Seems nowadays everyone is in the market to buy a condo or a home. Whether waiting in line for my medium with cream or finishing my workout at the Y, I always overhear men and women of every age talking about buying a piece of property. For a guy who made real estate his profession nothing could sound sweeter, hold the sugar. There is, however, a catch that keeps the real estate professionals phone from ringing off the hook.
Every single one of these conversations I overhear always (and I mean always) ends in the same catch phrase, when the market crashes that’s when I will buy. Sounds nice, right? If you wait, the Hub will become affordable and with the mainstream media throwing darts at the latest bubble. I can understand why buyers would feel that way. Clearly they are in control of this market. Those who are buying right now are making every demand under the sun and getting just about all of them. My caution to those buyers on the sidelines is that this catastrophic crash they are all waiting for may never come.
The Boston Globe published last week that single-family home prices have dropped 5.3% and sales have dropped 15% and, although these figures trend down, they do not indicate a crash, but a softer landing in the Boston market. Fewer homes and condos are coming on the market now - allowing for the units already on the market to be purchased at a healthy rate. Though I think prices will continue to fall through the last few months of ‘06 and the beginning of ‘07, I believe that these price drops will stay between 4% and 7 % a quarter. Meaning: if this market turns up again only one year of appreciation (at the worst a year and a half) may have eroded. I believe we are three quarters into a five-quarter decline-hardly a crash when you had 5 years of double-digit appreciation resulting in home values almost doubling!
I understand the lottery ticket mentality of a crash. Suddenly young professionals who only thought they could afford a condo can now afford a home. The family with young children can now afford the better school district. My advice to them would be to buy something in the next 6 months. Here’s why.
All the seeds for a healthy economy are beginning to grow if you can look through the election year ads and rhetoric. Our friends at the Globe have reported twice this month that the most sensitive sector in our economy is finally growing again: the Technology and Health Care Sectors. This sector has turned around and these companies are pouring millions into corporate campuses again and taking up commercial space downtown. Now I am not an economist but logic tells me more companies equal more jobs, which create more income and higher wages for Massachusetts’ residents. That income will trickle into housing purchases and sellers will quickly stop giving concessions to the first buyer they meet.
My advice to those people waiting for a crash to materialize is buy now while the buying is good. Sellers right now are giving their right arms to sell their homes. In less than a year they make be asking for your right arm.
In my next entry we’ll talk about the basics of the Boston Rental Market.
Happy Hunting, James

Filed under: Boston real estate bubble