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I'm a little biased I guess, but I think living near a T stop (especially the red line) it going to continue to command a higher premium. The construction going on in Kendall is still on a tear, most of those jobs are high paying. Fort point is going through a similar transformation and again pretty accessible from the red line.
I lived in San Fran 10 years ago when a friend paid a million for a fixer upper 2 family in an "up and coming" area (like prices are now in parts of Somerville). I felt bad for him for making such a foolish move, surely the sign of a top in the market. Boy was I wrong. He put 500k into renovations and today that house is worth 3 million. The same thing very well might happen here if our jobs economy continues to thrive and grow like it is currently.
Simple concept, but very few people understand. Homes are for living in. Not for withdrawing money from.
Exactly. Even though I am an investor, I am trying to pay off the mortgages as soon as possible. I'd rather not have debt on my investment properties when I end up retiring.
For someone buying their own home: get a 30 years if you are unable to afford the payments on a 15 year loan. Accelerate your payoffs by adding additional dollars to be applied towards the principal. If you cut your mortgage payoff from 30 years to 25 or 20 years -- you'll be in great shape, financially. Who cares if the market is up or down at that time? You'll own your primary residence free an clear and will have minimal (taxes, insurance, maintenance) housing expenses.
Last edited by New Englander; 07-07-2016 at 09:32 AM..
What people also don't realize is that it takes very little to drive prices of any over-bid commodity down very quickly. A relatively small number of people who have to sell at distress and have to chop prices, for example, can drive a market down. Just a very small difference in supply vs. demand at the going rate drives the going rate down fast.
I don't know what will trigger the next drop. Some possibilities could be a sharp rise in interest rates (certainly doesn't appear in the cards soon), a stock market drop making people feel that their total wealth has gone down, a relatively small rise in unemployment (how many people in this area, who are in houses at or below the median price, could keep going for a year with one job loss, without defaulting? I bet it's a lot fewer than half.) But I am confident there will be a next drop.
There's also a misconception that perpetually rising house prices are somehow a good thing, which is not actually true. If you think of your primary residence as an investment, how are you going to take the money out of it that its paper value implies you have gained? You have to sell it, and then you have to buy another house. Unless you are prepared to downsize or move to a dramatically different area, you have not made money on your investment, not really. A real investment is one where you can cash it out and spend every dime of the money left over after retiring any debts associated with when you bought it. Can't do that with your primary residence. On the other hand, people of relatively modest means are progressively priced out of the "hot" areas, and eventually this creates a desire to get out, especially among late 20-30s who want to start families and have houses, not share a tenement apartment with four other people.
100% agreed. Every sentence is valid and applicable. I wish more people saw things this way.
Unfortunately, we don't have a crystal ball with respect to the future -- however an economic downturn is definitely going to occur (business cycle).
I fundamentally agree with you and when purchasing my own home, essentially adhered to your financial advice ... but your last sentence really differentiates you from the average buyer. For a non-investor such as myself, I either buy a home or pay rents that, even in downturns, continue to go up. The most significant jump in rent I saw occurred at the bottom in '09 as occupancy rates increased, driven by both cultural preference and a pause in risk taking. Do I think rents and home prices will continue to accelerate over the long term? No, but rents likely won't decline much if demand continues to exist or accelerate. Home prices? Who knows?
I've dabbled with the math and after 11 months we could sell and break even with renting, including RE transaction costs. After 2 years, we could likely sell at a 11% loss (from purchase price, not market) and break even with renting. After 5 years, we could eat 32% ...32%! and break even with renting. Unexpected maintenance may drive down those percentages, but it's a known risk I'm willing to take. In short, while I prefer to think like an investor, I also need to think like a consumer of housing and buying a SFH which may stagnate or decline in value is still the logical financial decision over renting when my SO and I intend to live in the area for an extended period.
Great. Sounds like you have done your homework. By no means am I stating that you or anyone else should sit on the sidelines and not buy a home at this time. You have to have the financial safeguards (6 months of PITI reserves etc.), ideally be able to pay the mortgage obligations on one income (if in a two person household) and most of all, not continue to expect the prices to go up.
Look, I’ll be upfront: I made a killing in 2008 from the fly by the night flippers, speculators who went bankrupt or worse. I have every incentive (if I am a greedy jerk) to pump up the increasing prices in Metro Boston – because I stand to directly benefit from it, in the next downturn. However, I am a born and raised Bostonian, a New Englander at heart, who cares about my community, wants to preserve the economic diversity that comes from the working class/middle class earners being able to buy their first condo/Single family etc. I don’t want to see people lose their homes, communities negatively impacted, which is why I am providing my humble opinions/advice. If you (general you, not directed at Shrewsburried) decide to get caught up in the frenzy and end up buying a property that you are not able to easily afford, then you will have no one to blame but yourself.
Even if I am 100% wrong and prices continue to increase in Metro Boston – I’ll still be benefitting from seeing the appreciation in my existing holding, while I continue to buy elsewhere in New England. I have a 30 year time horizon and expect there to be ups and downs along the way.
There's also a misconception that perpetually rising house prices are somehow a good thing, which is not actually true. If you think of your primary residence as an investment, how are you going to take the money out of it that its paper value implies you have gained? You have to sell it, and then you have to buy another house. Unless you are prepared to downsize or move to a dramatically different area, you have not made money on your investment, not really. A real investment is one where you can cash it out and spend every dime of the money left over after retiring any debts associated with when you bought it. Can't do that with your primary residence
There is such a thing as a home equity loan. There are also reverse mortgages.
PS Not recommending anything- just pointing it out that people do have access to home equity.
There is such a thing as a home equity loan. There are also reverse mortgages.
PS Not recommending anything- just pointing it out that people do have access to home equity.
In the spectacular run up in the Real Estate market (2004-2007), that's exactly what people did (HEL, HELOCs) based on the perceived appreciation of home values. Those very same people are now either underwater in their mortgages, did a short sale, or lost their homes in foreclosure. The lucky few are above water due to the latest run up in appreciation in home values.
That equity access is a double edged sword: Unless the equity access is for another income producing investment, it will become a financial anchor for the home owner.
Reverse mortgages are a different topic altogether and require a personalized consultation before signing the dotted line.
It isn't a housing bubble. It is that the market (Developers) asks for xxx amount of units and they are allowed to build 1/2 that many. This means that supply is is being outpaced by demand, thus housing prices go up.
Great. Sounds like you have done your homework. By no means am I stating that you or anyone else should sit on the sidelines and not buy a home at this time. You have to have the financial safeguards (6 months of PITI reserves etc.), ideally be able to pay the mortgage obligations on one income (if in a two person household) and most of all, not continue to expect the prices to go up.
Look, I’ll be upfront: I made a killing in 2008 from the fly by the night flippers, speculators who went bankrupt or worse. I have every incentive (if I am a greedy jerk) to pump up the increasing prices in Metro Boston – because I stand to directly benefit from it, in the next downturn. However, I am a born and raised Bostonian, a New Englander at heart, who cares about my community, wants to preserve the economic diversity that comes from the working class/middle class earners being able to buy their first condo/Single family etc. I don’t want to see people lose their homes, communities negatively impacted, which is why I am providing my humble opinions/advice. If you (general you, not directed at Shrewsburried) decide to get caught up in the frenzy and end up buying a property that you are not able to easily afford, then you will have no one to blame but yourself.
Even if I am 100% wrong and prices continue to increase in Metro Boston – I’ll still be benefitting from seeing the appreciation in my existing holding, while I continue to buy elsewhere in New England. I have a 30 year time horizon and expect there to be ups and downs along the way.
I wasn't looking for validation, just looking to point out that bubbles are typically fueled by speculation and, in the case of central/eastern MA, I do not think speculation is fueling the gains. Perhaps speculation is rampant in the metro, but out in the 495 belt the open houses I've attended are predominantly families dealing with high rents and low inventory. It's a supply and demand issue, both in the RE market and rental market. For example, in Littleton, Westford, Bolton, etc. house rentals are in the high 2k to low 3k range for a rather small/mediocre home (<1,800sqft). A similar home can be bought for 400k-450k, which yields a lower monthly payment (including taxes) with only 10% down. Buyers such as myself are thinking this: rent is is 0% recoverable, a home provides an opportunity (with risk) to someday recover or reduce the COL burden. Local home prices will not skid without significant disruption - significant rate rise (unlikely), shrink in job market (could see it in this election cycle), lower rental fees (unlikely), more inventory for middle classes in RE and rental markets (unlikely).
I'm not a believer that we're bound to repeat the gains of the '80s-'90s, but also do not think we should conflate real tangible supply&demand with speculative bubbles.
I wasn't looking for validation, just looking to point out that bubbles are typically fueled by speculation and, in the case of central/eastern MA, I do not think speculation is fueling the gains. Perhaps speculation is rampant in the metro, but out in the 495 belt the open houses I've attended are predominantly families dealing with high rents and low inventory. It's a supply and demand issue, both in the RE market and rental market. For example, in Littleton, Westford, Bolton, etc. house rentals are in the high 2k to low 3k range for a rather small/mediocre home (<1,800sqft). A similar home can be bought for 400k-450k, which yields a lower monthly payment (including taxes) with only 10% down. Buyers such as myself are thinking this: rent is is 0% recoverable, a home provides an opportunity (with risk) to someday recover or reduce the COL burden. Local home prices will not skid without significant disruption - significant rate rise (unlikely), shrink in job market (could see it in this election cycle), lower rental fees (unlikely), more inventory for middle classes in RE and rental markets (unlikely).
I'm not a believer that we're bound to repeat the gains of the '80s-'90s, but also do not think we should conflate real tangible supply&demand with speculative bubbles.
I'll add that population growth in Suffolk county between 2010-14 has been somewhere around 6.5%, with much of it being net growth (immigration vs birth). That's 50k+ people seeking housing. Even if we account for couples/families, that's still a fair amount of housing.
I wasn't looking for validation, just looking to point out that bubbles are typically fueled by speculation and, in the case of central/eastern MA, I do not think speculation is fueling the gains. Perhaps speculation is rampant in the metro, but out in the 495 belt the open houses I've attended are predominantly families dealing with high rents and low inventory. It's a supply and demand issue, both in the RE market and rental market. For example, in Littleton, Westford, Bolton, etc. house rentals are in the high 2k to low 3k range for a rather small/mediocre home (<1,800sqft). A similar home can be bought for 400k-450k, which yields a lower monthly payment (including taxes) with only 10% down. Buyers such as myself are thinking this: rent is is 0% recoverable, a home provides an opportunity (with risk) to someday recover or reduce the COL burden. Local home prices will not skid without significant disruption - significant rate rise (unlikely), shrink in job market (could see it in this election cycle), lower rental fees (unlikely), more inventory for middle classes in RE and rental markets (unlikely).
I'm not a believer that we're bound to repeat the gains of the '80s-'90s, but also do not think we should conflate real tangible supply&demand with speculative bubbles.
The discussion, at least on my side, was focused on the Boston Metro.
Glad your not looking for validation. Let's revisit this in 5-10 years time if we're around and City-Data is around.
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