November 27, 2005

THE BUBBLE BURST AND ALL I HAVE TO SHOW FOR IT IS A $360K HOME:

Mass. housing boom over, homeowners, agents say (Bloomberg News, November 26, 2005)

Massachusetts' five-year housing boom, which lifted the average home price by 71 percent and bolstered the local economy, is over, according to homeowners and real estate agents. [...]

The median price of a single-family home in Massachusetts was $360,000 in September, down 4 percent from a record $375,000 in August, according to the Massachusetts Association of Realtors. Houses available for sale rose for the seventh month in a row to 38,319, up 1.7 percent from August. The number of transactions declined 19 percent to 4,464.

US home sales probably will dip 7.3 percent to an annualized 6.71 million this quarter after reaching an all-time high of 7.24 million in the third quarter, David Berson, chief economist of Fannie Mae, said in a Nov. 15 forecast.

Alan Clayton-Matthews, an economist with New England Economic Partnership in Walpole, said home prices in Boston probably will decline in 2006. The median price of a home in Massachusetts probably will fall ''less than 3 percent" between now and the third quarter of 2006, he forecast.


A brief pause, during which the Fed starts cutting its artificially high rates, isn't exactly a bursting bubble, is it?

Posted by Orrin Judd at November 27, 2005 2:30 PM
Comments

71% in 5 not bad at all.

We got about 125% in 9.

Posted by: Sandy P at November 27, 2005 11:31 PM


I'm sorry, did you say "during which the Fed starts cutting its artificially high rates"???

What "artificially high rates"? Even with the recent rate increases, rates are still at historic lows. And by all reports inflation is looming its head again. If you think rates are about to go *back* even lower, you're dreaming.

More simply: If rates don't go higher, Real Estate won't crash -- But the dollar will. Pick your poison.

Posted by: Popo at November 27, 2005 11:55 PM

Why would the dollar crash if rates go lower?

Posted by: David Cohen at November 28, 2005 12:25 AM

Magic. Daaark magic.

Posted by: Timothy at November 28, 2005 12:58 AM

real estate prices are artificially high, and will be dropping steadily for the next 3 - 4 years, regardless of interest rates. ask warren and bill (and hopefully george) about the dollar crashing. betting against America is a fool's errand.

Posted by: jay gould at November 28, 2005 1:15 AM

Popo:

Real interest rates.

Posted by: oj at November 28, 2005 7:16 AM

jay:

Drop to what?

Posted by: oj at November 28, 2005 7:32 AM

THE BUBBLE BURST AND ALL I HAVE TO SHOW FOR IT IS A $360K HOME: And a $ 400K mortgage, for those unlucky enough to have bought in the past two years.

Popo appears to be saying that foreign investors will pull their money from U.S. gov't paper, to invest in nations with higher interest rates for gov't bonds.

However, IMO there aren't any non-risky places that are currently increasing their interest rates faster than is the U.S.

The EU is the world's second-largest economic bloc, and they ought to be lowering interest rates.
If they bow to reality, then instead of "crashing", the U.S. dollar will gain against the Euro, and many other major currencies.

Posted by: Michael Herdegen [TypeKey Profile Page] at November 28, 2005 7:59 AM

The simpler point is there aren't any other non-risky places...period.

Posted by: oj at November 28, 2005 8:06 AM

oj. So right.

Posted by: erp at November 28, 2005 9:10 AM

Is this just the trend in Massachusetts, or nationwide?

Posted by: Mikey at November 28, 2005 2:34 PM

nationwide.

prices will drop to the point where salaries are sufficient to cover mortgage costs. since salaries aren't going up (no inflation) prices will come down. i believe mass. went through a 30+% drop from peak prices, when the last real estate cycle headed down (mid 1990's).

the carnage from real estate speculation is going to keep the carrion fat and happy for years.

Posted by: jay gould at November 28, 2005 7:22 PM
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