Will the home prices ever go down? (Boston, Braintree: student loans, house)

[Guineas]

Originally Posted by redplum33

There is something to correct - a market that was manipulated.

The main manipulators have apparently stopped, but many of those that were manipulated are making a strong effort to keep prices high so that they don't lose their shirts. Essentially, they are the new manipulators. The new manipulators don't have the resources, though, to keep this going. It's just a matter of time before the new manipulators give up or lack the resources to continue.

I kind of agree with this. Basically our economy cannot handle 6% mortgage interest rates, at least not at current asset values. Seems to go into recession every time we approach this.

SFH in Newton are easily over a million (decent ones are well over). At 6% interest rate over 30 years, that's over $2 million for a $1 million loan. People living in Newton also tend to have multiple kids (daycare, nannies, sports fees, saving for college). Good luck with that cash flow! I know people in Greater Boston are rich, but these prices make my head hurt, and we are a two physician household with no student debt, minimal health care premiums, and live a frugal lifestyle. Even the cheaper suburbs aren't that cheap and tend to have higher property tax rates to make up for it.

This ain't sustainable, at least not for families without trust funds. There's no chance my own kids could afford to live in this area with the way things are going.

[GeoffD]

Originally Posted by New Englander

How did the Boston real estate prices come down during the S&L Meltdown or any other market contractions? Did they gradually decline with the asking price mark downs or did the buyers simply disappear and those motivated to sell took steep reductions? I know my questions are broad, however I am hoping to capture the feeling of the time period.

I know that in 2008, lending dried up and much of the buying activity was limited institutionals and well capitalized investors. That's how I was able to buy my condo in Harvard Square. I had to put something like 50% down to make the deal work with a local bank.

Sadly, too many people have forgotten that markets are cyclical, expecting the good times to continue. I haven't been investing Boston for a while now, because the price to rent ratios are out of whack, price appreciation has been unstoppable until now.

At the S&L Meltdown in 1989, prices lingered at high levels with nothing moving for a year or so. Distress sales eventually forced the market down. The bottom was 1993/1994 and things didn't move much for several years. I bought my vacation home in 1993 and a house in Winchester in 1997. It was pretty flat those four years and a very soft buyers market. I remember looking at a new construction condo at Burroughs Wharf when I was debating Boston vs 'Burb. A 2br with a great harbor view was $500K-ish. The working class towns got slaughtered. 40% to 50% corrections weren't unusual. The top towns corrected a lot less. More like 25% to 30%. With all the zoning restrictions, there just isn't that much inventory of single family homes in the towns with the top school systems and viable commutes.

[MassVt]

I believe that there is still a 2BR condo in Chestnut Hill that's actually for sale for 410K. Meanwhile, just about everything else for sale in Newton is well over 1 million dollars. Maybe that condo is the tip of a price freeze iceberg..

[New Englander]

Originally Posted by GeoffD

At the S&L Meltdown in 1989, prices lingered at high levels with nothing moving for a year or so. Distress sales eventually forced the market down. The bottom was 1993/1994 and things didn't move much for several years. I bought my vacation home in 1993 and a house in Winchester in 1997. It was pretty flat those four years and a very soft buyers market. I remember looking at a new construction condo at Burroughs Wharf when I was debating Boston vs 'Burb. A 2br with a great harbor view was $500K-ish. The working class towns got slaughtered. 40% to 50% corrections weren't unusual. The top towns corrected a lot less. More like 25% to 30%. With all the zoning restrictions, there just isn't that much inventory of single family homes in the towns with the top school systems and viable commutes.

Great insights. I asked because there tends to be a lot of debate (even right now on this thread) about a market correction/slow down or just plain seasonality. I'm reserving judgement until we see the spring time numbers.

I think your words are prescient particularly with respect to significant price corrections, as many people forget that the good times eventually come to an end. Since my start in RE investing after the 2008 contraction, I too have seen the good times roll, however I am always wary that they can come to an end at any point and have prepared (mentally, financially). Those upper middle and middle class families that have stretchered themselves too thin and believe that these housing prices are the "new normal" will end up paying dearly whenever the downturn occurs.

[New Englander]

Originally Posted by Guineas

I kind of agree with this. Basically our economy cannot handle 6% mortgage interest rates, at least not at current asset values. Seems to go into recession every time we approach this.

SFH in Newton are easily over a million (decent ones are well over). At 6% interest rate over 30 years, that's over $2 million for a $1 million loan. People living in Newton also tend to have multiple kids (daycare, nannies, sports fees, saving for college). Good luck with that cash flow! I know people in Greater Boston are rich, but these prices make my head hurt, and we are a two physician household with no student debt, minimal health care premiums, and live a frugal lifestyle. Even the cheaper suburbs aren't that cheap and tend to have higher property tax rates to make up for it.

This ain't sustainable, at least not for families without trust funds. There's no chance my own kids could afford to live in this area with the way things are going.

Great post. You have highlighted, in common sense terms, how stretched people in Newton and elsewhere might be. Newton is a great community, with an excellent school system, however servicing the debt for that $1M mortgage including additional costs like rising property taxes, maintenance, may require two people in the household to work. In an economic downturn, you have folks losing their jobs, incomes being reduced -- eventually that impacts the ability to pay the mortgage along with related costs. Your cautionary words will come to haunt those who have made mortgage commitments that may lead to financial peril in the future.

[danjmac]

Originally Posted by BostonBornMassMade

I still don't think this as effective as more innovative strategies.

1)There ought to be protections for renters who have been in Boston since prior to 2010 or 2008. They should have priority when it comes to affordable housing development lotteries.

2) 16-22-year-olds in Boston need to have services that connect them to housing because of multigenerational housing isn't feasible for all families. Uprooting kids from Boston to say...Taunton at that age basically kills their chances at upward mobility and increases their chances of getting involved in crime. Displacement is real

3)Low-income and Gentrification prone areas should have rent controls put int place, before they became totally insane pricewise.

4)Landtrusts and co-ops need to see increased production throughout the city. Apartments should be produced at twice the rate of condos.

5)Exceed the affordable housing requirements should reap tangible rewards for developers.

6)Affordable housing needs to go from 80-120% of Area Median Income to 70-100% CITY median Income. Using Area Median Income is a way to purposely disadvantage residents of Boston who have lower income s than those in the Boston "Area"

7) Get rid of any additional requests for landscaping and trees. Trees should not be mandated on a large scale private development. The city ought to plant more street trees. It adds too much to the cost of housing. If 3 trees mean 1 person cant live there-thats too much.

8) if there is any eliminate SFH zoning in the city proper. NEW minimum Zoning must permit at least 2 family homes.

9) CIiy of Boston must go to war for about 1000-2000 more Section 8 Vouchers.

Wow the list seems like a way of keeping “everyone else out”... I have always had a problem with these types of protectionist policies. It keeps people that make a good living but are not Uber rich out. If 2 people in the house make 250k and have 2 kids in daycare they will not be able to afford anything decent and not quality for any subsidies. Maybe Boston wants to be a tale of 2 extremes....

[massnative71]

Originally Posted by danjmac

Wow the list seems like a way of keeping “everyone else out”... I have always had a problem with these types of protectionist policies. It keeps people that make a good living but are not Uber rich out. If 2 people in the house make 250k and have 2 kids in daycare they will not be able to afford anything decent and not quality for any subsidies. Maybe Boston wants to be a tale of 2 extremes....

A family earning 250K should get subsidies??? You got to be kidding me...

[Dom Cobb]

Originally Posted by massnative71

A family earning 250K should get subsidies??? You got to be kidding me...

250k is middle income in Boston for a family of 4, if your trying to own in a decent school district. Unless you bought awhile ago or you are gifted some trust or family money (which there is a high concentration in Boston) your SOL.

If your income is 250k, your looking at a mortgage of 600k tops of you want to be fiscally prudent with a family. Find me a property in that price range anywhere decent.

Boston and other wealthy cities are becoming even more bifurcated when it comes to who lives there.

Subsidies can be effective in certain areas for the example above - being able to fully deduct child care costs would be a benefit, but by and large politicians don’t really care about the middle class anyway.

[timberline742]

Originally Posted by Dom Cobb

250k is middle income in Boston for a family of 4 .

Where are you getting that from?
A Household income of 250k is in the top 5% of Boston metro area (95th percentile).
I would not consider top 5% as "middle class", personally.

[Dom Cobb]

Originally Posted by timberline742

Where are you getting that from?
A Household income of 250k is in the top 5% of Boston metro area (95th percentile).
I would not consider top 5% as "middle class", personally.

When you factor in child care costs, I would say that is middle to upper income;

https://www.google.com/amp/s/www.bos...mIiXO/amp.html