Real estate pricing

Newton, MA. Real Estate Recap


Newton, MA.  Real Estate Recap   Margaret Szerlip

Sorry I haven’t been posting lately…market is too busy!  WE STILL NEED INVENTORY!  Just put a cute house on the market in CH last week for 899K…went WAY over asking.  We had about 120 buyers come through the house and received 6 offers.  It went WAY over asking.  We met some of the nicest people who had dejection written all over their faces.  They knew they could not compete.  It’s not easy making the I am sorry but the seller has accepted another offer phone call.  If you are even remotely thinking of selling your house call us now.  We can show you the way!  617-921-6860

Towns: Newton
 04/30/2014  
Price Range Number of Listings Avg. Days on Market
Under $50,000
$50,000 – $99,999
$100,000 – $149,999
$150,000 – $199,999
$200,000 – $249,999
$250,000 – $299,999 1 25
$300,000 – $349,999 6 45
$350,000 – $399,999 5 36
$400,000 – $449,999 3 24
$450,000 – $499,999 3 16
$500,000 – $599,999 9 34
$600,000 – $699,999 6 12
$700,000 – $799,999 13 46
$800,000 – $899,999 11 25
$900,000 – $999,999 12 32
$1,000,000 – $1,499,999 40 66
$1,500,000 – $1,999,999 30 80
$2,000,000 – $2,499,999 14 83
$2,500,000 – $2,999,999 10 77
$3,000,000 – $3,999,999 10 52
$4,000,000 – $4,999,999 3 77
$5,000,000 – $9,999,999 2 32
Over $10,000,000
Total Properties 178 Avg. 59
Lowest Price:
Median Price: $839,900
Highest Price: $7,500,000
Average Price: $1,108,135
Total Market Volume: $278,141,971
Lowest Price:
Median Price: $839,900
Highest Price: $7,500,000
Average Price: $1,108,135
Total Market Volume: $278,14

 

Pending Statistics
Report Run: 4/30/2014 11:09:12 AM
Property Type(s): SF
Start Date: 04/15/2014
End Date: 04/30/2014
Towns: Newton
Went Pending
Price Range # of
Listings
Under $50,000
$50,000 – $99,999
$100,000 – $149,999
$150,000 – $199,999
$200,000 – $249,999
$250,000 – $299,999
$300,000 – $349,999
$350,000 – $399,999
$400,000 – $449,999
$450,000 – $499,999 3
$500,000 – $599,999 1
$600,000 – $699,999 6
$700,000 – $799,999 3
$800,000 – $899,999 7
$900,000 – $999,999 5
$1,000,000 – $1,499,999 6
$1,500,000 – $1,999,999 4
$2,000,000 – $2,499,999 2
$2,500,000 – $2,999,999
$3,000,000 – $3,999,999
$4,000,000 – $4,999,999
$5,000,000 – $9,999,999
Over $10,000,000
Total Properties 37
Lowest Price: $465,000 Median Price: $895,000
Highest Price: $2,399,000 Average Price: $1,040,794
Total Market Volume: $38,509,399

 

Massachusetts Home Sales Post Drop in March


Massachusetts Home Sales Post Drop in March
The Warren Group posted this report and the same is happening in Newton.  During the same time in 2013, 95 homes sold vs. 79 this year, a decline of 17%.  It’s the inventory people….I cannot understand what sellers are waiting for? Someone has to be the first person in the pool.  When everyone jumps in price increases WILL slow down.  If interest rates rise and inventory increases prices will decrease!  We have an abundance of inventory over 2 million and seemingly endless supply of people who have the means but only want new or like new construction.  What’s with that?  Please if you are thinking about selling your home, NOW is the time, not September when all the other fence sitters decide it’s time.  This is a simple business people — Supply and Demand…
BOSTON, April 23, 2014 – Sales of single-family homes in Massachusetts dipped in March, marking the fourth time sales have decreased in five months, according to a new report by The Warren Group, publisher of Banker & Tradesman.
Single-family home sales dropped 7.8 percent to 2,749 in March, down from 2,980 in March 2013. Home sales in the first quarter were down 2.4 percent to 7,557 from 7,745 in last year’s first quarter.
The median price for single-family homes sold in March rose 8.6 percent to $315,000 from $290,000 a year earlier. It was the eighteenth consecutive month that monthly home prices have increased year-over-year. The first quarter median selling price was $305,000, a 7.0 percent increase from $285,000 in the first quarter of 2013.

MASalesMar2014

“The low inventory of single-family homes in the market is the primary cause of the decreasing sales activity,” said Timothy M. Warren Jr., CEO of The Warren Group. “Motivated buyers, however, are eagerly bidding for the limited supply which accounts for the increasing sales prices. People want to buy homes before prices and interest rates rise further.”
Condominium sales increased statewide by 12.6 percent in March 2014 with 1,328 sales up from 1,179 in March of last year. A total of 3,420 condo sales transactions were recorded in the first three months of the year, a 12.2 percent increase from the 3,049 transactions a year earlier.
The median price for condos sold in March was $291,500, up more than 10.4 percent from $264,000 in March 2013. The first quarter median condo price was also up more than 15.7 percent to $290,000 from $250,500 during the prior year’s first quarter.
“As we see from the sales numbers, condos continue to be an attractive option for first-time home buyers or empty nesters,” said Warren. “With a tight apartment market and rising rents, condominiums are hot right now.”
The Warren Group also tracked the number of mortgage loans (purchase and non-purchase up to $750,000) on single-family properties  in March 2014. 2,324 purchase loans were recorded this month, down 11.0 percent from the 2,611 purchase loans taken out last year at this time. In the first quarter of this year, purchase loans were down by 4.8 percent to 6,348 loans compared with 6,665 in the first quarter of last year.
Non-purchase loans for single-family homes, which include home equity loans and lines of credit, refinances, reverse mortgages and new construction loans up to $750,000, were down by 59.3 percent in March 2014. 6,710 non-purchase loans were recorded in March compared with 16,469 recorded at the same time last year.  Non-purchase loans for the first quarter of this year were also down 65.0 percent to 18,419 transactions compared with 52,474 recorded in the first quarter of last year.

Margaret Szerlip   617-921-6860  margaretszerlip@gmail.com

U.S. Home Values Jump the Most Since 2006, Zillow Says


Best Realtor, Newton, MA.  newtonmasshomesforsale.com, Margaret Szerlip

 

U.S. Home Values Jump the Most Since 2006, Zillow Says

  • U.S. home values jumped 1.3 percent in the third quarter, the biggest gain since 2006, in an uneven recovery across the country, Zillow Inc. (Z) said.

The median value rose to $153,800 from $151,800 in the previous three months on a seasonally adjusted basis, the Seattle-based property-data company said in a report today. It was the biggest increase in Zillow’s Home Value Index since the first quarter of 2006, when values rose 1.5 percent.

U.S. home values jumped 1.3 percent in the third quarter, the biggest gain since 2006, in an uneven recovery across the country, Zillow Inc. said.. Photographer: Patrick T. Fallon/Bloomberg

Oct. 19 (Bloomberg) — Adi Tatarko, founder of online-home remodeling service Houzz.com, talks about the outlook for the U.S. housing market and the focus of the website. Tatarko speaks with Tom Keene, Sara Eisen and Scarlet Fu on Bloomberg Television’s “Surveillance.” (Source: Bloomberg)

Home prices are rising nationally as the U.S. unemploymentrate declines and buyers compete for a tightening supply of homes listed for sale. Still, values fell from the second quarter in 52 percent of markets covered by the index as the traditional homebuying season ended, according to Zillow Chief Economist Stan Humphries.

“The housing market is on the mend, but the housing bottom will be a protracted one,” he said in a telephone interview. “We will see more muted appreciation in the near term before we get back to normal appreciation trends.”

In Phoenix, where investor demand is helping to boost prices, home values rose the most of the 30 largest U.S. metropolitan areas, with a 5.9 percent increase from the second quarter, according to Zillow. They climbed 3.9 percent in Las Vegas and 3.8 percent in Denver, Zillow said.

Atlanta had the biggest drop in values, falling 2.2 percent from the previous three months, the data show. New York, Philadelphia, St. Louis and Cleveland were among other large metro areas where values declined.

Local Story

The recovery is uneven across the country because of local variations in foreclosure conditions and employment, Humphries said. Growing demand from investors and foreign buyers is helping to push up values in pockets that were hard-hit by the housing crash, he said.

“The local story for each metro is beginning to reassert itself,” Humphries said.

Zillow showed a drop in values for 17 of the 41 states it covers. Of the nine states considered U.S. presidential election battlegrounds, New Hampshire, North CarolinaOhio, Virginia andWisconsin had quarter-over-quarter declines, indicating that housing will be a key issue for many voters, the company said.

Values nationwide will increase 1.7 percent over the next year, according to Zillow’s projection. Of the 253 markets tracked by the forecast, 183 areas have hit bottom and another 41 will reach a floor in the next year, the company said.

Zillow measures the value of 100 million U.S. homes, regardless of whether they sold during the quarter, and calculates the median for its index. Other gauges, such as the S&P/Case-Shiller index, track purchase prices.

Real Estate is a supply and demand business….Newton has a very limited supply of housing currently listed for sale and that is the biggest driver of price increases.  If you are thinking of selling your home in the Newton/Brookline area please contact me at margaretszerlip@gmail.com or 617-921-6860.

 

 

Newton Recap September 1, 2011-October 15, 2011 VS. 2012


Best Realtor to explain market with numbers, newtonmasshomesforsale.com, margaret szerlip, Newton, MA. real estate
September 1, 2011 thru October 15th 2012 vs. 2011
2011      59 Homes     $814,689  Average Sale Price       $750,000   Median Sale Price
2012     58 Homes     $983,934 Average Sale Price       $757,000   Median Sale Price
The difference this year is more homes sold priced between $1,500,000 and 3,000,000 13 this year versus 4 last year.  That accounts for the jump in average sale price but the median of 750,000 remains almost unchanged.
It is important to bear in mind that the sold statistic reflect what happened 60-90 days prior to the closing date.
This year there are 86 properties currently under agreement vs. 59 during the same period last year, a significant improvement.  This year there are 51 properties under agreement priced between 500,000 and 1,000,000 vs. 32 last year.  There are currently 26 homes under agreement priced between 1,000,000 and 2,500,000 vs 17 in 2011.   

Report Name: 
Total Sold Market Statistics Print this page  /  E-mail this page  /  Make a PDF of this pagePDF this page
Report Run: 10/16/2012 11:23:36 AM
Property Type(s): SF
Status: SLD
Start Date: 09/01/2011
End Date: 10/15/2011
Towns: Newton
Price Range # of
Listings
Avg. Days
on Market
Average
Sale Price
Average
List Price
SP:LP
Ratio
Average
Orig Price
SP:OP
Ratio
$0 – $49,999 0 0 $0 $0 0 $0 0
$50,000 – $99,999 0 0 $0 $0 0 $0 0
$100,000 – $149,999 0 0 $0 $0 0 $0 0
$150,000 – $199,999 0 0 $0 $0 0 $0 0
$200,000 – $249,999 0 0 $0 $0 0 $0 0
$250,000 – $299,999 1 129 $290,000 $297,500 97 $335,900 86
$300,000 – $349,999 1 1 $339,000 $339,000 100 $339,000 100
$350,000 – $399,999 2 171 $391,250 $424,500 92 $433,944 90
$400,000 – $449,999 2 30 $404,817 $394,000 103 $394,000 103
$450,000 – $499,999 3 32 $486,333 $509,000 96 $509,000 96
$500,000 – $599,999 11 88 $539,000 $566,509 95 $578,055 93
$600,000 – $699,999 6 128 $667,083 $728,665 92 $784,817 85
$700,000 – $799,999 12 68 $758,091 $773,250 98 $782,325 97
$800,000 – $899,999 4 136 $830,625 $902,225 92 $992,000 85
$900,000 – $999,999 6 90 $947,150 $1,044,833 92 $1,082,333 89
$1,000,000 – $1,499,999 7 119 $1,191,214 $1,279,429 93 $1,389,571 86
$1,500,000 – $1,999,999 3 132 $1,616,667 $1,706,333 95 $1,706,333 95
$2,000,000 – $2,499,999 0 0 $0 $0 0 $0 0
$2,500,000 – $2,999,999 0 0 $0 $0 0 $0 0
$3,000,000 – $3,999,999 1 313 $3,164,000 $3,475,000 91 $3,599,000 88
$4,000,000 – $4,999,999 0 0 $0 $0 0 $0 0
$5,000,000 – $9,999,999 0 0 $0 $0 0 $0 0
$10,000,000 – $99,999,999 0 0 $0 $0 0 $0 0
Total Properties 59 Avg. 98 $814,689 $866,288 95 $902,037 92
Lowest Price: $290,000 Median Price: $750,000
Highest Price: $3,164,000 Average Price: $814,689
Total Market Volume: $48,066,623


page  /  E-mail this page  /  Make a PDF of this pagePDF this page
Report Run: 10/16/2012 12:08:25 PM
Property Type(s): SF
Status: SLD
Start Date: 09/01/2012
End Date: 10/15/2012
Towns: Newton
Price Range # of
Listings
Avg. Days
on Market
Average
Sale Price
Average
List Price
SP:LP
Ratio
Average
Orig Price
SP:OP
Ratio
$0 – $49,999 0 0 $0 $0 0 $0 0
$50,000 – $99,999 0 0 $0 $0 0 $0 0
$100,000 – $149,999 0 0 $0 $0 0 $0 0
$150,000 – $199,999 0 0 $0 $0 0 $0 0
$200,000 – $249,999 0 0 $0 $0 0 $0 0
$250,000 – $299,999 2 37 $270,179 $287,450 94 $292,450 92
$300,000 – $349,999 0 0 $0 $0 0 $0 0
$350,000 – $399,999 2 64 $377,500 $387,450 97 $387,450 97
$400,000 – $449,999 4 27 $428,750 $422,000 102 $422,000 102
$450,000 – $499,999 3 83 $476,000 $481,333 99 $479,000 100
$500,000 – $599,999 9 51 $551,028 $567,000 97 $582,667 95
$600,000 – $699,999 7 71 $640,114 $660,538 97 $670,953 95
$700,000 – $799,999 5 53 $758,300 $743,200 102 $743,200 102
$800,000 – $899,999 3 50 $835,000 $822,333 102 $829,000 101
$900,000 – $999,999 4 90 $941,563 $1,005,250 94 $1,055,250 90
$1,000,000 – $1,499,999 7 34 $1,141,714 $1,210,857 95 $1,210,857 95
$1,500,000 – $1,999,999 8 49 $1,646,250 $1,720,362 96 $1,804,863 92
$2,000,000 – $2,499,999 3 127 $2,040,667 $2,150,000 95 $2,266,633 90
$2,500,000 – $2,999,999 1 110 $2,680,000 $2,800,000 96 $2,800,000 96
$3,000,000 – $3,999,999 1 84 $3,999,000 $3,999,000 100 $3,999,000 100
$4,000,000 – $4,999,999 0 0 $0 $0 0 $0 0
$5,000,000 – $9,999,999 0 0 $0 $0 0 $0 0
$10,000,000 – $99,999,999 0 0 $0 $0 0 $0 0
Total Properties 59 Avg. 59 $981,426 $1,015,262 97 $1,040,055 96
Lowest Price: $260,358 Median Price: $775,000
Highest Price: $3,999,000 Average Price: $981,426
Total Market Volume: $57,904,158

How Do I Know My Home is Priced Right??


Newton, MA. Real Estate, Margaret Szerlip, NewtonMAhomesforsale.com

 

 How Do You Know Your Home is Priced Right?

WOW—you love your home, you have enjoyed it for years. Your family grew up in it! You can’t wait to sell it to someone and you just know it will have a high value because that’s what it means to you.

WRONG
…or not necessarily RIGHT…..
Here’s the upfront truth:

When you put your home on the market, it becomes a property, a commodity, the value of which will be determined by a buyer who wants it and can afford to buy it. Your beautiful 21 x 14 dining room with a fireplace and beautiful windows, where so many happy family memories were shared is now simply a 21 x 14 room and potential buyers are looking at it and wondering if their own furniture will fit, not thinking or caring about your happy memories.

You have lived with the 1980’s bathrooms just fine, thank you. They worked for you. Everything is in working order and it was good enough for your family all these years. A potential buyer, looking at the outdated bathrooms, is adding up the expense of tearing them out and remodeling. Then they mentally deduct this perceived cost from the price you are asking, unless you have calculated condition into your list price.  Your Realtor must be able to prove this.

Price per square foot has become ever more important.  If your Realtor cannot do this calculation for you, get a new one!  Different neighborhoods in the same town sell at an intrinsic value.  Busy streets sell for less, large level lots sell for a higher price.  Condition plays an important role.  Well done new construction, by reputable builders tend to sell at the highest price per square foot, opposed to a fixer upper.  Curb appeal, street desirability, perceived perception of the elementary school, snob appeal are all factors.  Old rules still apply, you never want to buy the most expensive house on the street, UNLESS the neighborhood is turning and all those little capes will be made into tasteful non-mcmansions.  Little jewel houses all sell for a high price per square foot.  Unique can work for and against you, unique as in a renovated barn is good, a modern structure built into the landscape-good.  A Georgian Colonial on the outside and a 1950’s retro on the inside-not so good.

So you get your house on the market and here comes the litmus test…IF you have showings but no return showings and no offers, and if  the number of showings starts to decline, THEN…. YOU ARE PRICED TOO HIGH. It is simple as that. The market is rejecting your house at the current price, not only that, your overpriced home is making the competition look good.  You are in fact helping to sell your neighbor’s home.

It would be helpful to you as a seller to walk through your own house as if you were a buyer.  Most of my sellers are also buying another property.  When they walk through a new property they don’t want to renovate the kitchen and the bath, sometimes they find it easier to move than renovate.  The truth is, I spend a lot of time convincing my clients that buyers don’t want to renovate the kitchen  in their house either.  Houses that are fully renovated sell at a premium.  Let me add that houses that are cheaply renovated with shoddy work are mentally discarded immediately.  One of the biggest turnoff’s is looking at a hastily repaired house.  Buyers get the feeling that the seller is trying to pull one over on them, and many times they are correct.

margaretszerlip@gmail.com

House Prices: Experts Becoming More Optimistic


 

Margaret Szerlip, Newton, MA. Realtor, West Newton Hill, Realtor

 

House Prices: Experts Becoming More Optimistic

This is very good news for the housing market and confirms what we are seeing here in Newton, Brookline, Wellesley….I want to caution sellers that we are experiencing moderate uptick in prices.  I have noticed that after Labor Day at least 25% of listings seem overpriced, and these houses are still sitting on the market unsold, while their competition priced correctly were sold within the week, some with multiple offers above asking.  If you house is not getting any showings, or no second showings, your house is most likely overpriced in comparison to your competition.  When a house is overpriced it is the best advertisement for other houses.

Each quarter, Pulsenomics surveys a

“distinguished panel of over 100 economists, investment strategists, and housing market analysts regarding their 4-year expectations for future home prices in the United States.”

Here are the latest survey results.

Price appreciation/depreciation expected over the next four years:

  • 2012: 2.31%
  • 2013: 2.44%
  • 2014: 3.25%
  • 2015: 3.43%

Fiserv also released a report projecting home prices to appreciate at an average of 3.7% annually over the next five years.

The average pre-bubble (1987-1999) annual appreciation was 3.6%

Margaret Szerlip

617-921-6860  margaretszerlip@gmail.com

 

 

Newton, MA. Real Estate by Zip Code 2011 vs. 2012


Newton, MA. Real Estate Prices.  Margaret Szerlip, newtonmasshomesfor sale.com, Top Broker Newton, MA.

Newton, MA.  Real Estate by Zip Code

Real Estate is local, very local.  The following is a break down of Newton by zip code, 2011 vs. 2012 thus far.  Please notice the price per square foot it is as important as could be in determining the price of a home.  A seller cannot get caught up in what their neighbor’s house sold for.  This price per square foot is also very indicative of condition.

Zip                  Units                         Average Sale Price               Average Price SQ FT

02458             51                                $954,000                               $310.00

02458             49                                $1086,000                            $330.00

02459             154                              $976,000                               $345.00

02459             135                              $997,000                               $335.00

02460                        25                     $694,000                              $333.00

02460                        3                        $806,000                              $326.00

02461             58                                $756,000                               $331.00

02461             37                                $683,000                              $337.00

02462             16                                $656,000                               $346.00

02462             11                                 $780,000                              $341.00

02464             14                                $534,000                               $286.00

02464             10                                $573,000                               $293.00

02465             88                               $793,000                               $329.00

02465             79                                $1,051,000                            $351.00

02467             24                                $1,262,000                            $380.00

02467             30                               $1,396,000                            $371.00

02468                        31                                $1,559,000                            $366.00

02468                        20                               $1,790,000                            $378.00

I am going to break these numbers down even further.

Chestnut Hill 02467 North of Rte.9

02467             13                                $1,703,000                            $422.00

02467             13                                $1892,000                            $430.00

Chestnut Hill South of Rte.9

02467             10                                $813,000                               $319.00

02467             17                                $1,011,000                            $315.00

It costs roughly $110.00 per square foot more to purchase a house north of Rte. 9 in the same zip code.

Same is true for West Newton, breaking out West Newton Hill

02465             24                                $1,559,000                            $420.00

02465             21                                $1,790,000                            $435.00

02465             73                                $577,000                               $305.00

02465             58                                $691,000                               $330.00

Again, it cost about $110.00 more per square foot to purchase on West Newton Hill.

I will now break down Newton Centre even further.  Newton Centre encompasses a vast area.  It stretches north slightly  beyond  Commonwealth Avenue, east to roughly  Hobart, west to Walnut Street and south, as far as Brookline Avenue. I will separate out the immediate vicinity surround Newton Centre and walkable to the T and shops.

02459             50                                $1,077,000                            $378.00

02459             104                              $918,000                               $334.00

Or roughly $44.00 more per square foot the closer to Newton Centre proper you are.

I would love to discuss this further with anyone who is interested.  617-921-6860

Newton Real Estate Reacap 2012 vs 2011


Newton, Realtor, Best Newton Realtor, Listing and Buyers Agent Newton, MA.

Yes the real estate market in Newton is better!  Inventory is extremely low…homes are going under agreement at an accelerated pace.

January 1, 2011 through August 15, 2011

335 Homes Sold

Average List Price – $978,000

Average Sale Price – $944,000

Median Sale Price – $$785,000

January 1, 2012 thru August 15, 2012

425 Homes Sold

Average List Price – $996,000

Average Sale Price – $$965,000

Median Sale Price – $804,000

These numbers correlate to a 20% increase in volume and a 2% increase in sale price.  Currently there are only 125 single family homes on the market.  Since this is a supply and demand business I would expect the sale price to continue on an upward trajectory, however, I do not see prices increasing at the fast pace they did in the old days.  Inventory will increase after Labor Day but 2012 is the first sellers market since 2007.  Seller’s,  get your home ready for sale, and I do mean ready; painted, de-cluttered, clean, repairs made.  Houses in excellent condition are selling at a considerable premium!  Conversely, houses that are not well cared for sell at a discount.  If you have $2,000.00 — spend it getting your house in order, you will get it back and more…!  Paint is an amazing tool!

Newton Real Estate Market’s Biggest Problem—Lack of Inventory!


Newton, MA. Realtor, Buyer/Seller Agent Newton, MA.  Newtonmasshomesforsale.com

Summer 2012 Real Estate Trends

You may have already heard these from many sources,Case Schiller Index, WSJ, but here is another article highlighting the 5 Real Estate trends (some good, some bad) to look out for this summer:
Newton has only 130 single families listed for sale and 166 are under agreement.  A steady market is  between 200 and 215 active listings, this is a supply and demand business.  When Under Agreements outpace current inventory we are in an accelerating market.  There are MANY buyers out there.  I put a Brookline condo on the market last week and more than 6o people came to the open house…we had 4 offers by Monday and it is under agreement.  Houses in good, crisp condition sell for a premium and houses with deferred maintenance  sell at a discount.  If electric, boiler, roof, and plumbing need updating buyers will discount for that.  If you can afford to fix the infrastructure of the house–by all means do it!

5 Housing Trends in Summer 2012

  • Inventory-continues to be an issue in certain markets, like ours!
  • Steady Home Prices-most experts predict 3% in home prices over next 18 months
  • Interest Rates-will continue to hover around 4%
  • HARP-is helping borrowers qualify
  • Appraisals-issues will continue throughout summer
What does this mean?  Now is the right time to sell-and to buy-there is no guarantee how long these circumstances will last, don’t waste time at the beach-get in the house hunt!(If you have not reviewed your mortgage rate in the past few months it may make sense to look again, fixed rates are well under 4% for most situations, be sure to tell your friends too) –
*Summer 2012 should be very busy with little vacation time for those of us in the industry!

The Real Estate Ship Appears to be Turning!


Newton, MA.  newtonmasshomesforsale.com

The Ship Appears to be Turning

Ken H. Johnson, Ph.D. — Florida International University (FIU) and Editor of the Journal of Housing Research. To view other research from FIU, visit http://realestate.fiu.edu/D

On October 31, CNN Money reported: “Home prices headed for triple dip”.  Reporting on information provided by Fiserv (a financial analytics company), a 3.6% fall in prices on a national basis is expected by next summer.  This will result in the Case-Shiller Home Price Index falling to 35% below its peak in 2006 and marking a triple dip in U.S. housing markets.[1]

Say it ain’t so!  Is housing set for a third dip in five years?  This depends on factors being in place to lessen the impact from market anxiety brought on by worries over a pending wave of foreclosures and the U.S. debt crisis, which we will start to hear more about shortly.

So, what are these factors and what do they tell us?  These factors are really fundamental drivers that encourage individuals to buy versus rent their personal residences.  They are sometimes referred to as housing affordability measures.  The price to income, mortgage payment to income, and a buy versus rent analysis for various markets provide strong evidence that factors are in place to encourage home ownership or favor renting depending on the resulting measurements.  In ongoing research being performed by Beracha and Johnson, these measures are at record levels in favor of buying.[2]  In fact, the price to income ratios in 23 of the 50 states are at 30-year record lows.  The payment to income ratios are at 30-year record low in all 50 states.  A buy versus rent analysis performed in 23 of the nation’s largest metropolitan areas also indicates that hurdle rates (the rates at which potential buyers are indifferent between buying and renting) in all 23 cities are below 25-year average appreciation rates.  All of these results strongly favor purchasing.

What about per capita income and present day prices (relative to past prices)?  Presently, U.S. per capita income is on the rise again and has regained to the level of 2007 (roughly $40,000 per person), while prices of homes on the other hand rest at 2002 levels according to the Case-Shiller Home Price Index.  What about mortgages rates?  Presently, 30-year fixed rates are at near record low levels.

So, let’s put this all together.  Housing is presently more affordable than at any time in the last 30 years.  While income is only at 2007 levels, home prices are even lower coming in at 2002 levels.  All of these factors set the stage for many individuals to favor purchasing over renting.  Thus, while there are grave concerns over the overall health of the economy, fundamental drivers now appear in place to staunch any further significant plunges in home prices.

The ship appears to be turning.[3]