Homeowners in Greater Boston and elsewhere continue to expect "big real estate gains" despite a stunning revelation this week: "asking prices in 16 MetroWest towns have dropped by nearly 15 percent" since August, according to MLS statistics. "All good things come to an end," economist and housing guru Karl Case told real estate reporter, Sue Brickman of the Weston Town Crier. Commenting on "a spreading inventory problem" and "a sea change on the demand side which we have been expecting for a long time," Case predicted that "prices are going to fall back to a justifiable level, because people are running out of gas (interest)." Noting that current price reductions will not show up in industry statistics for some time, Case was guarded — but cautious — in his assessment of the market:
"We’ll see some softness for a while, but I don’t see a collapse. But I say that not with a hell of a lot of conviction."
Last year at this time, a survey by Case and his partner, Robert Shiller of "irrational exuberance fame, revealed that home owners in Boston, Milwaukee, San Francisco and California’s Orange County were "counting on double-digit growth EACH YEAR for the next ten years."
Despite mounting evidence of a housing bubble, homeowners remain overwhelmingly confident about continued appreciation. According to the Daily News Transcript, another suburban newspaper in Boston, an online survey of 1,001 consumers conducted by RBC Capital Markets revealed that:
1. 60 percent of homeowners expect the value of their homes to increase by at least 5 percent annually during the next several years;
2. 24 percent of respondents said they expect annualized gains of 10 percent or more over the next few years; and
3. About 3 percent of respondents said they expect their home values to decline over the next few years.
That optimism is starkly out of line with short-term price changes and long-term home buying plans which recently plunged to their lowest point in a decade. Local listing agents say sellers "need to adjust their thinking and profit margins" to attract buyers. What’s your take? Is that enough to break the stalemate in the market; or if you buy now, are you setting yourself up for a heartbreaking loss of value in coming years? Post your comments online or call The Real Estate Cafe at 617-876-2117 to leave a one to three minute sound bite (which we may include in an upcoming podcast).