‘Sellers’ Anxiety Rises’ In Massachusetts
The Boston Globe has this follow up on yesterdays numbers. “Across Massachusetts, the average number of single-family homes for sale each month during the first quarter of 2006 rose by 16,467, to a record 55,338 homes, the Massachusetts Association of Realtors said. Homes are piling up on the market because sales have slowed dramatically in the past year. Sales of single-family homes fell to their lowest April level since 1995.”
“‘Prices are going to decrease,’ predicted Alan Pasnik, a Warren Group analyst, though he declined to speculate by how much. ‘Large inventories depress prices, because buyers have more choices, and you have a larger pool of possibly desperate sellers,’ he said.”
“As sellers’ anxiety rises, house-hunters such as Hannah Welsh take it slowly. She is looking, with her husband, for a single-family in Shrewsbury, where they own a condo. Welsh is noticing that more sellers are dropping their prices. ‘We’ve been able to look in a leisurely way,’ she said. The glut ‘is great for us.’”
“People in the real estate industry attribute the larger inventory to a return to a ‘normal market’ after years of sizzling demand. But (researcher) David Iaia said the cause is an unusual convergence of demographic, psychological, and market factors. ‘It’s a lot of factors working together,’ Iaia said. Housing supply ‘can spiral up faster than you would think.’”
“Slowing sales are one reason: As properties sit unsold, new properties come on the market, expanding the inventory. Last fall’s sudden chill in the market prevented many people from selling their homes, so they put them back on in spring.”
“Even with the slower sales, investors and homeowners are still motivated to try to sell now, with prices still at near-peak levels, to cash out ‘while the gettin’s still good,’ Iaia said.”
“Michael Tuttys’ neighborhood is a microcosm of a powerful force at work in Massachusetts’ real estate market: a record glut of homes for sale, which is likely to cause prices to fall in coming months. Tutty endlessly sizes up his competition. He learned that one house in his Shrewsbury neighborhood has the same floor plan but lacks the upscale light fixtures, maple cabinets, and Jacuzzi tub he and his wife paid extra for.”
“He watches prices like a hawk: One seller recently dropped the price of a two-bedroom, like his, by $10,000, to $399,900, dangerously close to his $389,900 asking price.”
“He got a blunt reminder recently of how fierce the competition is. One prospective buyer stepped into his home for a showing, having viewed three others in the neighborhood. ‘He walked in,’ Tutty said, ‘and said, `This is number four.’”
It’s nice to see a story like that get printed, finally letting people know that there is a huge backlog of unsold homes out there.
What makes me laugh in disbelief are all the sellers in this article and others like it who describe the market conditions as being so tough, how they just “can’t believe” that no one has made offers on their house, how they’re so “motivated” to sell, and can’t think of even one more thing they could possibly do to land a buyer. And then the article describes their house as (for example) a smallish, totally ordinary three-bedroom in an nondescript town far away from the city. Price? Why, a mere $450K (or more).
“There is nothing wrong with this house!” is a quote that sticks in my mind from a Globe article about a seller trying to unload a tiny little overpriced house like that about six months ago. Total denial. Total disconnect from reality. I bet she still hasn’t sold it. For some reason I picture that woman with frazzled, crazy hair and about forty cats.
Mr. Subliminal from years ago on Saturday Night Live should chime in here. Gee, I just can’t IMAGINE –lower the price– why no one is interested in this house. I can’t think of ANYTHING –lower the price– that the seller could POSSIBLY do –lower the price– that would help this totally impossible –lower the price– situation. That poor motivated seller –totally in denial– has tried EVERYTHING –except lower the price– and boy I feel sorry for them –no I don’t–.
But you know, when I go looking at houses, what I want is not an affordable house. What I really want is a year’s worth of free gas. WTF? The amount of seller denial going on here is staggering. Fortunately, the law of supply and demand doesn’t care. People like this are about to get a wake up call.
I disagree with the article’s title: “Buyer’s Market”.
It’s not a buyer’s market until after prices come down a lot more than they already have. Right now we’re in a standoff period where sellers don’t want to lower prices but buyers don’t want to pay too much. So the deals don’t get done. In time, the sellers will crack (further), prices will come down (even more) and we will get to a buyer’s market. But we’re not there yet. It takes time.
Someone here on this blog described the current market perfectly. It’s a “Renter’s market”.
Good post Charles
I agree, that was very good…
Great post!
Yes, prices are too damn high for this to be a buyer’s market for anyone that is not independently wealthy.
My little $300k roach hotel, er phone booth, ahem…elegant cottage home is a case in point. Yeah, I might able to sell it, but what else could I buy to live in ?..(wife won’t let me rent..).
Things need to come back to planet earth before buyers can do anything except impale themselves on these ruinous mortgages.
Slightly OT but relevant. Has to do with what you the home owner can do with your property. Heard on the radio that SJ wanted to put in place an ordinance on tree cutting. It seems that you need to get a permit to cut down any trees on your property (nothing about planting a tree that may block your neighbor’s view, access to sun light,etc) but people found it more to their liking to just chop down the tree and if caught pay a fine of up to $500 to keep bureaucracy out of their decision making process.
Not exactly, we have very spoiled people here who expect to be able to cut down mature trees in old neighborhoods like Willow Glen so they can build McMansions on every square inch of the property. They want to increase the fines for each incident and also fine the contractor who takes a tree down without a permit.
I don’t want a cruise, new car, new pool at the house, donation to my favorite charity, or other marketing piece of bovine fecal matter. I would just want a lower price. Is that hard to understand?
Exactly!
It seems strange that they throw in incentives instead of lowering prices, but I think it’s done to preserve the comps (at least in the case of new homes).
Does anyone know if the lady from the “From ‘For Sale’ to Sold in Thirty Days” ever sold her house?
Want to know how they plan on keeping the game going? Ad in the SJ Mercury News (5/22/06)”IRA and 401K rollover funds can be invested in real estate. You should attend this free siminar featuring attorney George Kucera and staff who will introduce a remarkable new product for investing in CA real estate….If you have an IRA or a 401K rollover and you don’t plan to retire for 3,5,7 years I can recommend the perfect real estate investment for your IRA or investment portfolio”……and folks, the snake oil salesmen are alive and well !
This gives me an idea for a nice “bailout,” one that allows sellers to price low and bring cash to the table, and one that will not mean an increase in everyone’s taxes:
Let sellers who need to bring money to the table tap into their IRAs or other retirement income.
This seems like a nice way for sellers with negative equity to finally lower prices quickly.
Already there. I see no reason for the bank not to go after your 401(k) or IRA in a deficiency judgement. After all, they’ll only give you credit for what they can get out NET of any penalties for early withdrawel assessed by the IRS, so they don’t CARE what penalties YOU pay.
Agreed. I’m just saying that if the government removed the IRA withdrawl penalty (10%) then even more people would be encouraged to take this route. And, it would show that the politicians are “doing something” for the FBs out there.
Never mind. Apparently the laws are complicated, but qualified 401k etc are pretty well protected from creditors in bankrupcy proceedings, and often protectected from creditors under state claims short of bankrupcy. (like deficiency judgements)
Strange disconnect between companies shafting their employees when they enter bankrupcy and employees being able to shaft their creditors when they go bankrupt.
I think there’s gotta be an effect, after a while of seeing that “what the hell is wrong with you? why won’t you buy my house?” attitude among sellers, prospective buyers will not only stay away til prices are lowered, but lowered *considerably*. This would be in addition to the more typical effects of fear about buying into a down market and wanting to work that ‘risk’ into the price, or a later-in-a-bubble-deflation-cycle effect of everyone staying away because the herd confirms RE is bad news…
Some of it may be a ‘hey, no, screw *you*’ psychology, desire to see some suffering in response to a stubborn refusal to see reality on the part of the sellers, and some of it I really think is a “oh my god, you must be insane and I don’t want to play games buying the house of an insane person”. Like, maybe you’ll too become insane, or find the small animals seller may have buried under the floor boards, or have to live with that little foundation creaking all night long issue the deluded seller forgot to mention, or the odd pickled things buried in clay pots in the yard, etc.
Yes, the frazzled crazy hair and 40 cats thing comes up when you encounter sellers who will seemingly wonder sincerely why their 1200 SF charmless house an hour’s hell commute from Boston isn’t flying at twice most people’s ability to own it without selling their financial soul for the privilege..
Here’s a thought that just popped into my brain….maybe that seller (at least the non-flipper) thinks he deserves a better home for all his hard work. Maybe that’s the reason his house is for sale. He’s got dreams of movin’ “uptown”.
When he realizes the house he’s in is the best house he’ll ever own (if he doesn’t have to sell due to job change or financial difficulty), he’ll just take it off the market and count his blessings.
A friend of mine is selling a house, in a similar situation to the people in the article. He is frustrated it hasn’t sold, but is adamant that he wants what his house is “worth”.
OT but made me chuckle. The radio news announced yesterday that here in CA the number of emergency calls for people running out of gas increased last month by 67%. I love it. Just wait till all that sludge in the bottom of the tank hits the electronic fuel injection system.
If you really want to make an inpact in popping the RE bubble you need to get your case to the national news outlets. What get’s attention, acting up…the news teams love demonstrators. Solution: show up as unruly demonstrators at the next news conference where David Lereah is being interviewed and your cause should get a weeks worth of prime time news coverage….might even end up on the talk show circuit.
And as the oldest baby boomers turn 60, they are starting to retire, with some moving to warmer climates or downsizing to condos. … “When the kids are done, the soccer games and endless minivans aren’t that interesting anymore,” said Brian Lambert, who relocated with his wife to a Back Bay apartment to be near their daughters, who are attending college in Boston…If only they could sell their 4,400-square-foot home, “with all the bells and whistles,” near the Massachusetts border in New Hampshire, Lambert said. After it was on the market a month, he reduced the price $20,000, to $719,000. But he has substantial home equity and a good income as a partner in a computer consultancy and won’t sell at “fire-sale prices,” he said.”
Fire sale? These people have only begun to understand the meaning!
Wait a month and see how good today’s prices will look in hindsight, especially if the Fed is crazy enough to drive the FF rate up another 25 bps.
you know what just struck me?
The idea that these people may have raised their daughters there, built up a lot of equity there, and thusly maybe were present in the state for the last bust there? There was a widely known and felt one, with reports even in the MSM as recently I recall as a couple years ago now talking about how great it is now for people who were burned in that downturn to be making up their losses and more.
So, sorry, this ‘firesale price’ rhetoric from people who should know way better is getting very very ugly.
Online deeds, search baby!
Michael and Shelby Tutty bought their house (its actually a condo) in 2000 for $207,000. And now they won’t settle for a dollar less than $389,000? Oh, and they have an adjustable rate mortgage which resets in October 2008 (they have refi’d several times).
Greedy losers. Get a life, drop the price and move on. I’m sure they can’t, though, because like every other starry-eyed yuppie moron in this area, they have grand plans for a hideous McMansion and his-and-hers Tahoes with “Black Dog” stickers on the back.
Exactly C_M! These people remind me of the following phrase … “Bulls make money, bears make money, pigs get slaughtered.”
It’s sounds as though unless the Tuttys change their attitude, they’ll be lucky to dump their condo for their loan balance (which I’d wager is at least $50k more than their purchase price).
Nicely researched! My, are they greedy! Or is it that they now owe a lot more than the original price? Perhaps, given the “improvements” they put in. Then again, might be like a friend of mine who bought for under $200k, posted for sale years later at $319k with no real improvements in the meantime, then reduced to $309k, and now with no sale happening he’s decided to “keep” the house rather than “lose money”!! Lose money! Indeed! He’ll see abbut losing money now that he’s transferred out of town and has to pay a mortgage on an empty house.
“Black Dog” stickers?
http://www.theblackdog.com/
It must be a Boston area thing. All the posers like to decorate their SUVs with stickers advertising the fact that they go to the “Black Dog” — a restaurant on Martha’s Vineyard.
Ok…this is how I see their scenario. The Tutty’s have a 2 bedroom (condo) and twin 10 month olds. Call me crazy, but they can definitely wait out the market shift by keeping the condo for a while longer. It’s not like they REALLY need more room for the kids yet, and it’s at least 2-1/2 more years before they will probably be in pre-school. Ok, so they have to move the home office into the living room or somewhere. WTF…so what! Make adjustments already! With the pricing of condos coming down faster than SFH, they will probably be lucky to get $250K when it’s all said and done.
Anyone know anything about that neighborhood?
BayQT~
And they live in Shrewsbury, which has perfectly good schools. A bit overcrowded, the last time I looked into it, when I learned I could rent in Brookline for what it cost to buy in Shrewsbury.
Since when did Shrewsbury become respectable? Is that the result of rising home values?
Shrewsbury has a well-regarded school system with relatively cheap housing, at least until a couple years ago. The MCAS scores came out pretty high, which may be more a function of homogeneity of population (since the tests are quite easy) than excellence of teaching.
Sorry Tulkinghorn, I didn’t mean to come off rude there. I haven’t been in that area of MA in 10 years so I guess things can change.
Not rude at all.
Shrewsbury got a real jump in values when the MCAS scores came out, and even though it is a suburb of Worcester (!) it became popular with young families from Boston, willing to make a serious trek. Also of note is that Westborough and Northborough have become popular with upper-middle class families with stay-at-home moms, raising the social profile and values in those towns as well.
Even Grafton has had a big expansion in McMansions. This market died suddenly in late 2004/early 2005, which was like a canary in the coal mine showing where things were going.
What I find interesting is that the Tutty’s home is the exact kind of property (condo/townhouse >30 miles from Boston) that went underwater from 1989 to 1998. A really dangerous investment!
started on the Cape , just like 1987
88 bahstin
89 new york
90 DC
see it’s always the same
flat,
Love your pithy comments… Keep em’ coming!
CC: Vacationland gets hit the hardest. (land of my first year round home)
Don’t know why buyers don’t research what happened during the last downturn. Former owners of my home got no increase in 9 years, put in lots of extras. We own for 2.5 years 99-02 and make $80,000. Timing on the Cape is everything.
OT
Anybody have any info on St. Joe’s… They are a huge player in the second/vacation home RE market in this area (NW FL)
http://finance.yahoo.com/q/bc?s=JOE&t=5d
short this instead BECN
compare it’s number to bxc,bmhc = WOW
Ah, MA-Land of the Big Dig with it’s $80k laborers and$120k dump truck haulers.
Budgeted @ $2.3billion…final tab to FED & state taxpayers-$29.8 billion or enough to have built a Class V hurricane resistant levee system around the entire city of NO…(shhhh…don’t tell Ray Nygen)
And the thing was built with garbage concrete and leaks like a sieve.
Weep no tears for this place.
Woohoo! Taxachussets homes for everyone!
These articles rarely reveal what the sellers PAID for their homes (Possibly the sellers refuses to tell the reporter, but since that information IS public record, that’s just a typically lazy reporter). So that Lambert fellow (listing his house currently at $719,000) won’t reduce himself to “fire sale prices”? — Does he mean he won’t lower to a price that reflects the actual value of his home? (Or, he won’t lower to a price that doesn’t net him an absurd profit for doing nothing?…)
Don’t you know that it’s rude to ask someone what they paid for their house? LOL.
New Hampshire registries of deeds are not as accessible online as Mass, but I am checking this out… That sort of money ought to buy an awful lot of house in New Hampshire.
If NH was so cheap, I’d be living there instead of Upstate. (it was a choice between family origins. Upstate housing could be had for 1/2 for 1/3 in 2002.) National company paid the same no matter where hubby transferred to so it was a no brainer.
Try this http://www.nhdeeds.com/. Works for me - he has to be in Rockingham or Hillsborough country to be near the border. Probably the guy who lives in Windham (Rockingham Country) and has about 450 k in 2 mortgages on his property - my guess he is trying to make a quick 200k
“‘Prices are going to decrease,’ predicted Alan Pasnik, a Warren Group analyst, though he declined to speculate by how much. ‘Large inventories depress prices, because buyers have more choices, and you have a larger pool of possibly desperate sellers,’ he said.”
Given the inventory correction underway in most every market formerly known as frothy, this statement pretty much sums up where US housing prices are headed (down!) and why.
The market has yet to be settled back to 2001-level to be a normal one. $389k all the way to $250k……
The market is turning into a showdown between buyers and sellers. However, the buyers have time, and lots of it on their side. I sold my house in the summer of 05 since I saw this coming and was considering moving in the near future (thinking of starting a family).
I don’t remember if I read it here, but does anyone have the LA Times article regarding the real estate market during 81/82. I was amazed when I read it, because all you had to do was the change the years and it would’ve read like our present situation. Price drops of 40-60%, is very possible, happened before, and it can/will happen again, ask the older home owners if they remember the days of ‘balloon’ payments.
OT but OMG…on Kudlow John Rutledge (advisor to Reagen) just said we have a liquidity shortage…”Come on Ben, give us some money!” That’s a quote…
Patience. A buyer needs to wait for the right setup. 50% declines from peak prices are coming, for Boston.