Not just Peak #LuxRE, Boston home values have ‘likely peaked’ – GBAR

A month after we began asking tough questions about the luxury housing market, it seems that the Greater Boston Association of Realtors is also saying Boston Housing values have “likely peaked.” This tweet reflects some of the stats underlying their prediction:

That’s started a debate on BostonBubble, a peer-to-peer bulletin board homebuyers have used to track the overheated housing market locally since 2005. That crowdsourcing site is no longer closely moderated so we’re inviting thoughtful comments on our intranet. Here’s a sample if you’d like to join us, on or offline.

Guest comment on BostonBubble:

Home prices always peak from April to June and take a dive in the winter months, but spring of 2020 looks to be another year of price increases because rents are still going up. We really need a recession or rent control to truly tank the housing market.

http://bit.ly/BosRE_AptRentsNov19

Our reply:

Thanks for your comment and link from Curbed Boston. Can we invite readers to address your assertions, not to be adversarial, but to inform homebuying and selling decisions?

ASSERTION #1. Prices are seasonal, don’t mistake the margin movements this Fall with softening overall.

REBUTTAL #1: Agree prices are seasonal and changes month to month are easily documented by graphs. However, the median prices cited by GBAR are Year over Year and inspired this quote:

“These conditions have the realtors association suggesting the once unthinkable: That the Boston-area housing market—so long the domain of ceaseless escalating prices, vicious bidding wars, and often paltry inventory—might be turning in favor of buyers.

‘The sellers’ market is likely over, or at least the balance has shifted,’ Jim Major, president of the Greater Boston Association of Realtors.”

http://bit.ly/CurbCoolBosRE

ASSERTION #2. Rents are still going up so sales prices will likely increase in Spring 2020.

REBUTTAL #2: Rising rents do not increase purchasing power, they deplete it.
Further, the Curbed Boston article you shared ends by suggesting rents may begin to fall in 2020. “Perhaps now that the Boston area’s for-sale market is cooling a bit more tenants will jump into that and free up space in the rental market, thereby bringing rents down.”

ASSERTION #3. We really need a recession or rent control to truly tank the housing market.

REBUTTAL #3: The lowest interest rates in three years juiced purchasing power and prices earlier this year, but there’s only so much demand you can pull forward. Further, demography is destiny, so watch for more signs the housing market has reached a #RETippingPoint in 2020 as we enter the first phase of the Great Senior Sell-Off:

http://bit.ly/SrSellOff

+ + +

Glad to continue a friendly debate offline over coffee or beer nearly any evening. Working on a series of topics for #REonTap. What would others, particularly potential homebuyers or sellers who fear they may have missed the top of the market — #PeakRE, like to discuss in a friendly, civil way? Hope the content and tone of what’s written above attracts thoughtful responses, here, on Twitter or inside the RealEstateCafe’s private discussion room:

http://bit.ly/PeakAt_PeakBosRE

Related Articles

Speculators Push Housing Rents Down

Speculators Push Housing Rents Down

By RUTH SIMON
Staff Reporter of The Wall Street Journal
From The Wall Street Journal Online

As investors flood into the housing market, they are not only pushing
up home prices. They are also putting downward pressure on rents.

http://www.realestatejournal.com/propertyreport/residential/20050815-simon.html?rejcontent=mail

Not sure we’ll see this play out in Greater Boston where rents are still
relatively high (7th in the nation), and investor activity is relatively
low, but the growing spread between falling rents and cost of starter homes
might be pointing to an affordability gap where the housing market will stall.
If renters can get deals so good that it makes no sense to buy, and investors
start leaving the housing market, there could be an oversupply of starter
condos on the market in some areas and prices will begin to fall.   The supply
of unsold homes in already rising in some markets, including Boston where
the inventory of unsold homes is up over 30 percent.   And that is with near
record low interest rates.   The inventory of unsold homes is likely to hit
a new record here in Boston this Fall. Watch for us to pass 40,000 listing
by the 2nd weekend after Labor Day.   Some might ague that the only real
indication that the market has turned is when local housing prices are flat
or begin to fall.   But there may be something more subtle going on under
the numbers.   If prices remain high or rising, it may reflect what is going
on at the top of the market, and ignore the fact that other sectors, like
starter condos are stalling even if prices have not started falling.   As
many economists say, the housing market hisses as it cools, it does not pop
overnight.   So, a decline in housing prices could be delayed for a year,
while signs that the market is headed for a downturn grow with each month. 

Housing price seasonality in Massachusetts

Maseasonality_bw1_1Some pictures are worth a thousand words, others are worth tens of
thousands in savings (or more than $100,000 in some communities in
Greater Boston.)

Click on the graph above for a closer look at seasonal variation in
median sales prices for single family homes across Massachusetts before
making "The Big Move" this Spring, or you could be making a "Big Mistake."

Note, this graph helps explain why median sales prices in Massachusetts are down 9.5 percent from their peak last summer.  Inflation-adjusted prices are down even further.  Will median housing prices
rebound this summer?  That depends, in part, on offers made by
overeager buyers in coming weeks.  Peak sales prices in June reflect
offers typically made in April and May.  What’s our advice?  Make sure
you’re making the "Right Move," and don’t mistake a marketing push for a market opportunity.  Asking prices will soften after the 4th of July, when it’s likely we’ll see a record number of listings get the "Big reMove," and savings opportunities increase for the balance of the year.

Inflation-adjusted price declines since Sept 2005 in MA

Yoy_bostonbubble_0206_1

BostonBubble.com has done an extraordinary analysis of single
family home sales in Massachusetts that ought to be mandatory reading
for any homebuyer making an offer this Spring.  Thanks for their
permission to reprint the graph above and pull quotes below from their full post, "Boston Bubble Report: What’s Really Going on in MA- Feb 2006":

"It turns out that Massachusetts real estate has seen year over year
price declines every single month between September 2005 and February
2006 inclusive. While the Massachusetts Association of Realtors
officially states that February 2006 was the first time in several
years that there have been year over year declines, that is only true
in nominal terms. Seasonally adjusted values have been declining for
half a year now in real terms."

The MIT graduate behind BostonBubble.com is one of the bloggers who
participates in our monthly Bubble Hour to review housing statistics as
soon as they are released by the Massachusetts Association of
Realtors.  Please let us know if you would like to participate in those
Bubble Hours, online or in-person by emailing RECafe@mac.com.
In the meantime, your comments are welcome below or on the BostonBubble
forum
where you’ll find another remarkable graph and more insights into why
"real prices are down 11.44% from their peak. This is in contrast with
the 9.48% that the MAR is reporting."

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