Tuesday, January 18, 2005

Housing bubble strong


By Jay Fitzgerald, The Boston Herald
The Boston housing market is in full bubble mode, according to a new report on real estate conditions across the nation.
The report by Michael Youngblood, managing director of asset-backed securities research at investment banker Friedman Billings Ramsey, says the price bubble it sees in Boston - and in 26 other cities across the nation - won't burst any time soon.
But it did say the ratio of median home prices to per capita income in Boston is as high today as it was in the late 1980s, when real estate prices hit their last peak before prices began to fall.
Other bubble-troubled areas across the nation include New York, Los Angeles, San Francisco and San Diego, the FBR report said. About 119 cities showed no signs of bubblelike conditions, the report said.
Judy Moore, president of Re/Max Premier Properties in Lexington and former president of the Massachusetts Association of Realtors, said she's not worried about the report - or numerous other past warnings about an impending end to today's housing boom.
``That bubble theory has not played out over the years,'' she said.
The local housing market remains very strong, she said, though there may be a moderation in the rate of price appreciation.
``We still have more buyers than buildings,'' she said.
The FBR report made clear that it doesn't anticipate any crash or bubble burst in the near future. The economy would have to contract for a minimum four straight quarters before a contraction in home prices would occur, the report said.
``The economic expansion under way generally and individually in the 27 cities that are experiencing bubbles postpones the deflation of home prices,'' the report said.
But the report did say that many major cities, including Boston, are exhibiting similar patterns of past housing booms, as prices skyrocket compared with incomes.
The FBR report analyzed statistics through the third-quarter months of July, August and September, a period when statewide sales of single-family homes in Massachusetts increased by 6 percent, to 15,603 units, while prices soared 11.1 percent, to a median state average of $350,000.
Condominium unit sales soared by 29 percent during the same period, with the median condo price hitting $268,000 across the state, according to the Massachusetts Association of Realtors.

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