Waiting for the Bottom of the Real Estate Market?

RECESSION ENDS IN 2009 Many people have been telling me for years that the real estate market is turning around.  Newspapers and blogs have been enthusiastically predicted that the recession ended and everything was going to be alright.  I heard the real estate market had “turned around” in 2010, but the downward trend continued.  Now new data is coming forward.

Home Prices over the Last 10 YearsAll signs indicate that we are very likely skimming the bottom of the real estate bust, and things are just beginning to look up.  Nationally, many other locations were much harder hit than Massachusetts.  Prices and sales in the Boston area were not has hard hit as Central Massachusetts.  The towns in the Wachusett Region lost an average of 25% to 30% from 2006 to 2012.

October sales numbers jumped 21%, according to the Warren Group.  Meanwhile home prices spiked 4.4 percent, according to the Massachusetts Association of Realtors, which also released its October numbers. .  This is the most impressive jump in median prices since the end of the $8,000 home buyer credit in 2010.  Unfortunately, the Warren Group, which includes all sales in Massachusetts, not just Realtor assisted sales, has home prices staying essentially flat.

NEW CONSTRUCTION INVENTORY 112812The new construction starts are down dramatically, as you can see by this chart.  In 2000 there were 850,000 homes built, and by 2005 we reached an all-time high of almost 1,400,000.    Today, we are lucky to see 390,000 built and they cost more than the existing homes available.  The new energy and upgraded code requirements haveNew Construction Inventory added thousands of dollars to the cost of construction.  Material costs have really started to move up as well, which makes new construction more risky.  As you can see, the inventory for new homes for sale is down dramatically, at its lowest point since 1960.

Although the inventory is down in both new construction and existing homes for sale, the advice to buyers is to consider buying sooner rather than later.  It is only a matter of time before the prices do start to move up and the interest rates will unlikely be better.  Buy a home you love and settle in for the long haul as a wonderful place to live, not just an “investment”.

The elections are over, and if our politicians don’t push us over the “Fiscal Cliff“, I believe we will start the slow recovery of improved pricing and reasonable sales pace.  Sellers will need to listen careful to their Realtors when pricing their homes, but the low inventory will help move homes.  I saw the crash coming in 2005, but I never believed it would be a seven-year fall.

Have We Hit the Bottom with Home Prices?

My daughter, the economist, tells me was are in a New Economy.  I believe her, because we have suffered so many ups and downs with this recession and “recovery“, perhaps the only way to describe this is an New Economy.

According to the traditional economic parameters, the “recession” ended in June of 2009.  That was three years ago and no one I know believes the recession ended then for them.  In perfect “economic terms” that may seem true, but the lingering damage continues today.

It will not be possible to have a sustained recovery until the housing market, including new construction, is on solid ground.  We “cheer” when we read a report in the newspapers that tells us today “Pending Sales in June are up 29%”, but in the next breath, “Month to month pending home sales are DOWN 3%”.  The bad economic news about lack of  job growth, significant slow down in China, and the European financial meltdown continue to affect the sentiment and confidence in the US.

Serious financial minds believe our country is in a better place than the rest of the world, but we will continue to be affected by the global economy.  The Wall Street Journal makes a case that the housing bust is over, but they also acknowledge that “The biggest threat is a large shadow inventory of unsold homes, homes which owners won’t put on the market because they are underwater, homes that will be foreclosed eventually and homes owned by lenders.

We grasp at straws.  While it may be tempting to say home prices have bottomed out, HIS Global Insight’s Patrick Newport warns it is, “premature to do so.  The most likely scenario, in our view, is that home prices will zigzag over the coming months, rising during the selling season, slipping in the fall.”  He feels that home prices may start to move up cautiously in 2013.

Alternatively, if you want to refinance, the timing could not be better, and there is even help for folks with less equity than their mortgages.  Call us and we can help.  It is also a good time to buy, because interest rates have never been better, and we will get through this very difficult time.

More Foreclosures Coming

Realty Trac is reporting today that foreclosures continue to drag the price of homes down and with more coming, they will be a glut on the market by increasing inventory.  The increase in the foreclosure process for Boston, Cambridge, and Quincy is pretty substantial at 67%.

New Wave of Foreclosures

The Realty Trac Map demonstrates the most serious regions of the country.   The Boston area has not been as hard hit as many regions of the country.  Even though Boston may have a 67% increase in new foreclosures, it means an additional 1340, while Southern California is expecting an additional 4300 new foreclosures. 

Total Foreclosure Starts for the Third Quarter of 2011

Many people are thinking it is a good idea to take their homes off the market for the holidays, but given these statistics, nothing could be further from the truth.  The spring market may simple produce an increase in inventory.   

The good news is that Fannie Mae and Freddie Mac have learned their lesson about foreclosed homes they own.   They will winterize the properties, but they do not turn off the heat.  The damage that can be done to homes due to lack of heat can be costly.   The lack of air flow and changing moisture levels cause damage to the walls, wood flooring, and woodwork, and the potential for mold can be increased.  

Serious buyers are still looking for the right home.  Sellers, keep your home on the market.  Take advantage of the low-interest rates and the moderate inventory now.


 The Zillow Home Value Index fell 26% from its peak in June 2006.  That’s a greater decline than seen in the Depression-era years of 1928 to 1933.

According to Zillow.com, “November marked the 53rd consecutive month of home value declines, with the Zillow Home Value Index (ZHVI) falling 0.8% from October to November, and falling 5.1% year-over-year.”

Although the news on housing seems bad, we do have some bright spots in the economy.   According to Zillow Research, the economy is improving.  The improvement is expected to be slow, but job creation and consumer confidence are improving gradually, and this is good news for everyone.   

The improvement is expected to gradually increase “household formation and consumer confidence”.  But the housing market may still face greater declines due to “excess inventory of homes, high negative equity and foreclosure rates, and weakened demand due to elevated unemployment,” reported Zillow.com.  

If you have been waiting and watching this unfolding situation, take note.    Although no one can tell you with absolute certainty, the opportunity for buyers today is very favorable.  Now is the time to buy

The interest rates are still very good, but no one is expecting them to stay at this low rate indefinitely.  If you buy a home for $250,000 at a 5% interest, you would have to find the same house later for $205,000  price to qualify at the same mortgage payment if the interest rate went to 7%.   Affordability will go down significantly when interest rates move up.   

All things are coming together to provide first-time home buyers with a unique opportunity to grab their chance at the American Dream.  Home prices are trending at low levels.  Sellers are prepared to negotiate to move on to their next homes.  There is a good inventory of homes in many price ranges.    

A few things to consider:  Do you need a place to live?  (Rents are going up.)  Would you plan to stay in your home for at least a few of years? (Most buyers live in their home on average seven years).  Do you want to own a home of your own?  Have you saved some money for a down payment?

Remember that homeownership has many benefits including tax deductions, the opportunity to make your own creative changes to your home, the opportunity to plant your own garden to grow organic food, and future increase in equity when you sell your home some day.   

Appreciation may be slow in coming in the short term, but the National Association of Realtors reports that homeowners have between 31% and 46% higher net work over renters.  This will make a big difference in your future.  Now is the time to buy!

Real Estate Trends in Sterling MA


Real estate has been on a roller coaster ride for over five years now. The Sterling Real Estate Market Statistics Chart demonstrates that the highest number of homes sold in recent years was 2004 when we sold 95 homes. In 2009 we sold just 49 homes.

Interestingly enough, the median selling price continued to rise for two more years when the highest median price in Sterling was $400,000 in 2006. The lack of inventory was part of the cause, but many people failed to see warning signs of the overheated market. The median sale price for 2009 was $291,000, and the lost value in homes has hit many people very hard. Even Sterling has had its share of short sales and foreclosures.

Our Annual Sales Trends Report , which we send to our clients on a quarterly basis, helps folks keep abreast of the fast changing real estate market. This report shows the listing and sales activity of many of the local communities.

Our Local Market Conditions Report is a monthly on the current real estate trends in Sterling. Just a couple of weeks ago, there were only 50 homes for sale in Sterling and 17 homes sold in the previous 6 months. Today there are 77 homes on the market, which may be indicative of the spring market. There are 3 homes under agreement and 24 homes sold in the last 6 months. Each time a home sells gives Realtors a different perspective on the changing market. It is one of the reasons we track these trends so closely, and many people appreciate having a better idea what their home is worth.

Bookmark our blog, Massachusetts Real Estate Trends and check for frequent updates.

Mortgage Implications – FHA Makes Changes

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The economic “crisis” with continued bad news may actually be blocking the recovery of the housing sector. The government has been “throwing money” at a myriad of problems, hoping this will provide a solution. In fact, the economy will recover in its own time, and the throwing of money at complex problems without careful analysis by economically knowledgeable experts may, in fact, make the recovery a longer process.

The real estate market in the small towns in Central Massachusetts and near Boston has started a slow recover already. Inventories are down substantially from the 2008 levels. The people who have been waiting on the side lines are getting ready to make a move. The $8,000 first-time home buyer credit will help move those buyers into the marketplace.

The National Builders Association proposal of a $15,000 credit for all buyers would have given a much better and bigger push to bring stabilization to the housing market. Massachusetts has reached a 50 year low for new construction, and the construction job losses are devastating.

See a forecast for 2009.  If you need further information, please email me.

Sterling Market Snap Shot:

There are 44 homes on the market at the present time in Sterling with the average list price of $436,000 and an average days on market of 338. In the last 6 months, 19 homes sold for an average price of $303,000.

Taking into consideration that 19 homes sold in the last 6 months with days on the market of 184 days, Sterling has a 14 month supply of inventory. A normal market would be 6 to 7 months of inventory.

Buyers should definitely take advantage of the very low interest rates and great pricing and purchase now. The special financing options, including the $8,000 federal tax credit for new purchases, are abundant now. This is a strong buyer’s market with the interest rates drifting below 5%.

For a review of other communities, see my Market Condition Report on Realty Times

The Local Sterling MA Real Estate Market

All real estate is local.  The small towns in Central Massachusetts have made a better recovery of sales than the cities like Worcester and Fitchburg, because those communities are dealing with a significant number of foreclosures and short sales.

 In Sterling there were 85 to 90 homes on the maket for sale in 2007 with about 28 closed sales every six months.  In 2008 there are 54 houses on the market with about 41 closed sales every six months.  With this changed picture, the small towns are approaching a more normal market. 

The Massachusett real estate market was on its way to recovery earlier than other parts of the country, because we were seeing an inventory glut and falling prices much earlier than the rest of the nation. 

 A buyer from Texas came to my open house this weekend, and he tells me that Texas is a very hot market, and never suffered a value loss.  Again, all real estate is local.  It is really a good time to be a buyer, and mortgage money is available to qualified buyers.