August 23, 2006
Industry's seller bias understates risk to homebuyers
Kudos to the Boston Herald for asking "Has the Mass. housing bubble burst?" on their front page this morning.
If homebuyers focus on median sales prices, they might reach the same conclusion the Massachusetts Massachusetts Association of Realtors (MAR) did three months ago when they told the public that a "New study finds no evidence of a “housing bubble” in metro Boston."
Afterall, according to MAR's report on existing home sales during July 2006, median single-family home prices decreased just 3.5 percent from the previous year, despite declining sales during 17 of the past 18 months. To their credit, MAR also disclosed: (1) that is the largest annual price decline since March 1993; (2) median sales prices have declined for six consecutive months, and (3) that is the longest slump since housing prices fell 13 straight months from March 1992 to March 1993.
What raises questions is that The Warren Group reported that median sales prices for single-family homes fell by 6.1% or 74% more than MAR's figure. Maybe that's because MAR based their assessment on a median single-family price of $361,750; in contrast, The Warren Group's median (which includes sales outside the MLS) was $339,000 or $22,750 (6%) less. Far more alarming is that The Warren Group figure is $1,000 less than their median sales price two years ago, $340,000.
So, despite the lowest prices in two years and the sharpest drop in sales since 1995, what's distressing -- as a buyer's agent -- is that MAR's talking points continue to understate the risk for homebuyers:
"Today’s lower prices reflect softening buyer demand and rising in inventory levels, which have started to trigger modest price adjustments on the part of sellers. With demand still historical strong though, major price corrections are unlikely."
If homebuyers look beyond median prices to individual transactions, they'll see that major price corrections are already underway. The Real Estate Cafe has already mapped nearly 400 sales below assessed value across 27 of the most expensive cities & towns in Greater Boston. In coming days, we'll post another 200 sales to our real estate bubble map including 50 in Greater Boston plus another 150 from Southeastern Massachusetts, primarily on Cape Cod courtesy of RealtyInsite.com. If you see evidence that prices are falling, please post them to the real estate bubble map or create your own. If you're one of our clients, we'll reward you for each property (see "Tipping Policy" for more detail.)
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I've been following the market closely for a couple of years now (closely in 20 communities and periodic benchmarking to a broader statewide). My response is to the observation of homes being sold below assessed value. One very striking contrast among many communities is the property taxation policies. Some towns have a low rate but high valuation and others the opposite. The mix and rates of industrial/commercial also come into play and have an impact on quality of life if the balance is not good. One frustrating thing is to see two very comparable homes with significantly different valuations. Despite this being about fairness, I haven't read much in the papers or the net about this and I wonder if will become a larger issue. What might jump start it is when the appraisers start modifying their numbers below the assessments and accepted offer amounts...
Posted by: John P. | Aug 24, 2006 11:40:52 AM
Great post... I think buyers should be hard-nosed now -- sellers were for the longest time. Also check out daily news at:
Posted by: Expert Research | Aug 25, 2006 5:14:10 PM
Timing is key. Everyone has a different set of circumstances working around their lives at any one given time. So a market within a market is always an option that operates outside the current market. Self market due to disease, death, divorce or motivation to make it sell quicker for less.
Posted by: Andy Mooers | Feb 25, 2007 2:15:15 PM
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