From our President

First-time home buyer? Long-time home owner? Assemble all the tools you'll need to do routine maintenance around the house, for under $250. The Pragmatist tells you how.

The number of holiday positions created by US retailers for the 2010 holiday season is on the rise since holiday employment dipped in 2008. "Hiring is one of the best economic gauges," reports USA Today.

Fannie Mae reports that serious delinquencies on single-home mortgages have fallen in July, a trend that began in March, and are now at a ten-month low. Serious delinquency occurs when mortgage payments are more than 90 days past due and the home is in danger of foreclosure by the bank. The Wall Street Journal suggests that the US economy is healing.

The latest Case-Shiller Index was released today and the composite data show home prices at lower but stabilized levels just months after the end of the tax credit. What a relief! Factual sales data is showing stability across the country-- not plummeting prices -- and if this is the bottom of the market, then it's an opportune time to buy. Why? You don't want to see the best prices pass you by in the rear-view mirror.

In the last few days, the press has been really digging into the real estate market. Recently released figures for July 2010 sales indicated a sharp decline in properties sold that month. Why is this a surprise? Everyone knew the tax credit deadline was behind the surge in June closings. The real question is whether, going forward, the post-tax-credit housing market is heading toward collapse or whether we're going to see a return to equilibrium.

To answer that question, we took a look at market activity in Cambridge, Mass. Two things stand out. First, although the tax credit did stimulate a good deal of activity this Spring, post-tax-credit July 2010 in Cambridge represents a return to our normal market dynamic rather than a nose dive. (See graph below) In fact there's been a slight but noted increase: in July 2009 we had 84 properties go under agreement; in July 2010 the figure went up to 86. Contrary to the generalizations being made about the national market, here in Cambridge we are not seeing a dramatic decline in activity nor do the statistics indicate this kind of trend for the future.

Secondly, it's being reported that, post-tax-credit, many parts of the country are seeing inventory levels jump to 12 months of inventory or higher. What does this mean? Basically, given the current stock of houses for sale and the current level of buyer activity, it will take over 12 months to sell all the inventory in those troubled markets. Six months of inventory is considered a healthy, neutral level of inventory to be at. In Cambridge, we've been doing better than average (See graph below): our inventory levels in July 2010 were at 4.3 months. The month before, June 2010, we were at 4.1. months, so the end of the tax credit clearly hasn't triggered stagnation in our market. In fact, ever since March, the beginning of our Spring market, our inventory has consistently hovered around 4 months.

These are just two ways that the situation in Cambridge differs dramatically from the doom and gloom reports making the rounds in the media over the last few days.

More and more home buyers are paying attention to where they can walk to from their homes. Listing agents are making a point of articulating all the neighborhood amenities you can walk to from a house for sale. Information from websites that rank a location's walkability, for example Walkscore.com, is also a popular feature on listing sheets. This article from the WSJ points out some ways that Walkscore gets "location efficiency" wrong.

What's the value of a good public school system? Does it make sense to pay for it even if you don't have children? Homes associated with great schools generally sell faster, in good markets and bad. And property values in towns with top-performing schools suffered significantly less (if at all) compared to neighbors with inferior school systems. If you're buying a house because of the school system, you're going to be paying a premium so be prepared to make some sacrifices when it comes to square footage and amenities. So long as the schools in your town maintain their performance, you'll be in a good position when it comes to sell.

In May 2010, pending transactions were down slightly in Massachusetts from the same time last year (3-6%). Month-to-month, there was a sizable decrease compared to April 2010 (16-17%). The deadline to qualify for the tax credit was April 30, and is the explanation for the significant decline in number of contracts signed from one month to the other. A few months ago, predictions about what would happen to the housing market once the tax credit expired were much more pessimistic than a mere 17% decline. Now, absent the government stimulus, the number of transactions shrank by less then 20% -- it's clear that the housing market has the potential to run on it's own steam again, and maybe at a more sustainable level.

April 2010 Massachusetts condominium and single-family home sales show increases in transaction activity and price. Condominium sales up by 55.7% from April 2009.

The Wall Street Journal reports on home value trends for 2011. Economists from Deutsche Bank to the Census Bureau are weighing in on what's in store and the prognoses range from pie-in-the-sky super optimistic to more moderate, plausible scenarios. And, we're not hearing so much of the grim predictions of further decline in the housing market anymore. The consensus seems to be that 5 or 10 years hence, not only will we all be in a good place again, the process of recovery is well under way.