Real Estate Slow Down????

[phoenix]

agree with Lakegeezer. My property also went up almost 15% again this year in Moultonboro. When i complained they resent the assessment letter. I also thought they only reassessed every few years not every year. Will be interesting if prices drop what they do next year

[ITD]

Check those appraisal cards. I finally got around to it a few weeks ago and found that the square footage on my house was way off. I went to a hearing with pictures and measurements and got it close to reality. My assessment went down 20%. If they can't get in your house when they come around they just guess.

[Paugus Bay Resident]

Properly priced properties are selling OK. IMHO, the problem is that a lot of people got greedy and set their selling prices high, hence the price reductions. It's difficult for a listing agent to do a market analysis and tell the seller his home isn't worth as much as he thinks. So, often they'll take the listing at the higher price. When the property doesn't sell, the owner blames the agent for the property not selling (couldn't be the price, could it ). The next agent gets the benefit of the owner softening up a bit and usually gets the owner to do a price reduction. Too many people are watching TV shows where people flip a property in 4 weeks and make 20%

Actually, our regional growth in terms of price has been somewhat moderate when compared to other parts of the country. Here's a great website on housing prices. Office of Federal Housing Enterprise Oversight

Year-to-date sales (per the Registry Review through September) are on track with 2004. One point to consider is that there is a lot more inventory (new construction) so, supply has increased. I believe we are in a neutral to slightly buyers market. Of course, as has been mentioned, we are in October, which typically signals a slower market period anyway. When I looked at MLS today, there were 23 new listings, 24 closed sales, 23 pending sales and 24 price reductions (Belknap and Carroll). Kind of neutral. Tomorrow, who knows

[secondcurve]

The following is an example of why I am starting to feel there is an overheated RE market. Help me understand how these economics make sense.

There is a slip in Meredith for sale on the Winni forum classifieds. The asking price is $69,000 and it will accomodate a 22 foot boat. Assuming a 30-year loan at 6% (not sure if this type of finacing is even available for a slip) I get a monthly P&I payment of $414.00. I then assumed property taxes of $500 a year and condo fees of $500 a year. This brings my annual carrying cost to $5,968 a year to own this slip.

Alternatively, I can rent this slip for about $3,000 a year. Why would anyone buy this slip with almost a $2,000 annual negative cash flow? If you say because it will appreciate, please explain why, since rental slips are readily available and assets with negative cash flows don't usually appreciate. Yes, tech stocks did for a while but then.............

[Skip]

Another interesting opiinion that counters the "bubble burst" predictions so prevalent lately....take it for what its worth:

http://www.theunionleader.com/articl...?article=61986

[Paugus Bay Resident]

secondcurve, I agree with you on the slip issue. To make matters worse, banks around here (that will finance slips) only offer 10 and 15 year terms with 25% down (interest rate last month was 8% and 10%), so the negative cash flow is even worse. I looked at the purchase of a slip at MVYC (between $100 and $110K), and, if I recall the difference between owning and renting was around $8,000 plus a $27,500 check for the down payment I know there is 1) the scarcity issue 2) the peace of mind knowing you'll always have a slip 3) possible appreciation and 4) writing off the property taxes, but those numbers are way off. Needless to say, I contiune to rent.

I would not be surprised to see a price correction on slips.

[PROPELLER]

Secondcurve, you are way too conservative on the taxes & condo fee in your example. Both would actually be much higher. On a slip assessed at $69k, for taxes to be $500, the per thousand rate would have to be $6-$7 which we all know is way too low. The rate in Gilford is $17-$18 per thousand so that would be $1173-$1242 in taxes. I don't know about other condo marinas but MVYC is $1200 per annual dues(condo fee).

If I were in the market now for a slip I would have to put serious thought in to it also but I was fortunate enough to buy a few years ago. My slip has appreciated 3-4 times what it was when I bought it. Even with the taxes being higher & the condo fee I still could not rent my slip for less than what it costs me to own it.

Even though I own a slip I would like prices to come down. I would like them to come back down to what I paid. My taxes would be much lower & I did not buy for investment. I don't intend to sell it, I bought it to use it.

The one good thing about buying is you have equity that you don't have when renting. If you know you will be boating for the next 20-30 years building equity by buying is better than renting. In your example if you rented at MVYC for the next 20-30 years at $4k per year (which is low, many go for more) that would amount to $80k-$120k with nothing to show for it & you could have bought for $69k. If you were only going to be boating for say 5 years it would not be worth it to buy unless the value appreciated enough to make a profit.

[Orion]

Skip, good article. Another set of factors not mentioned in that article are:

1) Baby boomers retiring - looking for likely getaway scenarios where they would have a Lakes Region home in the summer and a Florida home in the winter. They find they no longer need to live near work (major metro areas) and are looking for a quieter, quality-time life. There's a lot of money becoming available as people sell their Boston-metro homes and those in other high-employment areas of New England and beyond.

2) The post 9/11 era still fuels a demand for "getaway" living as opposed to spending money on travel. Many people want to vacation somewhere "safe" where they don't have to fly, or go on a cruise ship, or be in a foreign country. The Lakes Region is a perfect solution where families can enjoy a wide variety of quality-time activities.

So, I agree with the article....there is not likely to be a bubble burst in the Lakes Region real-estate market, especially lakefront.

[Skip]

More data to show that a market slowdown is more anecdotal than actual.....the market continues to defy mosts expectations, for many of the reasons Orion points out :

http://www.cbsnews.com/stories/2005/...in954611.shtml

[secondcurve]

Skip:

The reason I am starting to disagree with people who feel there is no bubble is a simple thing called liquidity. Since virtually anyone can get 100% financing, there is an artificial demand for property. As property increases in value due to easy liquidity the herd mentality, that is so prevalent in human nature, kicks in and property values increase further. My slip example illustrates the point clearly. A previous poster noted that unless you bought the slip you wouldn't build up equity. True, but if you put the cash flow saved by not owning the slip in the stock market or bank, over a 30-year period you would have a pretty good nest egg that might be worth more than the slip! Yes, property values can decline over long periods of time. Look at Japan, property values rose this year for the first time in 15-years! The bottom line is that booms are followed by busts. This is an economic reality.

[ApS]

Orion has it right, IMO.

Down the road, however, The President's Advisory Committee on Income Tax Reform has proposed that "state and local" taxes may become non-deductible:

"...whether a new tax system—one where potentially municipal bonds no longer receive a tax preference or state and local taxes are no longer deductible for individuals—will result in the level of economic benefits that are hoped..."
PDF: http://www.bondmarkets.com/assets/fi...nel_060905.pdf.

HTML: http://64.233.161.104/search?q=cache...ductible&hl=en

Does "state and local taxes" include Property Tax?

That could make a big long-term difference...right?

[Orion]

I believe docks fall into a totally separate arena from waterfront real estate. There are more emotional factors driving dock purchases than normal property. This includes, but not limited to:
- perceived disappearing opportunity ("I'll be locked out")
- lowest cost method of "owning" a piece/portal of/to the Lake
- perception (true in recent history) that prices will continue to rise 20+%/yr
- "gotta have a place to put my $500,000 boat and $100K dock ain't too bad"

There may be a bubble looming for docks. Who knows.

[secondcurve]

Orion:

You make some good points. However, I disagree that docks are in a seperate category than lake front real estate. I think it is just a little easier to see the over valuation in this asset category since we all know what the price of a rental slip is. It is more difficult to anaylyze the price of a home versus renting, etc. but I think the over valution may be just as severe. A couple of interesting points I have recently are as follows:

1) Bubbles are almost always built on excellent fundamentals. The point is demographics for retirement real estate is strong but do they justify any price?

2) Japan is and Island. I know I cited this fact previously, but think about its real estate market a little further. Certianly the island of Japan is a little bigger than Cow Island, but it is an island none-the-less and by definition there is limited land on an island. Japan is also the world's second biggest economy, with an aging population very similar to the USA. In the eighties the fear was that Japan would take over the world. Yet, Japan's real estate market has been horrible for years after a period of strong out performance. How can this be?

[beaner]

from today's Boston Globe business section...

Hub condo market cools over record 2004 pace
Sales off 12.3% in the 1st nine months of year
By Kimberly Blanton, Globe Staff | October 22, 2005

Boston's condominium market, which posted record sales in 2004, has slowed dramatically this year, according to a newly published report.

During the first nine months of 2005, sales fell 12.3 percent to 3,132 units, compared with 3,573 sold during the same period in 2004, according to the Listing Information Network, which compiled data for 12 city neighborhoods, from the South End and Fenway to the waterfront and South Boston. That is a sharp turnaround from the comparable time in 2004, when sales rose 32 percent from the prior year.

A separate study of Brookline's condo market by Otis & Ahearn, a Boston brokerage firm, also showed declining sales: 556 units sold in the first nine months of 2005, 11 percent below the year-ago period.

''We're seeing a slowdown across all price ranges -- I don't care whether it's a $300,000 unit or a $3 million unit," said Chris Tuite, a real estate agent for Re/Max Waterfront Realty in the North End. ''I attribute it to too many natural disasters, a quiet stock market, and people are scared about rising interest rates, even though they're still at historic lows."

Sales are slowing as a downtown building boom has pushed new properties onto the market. In the past year or so, large projects such as the 103-unit Atelier 505 in the South End and the 231-unit One Charles development in Park Square have opened.

Many more, such as the 133-unit Gateway Terrace in the South End, are due to open in the next year and are already being sold. At the end of last month, 1,475 condos were for sale downtown, 70 percent more than a year ago.

Adding to this unsold inventory are fewer takers for condos that owners are putting on the market at today's prices. Some real estate brokers said clients have started reducing asking prices after testing the market and realizing it has lost steam, despite tracking data showing prices are continuing to rise.

The median downtown condo price was $462,000 on Sept. 30, up 10 percent in the past year and up 25 percent in two years, Link data showed.

The data can lag the market by several months, since it includes prices only on sales that have closed, and it can take two to three months between the time a purchase-and-sale agreement is signed and the deal closes.

Wellesley College economics professor Karl Case cited ''fundamental reasons" condo demand is dropping, including high prices that make properties less affordable, rising interest rates, and worries about the economy and value of real estate, the single largest asset for millions of Americans.

In the Boston area, Case said condo demand is probably down among baby boomers, who are having a tougher time selling their large, suburban family homes to downsize into condos. Since single-family, suburban sales are slow, he said, ''You have fewer lookers."

Link's president, Debra Taylor Blair, said a condo slowdown could help restore normalcy to the market. ''You can clearly see that the market started to turn in June," she said. The 2004 condo market ''was in a frenzy and really overheated." It ''is really reverting to what we had in 2003, a stable, great, appreciating market."

In a few neighborhoods, Link said, January-to-September sales are still running ahead of a year earlier: Back Bay, Charlestown, the so-called Leather District near South Station, and the Midtown section along the Boston Common. But sales in the three quarters slowed in the South End, South Boston, Beacon Hill, North End, and properties ringing Boston Harbor.

Blair said one reason sales are holding up in Charlestown is because it has more ''properties in all price points. It's still affordable." Citywide, sales seem slowest in units that ''haven't been redone" in Boston's older housing stock, she said. ''There's a lot of demand for new-construction properties with services and amenities."

Asking prices for brownstones and other condos in the South End, Back Bay, and Beacon Hill have dropped, and the prices per square foot of properties that have sold are virtually flat, after increasing early this year, said Dan LaBarre, an agent for R.M. Bradley & Co. ''Properties that come on the market take longer than usual [to sell], months," he said.

But, he added, once the seller drops the asking price by 5 percent to 10 percent, ''then they will sell."

[BroadHopper]

With energy prices at an all time high, consumer goods will eventually follow as it takes energy to produce and get them to market. The buyers will have less money to spend on RE. That alone is a sign that the market will soften.
Many waterfront properties bought in the past few years were sold in a short period of time. As an example, my Dad sold his broadview site in 1997. It was 'flip' twice since then. It was sold last summer for almost 4 times the price my Dad got for it. I met a woman at Patrick's Saturday night who was thinking of 'flipping' a Moultonborough property she had for only one summer. She is worried about the market going South. She mention another couple on Long Island that felt the same way.
My feeling is that lakefront property is inflated due to speculation. Once that aspect goes away, I can see a reasonable drop in prices.

[secondcurve]

BroadHopper:

I am curious. What did your dad pay for the property (and the year acquired) and what did he sell it for? And finally, what did the last person sell the property for. I find this whole real estate craze amazing. As I have stated before, I am pretty sure it is over and we are headed a whole lot lower, but then again I've said that before!

[Live Free or Die]

Our families first property on the lake was purchased in the 50's for under 20,000 and sold in the 90's for over 250,000. The new house was bought the following fall for just under 300,000 and is now valued at 550,000, and it is a small camp with 70' of shoreline.....

[SIKSUKR]

DON"T FORGET 1990'!!I remember my dad telling me in the 80's about deflation of real estate and cuz I knew everything I said no way.Then in a few years we had deflation in some cases reaching 50% of previous value.Don't think it can't happen again.

[Winniislander]

Concord will have to start seriously considering alternative means to raising tax revenue as we baby-boomers approach retirement or there will be a mass exodus. The property tax is the most unfair of the broadbase taxes to virtually everyone. It is not based upon either wealth or ability to pay, especially when property is held for a long period of time, such as what most of us would like to do (and actually be able to plan to retire here). The mis-taxation in NH is the hot topic of anyone planning their retirement. Anyone who has lived in a remote NH town (w/out a good RE tax base) knows well how values fall as the tax assessment /rate goes up........

[RLW]

Originally Posted by Winniislander

Concord will have to start seriously considering alternative means to raising tax revenue as we baby-boomers approach retirement or there will be a mass exodus. .......

Do you really believe that the town fathers and accessors really care about a massive exodus happening in their town, heck no as some younger couple will be knocking the door down to buy whatever is up for sale and at high price which the accessors will then raise the evaluations making the taxes higher. No end insight at least the near future. Born and raised up on Birds Hill Ave.