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July 08, 2008

Bubble Hour topic: Money magazine forecast 10.5% decline, SF home prices in Boston by May 2009

Glad to see the pundits agree with the people, again. Boston buyers - interested in a Bubble Hour to discuss this forecast in Money magazine's Real Estate Survival Guide, summarized today on Boston.com's real estate blog:

Boston is forecast to see a 10.5 percent decline in single-family home prices by May 2009. While that's slightly higher than the projected 9.7 percent decline for the nation overall, there are 35 metropolitan areas expected to see bigger declines. In the past five years, prices had increased slightly more than 13 percent in the Boston area, according to Money's calculations.

The other four areas included in the list are also expected to see price declines: Cambridge (8.5 percent); Peabody (8.8 percent); Springfield (9.5 percent); and Worcester (9.2).

Would One Broadway in Arlington -- near the Cambridge, Somerville, Arlington, and Medford lines -- be convenient for people, particularly parents who can bring the kids to play while adults talk?

Open to suggests on when and where to host this Bubble Hour, as well as future gatherings and topics.  Follow http://twitter.com/RealEstateCafe for updates on time and place, as well as other BUBBLE BITES.  Watch for link to upcoming story on slowdown in Cambridge housing market, too. Preview of market stats and custom research available "a la carte."  Call The Real Estate Cafe at 617-661-4046 or email for details.

Bill Wendel | 12:51 PM in Bubble Hour, Defensive Homebuying, Housing forecasts, Real Estate Bubble, Timing the market | Permalink

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Not sure I understand that stated 13.4% increase in Boston home prices over the last 5 years. Prices have declined about that much since 2005 but in 2005 prices were up more than 100% from 2000 ($190k in 2000; $420k in 2005).

So to think that Boston prices are only 13% or so over-inflated based on this article would be misguided.

If everything else were equal then prices would fall another 30% from here. That's based on average incomes. However, all else is not equal since higher prices for necessities like food, gas, heat, electricity, toilet paper, soap, etc. means less money for house and condo purchases. Lower demand means lower prices, lower than the historical average relative to incomes.

Prediction: home prices fall more than 40% from current levels, 50% from peak before this is all over. And this may not all be over until 2012.

Posted by: Paul E. Math | Jul 8, 2008 9:15:48 PM

Take a look at the money supply. Take a look at the M3

http://en.wikipedia.org/wiki/Image:Components_of_the_United_States_money_supply2.svg

The banks have flooded the economy with money and now that it is starting to get to the people they are acting fearful of "inflation". The truth is that prices are adjusting to the increased money supply and the ownership rich are pissed that they can't keep all of the money themselves; they would prefer that we remain indentured servants.

Posted by: John P. | Jul 9, 2008 10:17:01 AM

Everything Money Magazine writes about Money Management is mis-guided!

Money Magazine was one of the biggest real estate cheerleaders during the Real Estate Boom. Money Magazine writers didn't beome concerned with Housing prices until the prices were in a clear down trend.

If Money is predicting a 10% decline - then I will venture to guess that the decline will be more like 25%-35%.

One thing is for sure - run your finances as Money Magazine recommends and you'll be broke in retirement.

Regards.

BK

Posted by: BK | Jul 9, 2008 1:43:40 PM

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