Recently in Real Estate Market Category
This question was asked on Linkedin.com and this was my response:
Real estate is local so some areas have hit bottom and many areas have not.
A good indicator is when the days on market start declining and the absorption rate is six to seven months or less.
The absorption rate is derived by dividing the active properties on the market by the number of homes that have sold in the last 12 months so if no new homes come on the market the inventory would sell in x number of months.
In my town of Foxboro, MA at the height of the market the absorbtion rate for single family homes was 2 to 3 months. It went up to around 8 to 9 months and now this morning, Nov. 25, 2007 it is at around 6.5 months. I'd say my home town is getting near the bottom or is close to the bottom.
The days on market for the first six months of 2007 in Foxboro were 164.12 days and the second half of the year so far the days on market is 144.44 days.
The stats came from my local MLS.
If you want to really get into this you could look at different price points and see if the lower end is doing better than the higher end or vice a versa.
Real estate is local so some areas have hit bottom and many areas have not.
A good indicator is when the days on market start declining and the absorption rate is six to seven months or less.
The absorption rate is derived by dividing the active properties on the market by the number of homes that have sold in the last 12 months so if no new homes come on the market the inventory would sell in x number of months.
In my town of Foxboro, MA at the height of the market the absorbtion rate for single family homes was 2 to 3 months. It went up to around 8 to 9 months and now this morning, Nov. 25, 2007 it is at around 6.5 months. I'd say my home town is getting near the bottom or is close to the bottom.
The days on market for the first six months of 2007 in Foxboro were 164.12 days and the second half of the year so far the days on market is 144.44 days.
The stats came from my local MLS.
If you want to really get into this you could look at different price points and see if the lower end is doing better than the higher end or vice a versa.
This question was asked on Linkedin.com and this was my response:
Real Estate is local. So the bottom is going to be different for different areas.
Even in the Boston area the better perceived towns will bottom out first and the lesser perceived towns will follow. It also differs depending on what price range you are in.
People were moving farther away from Boston to find affordable properties and now these people are not having to go so far. The towns closer to Boston and the Boston neighborhoods are benefiting from this migration back to the center. The towns farther out will suffer.
It's hard to over build in Boston. We don't have large tracts of land to build large number of homes. The towns south and west of Boston have restricted growth of homes through the increase of lot sizes that reduce the number of lots per acre. The towns have done everything to reduce density. The Commonwealth has done what it can to push back. So, what ended up being built due to this struggle have been 55 and older complexes and rental units in the towns that still have less than 10% of their housing inventory deemed affordable. Once you hit the 10% threshold the Commonwealth fast track permitting doesn't apply. The other area of growth is areas around train stations which gets special treatment/incentives by the Commonwealth.
The macro is having an effect but the micro economics of an area also has an effect on the real estate market. You have to look at both for each area to see the overall effect.
Real Estate is local. So the bottom is going to be different for different areas.
Even in the Boston area the better perceived towns will bottom out first and the lesser perceived towns will follow. It also differs depending on what price range you are in.
People were moving farther away from Boston to find affordable properties and now these people are not having to go so far. The towns closer to Boston and the Boston neighborhoods are benefiting from this migration back to the center. The towns farther out will suffer.
It's hard to over build in Boston. We don't have large tracts of land to build large number of homes. The towns south and west of Boston have restricted growth of homes through the increase of lot sizes that reduce the number of lots per acre. The towns have done everything to reduce density. The Commonwealth has done what it can to push back. So, what ended up being built due to this struggle have been 55 and older complexes and rental units in the towns that still have less than 10% of their housing inventory deemed affordable. Once you hit the 10% threshold the Commonwealth fast track permitting doesn't apply. The other area of growth is areas around train stations which gets special treatment/incentives by the Commonwealth.
The macro is having an effect but the micro economics of an area also has an effect on the real estate market. You have to look at both for each area to see the overall effect.
I've come to the conclusion that there are types of people in the market right now. Serious buyers and sellers and spectators. So we have two real estate markets going on at the same time and it is divided by motivation.
Serious sellers are the people who want or have to sell. They are people who have equity in their properties, who have fixed their property for maximum resale or have discounted it heavily because of the properties flaws. They have sweeten the terms by offering seller concessions such as paying for the buyer's closing costs. If the property gets rejected by the market they quickly adjust to the market to better align their property with the market. People who fall into this category are those who want to move to get to a warmer or cheaper area. Those relocating into the area. Lenders who have bank owned properties. Landlords who don't want to be landlords. Estate sales or people going into nursing homes and finally people getting divorced. They want to preserve as much of their equity as possible.
Some of these serious sellers will also be serious buyers too. Those of us who own a home know if we lose value on the property we own we will make it up on the next house so we are floating with the market. Other serious buyers are people who would rather own than rent. They might be renters now but they are starting to have kids and want to settle down in a neighborhood that's more conducive to raising kids or they are having more kids than their present home can accommodate. They can't wait for the market to turn around. Maybe they are relocating into the area and are used to owning a home and renting is out of the question. Maybe they are making good money and their financial adviser is telling them to trade in the rent payment for a mortgage payment so they can get the tax benefits. Most of these buyers have a long term look at real estate and know the market is still going down but they know that they will ride it out, enjoy the benefits that the property is giving them now and that the market with go back up by the time the need to sell.
If you don't fall into the descriptions above then you are a spectator and that's okay as long as you know you are. If you are a spectator and you are upset that the game is being played without you. Stop watching, become serious and get into the game.
Serious sellers are the people who want or have to sell. They are people who have equity in their properties, who have fixed their property for maximum resale or have discounted it heavily because of the properties flaws. They have sweeten the terms by offering seller concessions such as paying for the buyer's closing costs. If the property gets rejected by the market they quickly adjust to the market to better align their property with the market. People who fall into this category are those who want to move to get to a warmer or cheaper area. Those relocating into the area. Lenders who have bank owned properties. Landlords who don't want to be landlords. Estate sales or people going into nursing homes and finally people getting divorced. They want to preserve as much of their equity as possible.
Some of these serious sellers will also be serious buyers too. Those of us who own a home know if we lose value on the property we own we will make it up on the next house so we are floating with the market. Other serious buyers are people who would rather own than rent. They might be renters now but they are starting to have kids and want to settle down in a neighborhood that's more conducive to raising kids or they are having more kids than their present home can accommodate. They can't wait for the market to turn around. Maybe they are relocating into the area and are used to owning a home and renting is out of the question. Maybe they are making good money and their financial adviser is telling them to trade in the rent payment for a mortgage payment so they can get the tax benefits. Most of these buyers have a long term look at real estate and know the market is still going down but they know that they will ride it out, enjoy the benefits that the property is giving them now and that the market with go back up by the time the need to sell.
If you don't fall into the descriptions above then you are a spectator and that's okay as long as you know you are. If you are a spectator and you are upset that the game is being played without you. Stop watching, become serious and get into the game.
I don't think the Greater Boston market has bottomed out but I think we are getting closer. If for no other reason than there are three articles in the Real Estate section of Boston.com that are not doom and gloom articles on real estate. They gave reasons why this might be a good time to buy and that if buyers wait too long they might miss the chance to buy now when seller's are giving concessions, there is less competition from other buyers, and when inventory is up with lots of good homes to choose from. I linked the articles below for your own reading.
http://www.boston.com/realestate/news/articles/2007/11/05/is_buying_home_today_a_good_investment/
http://www.boston.com/realestate/news/articles/2007/11/09/even_in_a_buyers_market_house_hunters_need_a_plan_to_avoid_mistakes/
http://www.bankrate.com/bosre/news/real-estate/20071108_real_estate_revival_a1.asp
If you look at buying real estate as a long term proposition and you are buying because you want to improve your current living situation. I think it's a good time to buy.
http://www.boston.com/realestate/news/articles/2007/11/05/is_buying_home_today_a_good_investment/
http://www.boston.com/realestate/news/articles/2007/11/09/even_in_a_buyers_market_house_hunters_need_a_plan_to_avoid_mistakes/
http://www.bankrate.com/bosre/news/real-estate/20071108_real_estate_revival_a1.asp
If you look at buying real estate as a long term proposition and you are buying because you want to improve your current living situation. I think it's a good time to buy.
