Zeev's Turnips Patch-No Politics (ZEEV)

[marketmaven]

Boston Housing Bubble is Popped

Boston-Specific Info
http://www.bostonbubble.com/
* Boston has been ranked the #1 most vulnerable housing market for potential price declines by Kiplinger's Personal Finance and the PMI Group. [Kiplinger's] [Yahoo! Finance] [Chicago Tribune] [Denver Post] [Sun-Sentinel] [WFMY] [OCRegister.com (reg)]
* The Boston population is declining. "Hurt by skyrocketing housing prices, people are leaving San Francisco, Boston and other large cities in droves." One of the fallacious arguments used to contest the existence of a housing bubble is that a growing population is pushing up the natural price of property, but that is clearly not the case in Boston given the population decline. [CNN]
* The Wall Street Journal has identified Boston as one of the metropolitan areas in the US where it is cheaper to rent than to buy. Their data goes from 2001, when it was already cheaper to rent, to 2004 when the difference was even more pronounced. The Economist also published an article showing that renting is cheaper, and although it does not focus on Boston, it is very thorough about including various expenses and tax benefits that the Wall Street Journal left out. [Wall Street Journal] [The Economist]
* Consumer Reports has rated real estate in the Boston market as "Overpriced" and pegged it at 24% over the affordable price as of Q4 2004. [Consumer Reports]
* Massachusetts home sales recently slid 11% in one year. [Boston Globe] [Boston Herald]
* Foreclosures are rising sharply in greater Boston and Massachusetts. The first half of 2005 saw the number of foreclosures climb 37% in greater Boston and 30% statewide. [Boston Herald] [Boston Globe]
* To compensate for property that fails to sell, real estate agents in Boston are falling back on the deceptive practice of canceling the listing in MLS and then creating a new listing so that the property appears as new to the market. There were 10,606 MLS cancellations in the first six months of 2005, up from 9,722 cancellations in the first six months of 2004 and 3,736 in 2001. "The number of canceled listings in Massachusetts has nearly tripled since 2001... In a recent spot check of houses for sale on MLS in Middlesex County, Barry Nystedt, president of the Massachusetts Association of Buyer Agents, said one in four listings canceled between May 25 and June 25 was recreated by the same firm with a new MLS number." [Boston Globe]
* Boston and Massachusetts are the typical exceptions that people use to qualify their statements when they say that real estate prices don't fall. Boston and Massachusetts prices have fallen in the past, even in nominal terms (when adjusted for inflation, the fall is even more pronounced). Bear in mind that even if prices decline merely by the same percent that they have in the past, the leverage (a.k.a., margin or mortgage) used to purchase the homes must be taken into consideration - the substantially higher number of zero down and negative amortization loans will leave a lot of people with heavy losses and negative equity. [BusinessWeek] [Wall Street Journal]