‘Renters Feel Time Is On Their Side’ In Boston
The Boston Globe looks at ‘conflicting’ data on rents versus buying. “Gregg Croteau wanted his own place, but as he started looking at property in Lowell, he was so stunned by sky-high asking prices that he decided to keep renting and wait for a bargain. Selling prices, he reasoned, had to come down at some point.”
“Croteau’s case illustrates how conflicting forces are pulling down the region’s housing market, meaning rents are likely to rise more slowly here than in other parts of the United States.”
“Although the Boston area has more competition for apartments, Walter Moloney, the NAR’s spokesman said, that hasn’t translated into heftier rent hikes, because ‘we are losing population as a state and have been for the last several years, so there is less demand in the existing rental stock.’ Also, he said, there is a significant amount of new rental housing becoming available. After ‘underproducing rental housing for years,’ several significant rental developments are now under construction, he said.”
“Jutta Donahue owns a rental property in Stoneham, and in recent months she’s watched as her landlord-related costs have soared. ‘My condo fees have gone up because of fuel costs, and my insurance has gone up, too. Water costs, everything,’ she said from her Woburn office last week. She thought about raising the rent, and then she thought about the consequences of doing that.”
“‘Do you raise the rent and risk a possible vacancy or keep the rent low to keep someone in there?’”
“Donahue decided to absorb the added costs herself because she has a good tenant and wants to keep him. Increasing the rent, she said, would probably force him out. ‘Then my place could go empty for a while, but I’d still have to pay the bills,’ she said.”
“During the not-so-distant housing boom, many property owners in Massachusetts converted two- and three-family homes into condominium buildings, a move that took many rental units off the market. Now there is a glut of condominiums on the market.”
“Tom Meagher, the president of Northeast Apartment Advisors, said that this spring there were 16,372 condominiums for sale throughout the state, an 81 percent increase from the same time last year. Also, he said, 46,000 condominiums are in various development stages.”
“These days, potential homeowners are carefully monitoring the swollen housing inventory and watching as the cost of borrowing money for a mortgage gets more expensive. Croteau has been searching to buy a home for a little more than a year and has noticed two emerging trends. First, homes are on the market longer than they were a year ago.”
“‘There used to be this feeling that if you didn’t grab it, it would be gone in two days,’ Croteau said. Now, he said, prices are starting to come down. ‘I’m confident that I’m going to get something good sooner rather than later.’”
“Many renters feel that time is on their side. ‘There are lots of first-time home buyers who are waiting to purchase, and they are continuing to rent,’ said Jason Weissman, president of Boston Realtors Advisors.”
“Then there are people who have sold their homes and are waiting to buy another but are renting for now. They are waiting to see if prices drop. (Broker) Arthur Horiatis in Cambridge, said that ‘wait-and see’ approach could eventually trigger drops in rents in the suburbs northwest of Boston.”
“‘I think that the rents will stay flat or possibly go down,’ because when homeowners can’t sell their property, they have to choose between lowering their selling price or renting their home, he said.”
‘46,000 condominiums are in various development stages.’
It’s odd how the media has started this ‘rents scare’ thing at this stage of a deteriorating for-sale market. There are a record number of new and existing homes on the market. The Census Bureau reports the US is at a 40 year high in vacant rentals and the homebuilders are putting up 200-300k more homes than they sell per year. But we are supposed to believe there is now a shortage?
I completely agreee. The net amount of actual places for people to live is increasing. Assuming everyone only needs one address to call home (which used to be the norm before the “I’ll take two” approach to homebuying arose), the only way there could be a sudden shortage of rental housing and a surplus of housing for sale is that the houses for sale are sitting empty. It seems obvious that the two markets will eventually come to an equilibrium, either by an increase in homes for rent by individual owners, or a drop in home prices. Probably some combination of both.
Yes, any logjam in the rental market caused by people waiting to buy is not sustainable in the log run if there are vacant housing units available that must be paid for one way or another eventually. A lot of the condo conversions will probably go back to the rental market at some point, as is already happening elsewhere.
Why is it that developers and economists are also going on about the housing shortage in MA, it’s so hard to build and get permits, land use restrictions, etc., and yet somehow 46,000 more units are going to be built.
‘A lot of the condo conversions will probably go back to the rental market at some point, as is already happening elsewhere.’
That’s true, and if you think about it, what was the point? So the developers could make a quick buck. The line we were given the last couple of years was the some new ‘urban living’ trend had emerged, but that was a load of hooey.
A lot of the conversions in the Boston area were of the old 2 and 3-family buildings, traditionally affordable housing for working-class families. I’ve lived in apartments in some of these places, and they’re perfectly fine as apartments, so why pay twice as much just to own the space? Makes no sense. But now they’ll all have granite and steel.
I saw a condo on cragislist that didn’t have granite countertops. It had Corian. I was all…no way, man. No granite…no deal.
LOL! We were very happy to get Corian.
What’s next? Platinum??
A point that I’ve been meaning to make for the longest time is this:
In New York, state law stipulates that a lease MUST be honored, no matter who the owner is, which means that, at least in New York, if you sign a 1 year lease, for example, and the owner sells the property, you are entitled to live out said lease, according to my understanding and what was taught to me in my real estate agent class. (which I passed in flying colors, BTW)
I suggest that people research the laws in their home states to find out if such a law exists. If it does, then you can rest easy about renting from f@cked flippers, because you will be legally entitled to stay where you are for the duration of the lease, transfer of ownership notwithstanding!
Disclaimer: The above is in no way to be construed as investment advice!
In fact you could to some extent game this, the way that rent-control tenants in NY and SF do.
Find a flipper that’s desparate for cash-flow from a property you like the look of, but still thinks RE is going up in the long term, and who has an ARM or better yet a neg-am.
Sign up for as long a lease as you can (preferably fixed-rent), and be the perfect tenant. When the flipper flops, you’re in the catbird seat to talk with the lender about the foreclosure, because you’re the only person who won’t have the sitting-tenant issue.
Even if rents were to jump 10%, who cares! I’ll take a 10% increase in rents over a 30%-40% equity loss any day. Hmmmmm, let’s see…….do a take a $100 a month increase in rent, or do I buy at the top of the market and lose hundreds of thousands of dollars. Oh what to do, what to do.
Keep on spinnin’ your crap NAR, ’cause we’ll be here to refute it.
Right, how many cities now have a record amount of inventory for sale?
Some people just can’t afford a 10% jump.
In which case I very much doubt that they can afford to buy except with a suicide loan.
As a former native Massachusettsian I gotta tell ya the place is not ageing gracefully. The last person to leave the Commonwealth will need to turn out the lights by using “The Clapper®.” Just look at the demographics of places like Lowell where 40.7% speak other than English. All my family have or are leaving and that’s a big family.
We here in Massachusetts dearly miss your family. The mayor was just talking about you guys the other day.
LOL
When my grandparents lived in Dorchester, you could still hear Yiddish spoken in the streets. So things have changed, nu?
Nowadays when you go through Dorchester you had best bring your bullet-proof vest.
I gotta tell ya the place is not ageing gracefully
You got that right, Robert…
Up on the Northshore, which everybody thinks is so “upscale”, with it’s restrictive zoning and the horsefarms evolved from King George land grants, the infrastructure is crumbling beneath everybody’s feet, and the attitude is like who cares, I’m hip-I’m cool-I’m a Bostonian with big-time homequity in my hip pocket.
WTF do I care…
Rt. 1 and 128 from Peabody north haven’t seen a lick of maintenance in 30 years. One freakin’ massive pothole last winter took out like 40 cars in a row. State police had to shut down the road until enough tow trucks could be found to clean everything up.
All the “quaint” little village backstreets are riddled with potholes and collapsing sidewalks. Haverhill busts an antiquated sewer pipe during last months floods and flushes millions of gallons of raw sewage into the Merrimac River subsequently polluting all the immediately coastal clamflats.
Traffic is a nightmare, and the only population influx are illegal aliens shootin’ up the inner cities and runnin’ up the law enforcement and prison tab.
Everybody is in total denial.
So many try to escape I95 north to ME and NH is mobbed to the point of gridlock thru-out the summer. Might just as well sit in your driveway during the first 3 weeks of August.
And whoowee, wait’ll all those lavish public pensions come due…
Another 5 years and people won’t have any choice but to get some arm tatts, adapt a southern drawl, and slap a Confederate flag decal on the rear bumper.
And whoowee, wait’ll all those lavish public pensions come due…
Careful, that’s my mom you are talking about. The nice Commonwealth direct deposits her check like clockwork every month to her account in Florida where she lives.
Careful, that’s my mom you are talking about
She needs to start agitating for a lump sum pay-out-Quick!
She’s not gonna be gettin’ much from all the illegal Brazilians takin’ over the place.
It’s not that rents are going up, it’s just that people who are waiting for the market to drop are starting to rent houses that are owned by flippers. A couple months ago, you might have been in an appartment, but, with so many nice houses coming up for rent because people can’t sell, You can get a bargin on a nice house in a good area on the cheep.
lee,
So true. When we sold our house on the last day of 2003 (I made my money by selling early) there were few if any rentals of any kind available. Now we can pick and choose, the longer we wait the nicer it gets.
Did anyone see the headline on Fannie Mae. It says the accounting scandal could cost investors 25-30 billion dollars!!!
Do you have a link?
http://finance.myway.com/ht/nw/bus/20060615/hlm_bus-wbt005555.html
http://biz.yahoo.com/rb/060615/congress_fannie_losses.html?.v=1
pardon my ignorance, but WTF do they mean by “accounting errors”? sounds like another weak excuse to explain away a few fat cats robbing everyone else.
Is this due to loss in market cap of stock or something else?
Oops, too trigger-happy here :(. When Bluto said “did cost”, I thought it was a one-day smash.
Yeah a billion shares dropped from $70 to $45, it wasn’t could cost, it was did cost.
From the looks of things, $45 is just the halfway point to where it’s going
Whoa!! That could spoil your whole day.
More seriously, how does that affect FNM’s ability to do business.
There must be a collusion to make it seem like their is a rental shortage. That way sheeple may be scared into keeping buying. I bet it is Liarah, In the bag fat ass Watts, and I’m Toast Young, and Useless Ted Kennedy, and FlipFlop John Kerry.
The MA economy will collapse before selling prices come done.
Too much old money plus the boomers and WW II Gen types who bought for peanuts are still hangin’ around and don’t need to sell.
They have enormous profit margins will remain greedy to the last dime.
Best to head to the upper south and get a grubstake going before the boomer retirement exodus really picks up steam.
You ca leave Mass or even RI or CT- and head for where? AZ, FL or perhaps Indiana. Go to SC or TENN and see how you are greeted as a ‘Yankee’. Funny my next door neighbors here in central CT lived both in NC and Florida and are back in CT- saying its much cheaper here then Florida. Believe me- these wonderful places all these former north easterners are migrating in the end are not so wonderful.
Southerners still act like the Civil War like it was yesterday. My grandparents (I am a 6th generation NC) talked about it all the time; in the Deep South, I know people that talk about it everyday. When outsiders move in and start raising our prices and bulldozing our landmarks, the natives just see this as the latest form of carpetbagging. That’s the reason for the “friendly” reception.
That tends to be what happens when you forcefully invade, overthrow, and occupy a country at a cost of hundreds of thousands of lives.
the losers are bitter?
Sounds a little bitter.
I find this funny. The North one the war, but you hardly here anything about it up here. Seems like there is a memorial on every other block in the South.
Sorry. meant won. typing too fast.
It is why you never hear NY Yankee fans chanting “Red Sox Suck!”, and never hear a northen folk-band singing “The North is gonna do it agin”.
This really just 19th century romantic nationalism all warmed over for the modern (or anti-modern) age- cf. Quebec. More typical, in my experience, is the southern gent who, upon meeting me, declared, “I’ve got no problem with Yankees so long as they ain’t named Sherman!”
Maybe the new carpetbaggers, with their suburban sprawl, are just a bit too reminiscent of Sherman.
Also, Boston has a number of very visible memorials, both to the war and to famous abolitionists (every town has a Sumner Street, forex)… which may say something about the region’s ongoing decline. A glorious history of moral rectitude is not much to build on anymore.
(Believe me- these wonderful places all these former north easterners are migrating in the end are not so wonderful.)
Agreed, but they are more affordable. For the moment.
Usually things are “more affordable” for a reason.
They’re “less affordable” for a reason as well — speculative “investor” madness.
Have you ever been to Reno? It’s far from “affordable”.
And far from “desireable.”
you can how the real sellers would bahave in coming days..10k reduction every week. It won’t be as sticky as last downturn. 2007-2008 still appears to be a good yr to buy (not a bottom, of course)
one sampling from Ziprealty:
1544 NW 179TH AVE, Pembroke Pines, FL 33029**
Previous 1 of 8 Next
List Price: $514,900
Description
1 story on the “big lake” of silver lakes! 4 bedroom home w/ plenty of living space.Recently painted & has many amenities. Large kitchen w/ cooking island, 2 pantrys & garden window. Upgraded carpet in all bedrooms.Enjoy the sunsets & fishing from the ove
ZipRealty Price Track:
Price Reduced: 05/02/06 — $549,000 to $534,900
Price Increased: 05/23/06 — $534,900 to $539,900
Price Reduced: 05/31/06 — $539,900 to $529,900
Price Reduced: 06/09/06 — $529,900 to $524,990
Price Reduced: 06/14/06 — $524,990 to $514,900
Days on Market: 69
That’s kind of funny right there, So if your an interested buyer you just sit and watch till it hits your number. He fishing for a greater fool. He doesn’t have to sell. After the summer when the first school bell rings. It’s going to get real interesting when the have to sells stay on the market and the fishers reel in.
Here in San Diego, I have been stunned by the resilience of rents in the Carmel Valley/Mountain and Rancho Penasquitos areas. Three-bedroom single-family homes in these areas rent for about $2200-$2800, which is a lot for San Diego. We have been looking for a new house to rent to sit out the bubble but have only found dropping prices in the Chula Vista/Eastlake/Otay Lakes area. Potential landlords I talk to al seem to be realtors with multiple properties and eerily confident that their properties will rent at relatively high prices. Oddly enough, they seem to be right. Maybe there’s something about the school district in these areas that is helping to support prices. I get the feeling that multiple families are living in a single-family residence.
Around here, that rent will get you a nice 2 bedroom condo.
I am not familiar with the areas you mention, what sort of neighborhoods are these?
I am not surprised that rents are holding up - the folks who would otherwise be buyers are now looking to rent, creating more demand than we have seen in some time.
I grew up there in a rented house during the last housing bubble because my parents couldn’t afford to buy. Good schools.
Of course they bought the house they were renting for less than the cost of rent in 1995!
You can rent at a cheaper place and send your child to a pvt school @500 pm and still come ahead?? no?
Assuming you only have one.
What sort of private school charges $500 per month.
In some places you can’t even find a preschool for less than twice that amount.
LOL, we paid $125 a month for my daughters pre-school. It was a strict pre-school, no daycare, and only 3 days a week, but it was still only $125 a month.
maybe the illegals living 10 to a home could account for some of it? but, hey, don’t complain, after all we know they’re hard workers necessary to keep the economy running smoothly and doing jobs americans “don’t want to do” (for peanuts that is). not to mention the wonderful “diversity of culture” they bring with their blaring mariachi music and violent street gangs.
We just signed the lease on a brand new 2b/2ba house near Boise owned by an investor. The rent is only $150 more per month than our current apartment rent and several hundred less than buying.
I’m not suprised.
Here in the south bay of Los Angeles, we’re looking soon at a rent “inversion.” Soon it will be cheaper to rent a small home than an apartment… 3b/2ba homes in good neiborhoods aren’t that much more than an apartment…
Did I read correctly that were at a 40 year high in vacant rentals?!? Wow! And IIRC we’re at an all time high for unoccupied homes for sale… Hmmm… Naa… no bubble. Now is always the time to buy.
Neil
The “rental gap” is larger on the more expensive houses around Boise. Rent on some really nice homes is the same or less than an I/O loan if you bought it. Sounds like this is becoming the norm across the country.
We pay $1,100 for the house we rent. If we were to buy it, it would run about $2,100.
It’s already like that in many areas of NE Los Angeles. We’re renting a house for $1600 - 2br. dumpy aparments in “hip” neighborhoods are about that much, and luxury new 2br apartments are much more, like $2200 or so.
Hail-
If they bought in the last 2 years they are still losing money with those rents…
I’m visiting Seattle. Can anyone tell me why everyone here still believes that rents and house prices are still going up like crazy?
Because the ‘unbiased’ media keeps saying it will. For a more realistic spin on things, visit http://seattlebubble.blogspot.com/
While planning for our move back to MA next year I’m not so much concerned about the availability of rentals as I am with the possible (in)solvency of potential landlords. Assuming that a good-sized chunk of the rental stock at that point will be owned by would-be flippers trying to staunch outward cash-flow, there would seem to be a non-neglible chance of a property getting foreclosed and us renters getting kicked to the curb. That would really suck after the expense and bother of an interstate move.
On the other hand, that puts renters in the interesting position of having to do due diligence to make sure their landlords are financially solvent…..
Just went through this process. Needless to say, I found some potential landlords who were a credit risk (I used LexisNexis to get mortgage and HELOC information). One in particular had to cut a check to the tune of $1000/mo. in addition to my rent to “feed the alligator”.
However, of the 18 places I looked at, only 2 were owned by morons who bought at the top. So, it may not be that big of a problem. (This was in the Watertown/Belmont/Cambridge area.)
Additionally, I have heard from some reasonably experienced, though not expert, sources that a lease is an encumbrance and that you cannot be kicked out on the street until after the lease expires, regardless of a change in ownership.
Perhaps in Massachusetts. In my state, a renter with lease in hand can still be kicked to the curb with dizzying speed. One more reason we’ve stayed in our current hovel (besides good schools) is that it’s owned free and clear by the landlord. In an area that tops out the foreclosure stats, that’s comforting.
For the ignorant here (waving hand), can anyone buy/access mortgage information on the LexisNexis site, and if you could be so kind, through which of their 8,000 product/service links?
That is the very same reason we stay in the house we live now.
MA housing court is unlikely to throw a paying residential tenant out, but you still have to pull up stakes when the year is over. I expect there could be exceptions where the tenant is getting such a sweet dealt that the value of consideration for leasehold is questionable.
A foreclosure would be a more serious problem. Unless there was a foreclosure right after the leasehold started, the tenant would have a good opportunity to drag things out about as long as the now-deceased leased. But who wants to live under those circumstances?
A few casual questions can help you figure out how the landlord is doing. I generally only rent from people who have owned their properties for a long time.
I suppose if you prefer to rent a new house/condo it’s harder to ensure you’re not occupying an FB’s flip. A good long-term landlord will generally be happy at the prospect of a multi-year lease, while an FB might refuse anything longer than a year. Just a hypothesis. I haven’t done a survey on this or anything. Even if you don’t want a multi-year lease, it might be useful to bring up the possibility and see how they react. If they don’t seem excited by the prospect, run away and find someone else who is actually serious about being a landlord.
In Massachusettes the lease goes with the unit, so that if the unit is sold or foreclosed upon, the renter stays with the unit. In fact, MA has one of the most favorable views toward renters anywhere. I’ve had some good small-time landlords (one woman who had just my unit, she was the nicest ever) and some morons (one guy had about 16 units). Basically, try to meet the owner, figure out if they’re nice and use a MA standard lease form, and you should be fine. If not, call the city, they’ll err on siding with the tennant.
One thing you do need to be aware of is almost all leases in the city of Boston (and Cambridge and surrounding areas) are 9/1 through 8/31. If you show up in February, odds are you’ll sign a lease through the end of August. Furthermore, if you’re looking in May or June, you’re looking at a September start and competing with everyone else. And don’t even try to move the last two weeks of August - that is a mad dash of making arrangements with current tennants. When EVERYONE has to be out of their apartments in a big city in a single day, it makes a glorious mess. Just another artifact of the volume of student rentors that are around.
Oh yeah, and don’t drive a U-haul down Storrow Drive.
- Bad Chile
My understanding is that a foreclosure works differently than a sale, and that in that circumstance the lease might not be carried over. Obviously something we’ll have to research as the time draws closer. Something tells me that even if a lease stays in force, living in a building that’s being foreclosed on might not be too pleasant. Most likely we’ll be looking in Somerville, as we lived there for over a decade and liked it a lot. The thing with that city is it has a lot of the 2- and 3-family buildings that Moopheus mentioned earlier that have been condo-ized. So we’ll see.
Luckily, the plan right now is to move in the spring. Since we lived there for a long time (Moopheus grew up in the area) and I used to work at one of the famous institutions of higher learning, we’re well familiar with the housing timetable.
Chicago is like that too, just replace “September 1st” with “October 1st” and “Storrow Drive” with “Lake Shore Drive”.
LOL….at least one over what 11 feet?
“In Massachusettes the lease goes with the unit, so that if the unit is sold or foreclosed upon, the renter stays with the unit. ”
Hmmm… I know it goes with the unit on a sale… not as sure with a foreclosure…
Don’t worry about the landord insolvency problem…just move into an Avalon Bay complex…..they have built and are continiuing to build quite few new complexes in MA. I also suspect that the glut of condos and newer apartments will kill the 2, 4 & 4 family landlords.
Here In Rhode Island I just made an offer of 405000, on a house asking for 445000. The seller countered to 435,000. I countered to 410,000 and made it final. Never heard from the seller again. See, the price is sticky!
Just make sure when they come back asking if you are still interested that you offer $395,000.
To hell with $395 try 356k 20% off for being a moron
No, that’s the second step. You offer $395 they counter with something like your original $405. You counter that with $356 and their realtor is scratching his head. Fun and profit.
My wife and I are considering purchasing a home in greater boston. We rent right now and sometimes I wonder if we would be better off just continuing to rent? We’re contemplating a purchase at nearly 10% off original asking price, but I wonder if it is possible that prices will drop even further than that?
We will need to sell the home in four years when we will be relocating out of state. I just want to be sure prices will have bounced back strongly in that time.
Tom,
IMO, you should not even consider buying at this time. In LA during the last downturn, prices didn’t break even w/bubble valuations for 11 years (and homes, even in good neighborhoods dropped by 25%-40%, NOT counting inflation. This bubble is much, much worse.
Take your time, rent and enjoy life, IMHO. The unwinding of this **credit** bubble — and all the asorted shakeouts — will take many, many years.
4 years is not long enough to recoup your transaction costs, and it would be far less risky to just rent. Although real estate always goes up (ha), work out what happens if the house you might buy drops in price by 10%-20% over 4 years. That will convince you very quickly!
Tom,
Read this blog for a while and you will come to understand that now is just the wrong time to buy. YOu are better off renting for now and watching as in many many markets we are at the edge of what looks like it will be a deep price decline. Also, buying at peak prices costs you in higher taxes in addition to any value loss risk. Keep your powder dry and watch for at least 40% price drops before you even consider buying. OR if you are game, lowball offers in the 40% - 50% range. But don’t pay more than that or you are just throwing your money away.
Even though the sales volume is really down and inventory is high, there is very few decent house in 400k range, and the few that was sold was very close to asking price. So I guess my lowball is not received well right now.
Massacraptaxuestetts sucks.
I was thinking of starting a little side business to make some extra cash. Nothing big, and I wanted to keep my costs very low, since I did not expect huge revenue for the first few years. Well, after doing my research I realize that Mass sucks compated to many other states. The cost to register an LLC in $500, and with a yearly cost of $500 on top of that.
Well, Taxacraptussetts, screw you! I won’t start a business here. I’ll just keep making more off your decaying infrastructure and investing my yearly surplus. Once I’ll saved enough capital, I’m moving to small business friendly state, and I’ll be happy to give MAss the finger.