5 Responses to “Condo sales prices drop 1.8% in Nov; sales to 2003 levels” »»

1. Ed Chin
   Comment by Ed Chin | 12/27/06 at 6:29 pm

   What’s driving the drop in prices? What are factors that affect prices in Boston? Great website

   by the way…

2. John A Keith
   Comment by John A Keith | 12/27/06 at 10:59 pm

   Ha. Simple supply and demand, Ed,

   supply and demand.

   Prices are dropping because there are less buyers than there were before,

   and this had led to a glut in inventory, building over the past year. The glut means the typical

   seller must make his or her property look better than the competition. The easiest way to do this

   is to lower the price of his or her home. A buyer comparing two condos of the same estimate

   quality, may choose the one with the lower price.

   How did the glut happen?

   Say that

   there is an average of 2000 condos on the market at any one time, that 400 come on the market by

   sellers, each month, and that 400 sell every month. That would be a stable market.

   However,

   if sales drop to 300 per month, that leaves an extra 100 on the market, each month. Add those up,

   and, within a year, you’ll have 3,000 condos on the market, a 50% increase.

   That’s what

   happened. Of course, some sellers ended up pulling their units, because they didn’t sell, but at

   the same time, developers added units to the market.

   There are still many advantages to

   buying vs. renting.

   Low interest rates make buying a condo a good alternative to renting.

   The federal income tax deduction for mortgage loan interest is a big incentive to buying vs.

   renting. Plus, many people feel more comfortable owning a place (or, getting a mortgage loan)

   rather than renting and being subject to the whims of a landlord.

   1.8% is a pretty minor

   drop in average price, although I would expect prices in Boston to end up down 5%, when we look

   back, historically.

   Many people put their properties on the market at prices they don’t

   think they’ll get - they are testing the market. They feel if they get their price, they’ll

   sell, otherwise they’ll sit and wait.

   The longer we have stability in interest rates and

   home prices, and a steady national economy and no wartime surprises, the more buyers will re-enter

   the market. Maybe not at the level of last year or the year before, but certainly of the several

   years before then. There are too many people who need a place to live. Boston built very little

   (look at the US Census for proof) over the past five years; they will naturally move up from

   renting to buying. Even if our population stays stagnant, there will still be immigration of

   people, either from other countries or do to job relocations, plus graduates of nearby schools will

   continue to stay in the area. This will create a more stable housing market.

3. Martin Grammatica
   Comment by Martin Grammatica | 12/28/06 at 12:09 pm

   So

   how often do you have to replace your comma key?

4. Ed Chin
   Comment by Ed Chin | 12/28/06 at 4:30 pm

   Great answer, much longer than expected. I appreciate the time you’ve put into your

   website.

   So would you say that there’s no overwhelming reason that the boston real estate

   market will decrease other than due to the general cooling of the overall U.S. housing

   markets?

   Also, I’m looking for reasons why we can expect the boston real estate market to

   increase after the stablization of the cooling effect. For example, the big dig is going to done

   in the next couple of years right?

   When would you say is a good timeframe to purchase in

   Boston?

5. Rich Rosa
   Comment by Rich Rosa | 12/30/06 at 2:51 pm

   Just found your blog today. Nice job. Happy New Year!

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