Money quote from the report:
At both the national and metro area levels, the fall in home prices is showing no real signs of a
slowdown or turnaround,â€ says Robert J. Shiller, Chief Economist at MacroMarkets LLC. â€œYear-over-
year and monthly price returns are continuing to either move deeper into negative territory or are
experiencing persistent diminishing returns. There is really no positive news in todayâ€™s report, as most of
the metro areas are showing declining or vanishing returns on both an annual and monthly basis. Only
two metro areas â€“ Denver and Detroit â€“ showed improvement in their annual returns and even those were
reports of slightly less negative numbers.
I'm paying too much attention to economists? That demands a response.
I appear to be the only one on this thread offering a counterpoint. The question was "Do you think Boston prices will decline?" A few factual answers that no one else is offering:
1. It has happened in Boston. They declined in the late 80's/early 90's. Lots of people lost their homes.
2. Even If prices stay flat for 5 years, they will have effectively declined 25% in real terms.
3. If you put 20% down, and #2 happens, your equity is gone.
4. Put a $100K down payment in a CD ladder at 5%, and rent for half the price of a payment, and in 5 years you have $129,483.64 , instead of $0
5. Time is on your side. Why rush? Watch for 6 months, and see what happens. Not even the MAR is expecting prices to start going up again until the end of 2008.
Throughout the "anomalous" period of the last 5-10 years, which any objective observer, economist or not, will tell you is putting it very mildly, agents, brokers, bankers, trade associations, the media (whose money comes largely from industry ads), did nothing but sell, sell, sell, "life change" be damned. Lenders knew many people would never be able to pay back the loans they were making. But the fees were sweet, and the Fed was asleep at the wheel.
The fundamental problem in Boston is affordability: the median income cannot sustain the median house price. It's Econ 101 that those ratios correct eventually. Now's the time for Boston, and a lot of other places where the easy money created affordability problems for the middle class.
There's a lot more to say about your generalizations: "The real estate market in Boston is amazingly healthy." Is an indefensible statement, for example, but I will let hard numbers speak for themselves.
Towns included in the second graph:
Allston, Beachmont, Boston, Boston College, Boston University, Brighton, Brookline, Cambridge, Cambridgeport, Chestnut Hill, Dedham, Dorchester, Dorchester Center, East Cambridge, East Milton, East Somerville, East Watertown, Everett, Grove Hall, Hyde Park, Inman Square, Jamaica Plain, Kendall Square, Kenmore, Mattapan, Milton, Mission Hill, Needham, Newton, Newton Center, Newtonville, Readville, Revere, Revere Beach, Riverside, Roslindale, Roxbury, Roxbury Crossing, Somerville, South Boston, Uphams Corner, Watertown, West Roxbury, Winter Hill, Winthrop
Thanks for the debate. Paul, do your homework.
I want to buy in Boston, I have a family and a down payment, good credit, etc. But I will not buy for at least another year. Here's why.
1. All reputable economists (and some disreputable ones like David Lereah, now-former head of the NAR) expect house prices to go down nationwide this year for the first time since the Great Depression.
2. Prices in Metro Boston have gone down ~5% in the last year. With mortgage lending tightening up significantly and foreclosures up 100% over the last year, it is a very good bet that they will go down further for at least 2008.
3. Subprime Mortgages. between *$30 Billion* and *$100 Billion* worth of outstanding subprime ARMs will reset to higher rates *per month* for the next 12 months. That means more inventory, and fewer sales. Lower prices to follow.
4. Yes, real estate prices vary by location. However, if it costs a third to own in an adjacent city or state what it costs to live in Boston, which it does already in some cases, and will undoubtedly soon in others, that will affect prices here.
5. All of this is occuring in a period of economic growth. If there's a recession, and you can ask laid-off mortgage brokers, real estate salespeople, bankers, home depot workers, etc, if they see one coming, all bets are off.
6. The good news. Boston was among the first cities to see a price decline. We may get the pain overwith quicker and sooner than cities where everyone's still in denial.
Check the link for a much more nuanced and well-attended debate than the one available here.
Best of luck.
If this recession behaves like the others however prices in Boston that haven't given an inch so far will continue even higher in the spring of 2011
Hope this helps, Jeff Persons ABR http://wesellboston.net/
Below is a house price prediction site.
As home prices decline the whole market will suffer in Boston, which is home to nearly two-thirds of the state's population and has growing unemployment in the financial industry and technology. Rising job losses have contributed to the high number of foreclosures in Boston, which is expected to see improving home sales in the upper end of the market with the expansion of the federal tax credit to move-up buyers.
The inventory of homes has been slashed as a result of lower prices and mortgage rates that are staying near record lows. But Boston housing will have to work through the excess inventory of foreclosures before the market finds its footing, and is forecast to see average housing prices decline another 7.2% in 2010.
It was bad news in 2007. It was bad news in 2008, it was bad news in 2009 and 2010 does not look much better.
I think you might be leading Paul astray here. You have to look at the factors which drive all real estate markets, no matter what the economy is doing globally. Life change is the #1 reason why people buy or sell a home. In Boston you have the largest influx of new residents annually in the nation. College students and medical professionals come in droves every single year and that is never going to change. All of those people absolutely have to live close to the city. They do not have the luxury of taking the commuter rail or the T for a 2 hour round trip each day. These students will eventually graduate and take their first jobs and start moving up the corporate ladder. The demand will always be highest in Boston and you will continually see a strong real estate market. To make a blanket statement like "I will hold off because a global economist made a sweepingly generalized statement about something that is inherently specific and uncommon" is completely ridiculous. Life changes in Boston more than anywhere else. This will drive the market. Yes, have things stopped growing out of control like they were in '04 and '05? Of course they have. Those years had us in a completely unsustainable growth spurt. Someone as analytical as you try to sound should recognize that those years were complete statistical anomalies. The truth is in all of the desirable neighborhoods in Boston the market is well ahead of the national curve. Back Bay and Beacon Hill are seeing the third strongest year IN HISTORY. Brookline, Newton, Cambridge are seeing similar numbers. Yes, East Boston, Roslindale, Dorchester and Roxbury are not doing well, but those were highly speculative markets to begin with. The real estate market in Boston is amazingly healthy. Please just don't compare it to something that was unsustainable.