As The Market Changed, The Middle Class Changed Too
The Worchester Business Journal reports from Massachusetts. “Confidence among Massachusetts Association of Realtors members statewide fell for the seventh straight month from 83.08 in May 2013 to 67.73 last month. And the group’s price confidence index fell year over year from 81.95 to 76.58, marking the second consecutive month of decline. ‘Buyer demand is strong based on pending sales, and hopefully that should start to push the Realtor market confidence index up in the coming months,’ said MAR President Peter Ruffini.”
The Worchester Telegram & Gazette. “Worcester’s real estate market is among the bottom 5 percent of large metro areas in the U.S. according to CoreLogic. A closer look at the recent market suggests that there has been a big drop in the number of transactions, lots of properties on the market, and a drop in prices. The number of homes for sale is significant — with a huge proportion of foreclosed properties — and the listing prices are dropping.”
“As Trulia explained, ‘There are currently 589 resale and new homes in Worcester on Trulia, including 5 open houses, as well as 583 homes in the pre-foreclosure, auction, or bank-owned stages of the foreclosure process. The average listing price for homes for sale in Worcester was $213,999 in June, which represents a decrease of 1.7 percent, or $3,743, compared to the prior week.’”
The Valley Advocate. “Last Sunday morning, I took a walk around a neighborhood the Valley Advocate has written about a lot in recent years: the part of Forest Park that lies to the northeast of what is known locally as ‘the X’. On Leyfred Terrace, where we’d found a dozen or more homes vacant and boarded up in 2008 and 2009, I saw little visible sign that circumstances had changed much in the last five years. There may be slightly fewer boarded-up houses, but many homes appeared unoccupied, or at least uncared for. Turning on to Dickinson Street at one end of Leyfred Terrace, I saw more of the same.”
“I called longtime Forest Park activist Sheila McElwaine, who’s spent the last three decades fighting urban blight. I asked her if I was wrong in my impression that, while other parts of Massachusetts and even Hampden County have seen some improvement, Springfield is still dealing with a foreclosure crisis. ‘Things got a little better for a while,’ she said. ‘But just in the last year or two, something’s happened.’ Walking or driving around the neighborhood, McElwaine said, she sees recently occupied homes suddenly abandoned and boarded up: ‘We ask each other, ‘Why is this one boarded up? Why is that one boarded up?’”
From Mass Live. “RealtyTrac reports that early-stage foreclosures in Massachusetts jumped 178 percent year-over-year. Peter Gagliardi, executive director of HAP Housing said one reason early-stage foreclosures have spiked is that many lenders held back from filing while they waited for the economy, and the value of the home, to improve. ‘That was the banks,’ he said. ‘They held off on a lot of people, keeping them in limbo and now they are moving on them.’”
The Boston Globe. “The hardest part of battling eviction is the not knowing, Lavette Sealls said. The 58-year-old Hyde Park resident told her story to a crowd of more than 60 at a rally for affordable housing in Dorchester. The day’s main event was the occupation of a vacant home owned by Fannie Mae. ‘You’re always living on edge because you know eventually you might have to move,’ she said. ‘You go on fighting as hard as you can.’”
From Sampan. “Former Roxbury homeowner Paul Adamson lost his home in the foreclosure crisis. Adamson and his wife occupied the vacant home at 193 Norwell Street, where the rally was held, this weekend, only to be forced out by police yesterday. He commented on the irony of homes sitting vacant while homelessness rises. ‘Many of the homes are underwater, but they are not willing to allow the people to stay in their homes and pay rent. When families are desperate and they don’t know what to do, they want to move in to evict them. It’s thoroughly unfair and doesn’t make any sense—these people are willing to pay them rent!’”
From WGBH. “Ten miles from downtown Boston, Newton Centre sits at the crossroads of America’s upper-middle class. But the Mercedes Benzes and BMWs parked outside Peet’s Coffee & Tea mask the anxiety some here are experiencing about their place in the area’s complex economic landscape. ‘I’m just one of many, many, many that were in my position, that lost their jobs,’ said Ken Jaffe, a former community outreach executive at a local bank who was laid off in 2012. Before he was shown the door, he and his wife made a combined $150,000 a year. ‘But then all of a sudden, $120,000 is not there anymore.’”
“Jonathan Cohen says that in spite of earning ‘more than $150,000,’ he’s still insecure. Cohen says in his community, where the average home cost is $899,000, income is trickling down less and less each day. One-hundred-fifty-thousand a year is not what it used to be, he says. ‘Between income taxes—and those, I think, are fair enough—and property taxes and where I choose to live,’ he said.”
“Some have little or no choice where they live, and professor of social work Tiziana Dearing of Boston College, says even neighborhoods in Boston that view themselves as lower middle class are becoming too expensive for many. ‘And we’re certainly seeing that in the real estate market today,’ Dearing said. ‘Post-World War II and into the 1950s, we really put great cultural emphasis on the importance of owning your home in order to be middle class. But as the real estate market changed, that may be changing for us, too.’”
“‘I think that unless we can find a way to solve our housing problem, we cannot solve the income inequality problem,’ said Barry Bluestone, an economist at Northeastern University’s Dukakis Center. ‘Because if you think about income inequality, it’s not just, ‘Do you have a high income or a low income,’ it’s ‘How much does that income buy you?’ And so the real problem in Boston is not only do we have the fourth-highest degree of income inequality but we have the second or third highest cost of living.’”
Want to choke your market and increase your inventory? Just triple your prices. Its quite easy to do. Why you’d want to do is a mystery.
Tens of millions excess empty houses, prices that are 300% higher than long term trend and demand at 19 year lows. That’s a market with the life choked out of it.
Wouldn’t looser credit be all that is needed to remedy the situation?
“… many lenders held back from filing while they waited for the economy, and the value of the home, to improve. ‘That was the banks,’ he said. ‘They held off on a lot of people, keeping them in limbo and now they are moving on them.’”
Yes, and keeping them in limbo kept their hopes alive, and keeping their hopes alive enticed them to treat the places in which they lived as if they actually owned them.
Some of these people are now pissing and moaning because after all the time they spent in limbo they are just now being evicted which goes to show you that many people just cannot take a joke.
‘A group of local economists, whose consensus opinion was published in MassBenchmarks, the University of Massachusetts’ economic journal, said several factors warrant caution in the outlook. They include a stalled housing market beyond Greater Boston and weak levels of business investment, a key driver of the state’s economy.’
‘The state’s rebound in single-family housing construction has stalled, the economists said, which coincides with low levels of household formation, which remain below long-term averages. The weak economy has left many young workers unemployed and underemployed, with some living with parents and others putting off starting families.’
‘That is a “troubling trend that has been in evidence since the beginning of the recession and one that may help to explain the lack of sustained growth in single family housing construction and consumer durables” such as large appliances and furniture, the economists said.’
‘The economists also cited the continued effects of long-term unemployment on the state economy, citing high numbers of people who have been unemployed for more than six months.’
“It is now very clear that the longer a person is out of work the more diminished their prospects are for finding a job,” they said.’
None of this has mattered to people watching this bubble. Back in 2005, the job market was great in most places. Now, jobs stink, but prices in Boston are higher than ever. From yesterdays Florida post on Miami:
‘Before the last bust $300 per square foot defined a luxury condo. The same units bring more than $600 per foot today. New condos are pricing well above $1,000 per foot – and getting their price’
But there’s no problem here!
Sort of a “world’s smallest violin” problem, but it’s getting more and more expensive to be “rich. ”
There was an article in the WSJ about hyperinflation of luxury goods since 2008, and it’s amazing: http://online.wsj.com/news/articles/SB10001424052702304585004579415110604829016
‘In the past five years, the price of a Chanel quilted handbag has increased 70% to $4,900. Cartier’s Trinity gold bracelet now sells for $16,300, 48% more than in 2009. And the price of Piaget’s ultrathin Altiplano watch is now $19,000, up $6,000 from 2011.’
I guess Miami (and everywhere) luxury RE prices have followed this pattern too.
It’s a complete u-turn from luxury firms’ previous business model of “sell a lot of small goods at lower price points” (in the 90s/2000s) to “sell very few goods at very high price points” (today).
Probably won’t work so well in Miami real estate though; in the luxury industry, scarcity = expensive. But Miami certainly has no shortage of luxury condos.
local economists? so the county or state is raising rates, printing money etc? way too many gov workers on the dole
‘Springfield is still dealing with a foreclosure crisis. ‘Things got a little better for a while,’ she said. ‘But just in the last year or two, something’s happened.’ Walking or driving around the neighborhood, McElwaine said, she sees recently occupied homes suddenly abandoned and boarded up: ‘We ask each other, ‘Why is this one boarded up? Why is that one boarded up?’
‘The state granted Springfield Neighborhood Housing Services $450,000 Wednesday to help build six homes in the Old Hill, Upper Hill and Six Corners neighborhoods.’
“little or no control over where they live”
No person with a middle class income is forced to clown car commute.
professor of social work” is that a trade school thing- socialism workers
Right Liberace. Everyone walks to work. You clown.
‘Foreclosure starts increased in 17 states compared to April and in 12 states on an annual basis. There were large annual increases in Massachusetts (+178 percent), Indiana (+67 percent), and Delaware (+26 percent). Scheduled auctions were up month-over-month in 27 states and increased annually in 16 with Utah, Oregon, and New Jersey jumping 199 percent, 157 percent, and 70 percent respectively. Twenty-five states had more bank repossessions in May than in April and 14 states posted annual increases, most notably New York which has grown annually for 16 out of the last 20 months, this time by 117 percent. New Jersey increased for the 11th month out of 12, up 96 percent and Connecticut had a 15th consecutive increase, up 85 percent.’
“It’s not surprising that some of the states with the longest foreclosure timelines are those with markets still dealing with increasing foreclosure activity even as the country as a whole continues to hit new lows,” said Daren Blomquist, vice president at RealtyTrac. “On the other hand, the increase in bank repossessions in some states with shorter foreclosure timelines like California and Oregon demonstrates there is still some pent-up foreclosure activity in those states as well.”
‘The nation’s highest overall foreclosure rate continues to be in Florida. Even with 10 consecutive months of annual decreases the state still had a foreclosure filing on one in every 436 housing units in May, nearly three times the national average.’
‘Florida was followed by Maryland with a filing on one in every 621 housing units. Nevada is still in the top three despite eight consecutive months with annual decreases and a 57 percent year-over-year drop in May. One in every 717 housing unit in the state had a foreclosure filing in May.’
‘Other states in the top five are Illinois, one in 790 housing units; Ohio, one in 805; while New Jersey, Delaware, Indiana, Connecticut, and South Carolina round out the top ten.’
‘This past weekend I and group of folks from the church I serve drove 25 miles into Boston to serve dinner at the Pine Street Inn, the largest homeless shelter in the city… Yet here’s the strange thing. As we made our way to the Pine Street Inn, we drove by so many high-rise luxury apartment buildings under construction, their cranes dotting the city skyline. Boston is undergoing an unprecedented building boom in elite housing. In the next three years 8,000 luxury rental units will go on the market. Those who can afford to pay will have the privilege of calling the Hub their home. How costly?’
‘According to a recent Boston Globe story, “At Avalon Exeter, a tower rising in the Back Bay, one-bedroom units with 800 square feet start at $4,000 a month … A Street in South Boston, slightly smaller apartments … $3,700 … Allston [at] the Green District … $2,100 a month … Kensington, a 381-unit apartment tower on Washington Street in downtown Boston … a 578-square-foot one bedroom … $2,700 a month.”
‘Wow. For a one-bedroom abode. Is it just me, or does that seem like an awful lot of money?’
‘Rents in Massachusetts are the sixth highest in the United States. Forty-one hundred Bay State families live in shelters or motels every single night. Section 8 housing, which helps poor and working folks pay the rent, has a waiting list of 95,000 Bay State folks.’
‘Wow. For a one-bedroom abode. Is it just me, or does that seem like an awful lot of money?’
Which is why so many resort to the “clown car commute”.
isn’t BAHHstin still perky ?
my hood is at par now———flat at 50 units for sale
‘On a Boston skyline dominated by office towers, John Hancock and the Pru are about to get a new neighbor: A 60-story tower of ultra high-end condos that will be the city’s tallest residential building.’
‘The $700 million project — next to the Christian Science Plaza — got a huge boost Tuesday when Four Seasons Hotels and Resorts said it will manage the hotel and residences in the building, promising to bring a new level of opulence to the already pricey Back Bay.’
‘At 699 feet, the building will be the largest of a new generation of residential towers planned to shake up a skyline that has been the exclusive province of hedge funds, banks, and insurance companies. A 625-foot condominium tower is also under construction at the former Filene’s property. Other residential high-rises are planned at North Station, Copley Place, and Government Center.’
‘Condo prices in Boston have soared to record highs in recent months, with the average unit in full-service buildings downtown now selling for about $1 million, according to LINK, which tracks condo prices in the city. Units in several large buildings have sold for over $2,000 per square foot, a threshold seldom crossed in a city that is a relative newcomer to the super-luxury market.’
‘The $700 million skyscraper at the edge of the Christian Science Plaza promises to bring a new level of opulence to the pricey Back Bay, where demand for luxury housing and hotel rooms has surged in recent years. “This is going to bring a different aesthetic to the market,” said Kevin Ahearn, president of the real estate firm Otis & Ahearn Inc. “We’re really going from luxury to super luxury.”
Massachusetts is a strange bunch of people. Nowhere will you hear more whining about inequality and fat cats, while at the same time everybody is stuffing their pockets with loot. Come on Senator Warren, how about this super-luxury?
It warms my heart to see so many Boston/Massachusetts articles. From what I’ve seen, the housing bubble is back in full force, at least for real estate within 20 miles of Boston. We’re in a stock bubble again too. No one learned any lessons from 2001, 2005, and 2008. This next decline should be killer…
As much press as the bay area of CA gets, from what I’ve read, Boston has gone much higher than it’s previous peak.
If I’ve learned anything from the last real estate bubble, it’s that bubbles can go on much longer then any reasonable intellect would suspect. That and condo development and demand for exurb/less affluent locations needs to peak before the bubble pops.
Currently, all the demand is close to Boston. When we see the exurbs and crapholes like Dorchester, Chelsea, Lynn, Brockton and New Bedford start to see increasing demand we’ll know we’re close. We’re already seeing crazy condo development, which is the second pillar of the the bubble…
“When we see the exurbs and crapholes like Dorchester, Chelsea, Lynn, Brockton and New Bedford start to see increasing demand we’ll know we’re close.”
Interesting you should say that.
I’m helping out on some survey and geotechnical work for another business unit until my next project ramps up. Today I’m in the shittiest section of Brooklyn(empty lots used as lay down areas for construction equipment or salvage yards behind tall steel walls). As I’m coordinating efforts with the surveyor, utility locate crew and geologist, some cigar chomping fool pulls up and asked what was going on. I explained the details and then he said he owns the lot we were working in front of and then stated he’s going to be “breaking ground on a 120 unit apartment building and it’s going to be an up and coming area”. I’m thinking riiggght…. and so is Tijuana. I just smirked and said “that’s great.. good luck!”.
By the way…. I’ve never seen so many unemployed minorities driving BMW’s, mercedes and other assorted eurotrash in my life.
By the way…. I’ve never seen so many unemployed minorities driving BMW’s, mercedes and other assorted eurotrash in my life.
Welcome to the welfare economy: People collecting disability, SNAP, Welfare, Section 8 and Unemployment all while working for cash under the table.
I’m hearing (and personally observing) so much of this, almost everywhere it seems. The urban/trendy/desirable locations still going nuts on price, even in the face of collapsing sales and overall demand, while most everything else is totally languishing.
People who need to borrow to buy aren’t. People buying into the bubble zones with cash are going to have their clocks cleaned. Oh well, someone has to lose big in a deflationary collapse, better them than me. At least properties bought by individuals with cash don’t require TBTF taxpayer bailouts. Poof, it goes.
Middle East Shenanigans. So long $100 oil.
Yeah, the 10 year treasury just took a leap. I wonder what happened?
Real talk of recession in the wind?
‘Retail sales rose 0.3 percent in May, half the growth rate that had been forecast, while Americans’ new claims for unemployment benefits unexpectedly rose last week.’
You have to read to the bottom to get the real story:
‘Lululemon Athletica Inc fell 15 percent to $37.62 on heavy volume. The athletic apparel retailer cut its full-year earnings and revenue outlook.’
That’s right; it was the yoga pants that did it.
Check out this chart of the 10 year bond.
http://finance.yahoo.com/q?s=^tnx
Yep.
Unless I catch wind of some specific central bank shenanigans or interest rate ‘jawboning’ that took place today - I’m thinking there’s a wee bit of recessionary panic setting in, particularly over the Iraq news…
Whoa, are you suggesting war isn’t the economic bonanza some say? Why I’ve been told by posters on this blog that war gets you out of depressions, spurs innovation, puts you through school AND you get to kill bad guys! Why, we’ll probably get another internets out of this party.
You’d think everyone would be jubilant over the prospect of $5.00/gal gas, no?
Gas to $5000/gal! We’ll all get rich selling off the gasoline in our cars! And then after that …umm….err… we’ll think of something, I’m sure.
Don’t worry, housing will pick up the slack.
‘The national numbers aren’t in yet for May, but major local markets are already reporting a serious spring slump in housing. The expected sales bump never materialized in a meaningful way and that has analysts rethinking their earlier theories.’
“After much finger-pointing at the weather through a challenging winter, commentary from agents shows that confidence among buyers has taken a step backward,” wrote Credit Suisse analysts in their monthly survey of real estate agents. “The deteriorating sentiment is being driven by worsening affordability as prices have continued to move higher and a lack of quality inventory at multiple price points.”
‘Buyer traffic fell dramatically in May from April, according to the survey, and is now well below the traffic seen in May 2013. Sticking out like a sore thumb is Texas, where home sales had been surging and prices hitting record highs.’
“I think that what’s holding people back from buying is this virtuous circle that’s never materialized for housing, a virtuous circle where job creation means people buying and selling and changing location which leads to more job creation, which leads to more buying and selling and moving, that hasn’t occurred yet,” said Nela Richardson, chief economist at Redfin, a real estate brokerage.’
“There was way too much credence given to the polar vortex, and the winter slowing down housing markets, and that’s why the slowdown in the spring is taking a lot of people by surprise; it was never to me a winter weather story. It was always an economic fundamental story, where we as an economy lack the jobs to support a vibrant housing market,” added Richardson.’
‘Look no farther than Southern California, where there was no polar vortex. May home sales volume was down 2.3 percent from April, and down 15.1 percent from May of last year, according to San Diego-based DataQuick.’
On this:
‘a virtuous circle where job creation means people buying and selling and changing location which leads to more job creation, which leads to more buying and selling’
Well Nela, that’s always been a myth. We can’t build a sustainable economy on buying and selling each other houses.
Come to papa, now…
It seems to be trying to price in a recession.
I have to admit my relatively conservative portfolio is generally doing well these days — especially when the stock market gets hammered and bond yields drop like they did today.
I love Texas but the property taxes are insane. I’d rather pay 6% on my income than 3% on what the government decides my property is worth.
Interesting account of what’s going on in the upper middle class of Boston and everywhere else, as it’s people like the Newton Centers that the market used to rely on to get themselves and their “high incomes” over their heads in debt in order to buy an expensive house.
“…who was laid off in 2012. Before he was shown the door, he and his wife made a combined $150,000 a year. ‘But then all of a sudden, $120,000 is not there anymore.’”
I knew a family like this - they lived in a $2m house, kids in private school, etc. Then one of them got laid off. They sold the house (at a loss), moved in with their parents and put the kids in public school. Of course they spent those high income years in debt up to their eyeballs.
Now they have far less income, but they’re still gorging on debt, just at a lower level: massive student loans for the kids in college, and they just ordered a brand-new Audi, which they will travel to Europe to pick up in person for vacation (airfare paid for with kids’ student loans? Possibly!) They still live with the parents, btw.
So with people like this on the sidelines and unable to get enough credit to buy another expensive house (for the moment), who exactly is buying upper-middle real estate??
From the Sampan article:
‘According to the report, the current affordable crisis is marked by private investors buying up rental properties in the wake of the foreclosure crisis. The foreclosure crisis spurred a massive influx of new renters into the housing market, overwhelmingly low income and people of color. Boston is one of the most rapidly gentrifying cities in the nation, with a particularly high percentage of renters.’
“A massive influx of new renters, overwhelmingly low income” … “Boston is one of the most rapidly gentrifying cities in the nation.”
I think the Sampan journalist is confused.
Or perhaps it is the investors, buying luxury condos and housing at premium prices to rent the to this “overwhelmingly low income” “influx of new renters”, who are confused.
I’m definitely confused - how are these two opposing things supposed to even out?
Make no mistake, many of the renters here in Boston make some bank. There was a recent article on zerohedge about comp sci interns at silly valley companies earning $7000 per month. I know plenty of software developers earning well over six figures and many rent because it often takes two incomes to buy here.
we cannot solve the income inequality problem”
bama is solving the std loan “problem” making the honkey(taxpayers) pay
Why even single people in large cities with great jobs get upset because houses are unaffordable - baffles me. Particularly since renting small apartments is cheap, maintenance is same-day and included in rent, etc. It’s as if there is some type of meme that the RE industry puts out in the chem trails…”become a debt slave…become a debt slave…become a debt slave!”