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May 25, 2005

Single family sales drop 10% in MA

Rerealitycheck1_1Real estate headlines seem to be everywhere these days, from today's lead story in USA Today, -- the second in two weeks, to Monday's "Condo a Go-Go" story and slide show in the New York Times, to Saturday's story in the Washington Post about a Playboy centerfold who is giving up her modeling to become a real estate investor. 

Despite those sexy news angles and industry spin that "everything is coming up roses," the most revealing finding for home buyers and sellers in Massachusetts is today's Boston Globe Business headline: 

State home sales sag 10% in April

According to the Massachusetts Association of Realtors, the number of single-family homes sold in April was down 10.4 percent from 2004, marking the first double-digit decline since April 2003.

After years of warnings, is Boston in for a Real Estate Reality Check?  That was the title of today's talk show on The Connection, a nationally syndicated radio program, which will be rebroadcast in Boston at 9pm this evening on 90.9FM and archived online.

Wellesley economics professor Karl Case, cofounder of CSWv.com and partner of Robert Shiller, told the Globe, ''I think we are beginning to see the beginning of a soft period."  His comments could foreshadow the slide in housing prices, forecast last week by the New England Economic Partnership, that could last through 2007.

If you are a buyer or seller in Massachusetts has your thinking begun to change about whether this is a good time to buy or sell, and what are you doing to protect yourself?  Want to talk about it online, or at a monthly "Bubble Hour" where you can share insights and questions with other consumers?

08:36 AM in Sales falling | Permalink

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Comments

Err...you are only reporting half the story. Condo sales increased 13.2%, from April 2004 to April 2005. How does that fit in with your theory about a slowing market?

Posted by: John A Keith | May 25, 2005 8:34:59 PM

John, Thanks for your feedback. It is more than a theory of a slowing real estate market. It is a fact. The decline in single family home sales speaks for itself.

Why did I ignore rising condo sales? There has been considerable press recently about the large percentage of buyers who are relying on ARMs and interest rate only loans to stretch their buying power to get into the housing market. My guess is that many of those buyers are opting to purchase starter condos as your blog and web site suggest. From what I have seen, you write and reason well, so I respect your opinion. However, if you have only been in the real estate industry for three years, you may not know a popular joke from the last down market -- 1989 to 1994.

Question: What's the difference between a sexually transmitted disease and a condominium in Boston?

Answer: You can get rid of the STD.

While that may seem incredible today, the Globe reported earlier this week that NEEP's forecast for a 3 percent decline in prices between now and 2007, "would be far milder than the housing bust of the late '80s and early 1990s, when prices fell 11 percent and took nine years to recover."

Nine years is a long time to be upside down on a mortgage, wouldn't you agree? I wonder how many real estate agents are cautioning condo buyers about that possibility?

Bottomline: My guess it that some of the condo sales in April were purchased by investors (who made up one in four purchases last year according to the National Association of Realtors), and too many others were purchased with funny money -- ARMS and interest only loans. Throw those out, and you have a falling market with near record loan interest rates. As rates go up over the next two years, the slowdown will become more evident.

Whether I am right or wrong, I appreciate the opportunity exchange perspectives with you and wish you success with your clients in the South End. Thanks for your comments.

Posted by: RealEstateCafe | May 26, 2005 12:56:44 AM

Well, he should have mentioned condo sales, I agree. However, -- that actually supports the statement that housing is becoming unaffordable. The reason condo sales are up is because people can't afford single family homes. It's that simple John, do the math.

Posted by: dimitris | May 28, 2005 3:41:04 PM

I'm about to buy a single-family house in Watertown for $515,000. Am I insane? In a non-Boston market this house would bring in $200,000-$300,000. I only need a fixed-30 mortgage of $150,000, so I'm not in as volatile a position as many buyers, but at the eleventh hour I must admit my feet are pretty cool. Bubble phobia? Or the voice of reason?

Posted by: William Orem | May 31, 2005 11:25:35 PM

With the new May figures telling a similar story, I'm trying to figure out what to do as a seller of a condo. If you look at the MAR figures for 2003 & 2004 (on their web site), condo sales from 1/05 to 5/05 followed the trend from previous years, and sales remain above all levels since 1/03 except for 2 months in 2004. Furthermore, condo prices are also increasing. In short, there's no evidence in the data of some dramatic shift. I'm just a stats-savvy seller, but what am I missing here?

Posted by: swinship | Jun 28, 2005 11:48:28 AM

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