Need your prediction: How far will rising cost of jumbo loans drive prices down?

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If you are a home buyer or seller reluctant to drop your asking price, MarketPlace.org’s segment tonight on jumbo loans is required listening:  "Jumbo loans feel subprime weight."

During the past several weeks, The Real Estate Cafe has helped buyer clients in Greater Boston prepare offers on luxury condos and a single family homes in the jumbo price range.  Thus far, sellers with broker listed properties have been reluctant to drop their prices, while FSBOs are ready to deal.  Maybe it’s too early for the trend documented below to show up in broker "comps" (ie.  recent sales):

"…more than 10 percent of his deals have fallen through in
the last few weeks — up from less than 1 percent. He says many people
just can’t get the loans they need. The same thing is happening in New
York, Boston and San Jose."

Will the rising cost of jumbo loans drive housing prices down in Boston and beyond, or as one economist fears, have a broader "jumbo impact on the U.S. economy."  What’s your prediction?  You can follow what real estate agents and others are saying on HomeThinking, what the public is predicting on My-Currency, and what the pros are modeling on Wall Street.  You can also leave a comment below, or add the location of homes selling below their assessed value value on our Boston Bubble map or RealEstateBubbleMap wiki. 

Before you make your prediction, take The Real Estate Cafe’s analysis of seasonality in the past into consideration:

According to [our] analysis of listing data between 1996 and 2002, one
in five Massachusetts properties that went under agreement between
Thanksgiving and New Year’s Day sold for at least 10 percent below the
original asking price.

Cross-posted on The Real Estate Cafe’s new, experimental social networking site.

Related Articles

Real time “comps”

Link to recent press post Inman re "real time real estate."

Instead of developing a "CMA" type of report that describes sold data, I’ve
been using the "pending date" instead of the sold date.

 
Reason?  The market is changing so much on a daily or monthly basis,
that considering "comps" may not be as accurate if the sold date is used, as
much as using the "pending date."  If you develop a list of 6 houses that
sold in August to compare those sales with an offer you’re making today, then
what if the market has been in a decline since March?  How much of a value
difference may there be from properties that went pending in the spring,
compared to a property on the market now?
 
Some, if not all of those 6 "comps" could have sold last spring.  As
we know, listing agents and appraisers will often use the "comps" that best fit
the subject being appraised rather than an objective assessment of the sales
data.
 
So, next time you structure some type of analysis, why not use "pending
dates" instead of "sold dates" to make any comparison to a subject property
you’re trying to negotiate for on behalf of your buyer clients?
 
I suggested this to one of the "honest" appraises we typically use
here…he said he’s only using month old "comps" because there is an ongoing
decline in values here.

Mapping comments from the HousingBubbleBlog

Has anyone given any thought to "mapping" the kinds of trends and location specific information readers of this blog contribute from around the country?  Comments posted here could protect home buyers from making a mistake that will cost them for years.  Skeptics, like those in the recent newspaper article in Boston and other markets who blame the market slowdown on the media, should check the locations, price declines, and duration of past price corrections on this experimental site:

http://www.realestatebubblemap.com

Your comments are welcome.  Better yet, create your own local bubble map and let others link to it; and if readers are in the housing market, attach comps to their offers.  Be sure to click on the Boston map to see homes selling for below their assessed value, some $100,000 or more below their original asking price.

Wall Street “spooked” by falling housing index

Brainstorming about user generated content / video contest:
Haunted by the Housing Market

The Real Estate Cafe has maintained an excel spreadsheet comparing
housing market conditions from 2000 to 2007.  The original version was
prepared for Halloween 2002, and resulted in a slideshow called,
"Haunted by the Housing Market."

As Halloween approaches this year, and NPR reported yesterday that Wall Street was "spooked
by a sharp drop in housing prices," we are thinking about sharing the
spreadsheet and inviting others to update the "Haunted by the Housing
Market" slideshow.

Better yet, what would it take to create a contest with different categories for user-generated content, like "Funniest Housing Bubble Video," "Best slideshow attached to an offer" (samples available),
etc.?  We’re open to putting our content on the web so others can
"mash-up" images, statistics, quotes (both audio and text), etc.

Any good models and potential sponsors out there?

Cross-post:  "Haunted by the Housing Market" originally mentioned as comment in this blog post:
Wait 2.0:  Negative cycle creating marginal or mega-savings for patient homebuyers?

Use the following quotes to launch "Haunted by the Housing Market."

NPR:  The closely watched S&P Case-Schiller housing index earlier this week spooked Wall Street when it showed a sharp drop in home prices — down more than 3 percent in the second quarter alone. 

Karl Case, a housing economist who helped develop the 20-year-old index, says it’s the largest price decline since the inception of the index.

Economists expect total declines of about 10 percent throughout many parts of the country — and up to 25 percent in some of the formerly hottest markets.

Homes selling for below assessed value in Greater Boston

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During the past three months, March through May 2006, another trend has emerged signaling the end of the housing boom in Greater Boston:  nearly one in four single family homes is selling for below assessed value, according to an analysis of sales in 27 of the most expensive cities & towns in Greater Boston conducted by The Real Estate Cafe. 

During the three month period, 921 single family homes sold across the 27 towns, including 216 sales below assessed value (see related map) identified in listing data from MLSPin.com.  According to an interview conducted with Lawrence Yun, senior economist for the National Association of Realtors earlier this year, "There’s no solid data, but it’s pretty much well known that the government assessment is nearly always below the market value." 

Preliminary data for May 2006, suggests that the number of homes selling below assessed value is rising, even though the percentage may be falling slightly.  During March 2006, 71 of the 275 single family homes in the surveyed towns sold for below assessed value.  That number fell to 61 in April when 257 homes sold across the 27 towns.  However, preliminary sales information from May 2006, show that 84 of 389 homes sold for below assessed value — an increase of 23 sales or 38% over the previous month.

More important, the year-over-year change raises concerns.  During May 2005, only 23 of the 342 single family homes sales in the top 27 cities and towns surveyed sold for under their assessed value.  A year later, that percent tripled, rising from 7% to 22%; and the number of homes selling below assessed value nearly quadrupled, rising from 23 to 84 sales.

Opinions vary about whether the rise in homes selling for below assessed value signal a loss in housing value, distressed sellers, or town assessments which have overshot a changing housing market.  In coming days, weeks, and months, The Real Estate Cafe will take a closer look
at those questions, and discuss which cities and towns are most impacted by this
new trend, which towns are improving and which are getting worse.  We
invite readers elsewhere to let us know if homes are selling for below
their tax assessment in your communities, too, in Massachusetts and
beyond.

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