I read a very nice, concise article on what we’re likely to see happen to the US economy, over the coming months and years.
From today’s Times:
The Federal Reserve sent the stock market soaring yesterday. So can it stop the decline in home prices, too?
Don’t count on it.
By last year, [the] ratio of prices to incomes had suddenly shot up to 4.5 [from the historical average of three times income].
For it to return to its old level, home prices would have to fall by an almost unthinkable one-third, and probably more in California, Florida and the Northeast …
… there is a good deal of evidence to suggest that the typical home last year was overvalued by something like 20 percent …
… Mark Zandi, chief economist of Moody’s Economy.com, ran an analysis for me this week in which he looked at home values, mortgage rates, tax rates and incomes going back to 1968. Taking all these into account, he found prices were about 20 percent too high.
Of course, I must point out (as does the reporter), that the decline in average home prices is on a national basis. While some areas might see drops of up to 40% (er, did I mention Detroit?), others might see little or no drop (although whether or not this should include the rate of inflation, I don’t know).
My belief, based on current supply and demand, is that Boston proper real estate prices will stay about where they are, today.
(I pretty much agree with anything Mark Zandi says. He’s cool. So is Bill Gross, at PIMCO. Oh, and where is Edward Glaeser these days??? Why is he so quiet?)
(I also should add, I think most economists and analysts opinions on the direction of the market assume one thing: the cost of money will stay constant. However, as we all know, the cost of money is NOT constant, in the US. The Federal Reserve can change it, twelve times a year.
One story I read today said that in order for the housing market to get back in line, interest rates need to drop to approximately 3.75% (how you can measure something like that in such specific numbers is beyond me and probably impossible, but that’s economists for you …).
Don’t rule that out. The Fed has done stranger things.
If they do drop the rate, the economy could jump into overdrive, money would be spread far and wide, and the results would be worse than the cause.)
More: Will the Fed Reverse the Housing Slump? – By David Leonhardt, The New York Times
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Over the course of 20 years in the Boston downtown real estate market, John represented and sold numerous, condominiums, investment and development properties in Greater Boston and in the surrounding suburbs
In addition to representing Boston condo buyers and sellers, John is currently one of the most recognized Boston condo blog writers regarding Boston condominiums and residential real estate markets. John's insights and observations about the Boston condo market have been seen in a wide variety of the most established local & national media outlets including; Banker and Tradesman, Boston Magazine The Boston Globe, The Boston Herald and NewsWeek and Fortune magazine, among others.
For over 24 years, John Ford, of Ford Realty Inc., has been actively involved in the real estate industry. He started his career in commercial real estate with a national firm Spaulding & Slye and quickly realized that he had a passion for residential properties. In 1999, John entered the residential real estate market, and in 2000 John Started his own firm Ford Realty Inc. As a broker, his clients have come to love his fun, vivacious, and friendly attitude. He prides himself on bringing honesty and integrity to the entire home buying and selling process. In addition to helping buyers and sellers, he also works with rental clients. Whether you’re looking to purchase a new Boston condo or rent an apartment, you’ll quickly learn why John has a 97% closing rate.
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