Friday, October 28, 2005

1990's Housing Bubble vs Today's Market

1990's Housing Bubble - vs -Today's

Let's compare our last housing bubble in the late 80's and early 90's with today's current housing market.

1. 1986 the number of new housing permits issued was nearly twice the number today, 28,100 versus 14,842 today.

2. Fifteen years ago there was 1.5 years of supply of homes for sale, today 7.2 months.

3. Fifteen years ago unemployment was in double digits, today it's in the single digits.

4. Fifteen years ago interest rates were in the double digits, today it's in the single digits.

5. Fifteen years ago there was an over supply of rental properties for sale, today very few

6. Fifteen years ago banking requirements were very loose, today they have tightened.

7. Fifteen years ago mortgage payments, as a percentage of monthly income, was mostly in the area of 25- 30% , in 2004 it was under 20%, today it may hit 20%.

Just something to think about.

Wednesday, October 26, 2005

Some Good News for a Change

Multifamily Housing Stock are soaring through the roof.

The NAHB's Multifamily Stock Index follows 27 publicly traded companies and has recently reported that the index increased 48% this month.

The Multifamily Stock Index is currently outpacing the S&P 500 by more then a 130 percent, according to Elliot Eisenberg, a housing policy economist at NAHB and creator of the index.

Could this be the start of more good news?

Wednesday, October 19, 2005

Proposed Tax Reform Act

A bi-partisan commission has been formed to help bring in more tax revenues to off-set our growing budget problems. One of their ideas is to revamp the once "sacred cow" of mortgage interest deductions.

Should this proposed Federal Tax Reform Act pass it could have a negative effect on the high-end side of the Boston Real Estate market. Basically, what the proposed Tax Reform Act states, is that it would reduce the size of the mortgage on which interest can be deducted from 1,000,000.00 down to $350,000.00. As you are well aware, most single family homes in Ma. far exceed $350,000.00 and the Commonwealth will feel the impact of this bill more so then in other parts of the country.

Presently, the million dollar homes being sold are the underpinning of our booming housing market, but this proposal could slow down sales for these homes if this Tax Reform Act is passed. This could be another shoe dropping in an area noted already for the high cost of living. For most tax payers, the write off on their home is the single largest tax deduction and reducing the deduction would only deepen the housing affordability issue here in New England. In addtion, it would take millions of dollars out of our local economy which would impact not only housing but retail ect.........

Tuesday, October 18, 2005

The Housing Bubble Poll

Business Week....... Housing Poll

On October 4, 2005 Business Week conducted a Poll on the current housing market:

Any softness is the housing market is temporary ..............................6.6%

Housing market is losing steam in certain areas,
it will be a long time before houses near me are are affordable...........47.5%

Prices have already dropped where I live................................................13.1%

People have made to much of the housing bubble...................................27.8%

Not Sure................................................................................5.1%

Monday, October 17, 2005

The Growth in Real Estate Blogs

A growing number of homeowners, real estate agents and real estate junkies are going online with web logs (real estate blogs) to discuss everything from the Boston housing bubble, mortgages to what tiles to put on a kitchen floor.

According to, a blog search engine, it is presently tracking 14.4 million blogs and estimates are a new blog is created every 7.4 seconds. In addtion, search engine found 322,166 posts related to real estate.

I feel that real estate blogs will continue to grow as real estate junkies seek more and more information on the changing Boston condo market.

For the most updated listings visit our web site at

Asking Prices Drop

Homeowners in Greater Boston and elsewhere continue to expect big real estate gains might be in for a suprise. Stunning revelations came out last week from MLS: Asking prices in 16 MetroWest towns have dropped by nearly 15% since August. Source MLS Statistics.

Link- Broke the record for the most amount of listings on a given week 3,028.

Wednesday, October 12, 2005

Boston Rental Market.

How much does it cost to rent an apartment in Boston?

The other day I rented a two bedroom apartment on Columbus Avenue in the South End section of Boston, for two young professionals . Upon reviewing their rental application, I realized it would cost them 65% of their take-home pay to afford this apartment (not including cable, electric etc...) As you can imagine, I was reluctant at first to rent the apartment to them but, due to their excellent references I proceeded anyway. But it got me to thinking, how much does the average person need to earn to live in Boston, and how much of their take home pay is applied to rent. My findings were shocking.

According to the Greater Boston Housing Report Card published by the Boston Foundation, a family of four needs to make at least $65,000.00 to make ends meet. This exceeds New York City by $6,000.00 and San Francisco by $7,000.00

I then found out from the same report that the average renter in the Boston South End spends 80% of their take home pay on housing. What is also a suprise, is even though they are spending 80% of their income on rent you would think that they were just starting out in the workforce and therefore were young. However, the South End has the lowest population of 18-24 year olds in the city. Most South Enders are of the age of 25-64 professionals in thier prime earning years and yet, they are still struggling to make ends meet.

Other facts from this study:

Neighborhood-------------- Average Rent---- -- % Income Needed To Pay Rent

Allston/Brighton -------------- $1,300.00--------------------- 42%
Back Bay/Beacon Hill ---------- $2,250.00 -------------------- 45%
Boston Midtown--------------- $2,200.00 ---------------------50%
Roxbury----------------------- $1,250.00----------------------62%
Fenway/Kenmore ------------- $1,498.00 --------------------- 74%
South End --------------------- $1,950.00--------------------- 80%

I feel that this is the root cause of the pending slowdown in the Boston housing market. Basically, how does a young couple save for a downpayment on a home when they are spending so much of their income on rent.

According to our last census, New England and in particular Boston, lost 20% of it's 20-34 year olds, which is twice the US average. Our young professionals are creating a brain drain in the area as they begin to migrate to the southeast and midwest where the cost of living is cheaper. This I believe is a very troubling demographics for the future of the Boston housing market. Presently, the Boston population growth is anemic. The only New England region gaining in population is New Hamphsire and that is a result of the migration of our young profesionals from the state of Massachusetts.

These are the views of the writer not that of the Ford Realty staff.
To view property for sale in Boston or Brookline visit our web site at

Saturday, October 08, 2005

Housing Bubble?........Who's responsible?

Presently the Boston Housing market is changing faster then Harriet Miers job qualifications for the Supreme Court appointment. Gone are the day's of multi-offers and large potential buyers at open houses. Yes, my friends, we have begun the downward trend in the housing market. But how did this all happen so quickly? I can answer that in two words. Alan Greenspan.

Will the Boston real estate community jump for joy with the departure Mr Greenspan? Of course!

I believe not only will there be a housing bubble, I think it has the potential to be worse then in the late 80's early 90's for the Boston area. Contrary to what my esteem Boston realtors believe that this will only be a minor air leak, I believe you should cover your ears because balloons will be popping with a BANG.

First and foremost, let's seperate my opinion from the facts. These are the facts as of today:

1. According to Inside Mortgage Finance Publications in the year 2003 "creative financing loans" such as ARM, interest only, negative amortization loans ect..., only made up 26.2% of home mortgage loans. However,

2. In the second quarter of 2005 ARM and other creative financing mortgages soared to 49.1% of new home purchases but the share of conventional fixed loans dropped to 36.3%

3. According to Consumer Federation of America, "....many consumers who have alternative mortgages don't fully understand how they work"

4. A record number of individuals are cashing out their equity from their homes at an alarming rate, leaving little or no equity in their property. Basically treating thier home as it was a private ATM machine for cash.

5. A record amount of people are purchasing homes with little or no money down.

6. According to SAR Research 66% of home purchases in the first half of the year had a combined home ratios greater then 80% interest only, negative amortization.

7. Alan Greenspan's own words is a sign for worry when he commented on the current housing market by saying "......vulnerable to adverse advents"

8. Housing inventory is at an all time high, DOM (days on the market) are increasing in all areas of the country

9. Property foreclosures are on the rise due to increasing interest rates.

10. Home heating prices are on the rise and leaving home owners with less spendable cash.

So what do all these facts add up to? Basically, the Fed has single handedly created a means where people are buying homes they cannot afford and at some point in time the realities are going to set in. The Fed allowed many individuals to obtain negative amortization loans in which early payments are not enough to even cover the monthly interest of the loan, never mind the principle. The logic at the time, was as salaries increased they will be able to afford higher payments latter on. Is this not a recipe for disasater?

I can go on and on with more data but the bottom line is this: when you give away free money a bubble will happen. If you don't believe me just ask the Venture Capitalist in the Silicon Valley of California of the last bubble. Unfortunately, this is going to have a greater impact then the internet bubble because it influences a lot more people.

My concern is this, when the most recent home owners prepare to sell their homes in the next coming years, they may find out that their existing mortgage amounts owed are actually higher then what their home will be worth. In addtion, those buyers who opted for the introductory teaser rates of 1, 2 or 3% will be in shocked when they soar much higher. As a result, their monthly payments will rise hundreds if not thousands of dollars per month. Will they be able to make ends meet? One University study showed that the majority of mortgage holders with the teaser rates have only three thousand dollars in personal savings. Scary!

What is the future of the Boston housing market? Presently, interest rates are at a 6 year high and have gone up to the best of my knowledge 11 consecutive times. If the housing inventory represents the bubble (balloon) then Mr. Alan Greenspan is holding the pin to puncture the balloon as a result of him controlling the rates. Thus I will predict that once mortgage rates hit 7.5% cover your ears. However, if the mortgage rates remain below 7.5% I feel the outcome will be a slow but steady decline in home prices with an overall adjustment downward of 2-3% by the end of 2005. If the present economic climate continues, the downward spiral will then proceed into followng year of 2006. I predict that the fall in prices will level off at 8-12% of today's highs. Of course, if we have a terrorist attact or more natural disasters then all bets are off and the outcome may be much worse. I just don't see how this market can sustain itself if individual take home pay remains flat or only increases by 2 or 3% a year coupled with the current pace of inflation in heating oil and other utilities. At some point in time, which I feel has already occured, the Boston housing market will out price itself. I also feel that the Fed will have no other choice but to tightend up lending practices or foreclousres will skyrocket. It's "damned if you do or damned if you don't." By tightening lending practices and having borrowers more qualified you will slow the housing market down to a crawl. But, if you continue, and the economy goes south you will see an unforseen disaster as never before, as more and more families will be losing their homes as interest rates rise as the Fed tries to off set inflation fears.

Lastly, if the Boston economy continues to weaken with more and more mergers and companies leaving the city as of late and if housing inventory continues at its current rate things could get bad a lot quicker then what I am presently predicting.

Can the new Chairman of the Fed save the day? Hopefully, but I am doubtful. The saying "'s like rearranging the deck chairs on the Titanic" best illustrates my point. The Boston housing market hit an iceberg and it's sinking, changing the captain of the ship at this point may be to little to late. Hopefully the Fed Chairman (chairwomen) will tighten up the lending requirements for borrowers as they were in the past, so in the future so we don't repeat the same mistake.

Mr. Greenspan enjoy your upcoming mandatory retirement in the three months ahead, we will be reading about you in the history book and the Boston real estate market will be enduring your mess that you left behind for years to come.

The following comments are those of the writter not of the Ford Realty staff.

Friday, October 07, 2005

Can e-bay sell your property?

The pros and cons of using ebay:

Question. Does selling real estate on ebay really work?

The simple answer from my observations is no. Most people I spoke with were suprised of how few people actually use for their Boston real estate needs. But when you research into ebay you will find out that there is a reason for its poor performance.

Lets's get down to bidness (er, business) with the ebay auction format.

The main problem is that ebay's business plan fails to meet the legal Masachusetts requirements of a legal contract as it pertains to purchasing or selling real estate. Other items sold in an auction format on ebay are legal & binding. Real Estate is an exception to the rule, and thus is an unenforceable contract (void) by both parties in the bidding. You can post property ads on ebay for viewing but any bids on such property is uneforceable for it fails to meet state requirements for the transfer of title and deed.

So until a new business model is developed in the buying and selling of realty it appears that the tried and true basics of the real estate business are back in vogue. I believe that the old fashion principles will be around for a while, even in this internet enabled world. And what are the basics :

- For Sale signs and newspaper ads.
- Open Houses.
- Referals from friends and co-workers.
- Direct mass mailings of the listed property.

I do believe it will be hard for www.ebay to break into the local real estate market with the existing business model. Don't get me wrong, ebay has many great features especially for taking inefficiencies out of the marketplace. For example, I love to collect baseball cards and if I wanted a Babe Ruth 1915 Red Sox card to purchase it would be hard for me to go to a local store and find one. But ebay can fill that void because rare baseball cards are still, even today, an inefficient marketplace where on the other hand real estate isn't. Most real estate web sites and others have enormous amount of property listings, with no sign-in requirements that request personal data from you. In addition, these web sites provide free information on the home buying process for both the first-time home buyers and investors alike. So as you can see, the Boston real estate market is efficient and henceforth, why so few people go to for their housing needs. Plus, the Boston realtors are local, where ebay is a global, which ensures that the local brokers will target your market more efficiently in the buying or selling of your home. Also, have you ever tried to reach someone on the phone from ebay?

Are there any positives in using ebay? Yes, generally speaking it is an inexpensive venue to advertise your property which has an enormous viewing audience. My advertisement cost are only $150.00 per month, per listing. Although, I have yet to receive a call stating "I saw your property on and I would like to put in an offer" makes it very disheartening. As one of my agents stated: "John, did you really think someone is going to pull out their Visa card and say Oh yes! I will buy that Beacon Hill condo, my Visa card number is.........." Ok, maybe it is hopeful thinking on my part. But who knows what the future will hold. I am observing more and more viewers coming to my ebay site in the last three months more than ever before (ebay provides me with a free web counter for my listings so I can view it on a daily basis). Presently, I have received as few as 2 to a high of 40 unique visitors per day, per listing. Not a bad ROI (return on investment) according to marketing experts.

Another feature that I like about ebay is that with every posting it provides a commnity profile feature link of the neighborhood your listing is in. This added feature includes informational stats on the median age, number of college grads, number of married and singles living in the area and much more. All inclusive in the $150.00 posting.

I feel that ebay is still in the infant stages and still may be a major contender in the local market. However, It will require ebay to make some major adjustments in their business model as it pertains to real estate. With that said, the next generation of home buyers may change how we acquire real estate in the future. I remember back in the year 2000 when I first used for apartment rentals. At the time, I was only one of handful of brokers using it. Today, is not only successful, but it is second only to the Boston Globe for Boston apartment rental listings, so ebay may still be a player in our local market. But it will take a major shift on how people view how real estate is bought and sold. Presently, there is no signs that this will be happening in the next year or two but it may be in play in five to ten years from now. Old habits are hard to change, and I believe that there will also be some resistence from Boston realtors to prevent this paradigm shift to occur.

When this blog was printed I was the only person in the city of Boston, Cambridge or Brookline Ma.(to name just a few) that was using ebay to advertise properties for sale. But mark my words, this will all change in the future, the only question is how long will it take.

The views stated are mine and not those of the staff of Ford Realty Inc.

Boston Real Estate Holloween-Trick? or Bad Treat?


Check this out:

1. Mortgage interest rates are at a 6 year high.
2. Consumer confidence is at a 12 year low.
3. Home Buying Consumer Confidence is at a 10 year low.
4. MLS has more listings now then ever before.
5. Sub-prime loans are at record levels.
6. Foreclosures are on the rise.
7. Home buying plans are at a 12 year low according to Michigan Univer study.
8. Boston LINK (Multi-listing service) is at a record high inventory.
9 Days on the Market for listed properties is on the rise in Massachusetts.
10. Mortgage default payments are on the rise.

Lastly, Boston's growth rate is anemic. New England lost 20%, twice the U.S. average, of it's 20 to 34 year olds , according to the most recent survey.


I think the market is...........slowing.........dooooown.

more info on the Boston and Brookline real estate market visit our web site at