Housing market falling from L.A. to Boston

Much news has been made about the current status of the U.S. real estate market. Since the beginning of 2006 (some places started at the end of 2005) the housing market in just about every city in the country has been on a decline. But some cities and states have been more affected than others.

California, for example, has been noted for experiencing record-breaking sales declines in year-over-year statistics as well as significant home price declines. California sales woes are a bit drastic compared to other major real estate markets, but the northeastern hub of Boston is not far away.

Alexander von Hoffman, writer for The Boston Globe, explains how the sliding housing market in Boston has residents just trying to wait it out, in his article, “Riding out the housing bust,” published October 16, 2006.

“For the past 10 years, the real estate boom rolled from one Boston neighborhood to another. It put living in the South End out of sight for all but the rich, and threatened to do the same in Jamaica Plain. Prices rose even in lower-income neighborhoods such as East Boston, Roxbury, and Mattapan.”

Home prices have since been falling for the past year and Boston home owners (mainly sellers) are trying to fight off panic. The main question is whether the city, which has only experienced gains in real estate in the past, can endure the market downfall.

“The drop in values will affect low-income neighborhoods and towns -- parts of Dorchester and Brockton, for example -- where there has been less demand. During the boom, money lenders generated many subprime and other risky mortgages -- often with no down payments and sometimes with no requirement of clean credit or even employment.”

These risky mortgages have and will continue to result in default, thus prompting foreclosure. A record amount of foreclosures has been prevalent in California but they are spread out over a variety of cities and towns. In Boston, however, there are a lot of people living within a condensed space. A high number of foreclosures in Boston can affect a community’s economy.

“Dorchester community leader Bill Walczak remembers that in the recession of the early 1990s such loans brought hundreds of foreclosures to the western part of that neighborhood's Codman Square. The turnover of properties to absentee landlords allowed drug dealers to take over buildings, depressing values still further.”

While this is a potential disaster waiting to happen, not all bad is generating from the sagging market. Rents in less prosperous neighborhoods will decline which will be further aided once many of the condos revert back to rentals, which will help the working-class families and young adults survive in these areas.

“In any case, the fall in housing prices will not change the long sweep of change in Boston's neighborhoods. The economic shift toward white-collar industries, such as investment banking, medicine, technology, and law, will keep transforming once-decaying neighborhoods -- especially those with historic appeal and those located near in-town jobs, universities, medical complexes, and rapid transit.”

The housing market is falling from Los Angeles to Boston and just about everywhere in between but how the regions deal with this may differ. One thing that seems to be constant among all regions, coast-to-coast is that the market will slow or fall but never crash.