Boston Real Estate

For those who have not read this blog, let me just say that I was a stock trader from 1996 to 2002. I studied the markets during the boom and the bust. There are certain human behaviors that when put in graphic form make the same pattern time after time. This is called Technical Analysis.

This is my 8th spring in the real estate business as a Buyers Agent in Boston. Normally by April 1st I have a half dozen buyers coming to Boston and I’m busy trying to coordinate property showings. Everyone wants Saturday of course.

Unfortunately, not this year.

I think that a lot of buyers would like to buy but many are unemployed. Others can’t sell the house they are upside down in. For a plethora of reasons, in this economy buying, selling and moving just don’t seem like such a good idea.

More on the W bottom;

A few weeks ago I wrote a post about the W bottom that occurs in free market economies. – Forget The Boston Real Estate Market, Buy The Boston Home You Can Live With- There are a lot of reasons for this configuration. The W bottom is a graphic representation of human psychology. This happens in ALL markets because of the humans involved in them. You can look at stock charts, hog futures, commodities, bonds, all markets do this and once it is done you have a legitimate technical bottom for that market for that time.

The first leg down is the housing market was in late 2008 as well as 2009. The middle part of the W is perhaps this spring we are living with all the good news and stimulus. The second leg down in the W occurs because of all the sellers who didn’t get out during the first leg down. They start selling into the firmed up prices we are seeing now which creates the second shallower leg down.

This one should not go as deep.

As the spring market in real estate ends in July, I’m starting to think we have the next leg down coming, the second dip in the W. This should start on the fourth of July and go to spring 2011. In order for this formation to be good news, the second leg down doesn’t go as deep, (see chart). If it does we have another kind of problem. Also the second and final move up in spring 2011 should be on higher volume than the middle move up we are living right now. Not hard to imagine.

Once this formation is put in we usually have a market that moves higher because all the sellers were shaken out in the second leg of the W. Always with the caveat: baring any exogenous terrible events.
New stock graph flickr

Here is the perfect W bottom (also called the cup and handle) for the stock market bottom in October 2002. Notice the spike in volume immediately following the completion of the W.

I was so hoping that we had put in the W bottom for real estate this spring of 2010 but as time goes by it looks like another slow year in real estate. Keep in mind that I’m speaking as a real estate agent looking for more transactions as the most watched metric. This does not mean you can’t get a good deal at any time in any year. Just make sure you go over the comparables with your Buyers Agent so you know you are not paying over the current market value for the property.

It is starting to look to me that we will not be coming out of the W (like stocks in April 2003) until next spring.

Kind of technical jibberjabber, but it works every time in every market. Knowledge is power and you can be sure I will be looking at real estate sales volume and price charts early next year. With a bit of luck and a recovering economy we should see a more active market in 2011.

One more example is the controversial S&P Case Shiller Index that monitors single family homes. This chart is a 20 city composite so it doesn’t specifically graph Boston or even condos but it is a good illustration of W bottoms.