Separating hype from fact

Separating hype from fact

BK.housechartThis article is designed to make you crazy, buyers. Prices are up. We all know that. But, by how much? Funny, they don’t tell you anything relevant to your search. There is no chart of local information. Just a couple of paragraphs about why the housing bulls are dancing the gig.

The article is from last year at this time. Let’s call it a Timehop. But the conditions are roughly the same this year, as is our advice.

When you see an article with broad statements about the national market, it is best for your mental health to ignore them. If you can’t ignore them, then figure out who is telling you this, and why.

In this case, Bloomberg is telling you. Bloomberg is pro-investment. Their slant is that rising real estate prices are good. Wealth, it seems, grows faster in buying machines and land (and maybe real estate) than in paying wages and growing businesses that employ people.

The national market.

If you are going to watch national trends, watch the data that could affect the overall consumer economy. For real estate, that is:

Employment and wage growth. Although there are some wonderful, high paying, jobs in the greater Boston area there has not been a significant increase in wages earned here. Paychecks increased by only a hair more than percent from March 2015 to 2016, according to the Bureau of Labor Statistics.

Interest rates.

Watch for news about increased interest rates. Some will be pitched to you, as a buyer, in a way to make you crazy. “Buy now, before your buying power is eroded by increasing interest rates!” “Buy at any price, this might be your last chance!”

No. Don’t fall for it. When mortgage interest rates go up, buyers can’t spend as much. When that happens, some buyers drop out. Then prices fall due to decreased demand. A hint that rates are about to increase and cause a drop in demand will drive some sellers into the market (in order to sell at peak.) This will also cause prices to fall, by increasing supply.

The local market:

Although the national real estate economy floats or sinks all boats, real estate is hyper-local. To figure out the local trends, it is important to look at specific properties that are comparable to one you want to buy. Everyone knows that a house three blocks from the Red line is worth more than one that is a mile away (in the same town.) But, how much is that difference? It depends on which direction, how the two houses compare by land, quality and age of its renovation, density on the street, parking, and what other amenities are in the neighborhoods.

A Comparative Market Analysis (CMA) is done by looking at the properties that are most like the one for sale, the “target.” The like-kind properties’ prices are then adjusted so I can compare apples with apples, by deducting value from the target for things that are worse and adding value to the target for things that are better. I get a lot of information about the like-kind properties from a combination of reading the MLS sheets, seeing the properties when they were on sale, and by asking the former listing agent.

There usually is a preponderance of evidence that will point to a price range for a property. When I do it, I keep going until I see a pattern. Sometimes it takes me two hours to do a complete report if there are not a lot of obvious like-kind properties.

By | 2016-12-28T14:01:00+00:00 May 4th, 2016|Categories: Market data and conditions|Tags: , , , |

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