Thursday, July 21, 2005

Bubble Markets Stagnating

When the 'speculative fervor' ends in a real estate market it will inevitably lead to price stagnation followed by price declines. The rate of price appreciation slows, until prices are stagnating (appreciation is zero in inflation adjusted dollars). Then price declines set in. So which metropolitan areas are farthest along the cycle? Here are my candidates:

  1. San Diego: The year over year price appreciation (June 04 to June 05) is now a measly 6.3%. Most of that gain probably occured in the first part of that period
  2. Boston:
  3. Las Vegas
  4. Others ( please provide info)


    1. Boston is already slipping. There is a surplus of houses on the market. I saw 22 "for sale" signs on a 3 mile drive through Danvers, Ma the other day, and every open house I went to last weekend (about 10-12) the agent was virtually screaming "just reduced", and "willing to talk". I think that Boston probably does deserve to be listed as one of the 13 riskiest markets for just the reason that the PMI report indicated...job loss. The state is losing jobs. First it was the Bank of America buyout of Fleet and now it the P&G buyout of Gillette. Not to mention MA can't get new businesses to move here because the taxes are too high (oh yea and employees can't afford the housing)!

    2. Boston and Providence are indeed slipping or at best stagnating. I live near Hartford CT- and keep an eye on those markets. Boston and Providence have a close relationship, since many people who work in Boston, have fled to the more 'affordable' Providence. But that has driven prices up in Providence to levels that are bubble like. They have also fled to Worcester, which is stagnating with high prices as well. Trouble is job growth in all of these areas and in New England in general is lackluster at best. Hartford is still seeing strong pricing pressure, as well as eastern Connecticut (which has Bostonians, New Yorkers, and even Californians) relocating to for the peace and quiet of that area that still has cheap housing costs. Western Mass. around Southbridge, Surbridge and Springfield are strong also- with Bostonians again commuting the 1.25 hours to the Hub.

    3. Dc area still strong,but outer burbs stagnating
      the ball seems to stop in the air before it falls

    4. n va,

      That is what I also heard from an housing appraiser who works in the metropolitan dc area. Thank folr the report.

    5. The market has quickly come to a halt in central Connecticut-in the last week, more inventory, some price reductions. Could be slipping in the Boston/Washingtom corridor. I have no idea what things are doing in Greater NY- however from conditions locally, they echo what I read in the Washington Post today 7/25