Its starting to look dark outside....

From the Globe 12/9/05:

The median price of a single-family home in Massachusetts has dropped 7 percent in the past two months, to $349,000 for sales that closed in October. But reductions in asking prices of 10 percent or 20 percent are now common in both high and moderately priced neighborhoods, according to real estate agents and listings of homes for sale. In Cambridge, price cuts averaged $300,000 in a sampling of a dozen houses listed in the $1.25 million to $4.3 million price range. In suburbs like Tewksbury and Hopkinton, homes originally listed for around $500,000 have been slashed to the low $400,000s.

''The evidence -- both early data and the anecdotes -- are pointing more toward a hard rather than a soft landing" in the housing market, said Nicholas Perna, an economic consultant in Ridgefield, Conn. ''Prices could come down. Could it be 10 to 15 percent? There's no way of knowing, but what we're getting is more clues that you've got a decline in prices underway.
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So, what else is new? Ladies and gents, boys and girls, this is not just a blip from which your treasured asset will suddenly emerge, phoenix-like, shining with new accrued value. It is the start of a re-adjustment. Back to reality. A manifestation of the fact that Boston is no longer the center of anything, let alone the east coast alternative to Silicon Valley. Boston is a branch office town.

There is nothing at all that pulls the money to Boston. Boston as a business center only exists to serve the regional commerce and trade (such as it is) that is its natural due as a result of geography. With the exception of Fidelity, MFS and a few others, Boston is outlying service center for that which is Delaware registered and New York headquartered. Implicit in that remark is the awareness that if you kill off those firms, or otherwise make the business environment too hostile as a result of social regulation and taxation, you have nothing left but a regional college town. A big one to be sure, but ....

The next tier to leave will be the service firms that make their livings from what used to be a thriving banking and financial center: the law firms go "tits-up." There will be some survivors, of course. The academic hub (that is the only true hub that Boston has) will always spin out start-ups that are linked by the developmental umbilical cord to the research labs. These creations will need IP and patent representation, so some lawyers will survive, but kiss goodbye to the classic large firm like Testa. As the business environment gets progressively more hostile in response to the need to maintain the tax and services base, more business will depart. As Boston experiences these natural responses of rational business decisions, property prices will continue to tumble, deepening the chasm, putting more and more people into the deficit column -- creating the incentive to leave to go live someplace warm, at least.

Eventually, an equilibrium will be reached, presumably after some overshoot on the downside ... but you can kiss the notion of a soft landing goodbye. In some other regions, perhaps. But not here. We have a bill to pay and the piper is standing here with his hand outstretched. I have mentioned before that it only takes a good solid nudge to precipitate and then accelerate the slide. It may be happening without anything so dire as the H5N1 variety (alhtough as I noted yesterday, people are waking up to that one), but a harsh winter may be enough.