So, at the end of the year, everyone chimed in on what happened in the housing market in 2006, and everyone was asked for their predictions for the housing market in 2007.
I have my own predictions for the coming year, based on what I’ve read and heard (speakers at the Inman News Conference, which I just attended, had some great insights on the subject, which I’ll bring up, another time), but I won’t bother you with them, right now.
Here’s some brief comments from other “experts”:
1) The people over at Trulia report that Boston saw a drop of 9.1% in median sales price, in 2006, using a year-to-year comparison. I have no idea what Trulia is talking about, really. I guess they might mean the entire state, because, certainly, the city of Boston didn’t see a 9.1% drop in sales price. In addition, I don’t know what Trulia is including in their calculations – single-family homes, condos, or both? Oh, well, more grist for the mill, I guess.
More: Live From Inman: Trends, Trends, Trends! – Trulia.com, by way of Curbed.com
2) Karl Case, Wellesley College economist, is pessimistic on the 2007 housing market, based on what he saw in 2006 and the state of the national & local economies.
Combined with an already-large drop in housing starts, [a drop in housing prices] could put a measurable dent in the nation’s economy. The housing cool down, in turn, could lead to the loss of 1.4 million jobs by the end of 2008, pushing up the national unemployment rate to 5.8 percent, Case’s report estimates.
Um, okay. That’s cool. I’m extremely skeptical, and haven’t heard anyone else of any regard saying this. You can say that one thing “may” lead to another. You can also say that a 9.0 category earthquake in California would break off Los Angeles into the sea, but I’m not banking on it.
It’s just more rabble from the Herald’s resident real estate columnist, in my opinion.
More: Buyers vs. homesellers: Standoff could lead to recession – By Scott Van Voorhis, The Boston Herald
3) Predictions of the direction of the real estate market are all over the place. One thing is for certain, however, and that’s that using national forecasts to decide what to do, here in Massachusetts, is a mistake.
Also, it’s unclear when the average buyer will come back into the market, if ever. Anyone who bought last year will need to wait at least another two years, to make back what they’ve spent, for one thing.
Even though most housing experts would not recommend buying at the top of a market cycle, last years’ home buyers bought with reckless abandon, confident that home prices could go nowhere but up. Now that conditions are generally better for home buyers, many are waiting on the sidelines for a clear sign that the market has bottomed out.
I don’t know what a “clear sign” would be – buyer psychology is a big factor right now (isn’t it always?). First-time homebuyers may come back into the market, over the coming 18-months, but certainly not all at the same time.
More: Gauging where housing market is headed – By Dyan Hymer, Inman News, by way of The Boston Globe
4) More sales data from area experts show a small drop in condo prices:
[The Warren Group] said the median sales price for a single-family home in Massachusetts fell 6.5 percent from year earlier, to $315,000. The median condo price fell about 2 percent, to $269,900, The Warren Group said.
[The Massachusetts Association of Realtors, however, said] the median sales price fell 4 percent from a year earlier, to $340,000 from $354,000.
The median selling price for condos, however, rose about 2 percent, to $270,000 from $265,000.
(MAR only includes sales made through real estate agents, accounting for the discrepancy.)
Some Massachusetts experts predict the slowdown in sales volume will continue, with minor or no drops in average and median sales prices, according to a year-end story in the Globe. (Well, one expert sees the numbers improving, but the expert is David Wluka, of the Massachusetts Association of Realtors, so what do you expect?)
A recent forecast by Global Insight, a Waltham economics research firm, projects the median price for single-family homes in Greater Boston will slip about 2 percent in 2006 and another 4 percent in 2007.
More: Housing market outlook unclear – By Robert Gavin, The Boston Globe
5) The people over at the Wall Street Journal caution us from calling the current situation “the bottom”. Why?
A large number of homes for sale are unoccupied.
In the third quarter, there were 5.7 million vacant housing units for sale or rent, accounting for a record 4.6% of all U.S. homes. The average in the 1990s was about 3.5%.
To get this ratio back to normal, 1.3 million vacant homes would need to be occupied. For comparison sake, economists polled by Blue Chip Economic Indicators expect construction to begin on about 1.6 million homes this year. With so many empty homes out there, one wonders why builders would bother breaking ground on new ones.
That’s a very telling figure, and one I haven’t seen reported anywhere else. Of course, we all knew that there was a large inventory sitting out there, but this story puts it in perspective.
Of course, just because houses are out there, sitting empty, won’t necessarily lead to a lowering in the average and median sales price, right? I mean, a lot of those empty houses (and condos?) might be real junk, and unsaleable at any price, except at auction. And, houses and condos can be turned into rentals, real fast, which remove them from the total.
We’ll see.
More: Will Real Estate Finally Bloom Come Springtime? – By Justin Lahart, The Wall Street Journal Online
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