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October 28, 2005

Realtors' "Anti-bubble reports" out of sync with emerging buyers' market?

Move over St. Joseph, patron Saint of Home Sellers, a new saint's in Beantown, home of two millions Catholics.  Home buyers who have been praying for a decade for an opportunity to buy a home in Greater Boston's overheated housing market, can thank St. Jude -- patron Saint of Lost Causes -- for delivering this long awaited headline to page one of the Boston Globe on his feast day: 

Suddenly, area's housing market favors the buyers
Cooling of sales to crimp economy

PULL QUOTES:

The fall slowdown not only represents a sea for sellers, who for years have enjoyed multiple offers and higher prices, but also indicates the region's bull housing market is at an end. Real estate agents say a long-predicted market correction appears underway as the gap between the price of housing and peoples' incomes -- now even wider than at peak of the 1980s housing boom -- has become too great to sustain the recent pace of sales and appreciation.

Certainly, few expect an '80s-style collapse, when home values plunged 25 percent or more.Today, the economy and lenders are far stronger, and mortgage rates, which topped 10 percent when the last boom went bust, are far lower -- currently about 6 percent. In the 1980s, overbuilding, unsound lending practices, and intense speculation by investors, along with higher interest rates, sparked a real-estate crash.

Still, real estate agents today increasingly are telling sellers to expect lower prices than comparable sellers received six months ago. Linda O'Koniewski, owner of Re/Max Heritage in Melrose, said her brokerage is still selling houses, but at prices 5-to-10 percent lower than what comparable homes sold for in spring.

''All trends point to a correction period," she said.

With growing choices, buyer psychology has changed, brokers said. In recent years, buyers raced to make offers, convinced prices would only go higher, or even bid against each other, pushing prices up. Now, many are prepared to wait, believing that prices are coming down.

In the Boston area, the period between Thanksgiving and Christmas has historically been "let's make a deal season," with one in five homes selling for more than 10% off their original asking price according to original research by The Real Estate Cafe.  With expired listings at a record pace this summer, and thousands more expected in the remaining ten weeks of 2005, will homebuyers this year see even greater savings in the emerging buyers market?

Not if you buy the comparatively rosy picture hundreds of Realtors heard in one of the kick-off sessions at their annual convention today in San Francisco.  Entitled, "Winding Down to an Expansion," National Association of Realtors chief economist, David Lereah joked, "it's a good spin isn't it?"  Realtors are trying to spin the public perception of the real estate bubble across the country through a series of "anti-bubble reports," as Lereah described them.

Apparently, the press in Boston and prominent local economists aren't buying the spin.  While the spin is not real, the price reductions are, according to another story in the Boston Globe this week.  So, if you've been haunted by the housing bubble, are the markdowns that traditionally occur between Halloween and New Years Day reason to celebrate today's headline as an answered prayer, or time for more cautious patience before you restart your homebuying plans?

02:44 PM in Defensive Homebuying, In the News, Market trends, Real Estate Bubble, Savings & Rebates | Permalink | Comments (1) | TrackBack

October 20, 2005

Asking prices in Boston falling faster than anticipated?

A post yesterday on Business Week's real estate blog entitled "Home price danger zones" once again cited Boston as the nation's most vulnerable housing market, according to PMI Group's quarterly survey of major housing markets.  In the past, the good news for sellers has been that "House prices are sticky, so moving to another phase in the real estate cycle can be a slow process," as the BusinessWeek blog reports.  However, that conventional wisdom comes from real estate cycles before the Internet era

Will housing markets correct more quickly, when millions of consumers can access current market trends instantly online?  No one knows yet, but there are signs that asking prices in Boston are falling faster than anticipated.  Asking prices in 16 suburban towns dropped nearly 15% in recent months according to MLS stats cited in the Weston Town Crier, and a Boston real estate agent who blogs has began speculating about what would happen if prices in the city drop by 10%.

The fact that home buying plans have plunged nationwide to their lowest point in a decade and locally unsold listings are expiring at a record pace could make home prices fall more quickly, too.  What's your take?  You can post your comment here, or call our reader line at 617-876-2117 to record a one to three minute sound bite that we may use as a podcast episode in our Real Estate Bubble Time Capsule.

11:48 AM in Market trends, Real Estate Bubble | Permalink | Comments (1) | TrackBack

October 17, 2005

Do home buyers and sellers have the right to free choice without fear of discrimination?

In a democracy that values personal and economic freedom, doesn't this third point of the proposed Real Estate Consumer Bill of Rights seem obvious (or to quote the Declaration of Independence, "to be self-evident")?

DRAFT REAL ESTATE CONSUMER BILL OF RIGHTS

3. Right to be respected as an individual. 
Consumers of real estate services vary as to particular real estate needs. There should be no difference in the way an individual is treated by a real estate professional especially if that individual chooses not to be represented or chooses to use a real estate professional whose services offered may be different in custom or practice from other real estate professionals.

To the contrary, real estate consumers who exercise their right to choose "alternative" real estate service providers, like new flat-fee MLS listing services, run the risk of discrimination.  The same is too often true if they list their own properties "for sale by owner."  Those are the kind of the complaints that the United States Department of Justice and Federal Trade Commission are likely to hear on October 25th when they host their public hearing on anti-competitive trade practices in the residential real estate industry.  If you've been a victim of this kind of discrimination, we'd like to hear about it.  Exercise your own free speech by (1) posting your comment below, (2) sending a private email to recafe@mac.com, (3) recording a message by calling The Real Estate Cafe at 617-876-2117;

Or best of all, exercise your freedom of speech AND assembly by (4) logging onto Essembly.com to nominate your own idea for the proposed Real Estate Consumer Bill of Rights using the discussion boards there for home buyers and home sellers.  We look forward to hearing from you!

10:32 PM in Real Estate Consumer Bill of Rights | Permalink | Comments (0) | TrackBack

October 13, 2005

Shouldn't real estate consumers be free to choose based on informed consent?

Surveys conducted by the real estate industry over the past decade repeatedly find that some consumers want the convenience of one-stop shopping.  In response, real estate consumer advocates advise consumers to look carefully at the trade-off between time-saving convenience and cost, and to protect their right to make free, informed choices.  That's the goal of this second article of a proposed Real Estate Consumer Bill of Rights.  Initially drafted in 1999, how would you update it for 2005 and beyond?  If federal regulations were finally changed to allow banks to provide residential brokerage services, would this language need to be expanded? 

DRAFT REAL ESTATE CONSUMER BILL OF RIGHTS

2. Right not to be coerced into using products or service providers.
No consumer should be forced, without the consumer’s full informed consent, into using any particular service or product. Consumers should especially be cautioned where the real estate professional may, by office policy, be required to act as a dual representative or shift services without the consumer’s full informed consent. Consumers have the right NOT to use real estate brokerage services and to “self-represent” if so determined by the consumer.

As written in an earlier blog post entitled, Cell phone bill of rights? Why not real estate?, The Real Estate Cafe will:

1. Use this blog to release one item a day over ten days as a starting point for a draft Real Estate Consumer Bill of Rights;

2. If there is sufficient interest, we'll create a wiki and invite other real estate consumer advocates to to help create the draft Real Estate Consumer Bill of Rights;

3. If there is sufficient interest, invite consumers to comment, edit, or add items to the draft Real Estate Consumer Bill of Rights; and

4.  If our efforts are credible enough, we'll submit the draft Real Estate Consumer Bill of Rights as written testimony at the upcoming hearing on anti-competitive practices in the residential real estate industry, cosponsored by the Department of Justice and Federal Trade Commission in Washington, DC on October 25, 2005.

We invite your comments online or by calling us at 617-876-2117 to leave a one to three minute sound bite (which we may include in an upcoming podcast).

01:31 AM in Commission Reform, Dual Agency Detective, Real Estate Consumer Bill of Rights, Unbundling the Commission | Permalink | Comments (0) | TrackBack

October 08, 2005

Asking prices drop by nearly 15% in 16 suburban Boston towns

Price_reducedHomeowners in Greater Boston and elsewhere continue to expect "big real estate gains" despite a stunning revelation this week: "asking prices in 16 MetroWest towns have dropped by nearly 15 percent" since August, according to MLS statistics.  "All good things come to an end," economist and housing guru Karl Case told real estate reporter, Sue Brickman of the Weston Town Crier.  Commenting on "a spreading inventory problem" and "a sea change on the demand side which we have been expecting for a long time," Case predicted that "prices are going to fall back to a justifiable level, because people are running out of gas (interest)."  Noting that current price reductions will not show up in industry statistics for some time, Case was guarded -- but cautious -- in his assessment of the market:

"We'll see some softness for a while, but I don't see a collapse. But I say that not with a hell of a lot of conviction." 

Last year at this time, a survey by Case and his partner, Robert Shiller of "irrational exuberance fame, revealed that home owners in Boston, Milwaukee, San Francisco and California's Orange County were "counting on double-digit growth EACH YEAR for the next ten years."

Despite mounting evidence of a housing bubble, homeowners remain overwhelmingly confident about continued appreciation.  According to the Daily News Transcript, another suburban newspaper in Boston, an online survey of 1,001 consumers conducted by RBC Capital Markets revealed that:

1.  60 percent of homeowners expect the value of their homes to increase by at least 5 percent annually during the next several years;

2.  24 percent of respondents said they expect annualized gains of 10 percent or more over the next few years; and

3.  About 3 percent of respondents said they expect their home values to decline over the next few years.

That optimism is starkly out of line with short-term price changes and long-term home buying plans which recently plunged to their lowest point in a decade. Local listing agents say sellers "need to adjust their thinking and profit margins" to attract buyers.  What's your take?  Is that enough to break the stalemate in the market; or if you buy now, are you setting yourself up for a heartbreaking loss of value in coming years? Post your comments online or call The Real Estate Cafe at 617-876-2117 to leave a one to three minute sound bite (which we may include in an upcoming podcast).

08:24 PM in Market trends, Real Estate Bubble | Permalink | Comments (8) | TrackBack

October 07, 2005

How far should consumer access to real estate data go?

How far should access to real estate data go in an e-commerce era when consumers expect access and transparency?  Web 2.0 functionality is already opening up new ways for consumers to manipulate real estate data to inform their own homebuying decisions.  For example, The Real Estate Cafe's clients are using MLS data we provide them to create personalized Google Maps to value properties and make offers in ways that make HousingMaps.com look simplistic.  Should the real estate industry try to anticipate those needs and provide solutions, or should consumers be free to access housing data and innovate as they please?  Here's what one future-oriented real estate consumer advocated proposed as the first article of a Real Estate Consumer Bill of Rights way back in 1999.  How would you update it for 2005 and beyond?

DRAFT REAL ESTATE CONSUMER BILL OF RIGHTS

Article 1. Right of information access without limitation
No consumer should be denied access to information sources just because that individual is not a real estate professional or because the real estate professional attempts to use membership in a trade association or a listing service as a condition of “representation”. To the extent information may be available, its access should not be denied except to lawfully protect the adverse party only.

As written in an earlier blog post entitled, Cell phone bill of rights? Why not real estate?, The Real Estate Cafe will:

1. Use this blog to release one item a day over ten days as a starting point for a draft Real Estate Consumer Bill of Rights;

2. If there is sufficient interest, we'll create a wiki and invite other real estate consumer advocates to to help create the draft Real Estate Consumer Bill of Rights;

3. If there is sufficient interest, invite consumers to comment, edit, or add items to the draft Real Estate Consumer Bill of Rights; and

4.  If our efforts are credible enough, we'll submit the draft Real Estate Consumer Bill of Rights as written testimony at the upcoming hearing on anti-competitive practices in the residential real estate industry, cosponsored by the Department of Justice and Federal Trade Commission in Washington, DC on October 25, 2005.

We invite your comments online or by calling us at 617-876-2117 to leave a one to three minute sound bite (which we may include in an upcoming podcast).

04:59 PM in Real Estate Consumer Bill of Rights | Permalink | Comments (2) | TrackBack

October 04, 2005

Cell phone bill of rights? Why not real estate?

BorrowersbillofrightsYesterday, news outlets in Boston began reporting that Massachusetts legislators had introduced the first Cell Phone Bill of Rights in the nation.  (A simple Google search seems to challenge that, as a similar bill was introduced in California a year and a half ago; but that's a side point.) 

The $2 trillion dollar a year question is:  "Why is it that consumer advocates and legislators in progressive states like Massachusetts and California can rally around feel good legislation, like MASSPirg's Cell Phone Users' Bill of rights, but neither state has been a first mover on a Real Estate Consumer Bill of Rights?"  To my knowledge, no real estate consumer bill of rights exists at the state or federal level, despite Consumer Union's (non profit publisher of Consumer Reports) calls for one 4.5 years ago in Congressional hearings on banks entering the real estate brokerage business. 

Yes, there are tens of millions of cell phone users nationwide (which is probably why WBUR hosted a talkshow in November 2003 called Cell phone nation), but don't most cell phone plans cost less than a $1,000 per YEAR?  Compare that to real estate.  Mortgage payments of less than $1,000 per MONTH in Massachusetts or California are rare to non-existent.  The most expensive "smart phones" cost about $500, and it's nearly impossible to find a single-family home in many communities in Massachusetts and California for LESS THAN $500,000!

Do the math.  Doesn't that suggest that a Real Estate Consumer Bill of Rights would be a thousand times more important than a cell phone bill of rights?  So, what would it take to get a Real Estate Consumer Bill of Rights going, who should cosponsor it, and what would you like to see included?  To get started, what can real estate consumer advocates learn from borrower's bill of rights developed at the state and federal levels? 

Over the next ten days, we'll blog about 10 things that might be included in a Real Estate Consumer Bill of Rights.  If we create enough momentum, we post those ideas into a wiki, and invite readers to coauthor a draft bill of rights.  If it is credible enough, we'll submit it as written testimony at the upcoming hearing on anti-competitive practices in the residential real estate industry, cosponsored by the Department of Justice and Federal Trade Commission in Washington, DC on October 25, 2005.  We invite you to post your comments on this blog, or call us at 617-876-2117 to leave a one to three minute sound bite (which we may include in an upcoming podcast).

07:09 PM in Real Estate Consumer Bill of Rights | Permalink | Comments (2) | TrackBack

Will price corrections revive slumping market?

Nytimes_pg1_100405_3After a series of front page stories on the real estate bubble in the Boston Globe this year, their parent company, The New York Times, put this headline on page one today: "Slowing Is Seen in Housing Prices in Hot Markets."  Citing statistics about slowing sales, rising inventories, and flattening prices in Boston and elsewhere...

The question remains whether all of this represents a momentary cooling off of some overheated housing markets, or it presages a more pronounced downturn that would end a decade-long boom.

Some economists and commentators have for years predicted the bursting of a real estate bubble, and previous slowdowns have turned out to be relatively brief pauses before prices started accelerating again.

But with mortgage rates now rising, the cost of gasoline hovering at or near $3 a gallon and house prices in some areas out of reach for many families, brokers and analysts said they thought that this slowdown could be the real thing.

Yesterday's blog post foretold one of the reasons for the slowdown:  "sellers still expect to reap double-digit price appreciation each year."  Leading listings agents quoted by the Times say overpricing is causing the market down to slow down, but that's not even on the short list of factors economists at the National Association of Realtors are watching to identify markets headed for a bust.  While we've been tracking expired listings as a leading indicator, and others in Massachusetts are watching record high inventory levels, one of the most comprehensive list of factors we've seen on why the housing market is headed for a correction or crash is coming out of San Francisco. 

What's your take?  If sellers adjust their price expectations, will the market take off again or more serious fundamentals leading to a housing recession?  Post your comments or call 617-876-2117 to record a 1 to 3 minute sound bite (which we may use in a future podcast).

09:31 AM in In the News, Market trends, Real Estate Bubble | Permalink | Comments (0) | TrackBack

October 02, 2005

From double-digit expectations to double-digit disappointments

About this time last year, CNN/Money Magazine reported that a survey by economists Karl Case of Wellesley College and Robert Shiller of Yale revealed that home owners in Boston, Milwaukee, San Francisco and California's Orange County were "counting on double-digit growth [in real estate appreciation for] EACH YEAR for the next ten years.  Just twelve months later, some of those double-digit expectations are turning into double-digit disappointments, at least in Boston.  Beneath the median and average prices that Realtors report going up, up, up every month; price changes on individual properties are crushing seller expectations and falling faster than consumer confidence

We'd be glad to send you an example of a listing that has been canceled once, expired twice, and been listed by two different real estate agencies.  Originally listed for $750,000, the property could sell now for under $600,000 -- a savings of $150,000 or over 20%.  This trend will become more wide spread as interest rates, still near a forty year low, return to traditional levels.   

That's not the kind of information you'll get from traditional real estate listing agencies because their legal obligation is to get the highest price for their seller clients, even in a falling market.  You won't get it from dual agents or designated agents either, because representing the buyer and seller in the same transaction is an obvious conflict of interest (even if they try tell you otherwise).  So, if you'd like to learn about other double-digit markdowns in Greater Boston area (or anywhere), contact The Real Estate Cafe.  Our rebates and zero tolerance conflict of interest policy are unrivaled in New England.  For more information or a referral to someone who can help you outside Boston, email RECafe@mac.com or call 617-661-4046.

09:51 PM in Real Estate Bubble | Permalink | Comments (0) | TrackBack