Real Estate Bubble Debate

Cape Cod Bubble Map documents sales below assessed value

Curious that yesterday's cover story in the Boston Globe, The Summer of their Discontent, did not include the word "housing" or "real estate" despite the reports by one blogger "that home sales on Cape Cod were off some 20.1% year to date and a whopping 30.7% in July as compared to July of 2005."

So to document what's happening there, the Real Estate Cafe created the Cape Cod Bubble map, using information supplied by RealtyInsite.com, to identify properties selling for below assessed value during one thirty day stretch near the end of the sales season (7/22-8/22/06).  (It could take a few moments to download):

To scan the complete list of 140 plus properties by community, use the scroll bar on this larger screen format. We assume our readers know more than we do, so add comments, or post additional properties selling below assessed value, by logging onto this map for the Cape, this map for Boston, or this wiki which is waiting for user-generated bubble maps to be added in other overvalued housing markets across the country.  It's also easy to start your own local bubble map or republish any of ours to your blog, or even select some of these bubble comps to submit with your offer.  Contact The Real Estate Cafe for more information at [email protected] or 617-876-2117.

Are seller concessions masking deeper discounts on sales prices?

Side-by-side competition driven by the rising inventory of unsold homes across Massachusetts is creating a new kind of bidding war:  escalating financial incentives to help sell homes as soon as possible. 

Some time ago, the local MLS added a new field to document seller concessions at closing. However, entries are rare and as noted by one prominent critic, "current house price indices are failing to pick up the full decline in prices because they miss the various concessions (seller paid closing costs, buyer-side realtor bonuses, and seller subsidized mortgages) that sellers often use to move their houses."

That problem is compounded by the fact that median prices can be misleading, particularly when rival data sources reported different median prices in Massachusetts in July 2006. The Massachusetts Association of Realtors reported that single-family prices declined 3.5% statewide, while The Warren Group calculated a 6.1% decrease.  Adjusted for inflation, year-over-year prices fell 7.8% using MAR's stats and 10.2% using The Warren Group's according to BostonBubble.com.

To help get behind the confusion, The Real Estate Cafe created a real estate bubble map to document falling prices on a property-by-property basis.  We'd also love to use the map to document innovative sales incentives being offered by sellers, listings agents, and developers in Boston and beyond. Locally, one listing agent recently mailed fellow agents coupons for $20,000 off a new development in Cambridge.  That seems modest by comparison to the ambitious "Summer Full of Savings" being offered by one homebuilder across 17 developments in California.

Please let us know what's happening in your market, either by posting your comment below or on our RealEstateBubbleMap.com. We're particularly interested in learning which sales incentives you find most appealing, as well as seller concessions you've requested in recent offers (like asking sellers to pay your closing costs).

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.)

CAUTION: You are entering "The Bubble Spin Zone"

"You're traveling to another dimension, a dimension not only of sight and sound... but of mind. A journey into a wondrous land, whose boundaries are only that of the imagination... you're entering... the Bubble Spin Zone."

Reading some assessments of the current Massachusetts housing market, one wonders if industry spokespersons are taking their cues from Rod Serling classic, "The Twilight Zone."  Arguing "that prices are not declining sharply in response to falling sales," one recently told the Boston Globe that "I'm seeing some concessions from sellers, but not a whole lot." Last August when the same spokesperson was asked by WBZ-AM radio talk show host Paul Sullivan if buyers were in danger of buying at the height of the market, he said no.

So, to help inform homebuyers and protect them from overpaying in overvalued housing markets, The Real Estate Cafe has developed an interactive map to involve homebuyers (and fellow buyer agents) in the process of documenting falling housing prices, in Massachusetts and beyond.  Beyond price concessions, we are particularly interested in mapping sales below assessed value.  Would you believe that some buyer agents first began chatting privately about homes selling below appraised value this time last year?

If you are actively looking for a home, please visit our real estate bubble map before making an offer.  Working with site users, we've already mapped nearly 300 properties sold recently below their assessed value in 27 of the most expensive cities and towns in Greater Boston. We assume our readers know more than we do, so we've made it easy for you to post comments, add new properties, or start your own local bubble map.  Some consumers have begun documenting sales below assessed value in highly desirable towns like Cambridge, Brookline, Newton, and suburban communities near Route 495.

Shortly, we'll add another 150 sales below assessed value which occurred during the past six weeks.  Some of the properties already mapped have sold for at least $100,000 off, but don't let that cause you to rush into an offer.  The largest price reductions could be between Thanksgiving and New Year's Day; when historically, one in five properties sells for at least 10 percent off.  This year, we'll track how many sell for 10 percent below their assessed value, but we'll need your help to do it.

If you're one of our paying clients in Massachusetts, we'll reward you for each property you add to the one of our regional bubble maps.  See our Tipping Policy for more detail. (Get it?  Real Estate Cafe, Tipping policy?)

Add properties to bubble map before "Un-conference"

Exactly one year ago today, the Real Estate Cafe participated in a radio broadcast entitled, "The Beginning of the End of the Bubble" which featured some of our recorded interviews. Today, we celebrated that anniversary with more good news:  the leading real estate technology news service featured our real estate bubble maps as an example of "Real Estate 2.0." Our interactive maps are getting attention because they allow users to post their own examples of a falling prices, particularly homes selling for below assessed value in Greater Boston. We created the bubble maps because news reports, including one this evening, continue to point to modest declines in median prices as evidence of a "soft landing for the housing market.

If you share our belief that median prices are masking deep discounts on many properties, we invite you to add properties to document what's really happening at the street level.  Here's an example of what one homeowner has already done, plus a description of our "Tipping Policy": commission credits for paying clients who post properties to our map.

RealEstateBubbleMap.com, an experimental wiki authorized users can edit, will be presented as a case study Monday at an Un-Conference on Citizen Journalism at Harvard.  Before then, we invite you to post additional properties to the Boston bubble map if you live locally, or create your own local bubble map if you live in one of the 71 "extremely overvalued" housing markets nationwide. If there is interest, we'll host a Bubble Hour chat or conference call before, during, or after the presentation Monday for local clients, or real estate bubble bloggers and their readers nationwide.  Email us at [email protected] if you would like to participate.

Bubble Map comments reveal surprising price corrections

It hasn't taken long for the Real Estate Bubble Map's first user to go from their first post to their first dozen as shown on the image above and their interactive "places" map.

If you visit their map and view the properties, you'll read some interesting comments including two favorites: (1) A stunning $530,000 gap between a 2005 assessment and 2006 sales price; and (2) a long post comparing the present market to pre-9/11 slump).  After logging-in, you can write your own comments, add your own properties, or create your own map. 

Thanks to WestSideBubble and another new user, SoldAtThePeak for their thoughtful contributions.  We're open to your ideas about how to use this experimental map and wiki to protect homebuyers in overheated housing markets, in Boston and across the US.  Over the next ten days, we'll add another 119 properties to the Boston bubble map showing locations of homes sold below their assessed value in Greater Boston during June 2006.  Your contributions are welcome, too.) 

1st user documents falling housing prices on Bubble Map

The first user has added two local properties to an experimental Real Estate Bubble Map created by The Real Estate Cafe to involve consumers in the process of tracking falling housing prices.  Located at 21 and 30 Walker Street in Cambridge, Massachusetts, the contributions document an emerging trend:  both sales prices and asking prices are falling below assessed values in once overheated housing markets in Greater Boston.  Despite the prevailing myth is that housing prices never fall in Cambridge, the city is among 66 housing markets that have experienced significant price corrections over the past two decades.  21 Walker St. sold recently for approximately $150,000 below its assessed value; and the asking price at 30 Walker St. has fallen more than $110,000 below it's assessed value.  That property went under agreement in 11 days in 2003 when it sold for $1,275,000. After six months on the market, the asking price is now $50,000 less than the sales price three years ago.  (See comments on map for more detail on both properties and approximately 150 others in Greater Boston)

Both Walker Street properties are in walking distance to Harvard University, where an "Un-Conference" on Citizen Journalism will be held, Monday, August 7, 2006. It is hoped that other house hunters will create local bubble maps to protect fellow home buyers from overpaying in "extremely overvalued" housing markets nationwide. 

Launching Real Estate Bubble Map

The map may take a couple seconds to load.

REVISED POST on our main blog, please comment there (or on our new experimental Real Estate Bubble Map wiki).

Following our earlier blog post about properties selling for below their assessed value, this map shows some of the largest recent savings.  Interested in using Platial to create real estate bubble maps in local communities across the nation? Here are three options: 

1.  Register to use Platial to add your "Place" to THIS map.  If you'd like to publish a copy of this map on your website, click here and simply cut and paste the html. The map can be resized to fit any page layout.

2.  Send comments, corrections, or references to other properties asking or selling for (1) below their assessed value or (2) well below their original asking price to [email protected].

3.  Create your own map on Platial. For more information, read Wired's article, or listen to a story about the site from NPR's All Things Considered.  Check out the repeated references to Platial on the Where 2.0 Conference News site, too.