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October 08, 2005
Asking prices drop by nearly 15% in 16 suburban Boston towns
Price_reducedHomeowners in Greater Boston and elsewhere continue to
expect "big real estate gains" despite a stunning revelation this
week: "asking prices in 16 MetroWest towns have dropped by nearly 15
percent" since August, according to MLS statistics. "All good things
come to an end," economist and housing guru Karl Case told real estate
reporter, Sue Brickman of the Weston Town Crier. Commenting on "a
spreading inventory problem" and "a sea change on the demand side
which we have been expecting for a long time," Case predicted that
"prices are going to fall back to a justifiable level, because people
are running out of gas (interest)." Noting that current price
reductions will not show up in industry statistics for some time, Case
was guarded -- but cautious -- in his assessment of the market:
"We'll see some softness for a while, but I don't see a collapse.
But I say that not with a hell of a lot of conviction."
Last year at this time, a survey by Case and his partner, Robert
Shiller of "irrational exuberance fame, revealed that home owners in
Boston, Milwaukee, San Francisco and California's Orange County were
"counting on double-digit growth EACH YEAR for the next ten years."
Despite mounting evidence of a housing bubble, homeowners remain
overwhelmingly confident about continued appreciation. According to
the Daily News Transcript, another suburban newspaper in Boston, an
online survey of 1,001 consumers conducted by RBC Capital Markets
revealed that:
1. 60 percent of homeowners expect the value of their homes to
increase by at least 5 percent annually during the next several years;
2. 24 percent of respondents said they expect annualized gains of
10 percent or more over the next few years; and
3. About 3 percent of respondents said they expect their home
values to decline over the next few years.
That optimism is starkly out of line with short-term price changes and
long-term home buying plans which recently plunged to their lowest
point in a decade. Local listing agents say sellers "need to adjust
their thinking and profit margins" to attract buyers. What's your
take? Is that enough to break the stalemate in the market; or if you
buy now, are you setting yourself up for a heartbreaking loss of value
in coming years?
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