This tight renting market has left Boston apartment seekers scrambling to get an apartment before the traditional changeover date, September 1. Even apartments that have been declared “overpriced” by many are getting rented and some people are even renting without a viewing. Boston is a hotter location to rent than before, with real estate in the Back Bay, Beacon Hill, and Cambridge in higher demand than ever.

This is generally seen as a positive indicator for the national real estate market; however, I wonder whether existing home sales are on the rise simply because there are less new homes to buy. New development has plunged as it has been increasingly more difficult to secure financing for new projects. Homebuyers have also found it more difficult to get mortgages, and all-cash existing home sales rose to 32 percent in January from 29 percent in December and 26 percent in January 2010.

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It is easy to conclude that the Boston real estate market is improving. That said, it is important to note the reasons behind the upswing. The homebuyer tax credits are certainly giving some buyers and extra push to get their offers in by the end of April, and interest rates have been kept artificially low thanks to Uncle Sam. It will be interesting to see if prices and sales continue to increase in the summer months. Buyer confidence is improving, which is a solid improvement. Boston homebuyers who had been sitting on the fence for a few years have finally decided to put pen to paper. They are, however, purchasing homes with a longer time-frame in mind. Homebuyers who only a few years ago would have considered purchasing a studio in the Back Bay are now looking for a home they can live in for five or even seven years….just in case they need to stay longer than intended because of market fluctuations.

Condos and homes in Newton priced less than $600k with 3+ bedrooms, 2+ bathrooms and garage parking are going under agreement quickly – often in a matter of days and occasionally with multiple offers. Even in bidding war situations, however, buyers today are very wary to pay more than asking. Some examples include 59 Cook Street, under agreement in only five days,  and 307A Winchester, which had multiple offers after a spectacularly busy open house.

Why is Newton so popular? Well, not only is Newton a short 20-30 minute drive from downtown Boston, its school system is renowned as one of the best in the state. That said, Newton has always been geographically close to Boston and the schools were always great. So in my opinion, it seems that there is something else working behind the scenes here.

Many Boston and Cambridge homeowners decided to remain in their homes when the Boston real estate market started to turn from a sellers to buyers market back in 2005. While they would have preferred to move sooner, these homeowners decided to wait out the market in hopes of an upturn. Five years later, many of those homeowners have grown out of their condos and are looking for good school systems for their now school-age children. We are also noticing that Boston area homebuyers today are purchasing homes with a longer term in mind than they were only a few years ago. Homebuyers, specifically first-time homebuyers, used to purchase a space with a plan to upgrade in two or three years. Today, many first-time homebuyers taking advantage of the homebuyer tax credit are looking long-term and purchasing the home they plan to live in for the next five or even ten years. They may forgo a cute Back Bay condo or trendy Boston Loft for the spaciousness of a Newton single-family home.

What savvy Massachusetts and Boston real estate buyers should consider is whether this stabilization is entirely or at least heavily due to government incentives, or if this is truly a sign that the economy is ready to stand on its own.

Personally, I am somewhat on the fence. The homebuyer tax credit of 2009 had a huge impact on home sales in the third and fourth quarters. Historically low interest rates influenced by the Federal Reserve and increased FHA loans have also propped-up the Massachusetts and Boston real estate markets. The federal tax credit, which was expanded and extended last year, is scheduled to expire this spring, and the Federal Reserve plans to stop buying mortgage-backed securities by the end of the first quarter. The major question in my mind is: Is the real estate market strong enough to be sustainable without government capital?

It looks like we will know the answer to that question in the third quarter. It will depend on job security and the ability of reasonable financing options. Don’t forget, if rates increase by even 1 percent, a buyer’s capability to purchase may drop by $10,000 or more.

This year, however, it is looking like we will see the peak early. The first-time home buyer $8,000 tax credit is set to expire on June 30th, meaning buyers looking to take advantage of this government incentive will need to have a home under-agreement by April 30th, and close by the end of June. We are also seeing an uptick in interest rates, which will put a significant dent in buyer purchasing power. A 1 percent increase in mortgage interest rates will decrease a buyer’s purchasing power an about 10 percent. Lending rates began to climb last months and savvy buyers who are mortgage dependent will realize that they may be able to afford significantly more house now than they will by the end of 2010, when many experts suggest a 30-year-fixed loan could be well over 6.5 percent.

West:

1. 1. Merced, Calif.:  -62.11%
2. 2. Stockton, Cali.: -54.29%
3. 3. Modesto, Calif.: -52.42%
4. 4. Vallejo-Fairfield, Calif:. -47.62%
5. 5. Las Vegas-Paradis, Nev.: -47.53%

South

1. 1. Port St. Lucie, Fla.: -46.43%
2. 2. Cape Coral-Fort-Myers, Fla.: -46.38%
3. 3. Naples-Marco Island, Fla.: -43.63%
4. 4. Bradenton-Sarasota-Venice, Fla.: -41.52%
5. 5. Fort Lauderdale-Pompano Beach-Deerfield Beach, Fla.: -39.93%

Midwest

1. 1. Detroit-Livonia, Mich.: -30.66%
2. 2. Warren-Troy-Farmington Hills, Mich.: -27.95%
3. 3. Flint, Mich.:-27.47%
4. 4. Ann Arbor, Mich.: -20.37%
5. 5. Jackson, Mich.: -17.30%

Northeast

1. 1. Providence-New Bedford, R.I.: -17.30%
2. 2. Worcester, Mass.: -16.17%
3. 3. Atlantic City, N.J.: -16.15%
4. 4. Poughkeepsie-Newburgh, N.Y.: -14.60%
5. 5. Barnstable Township, Mass.: -14.48%

Source: Forbes, Francesca, Levy (12/21/2009)

A lot of people, especially new broadcasters, seem to be flaunting this news as a sign we are out of the recession and that the real estate market is predictably following recent stock market gains. Well, let’s look a little closer at the circumstances. Lehman Brothers filed for Chapter 11 bankruptcy on September 15th of last year. Utter shock and fear, not to mention huge portfolio losses, put prospective homebuyers on the sidelines and brought the real estate market to a screeching halt.The news rocked the real estate market to its core, so it is not a surprise that pending sales were extremely low in October 2008. Also, the original deadline for the first-time homebuyers’ tax credit was November 30, 2009. With an extension up in the air, first-time homebuyer flooded the market in September and October, trying to take advantage of the government benefit. The tax credit has since been expanded and extended, but I would expect another surge as we approach next year’s deadline. The above circumstances taken into account, I would be wary to conclude that we are out of the bushes.

The amendment would require the new agency’s director to replace the code with a set of rules developed through regular administrative procedures and public comment periods used by all federal agencies.

As we have seen in the local Boston real estate market, the current code created far more problems than it solved. We have seen the use of inexperienced appraisers by banks increase significantly. We have seen appraisers who normally work an hour or two outside of the city try to value properties in locations such as Beacon Hill and the Back Bay. It is now common for appraisers to attempt to value properties in high-rise complexes who have, prior to the appraisal, never set foot in the building let alone comparable properties. Banks have been forced to require multiple appraisals in many cases, forcing postponed and canceled closings. Oh yeah, and fees are through the roof.

By no means am I saying that there shouldn’t be regulation; I am just saying it makes sense to have experienced, local people on the ground who know the neighborhoods and can accurately value the specific property under consideration.

Right now it looks like the legislation to scrap the current code will pass the full House, but it may have a tough time passing on the Senate floor.