Real Estate Bubble Debate

Waiting game? Prices in 2007 vs 2010

Turn off pop-up blocker, and click on table for larger image.

The Boston Globe is asking readers whether prices will keep falling, remain steady, or begin to rise again in 2007.  We asked our blog readers a similar question last year, but as the responses above show, wanted them to graph price changes through the end of the decade.  We'd be glad to repeat that survey, but for now, just want to know whether you will make your own 2007 real estate resolutions based on where prices will be over the next 12 months or five years?  Does it make a difference?  Let us know what you think about what one industry spokesperson says about playing the "Waiting game."

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.

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.)

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. 

Boston bubble bloggers begin meeting OFFLINE

Fellow Boston bubble bloggers,

Over the past few months, a number of us have corresponded about getting together OFFLINE with other bubble bloggers in Boston / New England.  If getting together for one or both of the proposed events below make sense to you and your blog readers, feel free to pass this on or link to it.

1st Boston bubble blogger meeting:  Exploratory meeting for "citizen journalists"

Several Boston bubble bloggers have confirmed their participation in the following.  If your schedule permits, join us for any of these three:

1.  Starbucks (Mass. Ave & Wendell St. in Cambridge) from 6:30-6:55pm;
2.  Berkman Center (see link for location) from 7:00pm to 8:00 or 8:30pm.
3. Optional discussion over coffee / dinner afterwards, (Maybe Darwin's, JohnnyDs, or another location.  Call cell phone 617-388-5818 to confirm.)

Berkman's guest speaker from Newsvine should help all of us get more visibility for our individual blogs and enhance our mutual goal, as independent citizen journalists, of informing consumers about real estate market trends in Greater Boston / Massachusetts.

2nd Bubble Blogger meeting:  Reviewing & analyzing MAR stats

The Mass. Association of Realtors (MAR) will be releasing their data on January sales on Tuesday, Febuary 28th.  Should we get together the same day or the day after to review and analyze their statement and what some are now commonly calling their "spin"?

I think we should invite the public to participate in this meeting, and even extend an open invitation to MAR, real estate professionals, and sellers who do NOT think there is a real estate bubble.  (FYI - MAR released a statement yesterday entitled, "Bay State housing market shows signs of returning to normal."

Ideally, we could meet somewhere with a wifi connection for laptops.  Better still would be a venue with a wall-sized projection screen.  I have a projector and screen, any suggestions for venues?

1.  Cambridge:  Darwin's, wifi but no projection screen room;
2. A hotel near MAR, easily accessible from Route 128 & Mass Pike (would require fee of about $150, but we might be able to get a sponsor or ask participants to share the cost);
3.  Other possible locations?  Please post in comments below, or send to [email protected].

As always, you can call our reader line at 617-876-2117 to record a comment for potential use in a future podcast. 

Survey results: Where are housing prices headed in 2006?

It's good to be posting original content to The Real Estate Cafe's blog again after our second bout of bloggers block. Like the first time, the slump lasted for nearly 50 days but this time we had an excuse:  we've been waiting for enough responses to go public with our 2006 homebuyer survey.  The first of them appears above, and if you click on the image to enlarge it, the results speak for themselves. 

We'll post more results in coming days, as well as commentary on the findings and their potential implications for homebuyers and sellers in Greater Boston.  The survey is closed at this point, but you can comment online or by record a sound bite, for potential use our real estate bubble audio time capsule (a.k.a. podcast), by calling on our reader line:  617-876-2117.

Event planning:  Discuss housing bubble and survey results in person with other homebuyers & sellers

More than 40% of the survey respondents said they would like a monthly (or bi-weekly) update on the real estate bubble, and we have already corresponded with several other bloggers in New England -- LowellDeeds.com, BostonBubble.com, and MassHouseMarket.blogspot.com -- about getting together offline to exchange perspectives with the public.  Would Thursday night meetings in Cambridge work for everyone?  Your feedback is welcome below or by emailing us privately at [email protected]

Real estate bubble: Top news story of 2005?

For the past month, two Boston Globe real estate articles, one on falling prices and the other on rising foreclosures, have topped their list of "Most Popular Stories" (click on image for larger view).  Now, guess what their cross-town rival, the Boston Herald, has listed as #1 on their "top business and economics highlights of 2005"?

1. Pop goes the bubble — The state’s housing bubble finally sprang a leak this year, with a noticeable slowdown in sales, a falling off in prices and long waits to sell homes. Partly brought about by rising interest rates, the slowdown was evident by May, when housing sales fell by 11 percent over the prior year. The market hasn’t shown much improvement since.

The rest of the Herald's list includes factors that have contributed to the end of the real estate bubble and will continue to pull down housing prices in coming months and years: slow job growth in the state, rising gas and energy prices, and loss of major Massachusetts employers through mergers, acquisitions, and relocations. 

TEST MARKETING AN IDEA

The Real Estate Cafe has been tracking factors underlying the housing market in Boston since 2000, the peak of the dot.com boom, and we are eager to share our knowledge and get your insight, too.  Would you be interested in participating in a monthly or bi-weekly real estate round table, or since we'll probably host the conversation in a restaurant or bar, an occasional "Bubble Hour" or "Boston Realty Party" in 2006? If so, we'd like to hear from you particularly if you want to be a featured guest. 

We know that our clients tend to be part of the "do-it-yourself" movement, but this is one of the ideas we're exploring to increase peer-to-peer interaction in 2006.  Please let us know if you have ideas about how we can help you learn from each other to make more informed decisions, avoid making mistakes, and ultimately, save money.

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?