According to yesterday’s Wall Street Journal, many people still see real estate as their ticket to wealth. In several surveys conducted the expectation of the real estate market to bounce back could be as soon as six months. But many experts see things differently.

In the Wall Street Journal article it stated:

Karl Case, an economics professor at Wellesley College whose name adorns the S&P Case-Shiller home-price indexes, has studied U.S. house prices going back to the 1890s. Over the long run, he says, home prices tend to increase on average at an inflation-adjusted rate of 2.5% to 3% a year, about the same as per capita income. He thinks that long-run pattern is likely to continue, despite the recent choppiness.

Other experts make similarly modest predictions. William Wheaton, a professor of economics and real estate at the Massachusetts Institute of Technology, says he expects house prices to increase at a rate roughly one percentage point higher than inflation over the long term. Celia Chen, director of housing economics at Moody’s Economy.com, a research firm, expects house prices to increase an average of around 4% a year over the next couple of decades.

So what are your thoughts?

Source: Wall Street Journal

Curious as I was about sales during the past two months, I pulled the following data from the Listings Information Network, Inc. (LINK).

As you can see, activity is off around 25% compared to last year, while average and median prices and average price per square foot have increased, as well, but median is off when compared to 2006.

Sold Statistics, 2008

Closings: 346
Avg. $: $987,044
Median $: $469,750
Avg. $/SF: $644

Closings: 318 (w/out Mandarin Oriental or Battery Wharf)
Avg. $: $654,876
Median $: $448,000
Avg. $/SF: $564

Sold Statistics, 2007

Closings: 459
Avg. $: $664,675
Median $: $442,225
Avg. $/SF: $565

Sold Statistics, 2006

Closings: 473
Avg. $: $659,515
Median $: $490,000
Avg. $/SF: $603

2008 results are subject to change, since the LINK data is entered manually and is pulled from third-party sources, including real estate agents and the Suffolk County Registry of Deeds. Number of sales will go up, but average and median prices are probably pretty close to what really happened.

Neighborhoods included: Back Bay, Beacon Hill, Charlestown, Chinatown, Fenway, Financial District, Leather, Midtown, North End, Seaport, South Boston, South End, Theater District, Waterfront, and West End.

Last week, I mentioned a Fox 25 story that claimed that Downtown Boston “brownstone” sales volume had plummeted during 2008, down 78%.

After an exhaustive search through all the data, it seems to me that things are quite different from what was reported by Fox 25, and, earlier this year, by Kimberly Blanton at the Boston Globe.

The following includes condo sales data for the Downtown Boston from January 1, 2008 - July 11, 2008 (Fox 25 includes more months’ of data, but with the discrepancies are the same), including the South End, South Boston, West End, Waterfront, the Fenway, Midtown, Leather District, Seaport, North End, Charlestown, Chinatown, Back Bay, and Beacon Hill neighborhoods.

What was reported by Fox 25:

What was reported by the Globe:

What is the reality:

Building condo sales (that is, “new” and mid-rise / high-rise condo sales)

2007: 767 sales
2008: 423 sales (using LINK’s criteria)

Non-building condo sales (that is, “brownstone”, Victorian-era, three-decker condo sales)

2007: 1,087 sales (there were a total of 1,854 condo sales from 1/1 - 7/11; 1,854 - 767 = 1,087)
2008: 1,187 sales (there were a total of 1,610 condo sales from 1/1 - 7/11; 1,610 - 423 = 1,187)

Fox 25’s and the Globe’s data came from the Listing Information Network, Inc. (LINK), as did mine. Unfortunately, there is a wide discrepancy in the results which cannot be reconciled. I asked the people at LINK for further information / clarification and they graciously spoke with me at length, about it, but I just can’t get our numbers to agree. It’s a conundrum.

Here is what LINK reported in a spreadsheet released to both news organizations.

Unfortunately, these numbers don’t match up with what you would get if you did the research, yourself, using the same source.

At the end of the day, I guess it’s irrelevant which number is “accurate”.

Bottom line is, the Boston real estate market remains stagnant during these turbulent times, with sales volume off as much as 25-33% from years’ prior. Average and median sales prices through the third-quarter remain steady, but it remains to be seen what happened during the fourth-quarter, post-September meltdown.

On December 2, 2008 Emily Rooney of Greater Boston - WGBH interviewed Timothy Warren CEO, The Warren Group and Jack Enright Realtor, of Hammond Residential. The discussion was pertaining to the current real estate market conditions.

Some points of interest:

* Home sales in the state are up 14% and home prices are down by the same number

* For the first time in 5 years median home prices are below $300,000 (State home prices)

* Jack Enright from Hammond Residential, thinks we will see inventory increases in ‘09 and stated that “inventory is not where we wanted it to be in ‘08″

click on the link below to view the entire interview.

http://www.wgbh.org/gb/

From the wire:

Federal Reserve Chair Ben Bernanke said lowering the key interest rate is “certainly feasible,” but probably won’t revive the sagging economy.

In a speech Monday to Austin, Texas, business leaders, Bernanke said there are other ways the Fed might bolster the economy. He cited buying longer-term Treasury or agency securities on the open market in substantial quantities, which would lower rates on these securities and “thus help to spur aggregate demand,” Bernanke said.

Yep, that’s a tough situation, isn’t it? If the Fed Funds rate is cut to zero, then what other ways can you stimulate borrowing / spending?

It’s interesting that the Fed Chairman mentions buying up other government-issued debt. I had this very thought the other night. It’s too complex to get my little head around, but I was wondering if it made any sense to do so.

Could the Fed buy up a bunch of US Treasuries (Bills or Bonds, don’t know which makes more sense), isn’t this similar to what the Fed proposed to do with mortgage-backed securities, last week?, and wouldn’t it stimulate the credit markets?

I have some of this wrong, but I’ll look into it, further.

- Source: Fed Chair: Cutting Rates Won’t Help - By Jeannine Aversa, Associated Press

The Boston Courant does a great job of covering all the latest real estate news.

In case you missed this past week’s issue, here are some updates:

* Governor Patrick’s plans to dissolve the Massachusetts Turnpike Authority (MTA) could derail development of the air rights over the Pike. John Rosenthal has proposed a massive mixed-use project for land built over the Pike near Fenway Park, a second developer is expected to propose a project on Parcels 12-15 and, of course, the long-delayed Columbus Center project is proposed for land between the Back Bay and South End.

Fortunately, Columbus Center and Parcels 12-15 would probably not start construction until the credit markets recover, so the change in state agency would not delay anything. Meanwhile, Mr Rosenthal says his project is still on schedule for his #450-million Fenway Center development.

* The old Restoration Hardware space at the corners of Exeter and Boylston streets will become the Tannery, according to its owners. This had previously been announced. The old location, at 400 Boylston Street, would be turned into office space (no doubt capitalizing on the new office building going up at 350 Boylston Street, on the site of Shreve, Crump & Low).

* A proposal for a single-family home to be built on Putnam Ave will go before the Beacon Hill Civic Association, again, on Wednesday, 3 December. As mentioned in a previous blog entry, a developer is planning on building a new home on this now-empty lot, presumably the last piece of land available on Beacon Hill. The lot is landlocked, which means it is hard to reach by utilities and the fire / police departments. The builder has work-arounds for all these issues.

* Plans to open a pizzeria at 150 Tremont Street have neighbors up in arms, who want a more-upscale shop to open, instead. The retail space has been empty for almost a year, according to the Courant. Suffolk University owns the property, and presumably feels there is enough traffic in the area to make a pizza shop profitable. Some residents of the Tremont on the Common condo complex disagree; to wit, “We all know if you have a fast food place around you it collects an element that’s not conducive to a neighborhood.”

Residents would prefer “a gift shop, bakery, toy shop, or florist,” according to the article. To which I reply, “In future news: Tremont Street gift shop, bakery, toy shop, or florist closes due to lack of business.”

- Source: Boston Courant