The subprime-mortgage sector’s sudden implosion is putting some frost into forecasts for the Massachusetts housing market’s crucial spring season.
“I was looking for a recovery - or at least stabilization - in Massachusetts home prices this spring, but now I think we might see a little more deterioration,” said economist John Bitner of Boston-based Eastern Bank.
Word of major problems in the subprime-mortgage industry emerged last week just as Massachusetts moved toward spring, the No. 1 home-selling season. Last Tuesday, two big subprime lenders sent the Dow Jones industrial average tumbling 243 points by disclosing significant financial problems.
The news focused attention on the fact that around two dozen subprime lenders have filed for bankruptcy or closed in recent months. Subprime lenders - which write high-interest mortgages to people with weak credit - are facing growing problems from bad debt.
Many homeowners who took out such mortgages in the past year or so have fallen behind on payments.
That’s prompted big financial institutions that bought up the loans as investments to demand their money back from the subprime loan companies. However, many subprime firms didn’t have enough cash to comply, declaring bankruptcy or going out of business instead.
Now, experts say the subprime industry’s virtual collapse could raise housing supply while cutting market demand.
The Mortgage Bankers Association predicts tightened mortgage lending standards will mean 1 percent to 2 percent fewer house hunters will get loans this year. At the same time, experts predict a growing number of distressed properties will hit the market going forward.
The Center for Responsible Lending estimates 17 percent of Massachusetts home buyers who received bad credit home loans in the past two years will ultimately lose their properties.
Economist Jim Campen of the University of Massachusetts-Boston said that translates into thousands of extra properties for sale - and he thinks the CRL figures “may turn out to be conservative.” Campen and others also think the meltdown will affect more than just subprime borrowers.
“If one of your neighbors goes into foreclosure and their property sells for a below-market price, that will bring the value of your property down,” said Jeremy Shapiro of market-tracker ForeclosuresMass.com, noting that buyers generally base offers on what nearby homes sold for.
Experts add that bad publicity surrounding the subprime market might prompt some Massachusetts mortgage seekers to stay on the sidelines this spring.
“The knee-jerk reaction will be: ‘There’s going to be a lot of foreclosed properties coming onto the market. Maybe we shouldn’t be so hasty about buying,’ ” Eastern Bank’s Bitner said.
The economist recently revised his forecast for Bay State housing downward, predicting prices will decline until summer, then remain flat until early 2008.
Nationally, Merrill Lynch analyst David Rosenberg last week predicted U.S. home prices could fall almost 10 percent this year.
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An explosion in overdue mortgage loans tailored specifically to home buyers with bad credit has driven foreclosures to record highs in Massachusetts, the Boston Globe reports today.
These mortgages, known as subprime loans (or bad credit home loans), charge higher interest rates to compensate the home loan lender for higher risks associated with customers who have low credit scores or large debts.
In the first half of this decade, bad credit mortgage loans were lauded for helping more Americans than ever buy homes. But now, five years after their popularity took off, many of the home loans are backfiring.
More homeowners are no longer able to afford their mortgage payments, which typically rise sharply two years into the home loan. In 2006, lenders filed 19,487 foreclosure notices against Massachusetts homeowners, surpassing the record high of 17,000 filings in 1991.
Research by the Federal Reserve Bank of Boston on the rising tide of foreclosure filings in the state found that bad credit home loans are a major culprit.
While such loans make up 12 percent of all mortgage activity in the state, they accounted for more than 67 percent of foreclosure filings in the third quarter of 2006, the most recent data available.
Most delinquencies were tied to subprime loans with adjustable mortgage rates, which increase payments as interest rates rise.
Historically, one in four homeowners threatened with foreclosure actually loses a home. Foreclosure is a legal process that takes six months to two years from the initial filing to the sale of the home in an auction.
Most homeowners either renegotiate a payment plan with their lender or sell their house to pay off the loan. But when home values decline, as they did last year, the options become limited.
Tammy Amado obtained a second mortgage to buy a two-family home in January 2005 from Fremont Investment & Loan, one of the largest subprime lenders in Massachusetts. Despite having a good job as an apartment manager, she fell behind on her payments.
“I’m trying the best that I can,” said Amado, who found a second job last year as a tax specialist.
The interest rate on the bigger of the two Massachusetts mortgage loans, for a total of $380,000, was initially 6.4 percent and would rise after two years, according to her loan documents; a second, $89,000 loan had a permanent 11 percent rate.
Her combined monthly payment: $3,225, the documents show.
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A sharp rise in January home sales and modest price declines indicate that the Massachusetts housing market may be recovering from its worst slump in more than a decade, the Boston Globe reports.
The number of single-family homes sold rose almost 13 percent in January compared to a year earlier, the first increase in the last 10 months.
Sales were strongest on the South Shore of the Boston area and on Cape Cod. The median price of a single-family home fell to $340,000, 2.4 percent lower than a year ago, but virtually unchanged over the past four months.
“It’s been a long time since we’ve reported we had an increase in sales,” said Timothy Warren, CEO of Warren Group, a Boston real estate research and publishing firm that also tracks sales data. “I’d call it a hopeful sign.”
A warm and virtually snowless winter deserves some of the credit for the strong sales. But the most significant factor fueling the housing market this winter, agents and analysts said, may be the improving affordability of homes in one of the most expensive real estate markets in the country.
Larissa Duzhansky, a housing economist for the Lexington consulting firm Global Insight, said falling home prices “may be a sign of stabilization” because homes are becoming more affordable. Massachusetts experienced record price appreciation during the housing boom of 2002-2005.
“We had the overvaluation problem, which was one of the things that drove us into this correction in the first place. We’re less overvalued if home prices fall, and sales are beginning to go up,” Duzhansky said.
“Buyers really do want to buy but they’re afraid of making a mistake,” said the Tierneys’ agent, Gil Campos of Re/Max Real Estate Center in Foxborough, which closed 30 percent more sales last month than a year earlier. “The magic right now is, if your house is in really good condition and priced right, it will sell.”
Real estate agents statewide told of a flurry of recent activity that could reverse a trend of slow sales and shrinking commissions in 2006, when Massachusetts mortgage demand was tepid at best.
They reported their open houses are busier and buyers who window-shopped last year are now putting deadlines on finding a house. Some sale listings have even elicited multiple offers, they said.
Analysts were more cautious than agents and warned that a one-month sales increase - particularly in January, a traditionally light month - is hardly an assurance that the market is destined to rebound in 2007.
While home price declines have been good for buyers, it’s also unclear whether homeowners will see the value of the properties start to rise again this year, even as mortgage loan rates remain relatively stable.
“It’s quite possible the number of sales will be up for the whole year. My question is prices, whether they will be up for the whole year,” he said.
Beverly agent Linda O’Connor of Realpro Associates said buyers “are pawing over things like it’s Filene’s Basement.”
But they are buying. While sales in Essex County, which includes Beverly, fell by 4.34 percent in January as Massachusetts home loan activity slips, she saw “very strong pockets of activity,” especially for houses priced above $750,000.
“It’s almost as if there was a jump-start” in the high-end market, she said, though all price ranges are attracting more prospective buyers.
SOURCE: Boston Globe
Have we or have we not hit bottom?
That continues to be the real estate question of the hour (day, month, or year) in Massachusetts.
Whether one wishes to term it a correction, leveling out, or simply a return to normalcy, 2006 was a sobering year for professional real estate agents and mortgage brokers across the country.
Total existing home sales - detached single-family units and condominiums - were down 10.1 percent in the U.S. for the fourth quarter of 2006 compared with the fourth quarter 2005, according to numbers released last week by the National Association of Realtors.
“This information confirms 2006 was the year of contraction,” said NAR chief economist David Lereah, coining yet another variation on a theme. “And hopefully the fourth quarter was the bottom of this current cycle.”
In the Northeast as a whole, fourth-quarter house and condo sales dropped 6.6 percent from 2005-2006. The Massachusetts Association of Realtors on Friday also came out with its own end-of-the-year bad news. According to the association, Bay State home sales decreased 14.6 percent in 2006.
As Massachusetts mortgage costs grew many times faster than the personal incomes that make the payments, condo sales in Massachusetts in the same period were off by 12.1 percent.
The MAR’s South Shore region, which includes both Taunton and surrounding towns, accounted for 14.7 percent fewer single-family homes and 9.7 percent fewer condo units sold in 2006 than that of the previous year.
In a trend indicative of the Massachusetts housing market as a whole, the median selling price of a single-family home in the South Shore declined 3.4 percent in 2006, from $364,000 to $351,500, while condo prices also fell, but less so - from $259,900 to $253,750, or 2.4 percent.
Asked to predict when the market might hit bottom - the symbolic point when sellers’ asking prices have fully adjusted to market conditions and begin to rise again, some experts refuse to speculate.
“Oh boy, I have no idea,” said Gail Carter, president of Gail Carter Realty in Assonet.
Despite the recent numbers, she said not all is doom and gloom of late, with condo market activity remaining fairly vibrant from Fall River to Taunton.
Attractive home loan rates continue to be something of a motivating saving grace for buyers to act. As of Friday the average U.S. 30-year fixed-rate on a home loan was 6.32 percent, just 0.01 percent higher than the week before, according to Bankrate.com.
“It’s still a very good time to buy,” said Doug Azarian, MAR president and owner of Century 21 Dream Homes in North Falmouth.
One good sign for Realtors and real estate agents in general, said Azarian, has been a diminishing inventory of homes and condos that remain unsold, an indicator that some sellers are having more success.
He said whereas inventory levels are now averaging 10-11 months, in August and September they were in the range of 15-16 months. But there’s still a ways to go in that respect. He said 7-8 months’ worth of inventory is considered more indicative of “a balanced market.”
Things could be worse, of course. In all, 2006 turned out to be the third best year on record for home sales in Massachusetts.
But the record sales and mortgage loan activity of 2001 to 2004, officials caution, should be considered a thing of the past.
SOURCE: Taunton Gazette
Lillian Margolis of Andover, Mass., didn’t always have the perfect home.
In fact, there were eight inches of water in the basement after she bought it in 1981 for $129,000. She’s undergone three major home remodeling projects, expanding the living space by 600 square feet.
And while Margolis has no intentions of selling the home, she believes she could recoup her approximate $430,000 in home improvement costs - made possible via various home equity loans - at resale.
“I love how this house is married to the land,” Margolis, 73, told the Lawrence (Mass.) Eagle-Tribune. “Before, I was isolated. I couldn’t see anybody. Now, I can see everything. It took a lot of time to make this house the way it is. It was certainly a labor of love.”
Traditionally, home improvement projects have been a great way to increase your home’s resale value. This is no secret, as homeowners spent roughly $168 billion on home improvements and repairs in 2006, according to the Joint Center for Housing Studies at Harvard University.
Homeowners hoping to take advantage and cash in on a sizzling Massachusetts housing market focused on high-end projects, like new master suites, during the last five years.
But now that Massachusetts mortgage costs have soared and demand cooled, homeowners are more focused on modest home improvement projects that won’t price out potential buyers, said Kermit Baker, director of the Remodeling Futures Program at the Harvard center.
The truth is, you’re unlikely to recoup a remodeling project’s entire cost in today’s market. Price tags rose for most projects in 2006 while their resale value dropped back down to 2002 levels, according to Remodeling Magazine’s 19th annual Cost vs. Value Report.
But keep in mind that resale value isn’t always measured monetarily. You might spend $65,000 on an addition and increase the home’s value by just $50,000. But if it takes you three fewer months to sell the house, that time saved is also worth something.
When you plan to sell should factor into your project selection process. If you want to move homes this spring, simple improvements to the home’s electrical system or storage areas would attract buyers without making the house cost more than they can afford.
Keeping the house updated through small cosmetic improvements can result in getting $20,000 more at closing time, said Andover real estate agent Susan Papalia.
Also, it’s important to note that improvements that make your home more marketable can be as simple as cleaning up and decluttering.
“Your closets shouldn’t be overrun with stuff inside. If they looks neat and organized, buyers think, ‘There’s plenty of room in here,’” said professional organizer Jessica O’Leary of Derry, N.H. “It’s amazing how keeping things picked up really goes a long way.”
If you’d like to sell in a few years when the market is likely to regain at least some of its strength, think about using your home improvement loan for a larger project, like remodeling a bathroom.
A project designed for mass appeal will add value to your house in the long run, but more importantly, it will increase the quality of your daily life until then, Baker said.
“Home is a priority for me,” stated Andover resident Cathy Lloyd. “I love being home and love entertaining others in my home. Plus, I do believe that whenever we sell, depending on market conditions, mortgage rates, etc., we will get back some if not all of our investment.”
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Massachusetts buyers, heed this call.
The Boston Globe quoted a mortgage expert Thursday afternoon as saying the planets are in alignment for a “robust” spring housing market. A number of factors merging together could mean consumers experience the best buyers market in more than a decade, the Boston mortgage company said.
Recent sales have been slumping; prices have gone sideways and down, but Summit Mortgage LLC sees a bright silver lining ahead.
“With reduced home values, historically low mortgage rates, and pent-up consumer demand, I think the spring real estate market will be a home run,” Richard S. Fedele, Summit’s CEO, said in a statement. “We’re now seeing more affordability in the housing market than we’ve seen in years.”
For people who have looked at the cost of a Massachusetts mortgage in the past 18 months, that good news comes not a moment too soon.
In December, the volume of sales for detached single family homes fell 16.6 percent throughout the Massachusetts housing market, and the median selling price for a single-family dropped 5.4 percent to $335,000 compared with the same figures in December 2005.
Mortgage rates, meanwhile, continue to be low by historical standards.
For the week ending February 8, mortgage giant Freddie Mac reported that the average rate for a 30-year fixed-rate home mortgage was 6.28 percent, only slightly higher than the 6.24 percent average for the corresponding week a year ago.
Freddie Mac officials expect mortgage rates to stay mostly within the 6.3 percent and 6.5 percent range throughout the year, which represents more great news for potential home mortgage loan applicants.
Combine attractive prices with attractive home loan rates, and the result is good news in the Bay State for the first time in quite awhile.
“Declining home prices are behind us,” Fedele said. “The spring market will be solid, and I expect some appreciation in home values by the end of the year.”
SOURCE: Boston Globe
What is your home’s real value? No, we don’t mean the amount of your home appraisal - we mean the actual value, emotionally and personally, to you and your family.
This is the topic broached by Mark Pothier, the senior assistant business editor of the Boston Globe, in a recent column in the newspaper’s Sunday magazine. For all the talk of Massachusetts mortgage rates, market trends, asking prices and the like, we may be overlooking a more important view - one that previous generations embraced when it comes to home ownership.
After his in-laws died in 2005, Pothier writes that his family listed their house with an agent. Someone would eventually buy the place, and the deed would change hands. But the sense of home they nurtured for four decades would stay in the family.
The standard ads were sent to local newspapers and real estate flyers, their wording slashing 40 years of character to blurbs. Great in-town property. Near everything! Four bedrooms, heated sunroom, and large walk-in closet. Living room with fireplace!
A local real estate agent soon brought people to look around. They asked if the carpeting covered hardwood and wondered about the origin of a stain on the dining room ceiling. There was a lot of talk about “potential.”
In the following months, family and friends began to ask questions. Many of them sounded worried. “How many people have been through?” “Anyone make an offer yet?”
Some dispensed advice. Ask the agent to schedule more open houses. Think about renting it out for a year. Housing analysts already were poking at the bubble that lifted the Massachusetts housing market to new highs.
“For sale” signs were putting down roots on front lawns. Inventory across the state began collecting dust, the broker said, and buyers were not in a hurry to make decisions.
In early 2006, as winter wore into spring, they dropped the listing price once, twice, and then a third time. That’s when the hard reality of the real estate market: Almost no one outside of immediate family associated the parents with the house anymore. While they still treasured it, water stain and all, others saw a commodity in danger of becoming a liability.
These days, people tend to think of houses as places to stay while waiting to go somewhere else. They anticipate corporate headquarters moving jobs out of state or fear layoffs will arrive with the next quarterly report.
Perhaps they covet a bigger house with more amenities. Everyone seems to require gleaming appliances, new counters, huge bathrooms. But to previous generations, the attachment to where they lived was as secure as a foundation.
Houses were not acquired primarily for investment purposes or seen as banks to tap for a debt consolidation mortgage or a new car. They would not have considered buying one with the idea of “flipping” it for profit.
But they also bought during a time when prices were modest, job security was the norm, pensions were still intact, and marriages usually lasted longer than the mortgage. Home ownership was less complicated then.
Today’s first-time home buyers are 32 years old and earn about $58,000 each, according to a recent National Association of Realtors survey. They spend $165,000 on a house - clearly not in Massachusetts - and plan to stay six years.
The typical repeat buyer is 47, makes almost $82,000 (still not enough for a huge home mortgage loan) and hangs on to the house for nine years. But the emotions associated with a real estate purchase can’t be quantified so easily. And it feels as if we’re more clinical about obtaining a deed than our parents were.
Truth be told, most of us are acutely aware of our home’s market value and obsess about whether it is worth more or less than last month.
Some bookmark websites like zillow.com, which tracks estimated house prices as if the housing market were the stock market. The house in question finally sold in November, for about $80,000 less than we originally anticipated. But the lights are on again when you drive by, and that’s worth something.
A young family is making it their new home. I hope that they have the time to truly settle in, no matter what direction real estate charts travel in the coming years. Because that is a fair market value often overlooked.
SOURCE: Boston Globe Magazine
Ever wonder what your neighbor’s house is worth? Just take a peek at the assessor’s valuations, the Westford (Mass.) Eagle recommends.
The Assessor’s Office calculated values for the fiscal year 2007 based on sales from 2005, said Principal Assessor Paul Plouffe. Understanding the way values are derived helps people comprehend the Massachusetts housing market.
Not surprisingly, in the suburbs of the Boston-area market, some neighborhoods are still appreciating in value, while most are stable, and a select few have depreciated somewhat.
“We suggest, at this moment in time, that things are very, very stable, even compared with other towns,” Plouffe said.
In general, home prices within the same neighborhood are within the same range because they are usually similar in size, style and condition. The three highest valued residences in Westford, for instance, are all on the same street - and the only homes on said street.
Selectmen voted in late December to adopt a single residential mill rate of $13.10 per thousand with a small commercial exemption of 10 percent for businesses worth less than $1 million. Last year, the tax rate was $12.92. The commercial tax rate is $13.27 per $1,000 of valuation.
The new tax rate would mean that for an average residential property valued at $470,337, the 2007 property tax bill would come to approximately $6,161.
That’s a big hit to homeowners already struggling to pay the Massachusetts mortgage every month, but following a discussion about taking the burden off residential taxpayers, selectmen voted to adopt the same scenario as last year.
However, assessors reported that new growth had decreased and 30 percent fewer building permits had been issued in 2006 than in 2005.
Assessors include in the new growth category any new construction or any renovation, paid for in large part via home improvement loan funds from owners tapping equity). A new deck or kitchen renovation that increases taxable value of a home is considered new growth.
Plouffe said that despite what you hear, the residential market is still rather strong. The average assessment value for a single-family home is $470,337, up two percent from $461,379 last year.
“If you are listing a house today for a reasonable asking price, you will see it sell in a reasonable amount of time,” Plouffe said.
However, he said homes are often listed for sale at a listing price that is far higher than the assessed value and that this impedes sales.
The commercial and industrial market has also seen some improvement, as have rentals, with vacancy rates lower than last year. Although values are up slightly in 2007, there is still a lot of room for growth.”
“Things are a little bit better. I think the vacancies have gotten a little bit better,” Plouffe said.
SOURCE: The Westford Eagle
According to the Boston Globe, the Massachusetts real estate slump continued last month, as single-family housing sales posted their worst December since 1991, and the median price for a single family home fell 8.1 percent to $310,000 in December 2006.
The December median sale price is the lowest monthly figure since March 2004. Those are among the conclusions of a report on the Massachusetts housing market issued today by the Warren Group, a Boston-based provider of real estate data and the publisher of Banker & Tradesman.
On a volume basis, December single-family home sales fell 8.4 percent from their December 2005 levels to 4,037, the lowest level for December since 1991. With the costs of Massachusetts mortgage loans more than most residents can bear, it’s no surprise to many that the market has come back to earth.
“We’re still in the midst of a market correction which began in the latter stages of 2005,” Timothy Warren Jr., CEO of the Warren Group, said in a statement, adding that he wasn’t concerned things would get worse.
“We still see this as more of a soft landing than a crash, though, and we’ll be watching closely the next few months for signs of stabilization.”
For the full year of 2006, single-family home sales dropped 14.4 percent to 54,203, the lowest number of homes sold since 1995, and down 20 percent from the peak year of 2004, with a rise in foreclosures soon to follow, the Warren Group said.
The median sales price for a single-family home dropped 5.8 percent to $325,000 in 2006 in the Bay State; the first annual drop since 1993. As mortgage loan costs sky-rocketed after five straight years of record housing growth, inventory and prices finally exceeded demand.
Overall, home sales in Sudbury, Mass., fell significantly in 2006. But if you speak to real estate agents in town, you’ll be told that the market is looking up in 2007.
“We’ve had a couple of sales already in January,” said Louis B. Stephan, president of Prudential Ursula M. Stephan Realtors in Sudbury, noting that the Massachusetts housing market is starting to pick up.
Across the state, and particularly in the more affluent Boston suburbs, where prices achieved five straight years of record gains prior to last year, home sales were down sharply in 2006 from 2005 levels.
According to The Warren Group, a company that provides real estate and financial data, single-family home sales fell 13.5 percent in November compared to sales in November 2005.
The good news is that Warren Group statistics show in Sudbury, the drop in sales wasn’t as pronounced as in other towns. From January-November, 219 single family homes sold in Sudbury, compared to 231 during the same time in 2005.
Scott Beane, sales manager of William Raveis Real Estate & Home Services in Sudbury, said other towns in the area are seeing much greater drops in the number of single family homes sold. He cited multiple listing service (MLS) numbers that show towns such as Marlborough saw a decrease in sales of more than 55 percent and Stow saw a decrease of more than 33 percent.
Sellers in Sudbury being more cautious about entering the market in 2006, with Massachusetts mortgage demand tapering off. Stephan said that their motivations are guiding whether they’re deciding to move forward with a sale or wait until the market ticks back up.
“For people relocating, their motivation to sell is high and they will sell to get on with their life,” Stephan said. “These sellers are more willing to negotiate a price with buyers.”
But for baby boomers who are retiring and consider their home as their nest egg, this may not be the right time to sell and they might be able to defer two years to maximize their profit.
In fact, the median price of homes sold in Sudbury in 2006 was down from the previous year, after low mortgage loan rates fueled a five-year boom and subsequent run-up in prices. From January-November, the median home sales price in Sudbury was $625,000, down from $682,000 in 2005.
But agents caution that this dip in home prices shouldn’t spell the end of a great housing market because prices are still much higher than they were a few years ago. There has simply been a correction in home prices and Realtors are encouraged that not only are sellers being more realistic about pricing, but buyers are being more reasonable.
This can only result in more home sales.
Most sellers in Sudbury are eventually selling their homes for about 95 to 96 percent of the asking price. Unfortunately for sellers, they’re waiting a long time to sell their homes and they are facing increased competition.
In fact, the average house in Sudbury is on the market for 216 days, more than double the amount of time from one year ago. There are also more homes on the market - at the end of the year there were 164 listings in Sudbury, compared to 107 listings at the end of 2005.
Agents’ advice to people looking to sell in a buyer’s market is to help close a deal by being realistic about the selling price and paying attention to the condition of their house as it goes on the market.
