The Evolving Market
Each quarter the Massachusetts Association of Realtors issues a press release to accompany the sales and price numbers for the quarter. These press releases are archived on their website (here), and provide a telling recapitulation of the market's recent evolution. Each quarterly report (until the latest) ends with a quote from an MAR official summarizing market conditions (and in some cases offering up rosy projections). Recent quotes are reproduced below, accompanied by a link to each press release, and the YOY change in SFH prices for the quarter.
3rd Quarter, 2004 (11/15/04) SFH prices up 11.1%
“With today’s attractive mortgage rates, low down payment requirements, and steadily rising home values, it’s an ideal time to get into the housing market,” added Moore, who also noted that first-time buyers, immigrants, and baby-boomers who’ve reached their peak-earning years are all helping to keep demand for housing strong.
4th Quarter, 2004 (link) SFH prices up 12.7%
“Today’s healthy price increases are consistent with a market in which demand has outpaced supply, and we think that trend will continue in the coming year as large numbers of immigrant buyers and baby-boomers in their peak earning years hit the market,” said Tomkiewicz. “The good news for buyers is that we should see some moderation in price appreciation in 2005, especially if mortgage rates rise as forecasted,” she added.
1st Quarter, 2005 (5/12/05) SFH prices up 11.8%
“The current low interest rate environment is likely to prevent prices from falling any time soon,” Tomkiewicz predicted. Housing prices generally reflect supply and demand levels, so as long as mortgage rates stay attractive home buying activity should remain strong, thus prices should continue to climb rather than soften, she explained.
2nd Quarter, 2005 (8/15/05) SFH prices up 6.4%
“Predictions of a price bubble are simply unfounded, and ignore the fact that housing production across the state has failed to keep pace with demand,” asserted Tomkiewicz. “On top of that, zoning restrictions in many towns are contributing to today’s higher prices because they add to the cost of land and require that the homes that are built be larger in size. For these reasons, we don’t anticipate any decline in prices in the foreseeable future, unless the economy slips into a recession.”
3rd Quarter, 2005 (11/15/05) SFH prices up 5.7%
“With more sellers than buyers, especially at the upper end of the market, and mortgage rates now starting to rise, there’s not as much upward pressure on prices,” Tomkiewicz said. While sellers have started to adjust their asking prices, declines in property values are unlikely, according to MAR’s president, primarily because the risk of the market becoming overbuilt is minimal due to tough local zoning laws that restrict new housing production. “We expect homes will continue to appreciate in value in the year ahead, but more modestly than in recent times,” Tomkiewicz remarked.
4th Quarter, 2005 (2/15/06) SFH prices up 1.5%
“Prices may soften, but look for flat to modest appreciation this year rather than sharp price declines,” said Wluka.
1st Quarter, 2006 (5/15/06) SFH prices down 0.9%
No quote.
1 comment:
April jobs report in: showing 25,000 more jobs year-over-year. If net outmigration zeroes out (we'll know from the census stats in a few months), and interest rates stay flat, I think home prices will hold.
We can laugh at the MAR, but they're right about one thing: zoning, environmental, and other regulations result in dramatically more land required per new unit in Massachusetts and much higher cost per unit compared to other states. The replacement cost for a new 2,000 square foot single family is upwards of $800,000. The low existing price / replacement cost ratio, continuing depreciation of old houses, the need to remodel houses neglected during 25 years of rent control - all these factors (none receiving much attention on this blog) reduce the chance of any long-term correction in prices: a price decline will choke the supply of new or remodelled homes to a halt within a year or two, while job and income growth fuel demand.
We're in a buyer's market, but the fundamentals of supply and demand in Massachusetts remain strong. Aren't those the ideal conditions in which to be out there looking for sellers that have to sell and making a few low ball offers?
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