Neighborhood Housing Market
by Judy Weinberg (Venner Road)
The downturn in the housing market has certainly been front and center in the media this past year. There is no denying that the mortgage crisis hit many homeowners, and the rapid increase in house prices in the past decade caused inflated prices that were just ripe for a correction. Why did this happen? A lot of this can be explained in two words: easy money.
It became a cycle of supply and demand. Banks were allowing a higher debt-to-income ratio when determining loan amounts, meaning the percentage of income going towards housing costs kept climbing. They were also becoming more lenient when examining credit history and down payment requirements. These relaxed loan restrictions brought more activity to the housing market: more renters were able to buy, buyers were stretching themselves to purchase more expensive properties, and homeowners were trading up to more expensive properties. As the demand exceeded supply, bidding wars on properties ensued, and prices climbed. Increased prices also meant increased equity, so substantial equity loans were being granted.
The obvious downside to easy mortgage money is that homeowners kept taking on more and more debt. What goes up, though, must come down, causing so many of the problems we’ve seen in the past two years.
We all know politics is local; real estate even more so. Arlington real estate sales have had a downturn in the past two years, but substantial increases for many years prior to that. To put it in perspective, consider the following chart:
| Average sale price Jan ’01 to Dec ‘05 |
Average sale price Jan ’06 to Dec ‘07 |
|
|---|---|---|
| Single Families | 27% increase | 4.5% decrease |
| Condominiums | 49% increase | 8.5% decrease |
| Multi-families | 21% increase | 11% decrease |
So then, if property values are dropping, why hasn’t the assessed value from the town also dropped? These really are two different numbers that can be explained as follows:
An assessment is when the Town assesses your home’s value in order to determine how much property tax you should pay. Most governmental agencies do home assessments every 2 to 4 years. In some instances, an assessor will visit the inside of your home to see if any improvements were made which may affect the home value. At other times, the value will be based solely on property sales records, age, condition, size and other factors.
An appraisal evaluates your house and determines an accurate value based on comparable sales that occurred in the previous 6 months. This is using much more current information to determine fair market value. The following chart shows all real estate sales in our Newsletter neighborhood between October 3, 2007 and February 17, 2008:
Single-family homes
33 Academy Street $825,000
26 Bailey Road $650,000
20 Menotomy Rocks Drive $622,000
12 Newman Way $585,000
86 Pleasant Street $670,000
176 Pleasant Street $750,000
188 Pleasant Street $558,500
31 Wall Street $559,000
7 Woodland Street $730,000
Condominiums
79 Jason Street $450,000
105 Pleasant St, #2 $475,500
114 Pleasant St, #201 $229,500
125 Pleasant St, #306 $280,000
Tags: economy, The Leaping Issue 15(1)