Lost bidding war in Melrose - Where should I be looking? (job market, buy)

[simplexsimon]

Yes many people pay either PMI or a higher rate hoping for home appreciation to bail them out. Most people do not do the math on ROI, opportunity cost, transaction costs...they just want a house.

[BostonBornMassMade]

Originally Posted by matrix5k

So most people pay PMI? I always felt if you can't afford 20% down then you can't really afford it

There are programs and agencies that help/allow lots of lower middle class folks buy homes with 5% down, even in some affordable housing developments within Boston proper. *hard shrug*

[Shrewsburried]

Originally Posted by simplexsimon

Yes many people pay either PMI or a higher rate hoping for home appreciation to bail them out. Most people do not do the math on ROI, opportunity cost, transaction costs...they just want a house.

Or the slight overpay beats the cost of renting another 8+ months, especially if the intent is a long term hold. A purchase is much more nuanced when the buyer isn't a pure investor.

This said, with RE value plateauing and global demand slowing, current buyers need to be very confident they weather a market downturn. Demographics suggest good housing demand through 2030's, so valuation pressures will have to come via economic downturns and/or rate hikes, but a lack of demand is wishful thinking.

[Shrewsburried]

Originally Posted by matrix5k

So most people pay PMI? I always felt if you can't afford 20% down then you can't really afford it

High income, low debt, good job stability/growth + tired of high rents w/ zero equity. Many higher income millenials spent their first 8-10 years paying down debt and building a career in high rent cities, which means they now have good debt to income, but not a lot of cash/assets saved ... especially in what was a low yield environment through 2012.

I bought with only 12% down, but had zero debt beyond monthly CC, and projected carrying cost of 16% of the household income. Should I not have bought? Interest rates aren't 12% anymore, pops (I kid); i.e., it's buyer dependent.

[simplexsimon]

Housing expenses being 16% of income is probably as unusual as someone putting 20% down.

[tysmith95]

In this market, you're making pretty damn good money if your carrying cost is only 16%

[smc733]

Originally Posted by Shrewsburried

Or the slight overpay beats the cost of renting another 8+ months, especially if the intent is a long term hold. A purchase is much more nuanced when the buyer isn't a pure investor.

This said, with RE value plateauing and global demand slowing, current buyers need to be very confident they weather a market downturn. Demographics suggest good housing demand through 2030's, so valuation pressures will have to come via economic downturns and/or rate hikes, but a lack of demand is wishful thinking.

Long term hold, perhaps. Then again, the longer-term demographics suggest the US going the way of Japan, where a long-term hold isn't so great, a long plateau or decline of real estate against inflation can make it a horrible investment. It's been great for the last 30 years in a perpetually decreasing rate environment. Now we are at rock bottom rates, and the market is still slowing down.

The study by Zillow about demographics used some cherry picking and borderline dishonest analysis. It also did not account for a significant wealth gap between current owners and the supposed upcoming buyers that will somehow come up with a 70k downpayment on their 700k McMansion in Billerica.

IMO, the next downturn, probably starting in 2-3 years, coinciding with a mild recession unrelated to housing, will look much more like the early 1990s. This housing bubble has been concentrated to the coastal cities, where values have outpaced the economic boom. Values near the city will probably plateau or take a modest haircut, then have a number of years at stagnant growth, resulting in a decent decline in real dollars when all said and done. Towns between 95 and 495, IMO, are going to take a massive beating, especially ones with weak commercial tax bases and high residential property taxes. Those outside of 495 never really recovered, so they probably won't feel it too hard.

[panchilly]

Originally Posted by smc733

Long term hold, perhaps. Then again, the longer-term demographics suggest the US going the way of Japan, where a long-term hold isn't so great, a long plateau or decline of real estate against inflation can make it a horrible investment. It's been great for the last 30 years in a perpetually decreasing rate environment. Now we are at rock bottom rates, and the market is still slowing down.

The study by Zillow about demographics used some cherry picking and borderline dishonest analysis. It also did not account for a significant wealth gap between current owners and the supposed upcoming buyers that will somehow come up with a 70k downpayment on their 700k McMansion in Billerica.

IMO, the next downturn, probably starting in 2-3 years, coinciding with a mild recession unrelated to housing, will look much more like the early 1990s. This housing bubble has been concentrated to the coastal cities, where values have outpaced the economic boom. Values near the city will probably plateau or take a modest haircut, then have a number of years at stagnant growth, resulting in a decent decline in real dollars when all said and done. Towns between 95 and 495, IMO, are going to take a massive beating, especially ones with weak commercial tax bases and high residential property taxes. Those outside of 495 never really recovered, so they probably won't feel it too hard.

This is all wishful thinking.

We will absolutely not go the way of Japan. Do you see how many people are dying to get into this country? From South America, India, China, all over really. That is a lever we can pull at any time to bolster population growth. It’s already being pulled but it could be much much more.

What you posted is a lot of crap.

[smc733]

Originally Posted by panchilly

This is all wishful thinking.

What you posted is a lot of crap.

I'd love to see some cited facts. Its a shame you can't be more respectful with your discussion... Is it because I dared to suggest that Natick property values could take a modest (and temporary) haircut from their current highs? I have no incentive to be wishing for this, as someone invested in RE in the area, but I am not naieve enough to believe that values can continue to increase past the rate of wage growth and will never see another correction.

There are tons of articles, here's one example, showing that the US domestic birth rate is not keeping up with the level needed to replace the population, just like what's happening in Japan.

Originally Posted by panchilly

We will absolutely not go the way of Japan. Do you see how many people are dying to get into this country? From South America, India, China, all over really. That is a lever we can pull at any time to bolster population growth. It’s already being pulled but it could be much much more.

With the way the US' reputation is taking a beating, this may not last much longer. The wealthy from those countries already come in, or invest while remaining abroad. Much of the remaining demand is from the poor in those countries seeking a better life. They will not be bringing levels of wealth that can support property value growth beyond inflation.

Additionally, if China's economy is on the cusp of as big of a downturn as some believe, that's a lot of foreign investment money that could dry up in the US, especially if the wealthy need to liquidate existing US real estate holdings. That will affect coastal cities significantly.

[Shrewsburried]

Originally Posted by tysmith95

In this market, you're making pretty damn good money if your carrying cost is only 16%

65 percentile income + 90 percentile income + short sale in a second-tier Worcester 'burb. So yes, relative the population as a whole we make good money, but the ratio was only possible by buying in a town with a sub-$200/per sqft town (was, no longer is).

I should note that I'm including mortgage, taxes, and utilities; i.e., the 16% represents the bare minimum we're obligated to spend monthly to keep the lender and town happy. With ongoing window and siding replacement, some years come out closer to 30%, but these costs will amortize over ownership and if capital seizes, we can easily scale maintenance costs.