a still sluggish local economy.”

“Job growth has been a mixed bag, with Massachusetts, and its economic engine Boston, still recovering from the last recession. Overall, the state is still down 143,800 jobs from 2001. The one area Boston had seen strong growth in - housing - now appears to be cooling.”

“Outgoing City Hall development chief Mark Maloney recently boasted of the city’s big housing push - 17,000 new units since 2000. But even that accomplishment may be in trouble, with condo sales slowing downtown and developers of planned projects weighing whether to start building.”

“Dean Stratouly, the Boston tower developer, called Mayor Thomas M. Menino’s plan to form a City Hall sales group to market Boston to companies a step in the right direction. ‘It’s better late than never,’ Stratouly said. ‘When you have this…exodus from the city…it is horrible. It is a wake-up call.’”

The Worcester Business Journal. “Mark Fitzgibbon, CFA and director of research at Sandler O’Neill & Partners, LP, cites two significant headwinds that will affect the 2007 banking market. One is the yield curve. The second thing impacting the 2007 banking outlook is the slowing housing market, particularly in Massachusetts.”

“‘Credit qualifications will decrease from the current pristine level and credit costs will rise,’ he says. He expects credit quality to deteriorate in 2007, and that there will be more problem loans than we’ve seen historically. Some preliminary signs of this change were apparent in third quarter 2006, he says.”

“The region’s slowing housing market worries everyone from bankers to homebuyers. ‘There is speculation as to whether we’ve bottomed out,’ says Steve Groccia of Bay State Bank. ‘The time houses spend on the market has increased, which is driving prices down. Foreclosures are way up.’”

“Analyst Mark Fitzgibbon agrees that the housing market has slowed to a crawl, particularly in Massachusetts. ‘We are already seeing the impact of higher interest rates in the housing market,’ he says. ‘Some builders have gone bankrupt.’”

“Barnstable and Berkshire counties, with many second-home mortgages, showed the highest foreclosure rates in the Commonwealth in 2006, Fitzgibbons reports. ‘People tend to let their second home go first,’ he says. ‘This is consistent with prior cycles. The consumer appetite for debt has been satiated by mass home equity and principle residence refinancing.’”

“John Merrill of Sovereign Bank Massachusetts warns against interest-only mortgages. ‘Trying to afford mortgage payments is pretty challenging when rates go up,’ he says.”

“Mark Crandall of TD Banknorth suggests that the refinancing craze is over. Meanwhile, the refinancing craze brought out predatory lending practices, the effects of which we’re still seeing, he says.”




RSS feed | Trackback URI

48 Comments »

Comment by flatffplan
2006-12-26 10:31:54

going from arms to 40 year slave sentence -that will be the next craze

Comment by JWM in SD
2006-12-26 10:48:54

40 year loans won’t save them…there isn’t that much difference between payments on a 30 year and those on a 40 year loan.

Comment by GetStucco
2006-12-26 11:17:51

The main difference is to the bank (which earns much more lifetime interest over a 40-year term compared to a 30-year term).

Comment by jtcc
2006-12-26 12:37:48

ahh the 40 year loan. That will fix everything? The 100 year loan is available in Japan. Maybe we should just go directly to that. Would love to see that amortization schedule. Principal paid 19 cents interest paid $999.81

(Comments wont nest below this level)
Comment by bottomfeeder1
2006-12-26 12:48:56

We outdid the japs we have interest only neg am!

 
 
 
 
Comment by James Bednar
2006-12-26 11:08:19

Not 40 year conventional, payments aren’t significantly lower than a 30 year. For many the only alternative is going to be a long-term fixed rate interest only loan. Essentially, renting the money from the bank to live in a house, or rather, renting the house.

jb
New Jersey Real Estate Report.

Comment by Peggy
2006-12-26 11:11:30

Well, I would rather rent a house that I didn’t have to sell when its time to move.

Comment by diceman
2006-12-26 12:22:19

or maintain, pay taxes on, etc.

(Comments wont nest below this level)
 
 
Comment by GetStucco
2006-12-26 11:18:59

In the current environment, it is generally far cheaper to rent a house from a homeowner and let them rent money from the bank.

Comment by James Bednar
2006-12-26 11:27:38

You would have an easier time explaining string theory to Joe Sixpack than that.

jb

(Comments wont nest below this level)
Comment by JWM in SD
2006-12-26 11:38:45

Unfortunately, you are largely correct.

 
 
 
 
 
Comment by Flushing Coop Owner
2006-12-26 11:01:51

It seems like most MSM sources have mandated at least two paragraphs of happy talk on the tail of every real-estate story. I had hoped to send the link for that first Boston Globe story to a friend of mine. He just started renting a Sommerville condo from an FB friend of his who relocated across country, and the FB is trying to talking him into being a GF and taking it off his hands. (I’ve been trying to talk him out of even thinking about what would be the biggest mistake of his life so far.) That nonsense about “some signs of stabilization” seems to have no factual basis, but I fear that my friend would read the article and take from it the mistaken idea that “prices have been going down, but now they’re leveling out.”

Comment by bostonbubble
2006-12-26 12:24:13

Perhaps your friend might be interested in seeing what the ratio of income to housing prices looks like in Massachusetts, with a historical perspective:

http://www.bostonbubble.com/forums/viewtopic.php?t=141

Summary: it was 2+ standard deviations above the norm, last check. Prices have been falling, but they have a substantial way to go before things return to normal.

Comment by Flushing Coop Owner
2006-12-27 08:14:47

Thanks–That is an excellent graph, with good explanation. I’ll send him the link.

 
 
Comment by Dan
2006-12-26 13:52:45

Real estate reporters are following the journalism formula–always present both sides of the story. It’s the tyranny of balance.

 
Comment by Darth Toll
2006-12-26 14:05:38

“It seems like most MSM sources have mandated at least two paragraphs of happy talk on the tail of every real-estate story.”

And this is what keeps the contrarian position of a housing crash intact. Once everybody in the MSM agrees that housing has crashed and is a terrible investment, then I will buy - and not a moment before.

 
 
Comment by nyc-is-different
2006-12-26 11:11:00

“It was the Boston market’s worst year since the early-1990s housing bust.“

One year later…

“It was the Boston market’s worst year since the Great Depression.“

Two years after that…

“It was the Boston market’s worst year since…uuhhh…since…“

Comment by John Law
2006-12-26 13:04:47

SINCE EVER.

 
 
Comment by lainvestorgirl
2006-12-26 11:26:28

Wall Street Journal predicting 2007 foreclosures:

http://www.realestatejournal.com/buysell/markettrends/20061130-hagerty.html

 
Comment by az_lender
2006-12-26 11:27:50

“There is speculation as to whether we’ve bottomed out,” says Steve Groccia of Bay State Bank.

Who would be speculating on that, Steve? Not us chickens. We’ll call a bottom a little late, but that’s perfectly OK.

Comment by nyc-is-different
2006-12-26 12:08:11

Yup. How would we do that, by the way? Two to three years of YOY stability?

 
 
Comment by crispy&cole
2006-12-26 11:28:25

Gekko-

Please buy a home ASAP. You sound sad and bitter towards homeowners like me!

Comment by crazy canuck
2006-12-26 17:20:36

oh he will , and probably yours ,for 10 percent what you npaid

 
 
Comment by Mike
2006-12-26 11:30:51

Correct. 40 year mortgages make very little difference. I’m amused by realtors and others who try to convince everyone that there is no property “crash”. It’s going to be fun watching them spout the, “This is not a crash,” mantra as prices drop 5%, 10%, 15%, 20%, 30% plus, with the realtors spouting quotes from the, “HOW TO CONVINCE THE SUCKERS THE MARKET CAN ONLY GO UP,” handbook.

Rule #1: When a potential buyer expresses concern that the market still hasn’t hit bottom, take on an amused all knowing smile and say, “Some of the other realtors in my office are saying that traffic has doubled in the last month. That tells me the correction is over and now is a good time to buy.” Never, never use the word “crash” when talking to buyers. Use the phrase, “A needed correctiion to normalize the market has taken place and now it’s safe to buy.”

Rule #5. If a potential buyer tells you he fears a crash, shake your head wearily and say, “That isn’t going to happen. If it was going to happen it would already have happened. Everyone I talk to in the real estate business thinks there’s only one way to go from here. That’s up.” Remember, it’s crucial you continually say, “Now is the time to buy,” or “There couldn’t be a better time to buy.” That phrase should be injected into your sales presentation at least 2 or 3 times when talking to a prospective buyer.

Here’s the real story. A crash seldom happens. Painful declines happen a lot over the years with serious damage to assets. Be they stocks, property or gold, etc. The trick is to get rid of that asset at the top or buy an asset at the bottom. VERY hard to do. For buying at the bottom, the “Buy when there is blood on the streets,” is a great saying and great advice but so far, where property is concerned, there is nothing more than a paper cut. Nowhere near blood letting. 5% or 10% or even 20% drops for an asset which has gone up 100% to 200% is nothing. Especially when that asset has increase very quickly and thus the gain has no validity. Anyone with a brain thinking of buying, should wait until at least the end of 2008 if they can. Meanwhile, beware of dip buyers who think the bottom is in when it isn’t.

The vast majority of the sub-prime borrowers need to be cleared out and a good number of the non-thinking borrowers who had good credit but took on exotic loans and are now stretched waaaay beyond their ability to pay also have to realize the error of their ways before this is over. That’s when the dust will have settled. Not before.

Comment by Mike
2006-12-26 11:34:11

When I said, “Has no validity,” I should have added that the increase “Has no validity and was simply fueled by momentum buyers a.k.a speculators.”

 
Comment by DC_Too
2006-12-26 12:03:10

I would add that if history is any guide, there is no rush. RE busts are typically marked by nominal (price) declines, followed by stagnation for years - prices go sideways, allowing inflation to take the second half or so of the losses. Patience, patience.

Comment by nyc-is-different
2006-12-26 12:17:24

Yes sir. Calling the bottom is a lot easier than calling the top.

 
 
Comment by flatffplan
2006-12-26 12:06:15

shouldn’t anyone over 40 use a 15 year-who wants to make payments inot their 60’s ?
like a car after you’re 30 you buy the one you can pay cash for

Comment by diceman
2006-12-26 12:24:47

Sounds like common sense. Therefore, it will never catch on.

 
 
Comment by az_lender
2006-12-26 12:11:39

Mike says, “Anyone with a brain thinking of buying should wait until at least the end of 2008 if they can.” And if they can’t, I’d like to know why not! Who “can’t” wait to buy when renting is so much cheaper?

Comment by JWM in SD
2006-12-26 12:43:46

There is such a thing as social and marital pressure to buy. One can only hold off the wife for so long.

Comment by HARM
2006-12-26 14:53:30

In that case, consider marrying someone who understands finance and can use a calculator. ;-)

(Comments wont nest below this level)
 
Comment by ruth doyle
2006-12-26 16:54:49

Yeah, the husband always wants to rent and the wife always wants to buy.

More gender myths being propagated here I see.

(Comments wont nest below this level)
 
 
 
Comment by flatffplan
2006-12-26 12:15:42

don’t we have to go through hard times or at least hard money to get to the “bottom”
is there any tightening yet?

 
 
Comment by bc_cele
2006-12-26 12:00:50

I just e-mailed this to one of my friends in CT who is going through a divorce and is trying to have her house in Boston sold. She has noticed that prices are really starting to tank and she needs to do some serious renovations to get her house in shape to sell. I think she is shocked just how quickly things have turned around.

Comment by garcap
2006-12-26 12:24:47

Why renovate? That’s throwing good money after bad when you are about to sell. Tell her to wash the windows (professionally) inside and out and throw down some paint in really scruffy rooms…

Comment by bc_cele
2006-12-26 13:47:41

My understanding is that there are some problems that need to be brought up to code and there is a deck that needs to be fixed. The odd thing is that her ex is a construction worker (was even a supervisor on the Big Dig at one time), but he’s apparently too lazy to get things done. Personally, I think he’s just being difficult, but nothing she can do about it right now.

Comment by garcap
2006-12-26 13:53:28

Perhaps MA has laws preventing title transfer for property that is not up to code, but in states where this is not the case, it’s better to sell the house as is and avoid paying taxes and commissions on the work.

(Comments wont nest below this level)
 
 
 
 
Comment by barnaby33
2006-12-26 13:02:12

John Merrill of Sovereign Bank Massachusetts warns against interest-only mortgages. ‘Trying to afford mortgage payments is pretty challenging when rates go up,’ he says.”

Um no it isn’t, you just offer less for the house.
Josh

Comment by garcap
2006-12-26 13:04:43

I think he means it’s tough on folks who already locked in the their price (owners) but not their rate.

 
 
Comment by hd74man
2006-12-26 13:14:26

Mazzholeland and New England is in an economic death spiral.

The later segment of the Greatest Gen and early Boomers think they can foist homes they bought for $40k in the 60’s and 70’s onto massive student loan indebted Gen XYZ’ers for $450k and bail to greener pastures.

There is a total disconnect with reality going on here. Your can see and smell the stagnation and ossification.

The MSM and ivory tower pundits are whistling past the graveyard.

Comment by HARM
2006-12-26 14:55:37

Well said. Good luck trying to keep squeezing blood outta that turnip, though.

 
 
Comment by HonestAppraiser
2006-12-26 14:11:12

Mortgage originators are dropping off like wine barrels going over Niagra in Taxachusetts, but don’t worry the new gov (Deval) will fix it.. Right… I had a assignment this morning in Milton MA, houses are taken a hit especially around Mattapan/Rt 138…

 
Comment by 45north
2006-12-26 18:29:03

HonestAppraiser: Honest appraisers should be in great demand. Do you think that you will have more work or less next year?

Comment by Chip
2006-12-26 19:59:23

“People tend to let their second home go first…”

What’s the opposite of “profound?”

Comment by anon
2006-12-27 11:29:53

Confound?

 
 
Comment by HonestAppraiser
2006-12-27 09:57:14

I think there will be more work, however the loan pie is shrinking so every loan that the bank/mortgage company gets in will be like gold… So basically the pressure is still on..

 
 
Comment by Realtor09
2009-08-26 10:45:16

I am a real estate agent in MA and I pride myself as being an honest, forthright person whether it comes to working with a family member or a new client, I always give straight answers because I like to sleep well at night. I am writing this to hopefully provide some insight for people who are confused on the market. Don’t be.

Don’t listen to all of the misinformation being pushed by brokers and the media on the housing market. They will tell you the housing market is improving, that the worst is over, and that we have hit bottom. It is hype. It hurts people. It hurts local families. It could hurt you and me. The truth is that for the past 5 straight months, home sales in MA have in fact experienced a slight rise, and the market has seemingly improved. BUYERS BEWARE though, this was a temporary upturn based in part on the new $8000 home buyer tax credit, which expires this November. It was also caused by a wave of foreclosures that dried up in early spring, allowing the market to slightly rebound as well as the fact that spring and summer are ALWAYS better seasons for real estate. Unfortunately, reality is that buyers who bought in during the last 5 months will inevitably see an immediate depreciation of their home in the next year that will continue through 2011.

People, be careful what you buy. Be CAREFUL who represents you and LISTEN to what they say. If your agent says that, “now a good time to buy”, go with someone ELSE. If they say, “there are some good deals out there”, they are telling the truth. There are SOME deals, but you need to pick and choose carefully if you are looking to build equity in your home in the near future. Choosing a high priced home a good deal over assessed value is poor choice. Interview your agent. Make sure they are educated. Do you know that ANYONE can become an agent or broker? There are agents, like myself, with MBA’s who read reputable reports on the national and state housing markets and can provide informed advice to their clients. Learn the warning signs of a bad agent. They won’t tell you this:

Most folks in Massachusetts and areas of Rhode Island buy way above their means. Everyone wants a cookie cutter new build. Most of these new builds are built very cheaply and will deteriorate faster then the quality builds years ago.

Our biggest problems in MA right now are:

1.) Builders KEEP building cheap houses all over MA. This will eventually cause even more of a glut of homes on the market then we have yet to see. The flip side is that ill-informed homebuyers buy these cheap cookie cutter houses and the older, well built homes SIT on the market, causing a price gap between homes built pre-1980 and new homes. These older homes flood the market and pull the market value down for all homes. Couple that with a glut of new houses continuing to be built = a market in a downward spin.

2.) Foreclosures – you haven’t seen nothing yet, baby. Over 32% of homeowners in MA are already defaulting on their mortgages. We have yet to see the 2nd and 3rd wave of foreclosures. This will drive our housing market to a NEW bottom in 2010 and 2011.

2a.) Unemployment – No matter which way you think the economy is going, there is a very simple truth we have not yet fully realized; in MA, a huge wave of lay-offs came in late 2008, early 2009. Many of those folks have STILL not found jobs and they are struggling on unemployment to maintain their lifestyle and pay their mortgage. Unemployment extensions start to run out after about a year and a half, so that would be right around now and into 2010 = more foreclosures, less home buying….worse housing market.

3.) There are only two things I feel qualified to say about the hot MESS that the banks are in – 1.) Short sales are driving area housing markets down and holding back homebuyers from purchasing new homes. Banks are not required to approve a short sale, but their response time and entire process is so utterly backed up that a homebuyer could potentially put in a bid and not even hear from the bank for 6-8 months, let alone get an approval. 2.) Banks are STILL lending more mortgage debt then the average consumer can carry (as long as their credit is okay – not that it will be okay once they start to default.)

Neighbors, friends, family, MASS residents in general, please be careful. We live in a state that has YET to experience a full bottom. We panicked this year when prices came down, but we have not seen a true bottom.

I tell you this as a Realtor, because I spend most of my nights sitting at my desk with a cup of tea and reading report after report on what is happening in the housing market in our state and our country. As a SMART realtor with an MBA, I also realize that false lifts in the housing market won’t lead to bigger earnings for me as an agent in the long term. In other words, there is no job security in a faltering market. Spreading the TRUTH about the housing market can start healing it. Folks will make smarter choices in home buying/selling when they are truly informed. The last thing we need is more folks buying in, losing value and walking away from their loan to leave behind a foreclosure.

BUYERS: My advice: If you need to buy. Buy selectively. INTERVIEW your agent. A knowledgeable agent with integrity will get you into the right home. But, if you don’t need to buy, WAIT. The biggest deals are yet to come.

SELLERS: My advice: Know the facts. If you bought between 2002-2007 and you HAVE to sell right now, be prepared to give a price cut to your buyer depending on your area. Make sure your agent is informed. INTERVIEW your agent.

Good luck everyone!

 
Name (required)
E-mail (required - never shown publicly)
URI
Your Comment (smaller size | larger size)
You may use <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong> in your comment.

Trackback responses to this post