Conventional wisdom said the very best outfielders on the market this baseball offseason – Jayson Werth and Carl Crawford – should command somewhere in the neighborhood of six years and $90 million to $100 million.
Instead, Werth landed a whopping seven-year, $126 million contract from the Washington Nationals, a team desperate to sign top talent.
In baseball, it’s called “setting the market.”
Werth’s contract compelled the Boston Red Sox to also overpay to get Crawford, widely believed to be the better of the two outfielders. Crawford’s unique combination of talents commanded a premium over Werth’s, in the form of seven years and $142 million.
Every day in the Boston area – indeed, throughout Massachusetts – the housing market is being set and reset.
“If Joe and Judy down the street can get that much for their home,” Mike and Suzy say, “then we should be able to get at least that much. But our kitchen is nicer. We should be able to get even more.”
In a normal market, this is a good thing. But this isn’t a normal market.
Real estate is quickly turning into a kind of zero-sum game in which the number of buyers willing and able to pay a certain price for a certain home is finite and dwindling.
Just because Joe and Judy were able to fetch a buyer and command a certain price for their home, there is no longer any guarantee that Mike and Suzy will also be able to find a similar buyer.
Again, baseball can provide an example. In addition to signing Crawford, the Sox also made a splash recently by trading for all-star first baseman Adrian Gonzalez. Helping the Sox was the fact that the New York Yankees – another team with deep pockets – already had a top-notch first baseman of their own in Mark Teixeira, whom the Yankees signed two years ago to another monstrous contract.
Teixeira and Gonzalez’ contracts set the market for elite first basemen. But if and when three-time National League MVP and Gold Glove first baseman Albert Pujols enters the market at the end of next season, his prospects might be noticeably dimmer.
Only a few teams, Boston and New York among them, can afford the going rate already set by Teixeira and Gonzalez – two gifted players that nonetheless pale in comparison to the transcendent Pujols.
But Boston and New York already possess high-priced first basemen. If Pujols was a home, there would really only be a half-dozen or so qualified buyers for the ridiculously high asking price. And two of those buyers won’t be interested.
But unlike baseball, Mike and Suzy don’t have to sell or buy. Provided their situation affords it, they can be as stubborn as they’d like, and hold out for a price they think is fair – market or not.
It is this phenomenon, in part, that has created the Boston area’s unique situation of adding value to its housing stock, even as sales have remained flat, at best. Boston area homes are expected to gain $10.8 billion in value during 2010, a stark contrast from the $1.7 trillion expected to be lost nationwide, according to real estate website Zillow.
This growth in value is a good thing. Mostly. But flagging sales point to a dwindling supply of buyers with the resources and desire necessary to pay the median going rate of $300,000-plus for a home in Massachusetts.
The stubbornness of the Mike and Suzy’s of the world risks creating a situation in which home values stay steady or even rise marginally, but sales fall. And the resulting gridlock won’t help anyone.
Again, it brings us back to baseball. Signing high-priced talent is all well and good, but it comes at a price. Red Sox 2011 game tickets went on sale this weekend – at a 2 percent premium over last year.
Root, root, root for the home team. While you can still afford it.





