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Wall Street Journals says "The housing crisis is over"

05-08-08
Ed Hughes, Natick Real Estate
Ed Hughes, Natick Real Estate: Real Estate Agent in Natick, MA
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The Housing Crisis is Over -- Wall Street Journal

Wall Street Journal, By Cyril Moulle-Berteaux
May 6, 2008


The dire headlines coming fast and furious in the financial and popular press suggest that the housing crisis is intensifying. Yet it is very likely that April 2008 will mark the bottom of the U.S. housing market. Yes, the housing market is bottoming right now.

How can this be? For starters, a bottom does not mean that prices are about to return to the heady days of 2005. That probably won't happen for another 15 years. It just means that the trend is no longer getting worse, which is the critical factor.

Most people forget that the current housing bust is nearly three years old. Home sales peaked in July 2005.
New home sales are down a staggering 63% from peak levels of 1.4 million. Housing starts have fallen more than 50%, and, adjusted for population growth, are back to the trough levels of 1982.

Furthermore, residential construction is close to 15-year lows at 3.8% of GDP; by the fourth quarter of this year, it will probably hit the lowest level ever. So what's going to stop the housing decline? Very simply, the same thing that caused the bust: affordability.

The boom made housing unaffordable for many American families, especially first-time home buyers. During the 1990s and early 2000s, it took 19% of average monthly income to service a conforming mortgage on the average home purchased. By 2005 and 2006, it was absorbing 25% of monthly income. For first time buyers, it went from 29% of income to 37%. That just proved to be too much.

Prices got so high that people who intended to actually live in the houses they purchased (as opposed to speculators) stopped buying. This caused the bubble to burst.

Since then, house prices have fallen 10%-15%, while incomes have kept growing (albeit more slowly recently) and mortgage rates have come down 70 basis points from their highs. As a result, it now takes 19% of monthly income for the average home buyer, and 31% of monthly income for the first-time home buyer, to purchase a house. In other words, homes on average are back to being as affordable as during the best of times in the 1990s. Numerous households that had been priced out of the market can now afford to get in.

The next question is: Even if home sales pick up, how can home prices stop falling with so many houses vacant and unsold? The flip but true answer: because they always do.

In the past five major housing market corrections (and there were some big ones, such as in the early 1980s when home sales also fell by 50%-60% and prices fell 12%-15% in real terms), every time home sales bottomed, the pace of house-price declines halved within one or two months.

The explanation is that by the time home sales stop declining, inventories of unsold homes have usually already started falling in absolute terms and begin to peak out in "months of supply" terms. That's the case right now: New home inventories peaked at 598,000 homes in July 2006, and stand at 482,000 homes as of the end of March. This inventory is equivalent to 11 months of supply, a 25-year high -- but it is similar to 1974, 1982 and 1991 levels, which saw a subsequent slowing in home-price declines within the next six months.

Inventories are declining because construction activity has been falling for such a long time that home completions are now just about undershooting new home sales. In a few months, completions of new homes for sale could be undershooting new home sales by 50,000-100,000 annually.

Inventories will drop even faster to 400,000 -- or seven months of supply -- by the end of 2008.
This shift in inventories will have a significant impact on prices, although house prices won't stop falling entirely until inventories reach five months of supply sometime in 2009. A five-month supply has historically signaled tightness in the housing market.

Many pundits claim that house prices need to fall another 30% to bring them back in line with where they've been historically. This is usually based on an analysis of house prices adjusted for inflation: Real house prices are 30% above their 40-year, inflation-adjusted average, so they must fall 30%. This simplistic analysis is appealing on the surface, but is flawed for a variety of reasons.

Most importantly, it neglects the fact that a great majority of Americans buy their houses with mortgages.
And if one buys a house with a mortgage, the most important factor in deciding what to pay for the house is how much of one's income is required to be able to make the mortgage payments on the house. Today the rate on a 30-year, fixed-rate mortgage is 5.7%. Back in 1981, the rate hit 18.5%. Comparing today's house prices to the 1970s or 1980s, when mortgage rates were stratospheric, is misguided and misleading.

This is all good news for the broader economy. The housing bust has been subtracting a full percentage point from GDP for almost two years now, which is very large for a sector that represents less than 5% of economic activity.

When the rate of house-price declines halves, there will be a wholesale shift in markets' perceptions. All of a sudden, the expected value of the collateral (i.e. houses) for much of the lending that went on for the past decade will change. Right now, when valuing the collateral, market participants including banks are extrapolating the current pace of house price declines for another two to three years; this has a significant impact on the amount of delinquencies, foreclosures and credit losses that lenders are expected to face.

More home sales and smaller price declines means fewer homeowners will be underwater on their mortgages. They will thus have less incentive to walk away and opt for foreclosure.

A milder house-price decline scenario could lead to increases in the market value of a lot of the securitized mortgages that have been responsible for $300 billion of write-downs in the past year.

Even if write-backs do not occur, stabilizing collateral values will have a huge impact on the markets' perception of risk related to housing, the financial system, and the economy.

We are of course experiencing a serious housing bust, with serious economic consequences that are still unfolding. The odds are that the reverberations will lead to sub-trend growth for a couple of years.

Nonetheless, housing led us into this credit crisis and this recession. It is likely to lead us out. And that process is underway, right now.

Mr. Moulle-Berteaux is managing partner of Traxis Partners LP, a hedge fund firm based in New York.

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Tips from The Staging Holmes, Inc.

05-08-08
Ed Hughes, Natick Real Estate
Ed Hughes, Natick Real Estate: Real Estate Agent in Natick, MA
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Floor 'em!

Floor coverings have taken a dramatic turn in the last few years. It is no longer acceptable to offer buyers a credit to replace worn carpeting or refinish hardwood floors. If sellers think it is too much work or too much of an expense what makes them think the buyer isn't thinking the same thing?

Carpet Crisis

carpet cleaningIf a home's carpets are stained or worn they need to be repaired before it goes on the market. At the very least all wall-to-wall carpets throughout the house should be steam cleaned. If the carpet is beyond cleaning it is best to replace it with a neutral, low pile, carpet. If the home has different colored carpet in every bedroom, it is a good idea to neutralize the carpet and use the same color throughout the home. It will make the home feel larger and give buyers the impression of an "open floor plan."

Hooray for Hardwoods

harwood floorsBefore installing new carpet it is a good idea to look into the cost of installing hardwood floors or tile. You may be surprised at how close in price carpet and hardwood floors are. Keep in mind, carpet is a petroleum product and as the price of gas and oil rise so does the price of carpet.

More buyers in this market are looking for, if not demanding, hardwood floors. Hardwood floors come in a variety of types and finishes. Don't rule out bamboo as it is a strong natural material that gives any home a contemporary feel.

If the existing hardwood floors are in rough shape they should be sanded and refinished before going on the market. The goal is not to give the buyer a reason NOT to make an offer.

Tile, Tile Everywhere

tile floorsTile floors in kitchens, bathrooms, and entry ways are always a wise investment. It is important to select neutral, light colors. It is also important that existing tile and grout are in good shape. If the house has outdated porcelain tile from the 70s, there is a new technique that can re-glaze the tile with a special paint. The process allows you to change the color of tiles to a more neutral color such as ivory.

Staging Holmes, Inc. | 985 Trapelo Road Suite 17 | 781.891.7355 | fax 781.891.7357 | Waltham | MA | 02452
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Natick Open Houses Sunday April 13, 2008

04-11-08
Ed Hughes, Natick Real Estate
Ed Hughes, Natick Real Estate: Real Estate Agent in Natick, MA
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  • Mobile: (617) 875-4132
70734790ACT 18 Richmond Rd Natick, MA 4 room, 2 bed, 1 bath Bungalowx6 11$224,900
70735377ACT 91 Oak Street Natick, MA 4 room, 2 bed, 1 bath Ranchx25 120$289,000
70716660PCG 32 Pearl Street Natick, MA 5 room, 2 bed, 1 bath Cottagex6 46$312,000
70740688NEW 18 Curtis Rd Natick, MA 6 room, 3 bed, 1 bath Capex13 3$330,000
70700136ACT 19 Brookdale Rd Natick, MA : West Natick 7 room, 3 bed, 1.5 bath Ranchx6 110$333,000
70714538ACT 8 Westfield Rd Natick, MA 6 room, 3 bed, 1 bath Capex14 52$339,900
70736822ACT 62 Beaver Dam Road Natick, MA 6 room, 3 bed, 1.5 bath Capex17 9$339,900
70732625ACT 5 Nobby Lane Natick, MA 7 room, 3 bed, 1 bath Ranchx15 17$359,900
70566488ACT 26 Hemlock Drive Natick, MA 7 room, 3 bed, 1.5 bath Ranchx8 344$379,000
70692715ACT 27 Erlandson Road Natick, MA 7 room, 3 bed, 1.5 bath Ranchx6 98$399,000
70712676ACT 7 Elm St Natick, MA 9 room, 4 bed, 2 bath Colonialx8 46$439,900
70698384ACT 6 Jefferson St Natick, MA 7 room, 4 bed, 2 bath Colonialx11 86$455,000
70737528ACT 9 Tournament Rd. Natick, MA 7 room, 3 bed, 2.5 bath Split Entryx23 8$489,000
70732801ACT 16 Maple St Natick, MA 10 room, 4 bed, 3 bath Colonialx26 16$492,500
70621634ACT 4 Hampshire Dr Natick, MA 8 room, 4 bed, 3 bath Split Entryx16 259$498,900
70716188BOM 27 Barnesdale Rd Natick, MA 11 room, 4 bed, 2 bath Colonialx12 12$515,000
70740768NEW 169 Woodland St Natick, MA 9 room, 5 bed, 3 bath Ranchx8 2$525,000
70741822NEW 4 Rutledge Road Natick, MA 8 room, 4 bed, 3.5 bath Colonialx7 1$599,000
70601316PCG 64 Macarthur Rd Natick, MA 10 room, 4 bed, 2 bath Ranchx29 296$599,000
70736673ACT 21 Braemore Road Natick, MA 8 room, 4 bed, 2.5 bath Colonialx11 9$639,000
70676928ACT 52 WESTLAKE ROAD Natick, MA 9 room, 4 bed, 3.5 bath Colonialx18 152$685,000
70721562ACT 104 West Street Natick, MA 9 room, 4 bed, 2.5 bath Colonialx15 37$709,000
70587630ACT 25 Coachman Lane Natick, MA 13 room, 4 bed, 3.5 bath Colonialx14 317$819,900
70711132ACT 72 W Central St Natick, MA 10 room, 5 bed, 3.5 bath Antiquex10 298$829,900
70642348PCG 30 Pleasant St. S Natick, MA : South Natick 10 room, 4 bed, 3.5 bath Colonialx26 219$939,000
70726994PCG 8 Sundance Way Natick, MA 9 room, 4 bed, 3.5 bath Colonialx14 28$965,000
70480343ACT 16 PHILLIPS POND Natick, MA 9 room, 3 bed, 2.5 bath Contemporaryx16 504$999,000
70739358ACT 12 Leach Ln Natick, MA 12 room, 4 bed, 3.5 bath Colonialx15 4$1,025,000
70641575ACT 5 Chalcom Natick, MA : South Natick 10 room, 5 bed, 4.5 bath Colonialx5 566$1,095,500
Single Family Listings: 29 Average List Price: $573,317 Average Market Time: 126.55

Condominium Listings
MLS #Status Address Town Description DOMList Price
70697286ACT 50 Silver Hill Ln U:7Natick, MA 4 room, 1 bed, 1 bath Gardenx11 88$182,900
70702058ACT 50 Village Brook Ln U:3Natick, MA 4 room, 1 bed, 1 bath Other (See Remarks)x17 201$184,900
70737837ACT 34 Walden Dr U:3Natick, MA 4 room, 1 bed, 1 bath Gardenx3 8$184,900
70723256ACT 7 Village Way U:7Natick, MA 3 room, 1 bed, 1 bath Garden35$186,900
70721709ACT 42 Silver Hill Lane U:6Natick, MA 5 room, 2 bed, 1 bath Gardenx5 37$211,900
70704012PCG 17 Village Way U:2Natick, MA 5 room, 2 bed, 1 bath Gardenx10 74$219,900
70717183ACT 30 Silver Hill Ln U:1Natick, MA 5 room, 2 bed, 2 bath Gardenx13 46$244,900
70724142ACT 52 S Main St U:52Natick, MA 5 room, 2 bed, 2.5 bath Townhousex8 32$359,900
70664908ACT 15 Fairway Circle U:15Natick, MA 6 room, 3 bed, 2.5 bath Townhousex14 178$412,500
70728334ACT 22 Lanes End U:22Natick, MA 8 room, 3 bed, 1.5 bath Townhousex8 25$419,900
70684326ACT 39 Fairway Circle U:39Natick, MA 7 room, 3 bed, 3.5 bath Townhousex30 130$430,000
70729877ACT 15 Nern St U:15Natick, MA 6 room, 3 bed, 2.5 bath Townhousex4 25$439,900
70724973ACT 34 North Main Street U:3Natick, MA 6 room, 2 bed, 2.5 bath Townhousex10 722$479,900
70740447NEW 44 North Main Street U:3Natick, MA 6 room, 3 bed, 2.5 bath Detachedx10 6$495,000
70704189ACT 19 Davis Brook Dr U:19Natick, MA 8 room, 3 bed, 2.5 bath Townhousex9 76$965,000
70654385ACT 16 PHILLIPS POND U:16Natick, MA 9 room, 3 bed, 2.5 bath Gardenx10 192$999,000
70737621ACT 41 Davis Brook Drive U:41Natick, MA : South Natick 11 room, 4 bed, 4.5 bath Townhousex13 8$1,449,000
Condominium Listings: 17 Average List Price: $462,729 Average Market Time: 110.76

Multi-Family Listings
MLS #Status Address Town Description DOMList Price
70712665ACT 7 Elm St Natick, MA 2 unit, 9 total room, 4 total bedroom Duplexx7 46$439,900
70712840ACT 66 Summer St Natick, MA 2 unit, 8 total room, 4 total bedroom 2 Familyx28 56$479,000
70738078ACT 11-11a Union St Natick, MA 2 unit, 11 total room, 6 total bedroom 2 Familyx3 7$484,900
70732726ACT 16 Maple St Natick, MA 2 unit, 10 total room, 4 total bedroom 2 Familyx26 68$492,500
Multi-Family Listings: 4 Average List Price: $474,075 Average Market Time: 44.25

©2008 MLS Property Information Network, Inc.
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Natick Massachusetts Real Estate - Market Report 1st Quarter 2008

04-07-08
Jon Treon Natick Real Estate
Jon Treon Natick Real Estate: Real Estate Agent in Natick, MA
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  • Office: (800) 305-0685 x7015
  • Mobile: (508) 397-6081
  • Secondary: (800) 753-2042

Total number of single family home sales, 1st quarter '08: 46. Change from same period last year: -16, a decrease of 25%.

The median price was $376,450. The change from the same period '07: -$52,050, a decrease of 12%.

Average Days on Market was 147, almost unchanged from the same period last year (150). The average List Price to Sales Price ratio also increased slightly, to 95% from 96%.

There are currently 103 single family homes on the market in Natick, down from 113 a year ago. The median asking price is $469,900, down from $499,900 1 year ago.

For Condominium sales, the total number of sales decreased significantly, from 34 in the 1st quarter '07 to 13 for the 1st quarter of this year. The median price, however, increased a bit, from $220,475 to $229,9000. Average time on market decreased slightly, from 174 days to 169 days.

There are currently 89 condominiums on the market in Natick, down from 115 a year ago, a 23% decrease in inventory. The median list price is $269,900, down from $344,900 one year ago.

Homes that are priced right are selling. Call or e-mail me to find out more about how to price your home for today's market. The first step in selling a home is to select the right Realtor. I have over 15 years experience assisting sellers and buyers in Natick and surrounding Metrowest towns.

Jon Treon can be reached via email at jon@jontreon.com or by phone at 508-397-6081. Jon has been assisting buyers and sellers in Natick, Framingham and Wayland, Massachusetts and other Metrowest Boston towns for the last 15 Years. Visit my website at www.jontreon.com for the latest MLS listings and buyer and seller info.

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Brief History of Natick

03-07-08
Farzi Roshan
Farzi Roshan: Real Estate Agent in Natick, MA
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  • Office: (508) 589-2063
  • Mobile: (617) 429-1470

Natick was established in 1651 by the Puritan missionary, John Eliot, who settled a group of "Praying Indians" here on land granted by the General Court which was part of the Dedham Grant. To the Indians it was a "Place of Hills". The Speen family (Indian) owned much of the land in the Natick area and they deeded it to the Praying Indians taking house lots for themselves.
In the area now called South Natick, the Indians settled on both sides of the Charles River. Over the river they built a wooden bridge with a stone foundation that was eighty feet long and eight feet high to withstand the high water during floods. Next, three streets were laid out. To the north Eliot and Union Streets, and to the south Pleasant Street, as they are now called. The Indians then built a meetinghouse with the help of an English carpenter. The two story building was used as church, school, and warehouse, and as a place for Eliot on his fortnightly visits. The building, which stood about where the present Eliot Church stands, was palisaded with a circle of tall trees.

For more than twenty years Eliot instructed and preached to the Indians. A school was set up, a government established, and the Indians were encouraged to convert to Christianity. Eliot learned their language and with the help of the Indians, who had no written language, transcribed the Bible into the Algonquin language. A copy of the 1865 edition is on display at the Natick Historical Society Museum.

The prosperity of the village was destroyed when King Philip, son of the chief, Massasoit, attacked the white settlers causing such fear among them that in 1675 the Indians were restricted to their villages, which made it difficult for them to farm or to tend their livestock. In October of that year, over Eliot's protests, the General Court ordered the Natick Indians sent to Deer Island. Many Indians did not survive the lack of food and the cold and those who returned seven months later found their homes destroyed.

The Praying Indians did not flourish after their return to Natick and Eliot died in 1690. An Indian named Takawampbait had been ordained by Eliot and he carried on until his death in 1716. Two other Indians preached before the New England Company sent first Rev. Oliver Peabody and later Stephen Badger to fill the Indian church pulpit.

The land in the Natick Plantation was held in common by the Indians until 1719 when twenty men were named as Proprietors to oversee any division of land. Eliot had given the Indians their form of government and they held their own town meetings and elected their own officials. However, they were under the Guardianship of the Court and had to have permission to sell land.

White settlers now outnumbered the Indians. Thomas Sawin was one of the first white men to own land in Natick. The Indians asked him to build a grist mill and he was deeded land for this purpose. By 1725 the Indians had sold most of their land to pay their debts and many drifted away or succumbed to disease.

As more settlers began to move into the central part of Natick, an area called the Needham Leg, the Meetinghouse Dispute erupted. Those people in the more northern part of town wanted the Church in the center rather than supporting the Indian church in the southern part of town. This dispute continued over a period of almost sixty years. The people in the "Leg" requested the Court to restore this area of the Natick Plantation to Needham. This was approved in 1761.

During the Revolution Natick sent 174 men out of a population of 534 to fight. Eighteen Minute Men were raised under the leadership of Capt. David Morse on April 19, 1775. However, when the Town Meeting voted to reject the Constitution in 1778 Natick's loyalties were questioned but the town leaders pledged their support to the new government.

Attention turned once again to the Meetinghouse dispute. The church could not be relocated without the approval of the court so the parish petitioned to become a town , and to change the name to Eliot. The name change was not granted, but Natick became a town in February of 1781. In 1796 it was voted to build the new meetinghouse in the center. The inhabitants of the southern part of town did not want to support the new church and petitioned to be separated from the town. The Court resolved the issue in 1797 by restoring the "Leg " to Natick but the south and east sections remained in Needham. The Indian Church dissolved as the congregation dispersed to other parishes and the building fell into disrepair. In 1828 the present Eliot Church was built, the fifth church on the site of Eliot's Meetinghouse.

Natick was originally a farming town, but later, industries began to emerge. Mills had developed along the Charles River with gristmills first, and later nailmaking, papermaking, and woodturning. The shoe industry (which started as a cottage industry with piece work given out and picked up each day by runners) gradually became mechanized, and by 1836 (when the Boston and Albany Railroad came through Natick) became one of the largest producers of boots and shoes and by 1880 had 23 shoe manufacturers. During the early part of this century the shoe industry suffered and the last shoe factory in Natick, the Winchell Shoe Co., closed in l971. H. Harwood and Sons developed the figure eight stitching for baseballs and was the first such company in the country.

Natick developed as three distinct villages, each with it own stage route from Boston to Hartford. The original village in South Natick, to the north Felchville, and in the center Natick. In each village and along each coach route a tavern was built. Felchville Tavern to the north, the Morse tavern in the center and the Eliakim Morrill Tavern in the south. These taverns were used as meeting places and inns.

Two disastrous fires occured. In 1872 in South Natick and in 1874 in Natick Center. Businesses quickly rebuilt and the population increased rapidly. After World War II there was another tremendous population increase, the Massachusetts Turnpike was built through the northern section of the town and there was a spurt in commercial development and demand for housing. Commercial development along Route 9 has been extensive.

Natick boasts several historic figures:

John Eliot, the Puritan minister, who founded the Town.
Henry Wilson who established a shoe factory and later went into politics and became Vice President under Ulysses S. Grant.
Harriet Beecher Stowe, the author of "Old Town Folks", and "Uncle Tom's Cabin", and many other books, who married a native of the town.
Alexander Wheelock Thayer, United States consul at Trieste and the author of the definitive biography of Ludwig von Beethoven.
Horatio Alger, Jr., minister and author of children's books with a "rags to riches" theme.
With the town slogan "Home of Champions " this century will see many names added to the list.

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