A new report out today predicts Boston (actually, Massachusetts) may face a
worse housing market next year.

The findings contradict what other experts have been predicting.

Some economists feel as though Boston may have seen most of its damage,
already. Prices have dropped an average of 2-3%, in the state, during 2006.
(This is for homes and condos; single-family homes have dropped in the 5%
range, in the state.)

According to the New England Economic Partnership (CRAP), housing prices
will drop by as much as 10% from 2005 prices, but won’t bottom until early
2008.

Prices will remain flat through 2009, before beginning to climb, gradually.

I tend to believe this is worst case scenario, seeing as we have a healthy
economy (4.6% unemployment rate?), low interest rates (sub-5% fixed rate
mortgages?), and a leveling off in inventory. I have read a lot of
economists reports, which has led me to this belief.

I have to say, unless I’m reading it wrong, this is simply the stupidest
statement of the year:

During this recent housing boom, the gap between income and home prices
reached an all-time high, exceeding the gap of the late 1980s, the last time
a boom turned bust, Clayton-Matthews said.

The implication, either on the part of the study’s author, or the newspaper
reporters covering it, is that people can’t afford to buy a home because its
list price is too high.

That’s stupid. People buy based on monthly payments, not on list price.

Yes, the gap is the largest it has been, but in 1989 the mortgage loan
interest rate was %. Today, it’s around 6%. Home prices are irrelevant in
this regard.

More: Housing slide may deepen – By Robert Gavin, The Boston
Globe

Also: Home prices to reel? Study sees 10 percent drop – By Jay Fitzgerald,
The Boston Herald

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