Looking ahead

On the one hand, the Boston Globe gave prime placement in the January 29 edition of its Sunday Globe West insert to an article recounting rising home prices and sales volume in top-drawer towns west of Boston.

The article describes upward price pressure and bidding wars among avid homebuyers in upscale west-of-Boston suburbs such as Newton and Lexington.

The Globe article forecasts that home buyers will head further west beyond Rte 128 this spring in search of bargains, spreading the home-buying demand and encouraging more home sellers to try the market.  All in all an upbeat view of the future for real estate in Greater Boston!

Looking behind

Just two days after publication of the Globe article described above, the newest monthly edition of the S&P/Case-Shiller Home Price Index for Greater Boston was released by Standard and Poors.  The Index looks back in time to sales data two months old, in this case metro-Boston home sales in November, 2011.

The Greater Boston Index for November 2011 paints a picture of relative gloom. Metro-Boston home sales prices trended down again in November, continuing a decline that started earlier in the fall.

The Massachusetts real estate market was socked last November by widespread power outages caused by a freak late October snow storm which downed tree branches and power lines across the Bay State.

The storm damage and disruptions in electric service certainly slowed the November real estate market in Massachusetts and likely worsened the price performance for that month.

Which view is right?

Certainly, if you have to choose between older information and newer news, you go with the most recent dispatch when judging the current condition of any market.  So The Globe’s reporting on the active January real estate market in Greater Boston trumps the older take on Boston home prices provided by the November Case-Shiller Home Price Index.

Additional good news hit the Internet just today:  January’s US employment report was much stronger than expected.

Quoting Reuters:

“(Reuters) – The economy created jobs at the fastest pace in nine months in January and the unemployment rate dropped to a near three-year low of 8.3 percent, providing some measure of comfort for President Barack Obama who faces re-election in November.”

The jobs report is very good news for the overall US economy and real estate in particular.  An improving jobs outlook will boost consumer confidence which in turn should convince hiring managers to add still more employees.  If hiring and consumer spending build momentum this spring, we’ll see positive results in Massachusetts real estate.

You’ll be able to read all about it here at 02038.com!

Copyright ©2012 02038.com

Top 3 US cities ready for recovery

Forbes hired a real estate research firm to analyze housing and economic data for the 100 most populous cities in the US, looking for local housing markets that are at the bottom of their real estate cycles and poised for better times ahead.

The top 3 cities on the Forbes list of the best candidates for a real estate rebound were San Jose, Houston and Boston:

Here’s what Forbes had to say:

“Real estate experts . . .  agree that price fluctuations of 3 percent or less generally indicate that a market is stabilizing. If a city hovers within that range for several quarters or a year, it’s probably safe to say that market has found its bottom. All of the metro areas on our list have almost undoubtedly found their bottoms.” (Emphasis added.)

See the Forbes report

Click on the hotlink or on the image above to access info on all the top ten cities in the Forbes report.

What this means for MA home buyers

If you’ve been on the sidelines of the Massachusetts housing market waiting for prices to bottom, 2012 looks like the year to buy real estate in MA.  Mortgage rates are very low and home prices should start going up in coming years. Investors and first time buyers are in a position today to get a great deal on housing.

Home purchases in 2012 will be revealed to be savvy investments a few years from now.

Contact Warren for help making your smart real estate move a reality!

Copyright ©2012 02038.com

Median home sale prices off lows

While median prices in MA as a whole (shown in green in the chart below) are currently off 15% from their 2005 peak, they are still up a solid 35% from where they were back in 1998.  So if you are a long-term home owner in MA, your real estate investment has turned in a very respectable return compared to the stock market over the last 12 years or so (much more than the interest income on your bank accounts and CDs since 2008)!

What’s vitally important to the majority of today’s home owners who bought their homes after 2001, median prices have stabilized since the world-wide financial crises and now are marginally higher than they were in 2009.

So 2011 seems to have set the stage for a home price rebound in coming years.  The forecast for the MA economy and real estate market is pretty upbeat for the second half of 2012 and 2013, with a bit of tough going projected for early 2012.

MA home sale volume encouraging

The chart below documents the essential resiliency of home sales in the Massachusetts housing market.

Despite all the bad news and uncertainty bedeviling the US economy over the last 4 years, home sales in the Bay State have held up pretty well.

Homes sales on MLSPIN have moved in a remarkably narrow range during that time.  At 34,952, home sales on the MLS in 2011 actually exceeded the 34,652 sales on the MLS in 2008.

Market on the mend?

The Massachusetts housing market in 2011 clearly was not one in distress; indeed, with more justification, it would be called a market on the mend. The performance of both median prices and home sales in 2011 may have positioned MA real estate for a stronger showing in 2012 and beyond.

Happy New Year!

Copyright ©2012 02038.com

On December 15 it was announced that weekly jobless claims fell by a much greater than expected 19,000 to the lowest level since 2008. Small business appears to be shouldering the bulk of the hiring.  Manufacturing activity also saw sharp rises in December in several regions of the US.

What’s ahead for 2012?

Good economic reports come and go and usually give only a snapshot view of the economy.  There’s always a new economic report coming out to potentially muddy our sense of where the economy is really headed.

Since the advent of another new calendar year is typically the time for forecasts for the year ahead, now’s the time to check in on some of the nation’s economic experts to see how the MA and US economy and real estate markets may perform in 2012.

So what do top economists foresee for 2012?  See below for the answer . . .

JP Morgan Chase & Co

In an excellent 18 page report on the Massachusetts economy, JP Morgan Chase & Co  gives a pretty upbeat assessment of how MA has fared since the 2009 economic crises.  Chase’s take on the 2012 outlook for MA is much better than what it foresees for the US overall.

The report has interesting charts and graphs – well worth a look.  Click the image above or the hotlink to download the .pdf.

Key points made by the Chase economists in the report include:

• Boston’s housing markets are stabilizing, helped in part by the robust high tech sector.
• Massachusetts’ economy appears to be on the rebound . . . and is forecast to fare well into 2012.
• The booming technology sector is a plus for Massachusetts.
• The state enjoys some stability from the outsized footprint in a number of services and technology.

Freddie Mac on the 2012 housing market

The economists at Freddie Mac forecast a modestly improving US real estate market in 2012.  Sales should be spurred on by a pickup in consumer purchases and a reduction in unemployment.

Freddie Mac says home prices may dip in the first half of the year but should start a much-looked-for rebound during the second half of 2012:

Click the hotlink or on the image above to download the Freddie Mac publication.

“A full-fledged recovery in the housing sector will likely elude the U.S. in 2012,” Freddie Mac economists said in the report.  The report goes on to say that “we expect U.S. house price indexes to move lower before bottoming out in 2012, with modest appreciation forestalled until 2013.”

“Still, these national indexes mask the sizable variation in local house-price performance.  Some markets have appreciated over the past year and are likely to gain further in 2012.”

Wells Fargo on US real estate and the global economy

In a detailed, highly insightful, 28 page report, Wells Fargo economists delve at length into the role of housing in the US economy and forecast many sectors of the global economy.

Wells Fargo is a bit more cautious than Chase on both the US economy in general and the overall US housing market for 2012.  There may be bumps in the road ahead, especially if Europe enters a bad recession.  But the report does note unique strengths in the American economic system that it says should contribute to better times ahead in 2013 and beyond.

You can download the report by clicking on the image above or on the hotlink.

Wells Fargo agreed with the viewpoint of Freddie Mac that US home values may fall more in the first half of 2012 but noted that regional pockets of 2012 housing resiliency exist:

“. . . there are a few bright spots (in US housing). The Northeast continues to do relatively well, particularly Boston and New York” (emphasis added).

Below is a long excerpt from the Wells Fargo report on why America may recover much more solidly than Japan did after the Japanese economic crisis back in the 1990s:

“. . . the U.S. economy has achieved some important milestones that could lead to a better performance over the medium term. The Fed has been much more aggressive in fighting deflationary pressures than the Bank of Japan was in the 1990s, and the impact on the monetary base and inflationary expectations is far more constructive than what happened to Japan in the 1990s. Furthermore, U.S. banks are cleaning up their balance sheets at a rapid pace, which will put them in a better position to increase lending, while asset prices are already back to more sustainable levels that can be supported by fundamentals, such as income and rents. The churn of the labor market is making businesses more productive and more profitable than ever, laying the ground work for more balanced and sustainable U.S. growth ahead . . .”.

What does this all mean for you?

The bottom line in all these economic prognostications for us in MA is that both the Massachusetts economy and real estate market should improve modestly in 2012 and will continue to outperform the US market in general, just as they have for each of the last three years. 2012 may not be a great year for the MA economy and housing market, but it may lay the foundation for better years ahead.

A lot of 2012’s actual performance hinges on Europe.  If the Eurozone economies muddle through their current financial problems towards a lasting solution that brings stability, all should go well for the US in 2012.  Only if Europe enters a deep recession will America likely experience a 2012 worse than 2011.

Copyright ©2011 02038.com

If the recovery in home sales continues into 2012, it may mark the Bay State’s definitive emergence from a protracted period of weak home sales that came on the heels of the expiration of the Federal home buyer tax credit programs back in 2010.

Sales on par with pre-crisis 2007

This November’s home sales are significant not just because they exceeded the weak results of one year ago.

Last month’s sales exceeded November 2008’s production and were roughly on par with sales in November 2007, before the world financial crisis.  This is an encouraging sign of the real estate market building momentum.

Pending sales also rebounding

It was also good to see that pending sales in November 2011 were up significantly.  November’s pendings equaled 2009 levels, which were inflated by demand spurred on by the Federal tax credit programs.

Franklin, MA doing well

Homes sales and pending transactions in Franklin, Massachusetts last month mirrored results statewide:

November 2011’s production was up sharply in Franklin over the depressed levels of November 2010.

Federal tax policy skewed home sales in for past few years

November sales stats over the last few years clearly show the impact of Federal tax credit policy.

The Feds got started intervening in the real estate market in 2008 with a refundable tax credit to qualifying home buyers.  The 2008 credit had to be repaid.  It was in effect a tax-free loan and proved only moderately successful in stimulating home sales.

Sales exploded in 2009

2009 saw a new and improved Federal home buyer tax credit.  Because it did not have to be repaid it proved wildly popular.  This tax credit caused widespread increases in home sales volume and prices.

The 2009 tax credit was originally scheduled to expire in November 2009.

Massachusetts homes sales in November 2009 exploded some 60% above November 2008’s sales volume as many buyers rushed to close home purchases before the end of that month.

Sales collapsed in 2010

As it turned out, the tax credit did not expire as scheduled in November 2009.

Instead the Federal government extended the credit through April 2010 and created a second homebuyer tax credit.  The second credit was also set to end in April 2010.

Home buyers responded by going on a tax credit fueled bender. Home sales surged from the end of 2009 right until the two tax credits expired April 30, 2010.

Then the party was over. By mid-2010 the real estate market was not a pretty sight.  Homes sales and prices withered.

By November 2010, Massachusetts homes sales were down nearly 35% from the year before.

Back on track for 2012?

After protracted weakness that lasted from mid-2010 well into 2011, home sales have been recovering in Massachusetts.  The strong results for November 2011 may be setting the stage for continued improvement in the local real estate market for 2012.

Copyright ©2011 02038.com

So it was no surprise earlier this week when several upbeat developments in the US economy made the news at the same time that Standard and Poors announced a lackluster performance for Greater Boston home prices for the month of September.

Boston home prices slip

Greater Boston home prices fell 0.7% in the latest edition of the S&P/Case-Shiller Home Price Index released this week by Standard and Poors.

Both the seasonally adjusted S&P/Case-Shiller Index for Boston . . .

. . . and in the non-seasonally adjusted version of the Boston Index . . .

. . . showed the same percentage drop in values for September.

Both the seasonally adjusted and the non-seasonally adjusted versions of the Index show identical declines for the last 12 months as a whole.  Both Indexes are down -1.2% compared to September 2010.  On both Indexes however, Boston home prices remain above their lows set back in March/April 2009.

Good economic news belies weak home prices

During the same week as Standard and Poors made its announcement about the drop in Greater Boston home prices, several items of good economic news hit the wires.

US car sales strong

Sales of automobiles in November were very brisk with several automakers reporting double digit gains.

Early Holiday retail sales up sharply

Consumer spending was very strong in the days after Thanksgiving.  The all-important Holiday spending season is getting off to a booming start this year.  The consumer is king in the American economy.  U.S. businesses are currently very profitable but management has been reluctant to hire new workers in the face of sluggish consumer spending.  If Holiday sales continue strong, 2012 may be much better year for everyone.

US now a net fuel exporter

The startling news that the US is now a net fuel exporter marked a potential sea change in world economics.  If we can permanently reduce (or even eliminate) our decades-long massive trade deficits in oil in coming years, the US economy will reap profound benefits.

Look beyond the near term

There are many reasons to be optimistic about America’s future.  And the Massachusetts economy is doing much better than many other regional economies in the US.

So don’t get caught up in the short term ups and downs of area home prices.  Because of the enduring strengths in Massachusetts and America as a whole, the value of MA real estate likely will be a lot higher in a 3 – 5 years than it is now!

Copyright ©2011 02038.com

Greater Boston home prices take a breather

Metro-Boston home prices as documented by the folks at S&P/Case-Shiller were flat in August (down a minuscule 0.1%).

This stability comes on the heels of a cumulative 5.9% increase in the Index from April through June of 2011.  The Massachusetts economy has outperformed the US economy for the past few years, helping support local real estate.

The national “third dip” scenario

On October 31, newsfeeds displayed scary headlines predicting an imminent “third dip” for US home values.

The forecast was issued during a CNN/Money interview with the top economist at Fiserv Inc, a company that advises and supports the financial services industry.

In explaining his forecast third dip, the Fiserv economist described the two prior dips in national home values that have occurred since the 2006 market peak.

First dip

The first dip culminated at the height of the world-wide financial panic; by early 2009 the Case-Shiller National Home Price Index had plummeted 31% off its 2006 high.

Second dip

The second dip came in mid-2010 after a rebound in US home prices caused by the two Federal home buyer tax credits.  After  the tax credits expired at the end of April 2010, US home prices began to dip for a second time.  All the price gains engendered by the Federal tax credits were eventually lost.  The 2009 national market bottom failed to hold as the National Index slipped below where the first dip had left prices in 2009.   Home prices fell further and the National Index now finds itself down 33% from the 2006 market top.

Third dip coming?

Fiserv’s “third dip” forecast sees a additional 3.6% decline in the National Index by mid-2012.  Fiserv believes the second half of 2012 will usher in a mild rebound in home values that will extend at least to mid-2013.

Where MA fits in the “third dip” scenario

The chart below highlights some important differences between what has transpired over the last 5 years or so with Massachusetts real estate as opposed to the US market as a whole:

At their worst, Greater Boston home prices were “only” about 20% off their 2005 price peak, nowhere near the 31% or 33% decline seen in the US as a whole.  The Boston Index now stands 14.7% below its September 2005 high.

The relative strength and stability of the MA housing market may lessen the scope of any “third dip” in Massachusetts for 2012 – and might help us avoid one at all.

The chart above also shows the strong seasonal swings up and down that affect the Boston Index.  These up and down swings make it hard to spot a “second dip”, much less enable one to predict a meaningful “third dip” with confidence.

Seasonally adjusted prices show clearer picture

The next chart uses the seasonal adjustments applied by Standard and Poors to the Boston Index.  These seasonal adjustments smooth out the price undulations caused by the passing of the New England seasons and give a clearer view of the MA real estate market since 2000:

Here we see the something vaguely approaching a double dip in Greater Boston home prices; but the “second dip” looks very muted.

The chart shows a market peak in 2006, a bit later than the non-seasonally adjusted Index.  The following decline (“first dip”) bottomed in early 2009 at the crescendo of the world financial crises.

Greater Boston home prices did rebound in late 2009 through early 2010 just as overall US home prices did.  Like the nation as a whole, the local market was buoyed by the stimulation provided by the two Federal home buyer tax credits.

MA market bottom held

Once the tax credits expired at the end of April 2010, the stimulation ended and the Greater Boston Index weakened.

But it was not as severe a decline as that experienced by the National Index.

The moderate decline in MA (a “second dip” if you wish) ended in April 2011.  The Boston Index stopped declining at a point just above its low set back in 2009.  The Massachusetts real estate market achieved what the overall US housing market could not: MA home prices did not drop below the 2009 low.  The 2009 Massachusetts market bottom held.

Since last April, the seasonally adjusted Boston Index has started to rise again.

2012 – 2013 outlook better for MA RE?

The seasonally adjusted Boston Index presents a market that looks like it wants to trend higher.

No one knows what the future will bring.  We might well see a weakening in home prices in 2012, followed by a 2013 rebound exactly as forecast by Fiserv.

But it seems likely that the relative strength of the Massachusetts economy will keep conditions in the Massachusetts real estate market markedly better than they are for the US as a whole.

The Massachusetts real estate market seems positioned to outperform the US market as a whole in 2012 and beyond.

Copyright ©2011 02038.com

Another American Century?

The Telegraph Media Group of the UK just published an interesting article on why we may all soon be reaping the benefits of a radically improving competitive position for the US in the world economy.

The article is a well worth reading.  Below are summaries of the key points made in the piece:

US energy imports may fall sharply

The huge outflows of dollars from the US to buy Middle East oil – a depressing staple of American economics since the 1970s – may end by mid-decade.  If we could keep that money home, there would be profound benefits to the US economy.

This may become a reality due to new oil extraction techniques that are opening immense oil shale fields in the US to production.

You can read more about the Bakken fields here.  There’s even a large shale oil field in Ohio!

There are also huge amounts of  natural gas in US shale deposits.  These supplies have been coming into production with a lot more on the way.  Because of this, natural gas prices have dropped significantly over the last three years and US manufacturing is  just now experiencing the economic benefits.

The US is now the top producer of natural gas in the world.  We are looking at soon becoming a major EXPORTER of natural gas – what a profound (and beneficial) change!

Manufacturing renaissance in US

America is poised to add 2 to 3 million jobs in the next 5 years as manufacturing returns to the US according to a new report by the Boston Consulting Group.  Manufacturing jobs are being “re-shored” back to the US from overseas in increasing numbers as the costs of production keep rising in China and other offshore manufacturing centers.

You can download the full report by clicking here or on the image above.

America is making some high quality products these days; we recently bought a Ford Focus SEL 5 door automobile and love it!

You can help this trend by buying American-made products as much as you can.  This can be hard to do, but well worth the effort in terms of creating a better economy for all of us.

ABC News has created a website to help you buy American.

Low fertility rates will hurt the economies of other industrial nations

New research is exposing a fundamental weakness in China, Japan and most European nations: demographics.

Low birth rates have put China and many other economic competitors of the US on a disastrous demographic path towards an aged population.  These economies may soon lack enough young workers to support all their upcoming retirees.

The US birth rate while declining is not nearly as low as China’s and Japan’s.  Demographics will help America compete in the world economy and grow its way out of its current debt problems as the 21st Century unfolds.

So there are seemingly many good reasons for optimism about your economic future as Americans – the current difficulties will end and better times are coming!

Copyright ©2011 02038.com

Regional  markets even better

As set forth in a separate report issued recently by The MetroWest Economic Research Center at Framingham State College (MERC), the employment picture is even better in many regions to the west of Boston in the greater I-495 area.  The MERC report covers employment rates as of August 2011:

The MetroWest region especially stands out with an impressive unemployment rate of 5 percent in August.  That’s nearly half the national rate.

Employment has improved dramatically over the last 12 months in all I-495 regions tracked by MERC.

Long-term unemployed still face challenges

Despite the drop in Massachusetts unemployment this year, there is still a lot of pain and frustration among MA job seekers.

Those who lack skills that are in demand and those who have been out of work for an extended period face still serious difficulties finding work.

Job sectors doing especially well in MA

As shown in the chart below, the professional, scientific and business services sector in Massachusetts has done every well this year, adding nearly 16,000 jobs through August.

Coming in second with over 13,000 jobs created in so far in 2011 is the education and health services.  Only the government job sector has suffered significant net losses in MA during 2011, MERC reports.

Improving jobs outlook and low interest rates should help local real estate

Times remain tough for many in Massachusetts.  However it is clear that the Commonwealth as a whole, and the Greater I-495 area in particular, are doing much better in terms of employment than the US average.

As the MA economy adds jobs, consumer confidence and discretionary spending should strengthen in coming months.

Improving economic conditions coupled with The Fed’s recent commitment to keep interest rates historically low int0 2013 should help the Massachusetts housing market in 2012.

The time to buy MA real estate is now!

Copyright ©2011 02038.com

The startling news is contained in the non-seasonally adjusted S&P/Case-Shiller Home Price Index for Boston which climbed 2.3% in June, after leaping 2.7% the month before.

Good news tempered by seasonally adjusted results

Although the 5% jump in MA home prices should be a wake-up call to prospective home buyers who have been sitting on the sidelines, MA buyers may not need to panic yet: the seasonally adjusted version of the Case-Shiller Home Price Index for Boston shows a much less buoyant 1.7% rise in MA home prices over the same last 2 month period.

The seasonally adjusted Boston Index rose +0.69% in June after increasing nearly one percent in last May.

While these seasonally adjusted increases are respectable, they still leave Greater Boston home prices 2.3% below where they were in June 2010 and just 2.7% higher than the market low set back in April 2009 during the nadir of worldwide financial crises.

Buyers need to take heed

Whether you use the exuberant 5% unadjusted home price increase figure or the more modest 1.7% rise on a seasonally adjusted basis, the fact remains that Greater Boston home prices have risen over the last 2 months reported on by S&P.

This illustrates the danger of holding off on a home purchase hoping to buy at the absolute bottom.  Home prices tend to lurch upward and downwards in spurts and you may find yourself on the wrong end of a market move if you try to time the Massachusetts real estate market.

If you need to buy a home, by all means do so now.  Interest rates are low and there are lots of affordable homes from which to choose.

I honestly believe that in five years home prices will be a lot higher than where they are today.

You will be very happy then that you bought your home or investment property at today’s attractive prices and great mortgage interest rates!

Copyright ©2011 02038.com