January 23, 2007

Falling Prices “Part Of The New Reality”: Massachusetts

The Associated Press reports on Massachusetts. “Massachusetts’ housing market had its worst year in more than a decade, with sales and the median price for single-family homes dropping to levels not seen since the mid-1990s, a firm that tracks real estate transactions said Monday.”

“Diana Grammont, who recently sold her four-bedroom home in Lexington, said she and her husband lowered their asking price multiple times during the seven months the house was on the market. Potential buyers, she said, were well aware of the recent downward trends.”

“The only other option the couple would have been was to wait, possibly for years, for the market to recover. ‘That was not something we considered,’ said Grammont, now of Bedford. ‘We were just, I won’t say victims. It was just the way the market was when we were ready to sell.’”

“The median price, the point where half of homes sell for more and half sell for less, dropped 5.8 percent, from $345,000 in 2005 to $325,000 last year, according to a report by The Warren Group.”

“That price had grown 12 straight years, beginning in 1994. ‘You have to realize that that was a wonderful decade,’ said Timothy Warren, CEO of The Warren Group. ‘I think we have to take our medicine and realize that it can’t go up forever.’”

“Buyers also have become more cautious, because they can’t expect rapid increases in their property values, said Doug Azarian, president of the Massachusetts Association of Realtors. ‘When the market was climbing, they knew they would see their investment climb,’ he said. ‘There was less concern about the price.’”

The Telegram. “In talking with Realtors, Mr. Warren said, there is a concern that any increase in foreclosures could put more housing on the market, exacerbating the situation.”

“‘If there are a lot of those, you’ve got distressed properties flooding the market,’ he said. ‘And not just those in foreclosure, but others who may be threatened and have to sell their properties. Banks are trying to make decisions whether to take them or let them go for less. In the early 1990s, banks owned a lot of properties they got stuck with.’”

“Also of concern is the amount of apartment construction in the market, he said. ‘If you have a lot of apartments coming on, it tends to drive down rents,’ said Mr. Warren. ‘And that makes rental more attractive than buying.’”

“Homebuyers who financed 100 percent of their homes, or who used subprime loans that have low initial rates followed by years of increasing rates, could have a problem if they have to sell their homes. ‘I’m concerned for those who bought a year or two (ago), particularly with toxic financing,’ MAR President Doug Azarian said. ‘They may owe more than the value of their property.’”

The South Coast Today. “The Warren Group’s report said last year’s single-family home sales fell 14.4 percent from 2005. There were 54,203 homes sold in 2006, down from 63,350 the previous year. The 2006 sales figure is also down 20 percent from the market’s peak year in 2004, and the lowest since 51,032 homes were sold in 1995.”

“The median sale price of a home fell 8.1 percent from November to $310,000 in December, the lowest monthly figure since March 2004, when homes sold for $299,000. ‘What we’re starting to see now, in talking to my agents in Southeastern Massachusetts, there are more buyers coming in,’ said Ralph Grassia, VP for Jack Conway Realtors said. ‘Now is the time to get in.’”

“Glenn Rapoza, co-owner of Gaspar-Rapoza Realty, expects to see home sales continue dropping for the next two to three months, but said they will be minimal and should level off by mid-year.”

“‘No doubt, I can see the median prices falling a bit because of the realization that the market has changed,’ Mr. Rapoza said. ‘It’s part of the new reality. In order for sellers to sell and be competitive, they have to be focused.’”

“Mr. Grassia likened the market to being at the top of a pyramid, about to roll over into a plateau of moderation and consistency. ‘This is going to be the year of stabilization,’ Mr. Grassia said. ‘There is good inventory. There are going to be buyers out there. They’re not going to be shell-shocked and say, ‘Oh my god, the market is overpriced.’ They will continue to be educated consumers.’”

The Hartford Courant. “Hundreds of employees already furloughed by beleaguered Mortgage Lenders Network, including about 200 in Connecticut, will be laid off permanently. Layoff notices were sent, beginning late Friday, to about 830 furloughed employees in Connecticut and in four other states who worked in the lending division that the Middletown-based lender abruptly shut down on Dec. 29, the company confirmed Monday.”

“In Connecticut, the layoffs this past weekend are in addition to another 100 job cuts made three weeks ago. The initial layoffs came just after problems surfaced in the lending unit. The 300 Connecticut layoffs reduce Mortgage Lenders’ workforce in the state by 30 percent. It once had about 950 employees. Nationally, the company once had 1,800 workers, a number now cut in half.”

“Mortgage Lenders is the latest company to get dragged down by problems in the ’sub-prime’ mortgage industry, which has been slammed with rising delinquencies and defaults. What made matters even worse, the company priced some loans too low in October and was forced to sell them at a loss.”




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82 Comments »

Comment by Ben Jones
2007-01-23 05:38:25

I have to say I’m disappointed that Warren is stooping to cheerleading:

‘Inflation continues at a moderate pace,’ Mr. Warren said. ‘The unemployment picture is not terrible. The stock market is near an all-time high. Those point to better conditions. For a good part of this century, real estate was carrying the economy. People’s equity was growing, and their net worth increasing. There was a lot of building and home improvement. Real estate helped a lot of people. Now, it seems the stock market has picked up in the last quarter. They’re taking turns.’

Whatever happened to an economy ‘carrying’ itself?

Comment by flatffplan
2007-01-23 05:47:57

so why are MA homes dwon 15-20 % from peak ?
markets correct- doesn’t matter what fundamentals are

where is the mean line ?
2002 , 2003 ?

Comment by pinch-a-penny
2007-01-23 07:13:37

Try 1996-97… At least here in MA. Run down is that in 96-97, the dot con, and tech boom was starting to take off here, and property naturally followed. Before that, property was average for the nation here in Ma. Now there are few if any high paying jobs in ma, no tech boom, and most of the companies are relocating away. Think Pittsburgh after the steel mills left.

Comment by flatffplan
2007-01-23 07:32:12

Romney’s FREE-er healthcare thing was dumb

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Comment by turnoutthelights
2007-01-23 07:34:07

The bear side of me wonders if the entire US will look like Pittsburgh after the mills left.

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Comment by Kurt
2007-01-23 08:07:04

Nonsense. MA is Boston, and the colleges and universities employ tons of people at pretty high wages. Tech is still robust in the Boston area. This type of overexaggeration drives me nuts.

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Comment by pinch-a-penny
2007-01-23 08:30:41

Right…. Median price for mass is around 320K, and that is including the far west suburbs. Median income for a family of 4 is around 45K. That means that only those with income above 100K should be able to afford the “median” house. 100K jobs are not exactly around the corner.
Major Corporations: What major corporations are left?
Banking. State street, and lots of hedge funds
Tech: Akamai, some HP, some Cisco, and other minor players.
Insurance: John Hancock, (boutght by a canadian firm) Prudential, (lots of moves south to RI, and north to NH)
Manufacturing: Long gone
Services: Some specialized services left over from having major players.
Bio Tech: Genzine, Boston Scientific, and some minor players. few biotech companies have lived up to their promise, and the mature ones have a product range that is quite a niche market.
Yes and finally Education:
Education will not save this state. Forget about the 11or 12 Billion endowment for harvard, or other colleges and universities. Grads are going to look for jobs, and there are few and far between. Certainly none that pay the 100k to 150K (and if you know of any, please tell me) that they would need to buy the “average” mcshitbox around here.

 
Comment by Kurt
2007-01-23 09:16:21

Yes, but these days it is pretty much a two person income household which makes the median 90K. Not too tough to afford the median house. So, there you have it. Remember, those grads have parents with MONEY. If Boston is hurting, why is it that every restaurant and bar is packed all the time?

 
Comment by Robert
2007-01-23 09:24:45

The job market in Boston is awesome - at least for high tech. Since about 1-2 years ago, every time I put my resume up on Monster I get innundated by calls from recruiters, and now I’ve been getting bonuses for referrals. On the flip side, it sucks here if you are not in high tech or the other skills in demand. And also many people have been moving away because of the high cost of living.

 
Comment by hd74man
2007-01-23 09:29:19

it is pretty much a two person income household which makes the median 90K.

So?

Is this why I see 4 to 5 cars parked in every middle class neighborhood around the northshore?

$90k gross x 2.5 =roughly the ability to afford a $225k note.

Where the fook are you seein’ decent housing in this value range, assuming a 20% downpayment of $45k?

 
Comment by Betamax
2007-01-23 09:38:12

If Boston is hurting, why is it that every restaurant and bar is packed all the time?

It’s called credit.

 
Comment by Betamax
2007-01-23 09:39:01

italics off

 
Comment by Northeastener
2007-01-23 09:40:14

I think the median family income in MA today is closer to $60K (when adjusted for inflation). From the Census Bureau, 2003 Median Family Income was $52,713. (http://quickfacts.census.gov/qfd/states/25000.html)

From the IRS website (State Tax Stats), there were 423,650 tax returns filed in 2004 in Mass with an Adjusted Gross Income over $100K. 107,985 of those were $200K and up. (http://www.irs.gov/pub/irs-soi/04in22ma.xls)

Not sure if this data clears things up any, but it certainly is interesting.

 
Comment by bostonian
2007-01-23 09:43:29

Umm, I work for a university and can assure you that the average employee doesn’t make anything close to what is required for a median priced house or condo. Many of my colleagues spend a few years training here and then move somewhere that they can afford a house. The universities won’t save Boston prices. In addition, ow that prices are not moving up at insane rates, parents will be much less likely to buy rather than letting their offspring rent for four years.
That said, there are still plenty of reasons to live in Boston (at least if you don’t have kids that need to get educated) and I doubt that Boston will ever look like Buffalo, unless Deval gets really crazy.

 
Comment by pinch-a-penny
2007-01-23 09:52:22

Kurt: Where do you get 90K? I get around 52K for median family income in MA according to: (I believe that the measure is not median household income *2 for income to purchase a house!)
http://www.ers.usda.gov/Data/Unemployment/RDList2.asp?ST=MA
and
http://www.bos.frb.org/economic/neppc/memos/2006/sasserhershbein051606.pdf (WARNING PDF)!!!
That would put the AVERAGE house at no more than 150K, with a 30K downpayment. I would say that the median price of a house is around 100% over valued. (it would need a 50% decline in order to align itself with income.)

 
Comment by FED Up
2007-01-23 12:19:50

from pdf: median household income
Boston Metro ~ 62k
Boston City ~ 45k

 
Comment by anon
2007-01-23 16:23:43

Take 2 at turning italics off.

 
Comment by Crackpipe
2007-01-24 07:59:46

I bought my house in 1996 for $150K in Weymouth, Ma, Sold it in 2003 for $365K. Try to tell me this run-up has been normal? Lets all put away the crackpipe and get back to business…. Now, if I can manage to sell my girlfriends townhouse without taking a bath, it’ll be a miracle. Theres 5 units on, and one guy just put his unit on for $300K to settle estate, the same type of unit sold last year for $345K……OUCH, there goes the comps

 
 
Comment by Brittain33
2007-01-23 08:20:23

Now there are few if any high paying jobs in ma, no tech boom,

Good gracious, which Massachusetts have you been living in? Manufacturing is having problems, as everywhere, and we’re losing corporate headquarters, but we have tons of high-paying jobs which is why our housing market doesn’t look like Pittsburgh. Maybe Pittsfield does, but nothing in the greater Boston area.

Housing costs are driving white collar and blue collar people away, but only certain sectors are driven away by lack of jobs. And it isn’t the rich people or upper middle class.

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Comment by Neil
2007-01-23 09:43:38

??? My brother’s company has reduced hundreds of high paying tech jobs in the Boston area over the last two years.

Its tough selling a home in Boston. But nothing compared to what it will be like in a year. This is national. Once loans go back to normal… you’ll see what I mean.

I see nationally we’re still in denial. Ceat la vie.

Got popcorn?
Neil

 
Comment by pinch-a-penny
2007-01-23 10:49:43

Robert: I get calls from head-hunters at least 3-4 times a week. Seldom if anytime I have had a job offer come from them, in fact, most of the jobs that I have had are because I knew someone in the company.
Also I am making around 2/3rds of what I made in 2002, and I never worked in a dot con, like a lot of my friends (one even worked at cambridge consulting or whatever the name was for those two bozos that didn’t even have a ged!).

 
Comment by Robert
2007-01-23 12:27:19

I’m sorry to hear that; my experiences happen to be very different. Now it seems like the biggest problem is finding good people; it seems like the only programmers out of work are the ones that cannot write a function to average an array of integers.

Send me your resume - robertotis@gmail.com; I might get a bonus referring you to where I work.

 
 
Comment by CarrieAnn
2007-01-23 09:52:03

I know on the surface that 96-97 comment feels right. But I got married in 95 and rented in Norwood, MA. We were looking pretty closely at the market in 96. I believe Boston housing was 2nd behind San Francisco at the time for most expensive in the nation.

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Comment by pinch-a-penny
2007-01-23 10:06:37

Boston itself yes. Greater Boston area, was not as hideous. I remember looking up houses around 150 to 200K less than 30 minutes from Boston, and in fact accross the road from Norwood in Canton. Very nice commute, and had the benefit of either the 128 train stop, or going into quincy for the “t”..
Now you cannot get anything 2 hours out of Boston for less than 400K, and if it is close to the commuter rail, it is even worse.

 
Comment by CarrieAnn
2007-01-23 14:20:01

Yeah, that’s why we ended up buying our first home on the Cape…in ‘99, home was about 1/2 what we would have paid in Norwood or surrounding area. We were already down there alot with friends anyway.

I know that Canton Commute. When I first moved to MA (’85) I lived in Greenbrook apartments. It was a nice commute into town and later the commute to Needham area was only 20 minutes…..except in one freak snowstorm when it took 5 hours!

 
 
 
 
 
Comment by Annata
2007-01-23 06:09:09

“Mr. Grassia likened the market to being at the top of a pyramid, about to roll over into a plateau ”

What kind of bizzare pyramid rolls into a plateau?

Comment by Marc Authier
2007-01-23 06:11:45

Free mason bullsh-t. Pyramid of lies and deception like on the US dollar.

 
Comment by GH
2007-01-23 06:19:56

Realtor Interpretation of Plateau - Other side of the hill … I suspect this bobble looks more like a mountain and so in this case Plateau will be the word used to describe the other side of the mountain.

 
Comment by edgewaterjohn
2007-01-23 06:51:54

Maybe he was envisioning a ziggurat, they kinda have steps and a flat top? Socks on heifer, t*ts on a bull.

 
Comment by pinch-a-penny
2007-01-23 07:15:07

Maybe thinking about a plateau at a -45 degree angle????

 
Comment by CharlesM
2007-01-23 10:15:44

Personally, I liken the market to a giant falafel, orbiting a quatrefoil, ready to spread out into a field of egg salad. I know I’m oversimplifying, but hopefully that’s more clear.

 
 
Comment by Dan
2007-01-23 06:17:34

I like the comment:
“In order for sellers to sell and be competitive, they have to be focused.’”

I can see it now. Agents sit in the sellers house and train them to “focus”. That’s the problem….sellers haven’t focused. It does raise some interesting ideas about eyesight and financials….LOL

Comment by implosion
2007-01-23 06:28:15

Be the house.

 
 
Comment by ed in texas
2007-01-23 06:18:26

“There are going to be buyers out there. They’re not going to be shell-shocked and say, ‘Oh my god, the market is overpriced.’ They will continue to be educated consumers.”

Don’t forget those pink unicorns. Gotta have them, too.

Comment by GH
2007-01-23 06:22:55

There will be buyers, just not enough to go around :-) And they will be educated and look for distressed properties where the deals are to be found.

Comment by Neil
2007-01-23 07:13:13

I was about to sway (but GH beat me) that educated buyers aren’t a seller’s friend…

Got popcorn?
Neil

Comment by P'cola Popper
2007-01-23 08:00:54

“Oh my god, the market is overpriced.”—that’s so 2006.

People are saying, “The market is way the Fyck overpriced but that’s cool because my money is in my pocket, foreclosures are growing by the day and I have plenty of popcorn to wait this puppy out.”

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Comment by mojo
2007-01-23 06:22:15

“There are going to be buyers out there. They’re not going to be shell-shocked and say, ‘Oh my god, the market is overpriced.’ They will continue to be educated consumers.”

I love this line — so you are only educated if you believe prices aren’t too high? Geez i guess I didn’t learn a damn thing in college, I’m no longer educated because I think prices are too high ?!?!

 
Comment by WT Economist
2007-01-23 06:38:04

(‘I’m concerned for those who bought a year or two (ago), particularly with toxic financing,’ MAR President Doug Azarian said. ‘They may owe more than the value of their property.’)

He should have been concerned a for them a year or two ago. Those who didn’t buy at the top or HELOC their way to the poor house will be unaffected by this. Those who buy in the future might get a fair shake. One question is, by market, buyers in which years are screwed? Certainly 2006, 2005 and 2004. I’d say 2003 and 2002 as well. Prices were high in 2001, but we’ve had enough inflation since then that I don’t think anyone who bought then or earlier faces nominal declines.

Comment by ron
2007-01-23 07:21:30

WTEconomist: When RE is appreciating then the low down payments work If the local market has significant appreciation that allows the investors to refi or sell before the market falls.
Today RE markets are trending lower (next 5 years)
so anybody without significant LTV will have a bad experience some nightmares.
Many believe its just the subprime folks in trouble but one has to understand that millions have refi’d based on inflated comps and hungry LO, their LTV ratio’s have suddenly gone south and they face the prospect of having a huge mortage and a depreciating asset.

Comment by Sobay
2007-01-23 07:40:21

The absolute bottom line is income to debt ratio. No information seems to exist profiling the amount of folks that were allowed to buy that can not service their debt from the inception of the loan. The market is slowing starting to reveal the weakness of these poor folks.

Comment by CA renter
2007-01-23 08:03:10

Exactly, Sobay!

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Comment by hd74man
2007-01-23 06:38:08

The last bust in ‘90 & ‘91 took down every major lending institution in New Hampshire.

Bank of New England went down in Beantown.

Maine Savings, Casco Northern and very nearly People’s Heritage failed in Maine.

At the time there were few mortgage companies and very little sub-prime lending, so it was primarily the mid-sized banks who took the hit.

The subsequent FIRREA clean-up wasn’t pretty but it got done.

Final tab nation-wide was $500 billion.

Fast forward to 2005.

The bubble this time has been facilitated by scads of flight-by-night mortgage companies, crooked appraisers, independant operators, and sub-primers, with virtually no regard to the bottom line due to the unregulated nature of their businesses.

The tab for this mess will be in the trillions.

Comment by Marc Authier
2007-01-23 06:42:38

And what will happen to the GDP ? What’s the percentage of GDP that will dissapear in the process ? MINUS 10% ? MINUS 20% ?

Comment by Marc Authier
2007-01-23 06:44:55

Does someone has an idea of the impact on the economy ?
Is there a number somewhere ?

Comment by Arizona Slim
2007-01-23 07:29:33

At last week’s University of Arizona lecture by Fed Governor Susan Bies, the figure I heard was 1%. As in, the housing slowdown is already shaving 1% off US GDP growth.

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Comment by Marc Authier
2007-01-23 08:51:54

Knowing how a bunch godddam liars these people are, it’s probably multiply the number by 5. MINUS 5% will be really easy to attain. MINUS 1% is probably only the direct impact.

 
Comment by grush
2007-01-23 13:52:44

With respect to your deep insight into the nature of Fed Govenors, a 1% decline in GDP growth is very significant. The United States had about a 3.4% GDP real growth rate in 2006, which was significantly higher than most developed countries (EU and Japan were both 2.8%). A drop of 1% is a big deal.

 
Comment by grush
2007-01-23 14:22:09

BTW, the above reply was in response to Marc, as comments won’t nest any deeper.

 
 
Comment by Eastofwest
2007-01-23 07:41:20

Just saw a blurb on CNBC where cancellations in Fl. are 5% higher than sales in Dec….trying to find the article

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Comment by craiggy
2007-01-24 09:14:45

Figuring the impact on the economy is no small task. Any number you find in terms of GDP decline will probably be understated anyway. 70% of our GDP comes from consumer spending. We all know that inflation adjusted wages have been stagnant since pretty much the 70’s. The only way we can continue to consume is by borrowing. As long as Americans can keep borrowing and consuming foreign products, and delaying that inevitable day when we have to settle our debts, the GDP will keep limping along at 3% +/-. Meanwhile, countries like China and India are blazing forward with GDP growth of 8% +. The problem in the US is not just the housing bubble, it is our massive debt, our trade deficit, our declining US dollar and our stock market bubble. All of these things are on a collision course that will plunge the US into the mother of all depressions. The good news is that if you protect yourself now, you will come out the other end and be able to capitalize on some great investment opportunities.

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Comment by screwed in Acton
2007-01-23 06:41:34

Central Massachusetts has to be one of the worst hit.
There are virtually no employers. Most of the Intel
employees are gone or will be laid-off in Hudson, and
that should pretty much shut down places like
Shrewsbury, Northborough, and Marlborough.

Central Massachusetts will soon look like Roman ruins.

Comment by Ben Jones
2007-01-23 06:51:33

I was talking with a young man who lives in eastern Mass. yesterday. His family owns a farm and has sold some off from time to time. He told me prices were going down right now and that ‘only a fool would sell’ because of that. Goes to show why psychology works out the way it does in RE.

Comment by Jerry from Richardson
2007-01-23 11:06:16

I think he meant to say that if you don’t need to sell now, then hold off. Sell high, buy low. These idiots the past few years have been buying at the top of the plateau. People don’t realize what happens when you reach the edge of the plateau. It’s a pretty steep drop.

 
 
 
Comment by Sobay
2007-01-23 06:45:25

“The 300 Connecticut layoffs reduce Mortgage Lenders’ workforce in the state by 30 percent. It once had about 950 employees. Nationally, the company once had 1,800 workers, a number now cut in half.”

So each laid off worker ‘used’ to stop at Starbucks…then Taco Bell for lunch….whose manager bought 6 houses to flip…who hired Juan to fix the houses….who bought a Hummer from Shelly…who refi-ed…..

Comment by pressboardbox
2007-01-23 07:34:59

They still do all that stuff- they have credit cards. This is America, dammit!

 
 
Comment by bearbanker
2007-01-23 06:50:02

“Mortgage Lenders is the latest company to get dragged down by problems in the ’sub-prime’ mortgage industry, which has been slammed with rising delinquencies and defaults. What made matters even worse, the company priced some loans too low in October and was forced to sell them at a loss.”

A-hole, they didn’t get dragged down . . . they are the brown matter leading the charge down the proverbial toilet.

Mortgage Lenders, “We need more loans, what should we do?”
“I know, lets give it away, we can make it up on volume”

Idiots

 
Comment by Sniggle
2007-01-23 06:51:34

WT Econ,

Only a subset of those who bought in 2004, 2005 and 2006 are screwed, because many plowed equity liberated from the sale of a previous home into the new home purchased during that time frame (me, for example). For those who put substantial funny money down, the drop in sales price will just represent a reduction in accumulated equity.

That said, anyone who bought with less than 20% down in 2004, 2005 and 2006 is gong to have to bring money to the closing table for the foreseeable future.

Those who bought condos with less than 20% down in the last few years will just start walking away from them when they need to move..since they won’t be able to give them away.

Comment by hd74man
2007-01-23 09:08:41

I wouldn’t be so sanguine.

It will be real interesting to see where values end up in the next decade, as the MAZZHOLELAND economy insidiously implodes.

As the top sayin’ on Ben’s Blog goes-Who wants to catch a falling knive.

Ya gotta be on serious dope to be buyin’ a house anywhere in New England right now.

 
 
Comment by bearbanker
2007-01-23 07:00:30

Anyone see the article in WSJ about maker of Sub-Zero and Wolf appliances? Business has been so good, they have announced a plan to expand manufacturing capacity by 40%.

D’oh - too late!

Comment by Neil
2007-01-23 07:25:45

Better late than never. ;)

D’oh!

Got popcorn?
Neil

 
Comment by Arizona Slim
2007-01-23 07:31:11

I’m in the market for a new refrigerator. I very briefly checked the prices on Sub-Zero. Yeesh! I didn’t know there was a fridge that costs THAT much.

Comment by P'cola Popper
2007-01-23 08:16:37

Don’t worry. I predict a boom in slightly used Sub-Zero’s and other major appliances within a year. Keep an eye on Craigslist and eBay.

Comment by LArenter
2007-01-23 09:32:58

I got a 6 month old KitchenAid stainless steel fridge at a $1500 discount last year on Craigslist as well as 2 Bimmers which are paid for! Just love it!!

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Comment by UnRealtor
2007-01-23 11:30:17

If you’ve got the extra $5K, they’re a sweet fridge, especially with the cabinet-faced doors.

In many neighborhoods, not having a SubZero will actually hurt resale value.

 
 
 
Comment by edgewaterjohn
2007-01-23 07:01:19

“Those who bought condos with less than 20% down in the last few years will just start walking away from them when they need to move..since they won’t be able to give them away.”

Ain’t that the truth. Condo meltdown, coming to a city near you.

Comment by WT Economist
2007-01-23 07:06:49

(Ain’t that the truth. Condo meltdown, coming to a city near you.)

Hope so. I might buy one at the right price.

Comment by Neil
2007-01-23 07:21:42

I have no desire for a condo where I work. Now… in the right resort market, for the right price (after accounting for insurance, taxes, HOA, etc…)…

Got popcorn?
Neil

 
 
 
Comment by Sniggle
2007-01-23 07:25:38

That brings up an interesting question: What is the right price for a condo? The problem with new condo developments (besides the current obscene prices) is that the condo fees are established at unsustainably low levels to facilitate sales (subsidized by the builder). So once the builder gets out of the picture, the condo association eventually faces reality and starts jacking up condo fees.

Now if the condos start going vacant (eventual REOs), then the condo fees are not collected (without expending legal fees) and that puts more upwards pressure on the condo fees.

If the condo development is over 10 years old, odds are that the condo association has not funded for capitol improvements and long term maintenance issues, so then you have assessments.

So you need to look at more than just price when buying a condo. In my mind, most condos should not cost more than $100,000.

Comment by Austin Martin
2007-01-23 07:55:15

Actually, I believe that even when they are REO, the bank is responsible for the condo fees. That’s why some banks won’t lend on condos with high fees.

 
Comment by P'cola Popper
2007-01-23 08:23:52

Good point Sniggle. No need to jump on a low price condo only to find out the five occupied units need to come up with $2 million to replace the roof.

 
Comment by edgewaterjohn
2007-01-23 08:26:03

Assessments always seem to get overlooked by many condo buyers for exactly the reasons you cited, sniggle. In a small building, under say 6 units, one bk will screw the association’s finances up mightily. My building is 90 units and one bk in the 1990s left the building holding the bag for $10k. But, this is in an established building with low turnover and many established owners. In contrast, here in Chicago, oodles and oodles of small condos have been built - some with as few as 3 units. Now, what will the other two owners do if one goes bk? Especially since they all bought in with artifically low assessments at the get go. Just wait until they have to negotiate a new refuse contract for one, not to mention all those other creeping costs.

There’s an awfully loud ticking sound on the urban streets today.

Oh yeah, 100% agreed - $100k is plenty for an apartment. $400k, for an apartment (in Chicago) - what a joke. For what, the priviledge of fighting with your neighbors over finances? That granite must have a lot of pull.

 
 
Comment by jAYMAN
2007-01-23 07:37:29

I was thinking about the first few years I lived in Mass. there were a few hundred arson fires in the City of Lawrence Ma.There was a severe downturn in the economy and the Sunday papers were filled with pages of foreclosures.I wonder how many people are upside down now in cities like Lawrence and if history is about to repeat.

Comment by hd74man
2007-01-23 09:22:37

Lawrence is a sewer.

High crime-zip for an economy.

Not only will the sub-prime foreclosure market explode, there’s gonna be lots of development bag-holders who started condo project’s with the attitude, young, urban, pioneer types will buy anything to get into the housing game.

Surprise, surprise…

 
 
Comment by indigo144
2007-01-23 07:45:02

“For a good part of this century, real estate was carrying the economy.”

You have to appreciate the spin skill. Please remind me how many eons ago did this century start?

Comment by Marc Authier
2007-01-23 08:11:03

94 years left to the century. What a pack of bull indeed.
It’s the economy that supports real estate.

Comment by tj & the bear
2007-01-23 08:47:31

It’s the economy that supports real estate.

Oh really???

 
 
 
Comment by HarryD
2007-01-23 07:51:11

Romney’s health plan in Mass, yes, a huge mistake, and now Mass has a flat out socialist governor - who is all but inviting hordes of new illegals into the state

Comment by hd74man
2007-01-23 09:16:19

Romney’s health plan in Mass.

Get your fact’s straight…The new health plan wasn’t Romney’s initiative, it’s the creation of the state’s Democratic legislature.

And with a new DEM governor, (who BTW is PRO-Illegal Immigrant) there ain’t no financial watchdog on alert now.

Plus no more pork fat from scams like the Big Dig.

Mazzholeland is truly fooked.

Comment by flatffplan
2007-01-23 12:13:01

streeto de las illegalos
hehehhehe
move south dude, you’ll love it

 
 
 
Comment by CA renter
2007-01-23 08:07:03

“Also of concern is the amount of apartment construction in the market, he said. ‘If you have a lot of apartments coming on, it tends to drive down rents,’ said Mr. Warren. ‘And that makes rental more attractive than buying.’”
——————————

I like how these kind folks think affordable housing is a bad thing.

Lower rents and lower housing prices are a **GOOD** thing. Bring on the new buildings!

 
Comment by BK- former owner
2007-01-24 07:46:15

Many of the optimistic comments here demonstrate Boston isn’t anywhere near a bottom - true market bottoms are SCARE all market participants!

Lets not forget that Buying and selling a Home takes Two Buyers - the folks you buy the Home and the Institutions who are interested in Buying the Mortgage Paper. The failure of these Mortgage Companies is telling the Market that the Institutional buyers of Mortgages (the Bank isn’t going to make the loan unless he can sell the Mortgage in the secondary market) are getting selective. If there are fewer and fewer Mortgages available that reduces the number of potential buyers - fewer customers leads to lower prices. This is the big problem with a leverage Market like Real Estate - the market requires other peoples money to keep prices elevated!

The Sub Prime Mortgage Brokers that drove this R/E Market from 2003-2005 are dropping like flies because the folks they offered Mortgages to aren’t able to pay (the adjustable rate mortgage - keeps going up). This results in the Institutions trying to sell the Mortgage Back to the Mortgage Finance Company and makes instutions less like to buy any more Mortgages from the Mortgage Company.

I miss and love Boston- but, the loss of the old guard employers (Raytheon -downsizing, Polaroid- bankrupt, JHancock-sold, Gillette -sold, BBN Planet/GTE/Genuity- bankrupt). The jobs at Gilette, JH, Polaroid, and lost Raytheon Manufactuing jobs offer life long employment, great health plans, and generous Defined benefit Pensions. This is the Loss of Lots of CASH from the Boston Area Economy.

 
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