Well, the Globe writes that there continues to be a lot of downward pressure on housing prices, although calling it a “buyers market” still seems like a stretch to me.
So, on one hand we’ve got burgeoning housing inventories on the market; on the other, the reports issued on Monday regarding the lack of housing. does that mean we can just let the market’s Invisible Hand take care of things? Just wait it out, and prices will come back to earth?
Well, probably not. According to Profs. Bluestone and Glaeser, the volatility of the Massachusetts market is a result of scarcity. We may be hitting a plateau … or just over the top of a roller-coaster ride. Somewhat counterintuitively, increasing housing supply is one way to stabilize the market, making a crash less likely. Bluestone’s PowerPoint presentation states “an increase in housing supply could ‘inoculate’ Massachusetts homeowners against the possibility of a long-term precipitous decline in housing values.“
That’s a tough one for folks to understand — kind of counterintuitive. But there it is.
more housing stock to avoid a complete crash. Now the question is: Can the individual homeowner, who makes a short-term gain by locking out development, act in his or her long-term benefit by promoting development and stabilizing the market? Will the individual act collectively to that individual’s benefit?
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and remember, the truly “free” market — that is, one with no interference whatsoever — is anarchic (in the political sense of the word.) That caveat should be affixed to every debate involving the “free market.”
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Hey, it looks good on paper, right?
The presentation does not suggest that increasing housing supply now will help avoid a crash. What it says is that the housing bubble is larger because of previous restrictions on increasing the housing supply. It is too late to avoid a crash for this real-estate cycle. If we remove the restrictions on new development then it will help prevent future bubbles.
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I don’t really trust their work very much though. Most of their graphs are based on very small amounts of data (they have only looked at one previous real-estate cycle). Most the graphs in that presentation look like they were taken out of a book on how to lie with statistics. The axes are scaled to make things look like huge differences when they aren’t. Their fitted curves don’t go through their data points very well and they don’t give the r-squared coefficient that would tell you how well they do fit. It looks like they developed their conclusions and then found data they could fit to them.
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When everyone is complaining about housing being too expensive and people are moving away because house prices are too high, something is wrong if house prices are climbing. This has been the case for several years now in Massachusetts. House prices here are going to fall for the next few years. It is too late to do anything about that other than causing high inflation (which only the federal government can do and would cause other problems). The discussion we should be having now is how do we prevent another real estate bubbles from forming. How do we stop people from being stupid enough to buy a house in a market where everyone says houses are too expensive? How do we convince homeowners that development and stable house price appreciation is better than the real-estate bubble cycle? Especially when many current homeowners bought overpriced homes and are going to have negative equity within a few years?
Despite the rampant opinion that there’s a housing bubble and a crash is inevitable or that it’s “too late to avoid a crash for this real-estate cycle,” a bubble isn’t certain and a crash is not inevitable.
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Frankly, pundits have been writing about the “current” housing bubble for over a year and it’s yet to appear. Someday a real estate crash will appear and the ‘a stopped clock is right twice a day’ rubrick will be appropriate.
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For now, there’re are some good reasons that real estate is fairly priced. Or, if residential real estate in New England is high by historic measures, then there are reasonable scenarios where the excess price will gradually decline over the short or long term, without a bubblish ‘pop.’
that with so many people moving away from MA, prices would start dropping. The problem thus is not with growing supply, but rather dropping demand.
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I wouldn’t be surprised if the fact that condo prices are dropping faster than single families is directly correlated to the fact that it is primarily the younger people moving out — the same people who would buy a condo first as a starter home because it is cheaper than a single family house.
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MA obviously has a lot of things going for it, including (at least for now) good job opportunities for well-educated young professionals, good cultural/historical resources and the like. If housing was more plentiful, I don’t think house prices would crash, because people would stop leaving.
when I read hoyapaul’s “MA obviously has a lot of things going for it, including (at least for now) good job opportunities for well-educated young professionals…” This is exactly the cohort group buzzing off for Raleigh/Durham, Austin and Tampa. Yeah, good opportunities for History BAâs collecting tolls on the Mass Turnpike.
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Can you provide a citation? Thought MA’s unemployment was above the national average? Am I wrong on this?
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Except for “eds and meds”, jobs are flat, and still 50,000 below our 2001 peak. Oh, I forgot: the public sector has shown some growth. But that’s easily offset by all the Big Dig jobs that are coming to an end.
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The housing market is not homogeneous across price levels. High end stuff is selling well (>$1,000,000) and so is entry-level (<$300,000) and the inner-urban yuppie/DINK market, too.
But the inventory build-up and looming price declines generally predicted (another article today in the Herald) will hit the middle markets: mid-range condos in Boston ($500âs to $900âs) and suburban mid-range ($400-ish to $750-ish.)
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These dynamics reflect whoâs leaving, whoâs coming, and whoâs staying. Bottom line is MA is becoming highly income-bifurcated, with increasing populations at the far ends of the income scale (especially low-income, modest-income, immigrants, and minimum-wage households) while the middle-income range is being hollowed out.
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So while thereâs a ton of inventory, and building, youâll find itâs mostly in the middle range product sector. The high and low ends of the market still have an excess of demand.
Think you misread my comment. I added “(at least for now)” to clearly imply that as people leave, the jobs will eventually leave with them. So I don’t disagree with you.
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In any case, obviously looking at overall unemployment numbers are irrelevant, since my comment was about jobs for well-educated young professionals, not the overall job force. As this citiation shows, MA has been adding a few jobs in the “young professional” industries, and losing jobs primarily in the manufacturing and utilities, etc. groups. Nevertheless, compared to NC (for example), this growth is weak, and it is no doubt because young professionals are leaving the state and (I think we agree) the jobs will eventually follow.
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Also, do you have a cite for the middle-market losses in the housing market? I suspect that this is correct, but I’m interested to see how pronounced this trend is. Needless to say, if the solid middle-class starts leaving in droves, creating an income-bifurcated populace, that spells big trouble for the Commonwealth down the road.
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Which is why I think housing (and the very much related issue of restrictive zoning) is one of the, if not the, biggest problems facing MA today.