March 17th, 2014

Generational Trends in Housing


By Victor Normand

Before Tom Brokaw wrote about the “Greatest Generation,” that generation was also known as the “Silent Generation,” a description popularized by Time magazine for those born after 1925 who lived through the Great Depression and came of age during World War II.  They were preceded by the “Veterans” who were born after 1900 and followed by the most famous generation of them all- the “Baby Boomers.”  After coming up with that title, we got lazy as a society and began naming generations with just letters, X and Y, though the Y’s are now becoming known as “Millennials.”

There are specific benchmarks for the start and end of some of these generations, like world wars or sudden spikes in births.  Although exact dates sometimes float around, they still tend to be in roughly twenty year increments.   As for their usefulness, they often seem to have more significance after those within a given generation have had a chance to demonstrate behaviors.  Predicting how a demographic segment of the population will act is an inexact science.  That’s why it is wise to call them trends, which are easy to alter to conform to real time events.

Generation dates and population SizePopulation and Generational Distributions
(For other towns or Census facts visit the US Census website.)

So, here are some recent trends:

  • Not surprisingly, Generation X is the largest group of home buyers as you would expect that age group to be, though they too were affected by the Great Recession.
  • The age of the home purchased increases as the age of the home buyer decreases.  The dominant preference for newer homes spans all age groups, but younger buyers are more likely to have to make more sacrifices to get that first home.
  • There is a trend among younger buyers toward more urban properties and away from the suburban locations popular with their parents.  While some of the reasons relate to life style choices, two others factors may be in play as well:
  • Generation X and older Millennials are having children later so choices involving open space and schools can be postponed
  • In many communities near urban centers, suburban home sites are less readily available and more costly to build on, making urban locations with favorable zoning and in-place utility infrastructure more attractive.
  • Among Millennials, 65 percent are renters and 22 percent live with parents.  Although their numbers rival that of the Baby Boomers, their activity in the housing market has yet to be felt for several reasons:
  • The economy has yet to produce sufficient job growth which affects this group more than any other
  • Student debt is a significant drag of finances for this age bracket
  • Condominiums, often the first purchase for first time home buyers, have become difficult to finance
  • Many older Baby Boomers are still stuck in homes with mortgages that exceed the value of the property and are unable to downsize as they had once planned.

Despite the challenges still facing many in the housing market, the economy is clearly moving in the right direction and the value of home ownership has not lost its appeal.  The trend toward renting instead of buying that was strongest during the years immediately after the Great Recession has abated.  So, while events shape history and the generations seem to behave in new ways, most of the underlying fundamentals of the housing market don’t really change.


February 18th, 2014

The Small House Movement – Only a Niche


By Victor Normand

There should be a product out there for homebuyers who desire a new, smaller house.  Those buyers include first timers, singles of all ages, and people looking to downsize from their present home.   An attached condominium has been the default option, but a townhouse or flat is just not a single-family home.

Recent interest in building smaller houses first attracted attention with the publication in 1997 of The Not So Big House by Sarah Susanka.   The author argues for quality of design over quantity of space.  By choosing only spaces actually used by inhabitants and then carefully designing that space so that they relate well to one another both functionally and visually, houses can be built dramatically smaller.  These small houses have their appeal economically as well as ecologically.

For a while during the recent post recession years it seemed that the size of houses was beginning to reverse direction.  Nationally, house size did decline after the recession in 2008, though only by a few hundred square feet. We looked at the trend in Middlesex County for a period beginning in 2000 and found that the percentage of new houses sold having less than 2,600 square feet of living space, had dropped by more than ten percentage points in the years after the recession.

New Homes Sold Middlesex County by SizeWe also noticed that while new houses seemed to be getting smaller, the percentage of much smaller houses (less than 1,400 square feet) did not increase and remained at 2% of all new houses constructed. Builders responded to the bad economy by constructing houses they could sell for less, but they did not move in the direction of the much smaller house.

But the figures for 2013 show a return to big old days.

Fundamentally, market forces drive the size of houses and higher wealth and cash buyers for whom size is everything apparently, dominate the market for new houses in this area.  Why so big?  A study done by Shrink That Footprint, an independent research group that provides information to people interested in reducing their climate impact, questions the need for so much living space.  Of the 18 countries they studied, only Australia averaged more residential floor space than the United States.  Weighing in at 832 square feet per capita, the United States bested the likes of France (464), England (356), Germany (587), Italy (335), and Spain (373).

So, if the worst recession since the Great Depression could not get us to modify our appetite for the Not So Big House, what are the chances that demand for large houses will lessen any time soon.  Not to take anything away from the principles of the “movement” with its rational focus on conservation and its embrace of esthetics, but builders know, if they build them, the buyers will come.

January 17th, 2014

Rising Interest Rates and the Local Housing Outlook


By Victor Normand

The good news for the housing market is that the economy is improving.  Job creation is getting better and incomes are growing.  The bad news for home buyers, and sellers who need buyers, is that the economy is improving.  Of course, that news is not really bad, but it is changing the marketplace.

The Federal Reserve is easing up on its purchase of mortgage backed securities resulting in the expected rise in mortgage interest rates.  Last month, when the Fed finally followed up on its intention to “taper off” its level of purchases, the markets reacted calmly and interest rates went up only modestly.  That was a good thing.  Now economists are wondering what the longer term impact on housing will be.

Even before the Fed acted, interest rates had been going up from their historic lows (3.34% in May of 2013).  At the current rate of 4.50%, it is hard to say if the increase has had an effect on the market.  Nationally and locally, sales have softened a bit but that may have as much to do with the lack of inventory as anything else.  The math tells part of the story. Presently, the median price for a single family home in Acton is approximately $520,000.  For every 1/8th percent increase in the rate of interest on a 30 year mortgage, the consumer loses about $5,500 in buying power.  This example below holds the term, down payment, and monthly payment constant, showing how significantly purchasing power and interest rates are inversely related.

Mortgage Interst Rate Chart
However, as the charts below show, dramatic changes in home mortgage interest rates as seen during the 20 year period from 1972 to 1992, seem not to have effected home value appreciation.  Nationally, values rose steadily during the same period when interest rates fluctuated by more than 10 points, peaking in January of 1982.  Home price appreciation averaged 8.5% during this period despite extraordinarily high interest rates, which has more to do with annual inflation running at 6.4% and increases in median household income of 6.1% during that same period.

jan blog chart 3jan blog chart 4
Source: Freddie Mac (  U.S.Census Bureau (

All this helps to explain why the recent low interest rates, nearly as low as they have ever been in history, were not enough to restore home values.  The Great Recession began in December of 2007 and lasted for 16 months, bringing  about low inflation and low household income growth as well as low interest rates.  In Middlesex County, sale prices fell by 15% from their peak and were not able to reach their pre-recession levels until 2013.

So, as the economy improves, look for increased sale prices and increased numbers of sales. If anything, rising interest rates will cause buyers to enter the market fearing even higher rates to come.  Interest rates are an important factor to consider when making a real estate decision and do influence consumer behavior. Call on a Resident Expertsm to help you keep all of the factors in perspective.

December 13th, 2013

Building Permits and Home Improvements


building-permit2So you have decided to do some home improvement work around your house. It’s great to envision the kind of upgrades you could do and at the same time, significantly raise the value of your home.  Maybe update the kitchen with a new granite countertop, under cabinet lighting and hard wood flooring. Finally take up that impractical wall to wall in the dining room.  You’ve got your plan; you’ve fixed your budget, now what?

You might want to do some or all of the work yourself. Maybe persuade some handy friends to lend their expertise?  Or maybe the more you look at the scope of the job; you begin to weigh the idea of hiring the help you need.  The more you get into what needs to be undertaken, the better some hired help begins to look.

Do you need a building permit for the work?  If that question does not readily come to mind, it should.  If your project only involves ordinary repairs such as painting, wallpapering, or replacing that old countertop, you are probably good to go.  But larger projects, such as building a deck or putting on an addition would require a building permit. As the homeowner, you could apply for one. But here’s the thing; you might not want to do it yourself.

For large projects, most homeowners may not understand what’s involved in properly    pulling together all that is required to complete a building permit. And even if you have the time and expertise to do the work, you’ll want to be mindful of the following.  Only by using the homeowner exemption, which is allowed under state law, all construction, reconstruction, alteration, repair, removal or demolition of a building or structure in Massachusetts requires both a Licensed Construction Supervisor (LCS) and a registered Home Improvement Contractor (HIC).


There are strong consumer protection laws in Massachusetts for homeowners who do not get the work they contracted for, but only if a LCS and HIC are used on the project.  The Home Improvement Contractor Act will compensate consumers up to $10,000 for unpaid judgments against a contractor, but only if the building permits were applied for by a LCS and the work was done by a registered HIC.  The full requirement for access to this Guaranteed Fund as it is referred to include:

  • A written contract for the job
  • The work must be supervised by a Licensed Construction Supervisor
  •  The contractor must be registered with the state as a Home Improvement Contractor on the date the contract was signed
  • The property is located in Massachusetts
  • The property must be your primary residence
  • The contract must be for work to a preexisting owner-occupied residence with no more than 4 units
  • The Request for Arbitration, or other court action must be filed within 2 years of the contract date

No one likes to complicate a project more than necessary or add costs where they might be avoided.  Everyone has heard horror stories about projects that have gone very wrong.  Bear all this in mind as you progress with your improvement plans.  Before you actually begin construction, pay a visit to your local building inspector and have a talk about what you plan to do.

Along with some terrific resources that we can offer, below are some useful links to check out.

The Official Website of the Executive Office of Public Safety and Security

Homeowners Q&A

Look-Up for Licensed Construction Supervisors

Look-Up for Registered Home Improvement Contractors

Building Permit Contact Information

Town Building Department Phone email
Acton Frank Ramsbottom 978-929-6633
Boxborough David Lindberg 978-264-1725
Concord John Ross Minty, Jr. 978 318-3280
Harvard Julie Doucet 978-456-4100
Littleton Roland J. Bernier 978-540-2420
Maynard Richard A. Asmann 978-897-1302
Stow Craig Martin. P.E. 978-897-2193
November 19th, 2013

Pricing Property Using Square Footage of Living Area


By Victor Normand


Square Footage

Pricing an individual property using only an average square footage price of recent sales is never advised.  A price per square foot of living area alone often neglects to take into consideration many things like location of the property, how square footage is actually calculated and distributed, or the condition of the home.  However, everyone uses square footage pricing; buyers, sellers, real estate agents, appraisers, and local assessors to approximate the value of property.

At the end of the day, it is the marketplace that determines what the sale price of a home is, so looking at recent comparable sales information is advised.  The most efficient way to transfer the actual sale price of a property to a current one on the market is to begin with the sale price per square foot and adjust from there.  Those adjustments need to include:

  • Location – the same neighborhood in the same town
  • Age  – new, nearly new, mid-century, pre-war, antique
  • Style – colonial, cape, ranch, contemporary
  • Condition – depreciation or replacement attributes

The chart below shows the average sale price per square foot in the past year for many of the communities in our area.  The current list price for single family homes on the market is also shown along with the ratio of current list price to actual sale price for the previous year.  While this information has limited utility in pricing an individual home, it does provide some indication of where the price should be.

blog chart
These aggregated numbers are useful in other ways.  They provide information useful in relating towns to one another in terms of overall home value.  For the towns listed above, properties in Concord list for higher prices than those in the other communities.   Also, the relationship between listing prices and home sales for the previous year help to provide a picture of where home sellers and their real estate agents think the market is headed.  For the most part, sellers expect the market to continue to be strong and they are pricing homes accordingly.

Sometimes the numbers are difficult to interpret.  Although the pricing in Harvard and Concord seem similarly aggressive at 133% of last year’s sale prices, interpretation of this ratio might be different.  In one instance, the town of Concord with its greater proximity to the Boston Market, which is very strong, and the low absorption rate of three months (half of what is generally considered a balance market) seems to reflect a strong forward looking market, whereas higher expected prices in Harvard may have more to do with an extended period of depressed prices and a market trying to regain its place relative to other nearby communities.

So, if you are going to use square footage as one factor in pricing a home, start with accurate measurements.  Although there is no “right” way to determine correct square footage, here are some guidelines as established by ANSI (the American National Standards Institute):

  • Measurements are taken from the outside of the building and include the thickness of interior walls, closets and hallways
  • Below grade spaces like basements, even when finished should not be counted as living area, though an adjustment should be made for that finished space
  • Any rooms or accessory spaces not directly accessible from the main house cannot be counted
  • Enclosed porches can only be counted if they are heated using the main heating source or other permanent systems
  • Finished attic space can only be counted where the ceiling height is at least seven feet

Finally, after you have taken a stab at pricing your home or a home you would like to buy, try taking advantage of a Resident Expertsmto put a finer point on your work.

October 16th, 2013

The Effect of Inflation and Personal Income on Long Term Home Price Appreciation


By: Victor Normand

The past year has been a good year for home sales and appreciating values.  In general, the Acton area has experienced home sale prices about 10% above last year’s level.  This makes home owners feel good and a bit wealthier and home buyers anxious, with both sides wondering where prices are headed.  Are we in a period of prolonged rising home prices?  Or are we in a bubble that could burst suddenly and send prices crashing back to earth?

Predicting the future of home prices is like predicting anything, nobody knows for sure what tomorrow will bring, but we do have history and past experience to point us in the right direction.  Local markets can vary wildly from one another and sometimes move in the opposite direction of the larger market over the short run. However, time tends to smooth out the rough spots.  Fundamentally, home prices must mirror inflation and changes in personal income. If home prices increased greater than the rate of inflation and per capita income, eventually, no one would be able to afford to buy houses.

As the chart shows, over the past twenty years (and I am sure for longer than that), home prices have indeed matched the general rate of inflation in the U.S.  If anything, they have lagged somewhat which makes sense given the prolonged period of depressed housing markets in many parts of the country.  So, in general, look for home prices to continue to play catch up.

blog chart
The other factor fueling home price increases is personal income.  If personal incomes increases faster than the rate of inflation, home prices can be expected to rise above the rate of inflation.  That helps to explain why the twenty year home price experience in Acton has outpaced the average for the rest of the country for both inflation and the general Home Price Index.

Over the past 20 years, per capita income in Massachusetts has increased at a greater rate than the country as a whole and the per capita income in Acton has consistently been higher than the statewide average. .  So, it is not surprising that states and communities showing patterns of greater income growth would also have higher home price appreciation.

Per Capita Income*



Rate of Increase










 Where are we headed?  Once the local housing market reaches equilibrium where the current supply shortage is corrected, expect price appreciation to continue, but at a slower pace.  Given the past history as well as the prospects for continued growth in incomes in the area, an extended period of steady 4% home price appreciation should not be unexpected.

As we said, predicting the future is not a perfect science.  So, the best advice is to keep in touch with a Resident Expertsm for the latest in market trends.

September 17th, 2013

Great Information from Service Professionals for Home Sellers


shutterstock_141754537 [Converted]You may have heard a lot about the shortage of homes for sale in many communities, including many of the towns in our area.  While it is a fact that the number of homes being listed is down and the competition for well-marketed homes has become more intense, the outlook is that more homes are likely to come to market this fall and certainly next spring.

A big reason why more homes will come to market is that higher selling prices are occurring.  And higher sale prices mean many potential home sellers now have sufficient equity in their properties to make selling a realistic economic consideration.

Selling a home is a complex undertaking that gets more complex as you become familiar with the required steps   At Acton Real Estate we have tried to make the experience  more manageable by breaking things down to ten basic elements (contact us for a copy of  “The Home Selling Process”  which details how we go about selling homes).   The most important steps are pricing, staging, marketing, negotiating, and closing, among others.  Another key step is vendor coordination, which relies heavily on the agent’s knowledge and experience with actual property service providers.

In order to bring some clarity and efficiency to the process, we’ve gathered our trusted Vendor Partners together at an event called,  “The Agents Roadshow for Home Sellers”.  This tradeshow will be held at The Holiday Inn in Boxborough on Wednesday, September 25 from 5:30 to 8:00pm.   Here you will be able to meet with the pros and have all your questions answered.

You may recognize some of the vendors who will be at the event.  We have worked with all of them; they are among the best around because they always get the job done well. We can help answer your questions about:

  • Credit and current interest rates
  • What kinds of upgrades buyers expect
  • Which rooms could use remodeling
  • Increasing curb appeal with landscaping
  • Choosing the right paint palette to unify your home
  • Straight talk about environmental issues (mold, radon, etc.)

Whether you have questions about these issues or others, you will find advice from these folks helpful for all these topics.

So, if you are thinking about selling your home now or sometime soon, this is the “one-stop shopping” forum that will help you put all the pieces together. There will be no formal program or presentations, just you and your neighbors in the company of these service professionals.   Of course, the Resident Experts sm will be there as well to talk about the current market, and how to take the next steps along the way to a successful home selling experience.

August 19th, 2013

The Extended Family Is Coming Back


By: Victor Normand

What do McMansions, boomerang kids, and the Great Recession have in common?  Think multigenerational housing and the days before WWII when it was common for several generations to live together under one roof.   Today over 50 million Americans, or 16.3% of the population live in households with more than two generations according to the U.S. Census Bureau, and the trend is increasing every year, though far below the 25% of the population living as extended families in 1940.

The housing boom after WWII saw large tracts of land developed for housing in all parts of the country, and little of it was built for the extended family, just housing for parents and their 2.3 kids.  By 1980, the number of extended family households had shrunk to half of what is was, just 40 years previous.

Since 1950 the size of the average home has grown by 240% while the average family size has decreased by 30%.  According to the National Association of Home Builders, the average size of an American home has increased from 983 square feet in 1950 to 2,349 SF in 2002 with the Northeast leading the way with an average of 2601 SF.

The housing plan envisioned by many Baby Boomers who bought all those big houses, involved selling that big house when the kids left the nest and downsizing to smaller quarters.  The flaw in that scenario is twofold.  Though the kids did leave the nest, often, very often, they came back, and flaw number two: where to find the smaller house to down size to?

Presently, there are 2,748 single family homes on the market in Middlesex County; of those only 203 have fewer than three bedrooms, and of those, only 37 were built after 1980.  The alternative is newer, age restricted developments that often do not provide all of the economic relief hoped for by retiring Boomers.

As for the Great Recession, it seems to have imposed a reexamination of the social benefits of the extended family.  Single and married children living with parents clearly has powerful economic benefits,  as does providing housing for elderly parents who can free themselves of their larger homes.  So, the problem of what to do with the big house may have its solution in accommodating some major social and economic changes.

Indeed a niche has developed among home builders who are designing homes to provide for the extended family.  Also, home owners are re-designing existing McMansions to provide interior living spaces for the comfort of the extended family members.  Now the challenge is zoning which often makes it difficult for homeowners and builders to create in-law apartments or accessory buildings.  Only California has a law which allows such housing by right.  But there are options in the marketplace and then, of course, there is a Resident Expertsm who can help with your multigenerational needs.


July 16th, 2013

First Time Home Buyers – A Call to Action


By Victor Normand

The 25 to 34 year old demographic typically makes up the largest percentage of first time home buyers, but they are largely absent from the scene nationally and in our market.  Beset with student loans, challenging job circumstances and a conservative lending environment, these future homeowners are holed up at home with their parents or in rental units waiting for things to change.

The economy is improving, but not fast enough to deal with the unemployed or underemployed who might like to own their own homes.  And lenders are cautious in making loans to those who might have good jobs with good incomes and good potential for advancement, but they have education debt (which they are managing) and only a little cash for a down payment.

That’s not to say that programs aren’t out there to help.  The Governor recently announced a new initiative called the “Home Ownership Compact” to help first time buyers.  Six banks in the State of Massachusetts have signed on to this initiative, which should be rolling out very soon.. However, the major players behind almost all of the mortgages made in the country — Fannie Mae, Freddie Mac, and the FHA — are effectively on the sidelines when it comes to first time home buyers as we have described them.

Expect that to change at some point, now that interest rates have begun to rise and the refinance market has come to a near halt. The big banks seem to have more influence on the aforementioned government-backed entities than your average consumer, and soon they will look for new markets to replace their lost refinance business. For those first time buyers who have good jobs, less than perfect credit (as in paying down student loans), and little cash, some creative borrowing may be in order.

In the past we have suggested that borrowing from parents may be a good option.  Most 401(k) employer sponsored programs allow participants to borrow from their own accounts; often with very low interest which accrues to the participant.  Even IRA’s funded by a potential first time home buyer allows contributors to take penalty free distributions for the purchase of a home.  Given the low rate of return on these accounts, an interest bearing loan to a first time home borrower can be a good investment.   Get the facts to see if it’s a good option for you.

Recently, we have shown that the purchase of a condominium can be a good investment.  In fact, in our market, most condominiums priced under $175,000 are being purchased by investors, usually with cash.  Unlike recent single family home sales, which have been showing increasing price appreciation, condominium sale prices continue to decline, while rents on these units have been increasing.  On the basis of an income approach to value alone, sale prices for condominiums will eventually rise.
Every real estate deal is unique with different criteria involved depending on the condo complex.  Ratios of Owners vs. Renters come in to play along with knowing what specific type of financing might be available. Trust a “Resident Expertsm,” to apply their knowledge and expertise to insure a smooth transaction. You’ll move quickly through the potential pitfalls and learn something about the real estate market. It’s what we know that makes the difference.

June 14th, 2013

A Housing Bubble in the Making – Not Here, Not Now


By: Victor Normand

As we have said recently, the housing market has changed from a buyer’s market to more of a seller’s market, with the resulting increase in home sale prices.  Anecdotal evidence all portray a hot market on the verge of going bubble: multiple offers, bidding wars, buyers camping out.  And in fact in some markets, mostly on the west coast and down south, home sale prices have seen double-digit, year over year increases.  But the housing market as a whole seems far from being in danger.

Prices everywhere are rising for some very predictable reasons.  The National Association of Realtors reports a 31% increase in buyer traffic over the last year. Additionally, inventory and interest rates remain low, and in general, the economy is steadily improving as is consumer confidence.  But home prices still have a ways to go before getting back to their pre-recession peaks.  None of the twenty markets tracked by the Standard & Poor’s Case-Shiller home price index has returned to these peak levels.  The Boston market declined by more than 15% and has regained about 8% of that loss in value.

The towns in our market that we track have similarly done well in gaining on the highest prices paid before the recession, particularly over the past year, but there’s still room to grow.  The chart below shows peak average sale prices for single family homes from 2004 through 2006 and compares them to recent sale prices.

The averages are for the same style home throughout the analysis.

So, what is likely to keep prices from increasing into dangerous, unsustainable levels?   According to Jed Kolko, chief economist for Trulia, three factors are at work to produce a stable market:

  • Inventory should expand in response to demand
  • Mortgage interest rates should rise as the economy strengthens, and
  • Investor interest in undervalued properties should fade

A stable housing market is in everybody’s interest.  Both buyers and sellers are best served when housing decisions are made for personal reasons and not out of “irrational exuberance” as former Federal Reserve Board Chairman, Alan Greenspan once said.   And the Resident Experts(SM)are available to help you deal with all your rational exuberance.