2021 Real Estate Observations (Boston: appraisal, moving, authority)

[redplum33]

A lot of down arrows here:

https://www.realtor.com/realestatean...h/Wellesley_MA

7 of the 33 houses currently available have price drops.

[OtterTrees]

Originally Posted by redplum33

A lot of down arrows here:

https://www.realtor.com/realestatean...h/Wellesley_MA

7 of the 33 houses currently available have price drops.

No big news there. Price cuts have happened consistently for the past 5 years that I have followed the market. Even in hot markets you have people who price too high.

[Lampert]

Originally Posted by OtterTrees

No big news there. Price cuts have happened consistently for the past 5 years that I have followed the market. Even in hot markets you have people who price too high.

One of the houses is down over 10%, that sounds like a pretty major miscalculation.

[Shrewsburried]

Originally Posted by bugelrex

At the same tine, if this is a whiff of big inflation, i would rather hold real estate than paper money.

Curious, anyone in the 1970s recall what inflation did to boston real estate?

IMO, I don’t think one needs to reference the ‘70s to understand the potential impact of rising rates.

The 2014-16 period was a recent example which is, IMO, very transferable to the current market. Home prices outside of the immediate Boston market effectively stalled out YoY in q1 of 2015 as mortgage rates rose noticeably throughout 2013-2014. Were the inventory not extraordinary tight (far worse than now) we might have seen the stall turn more overtly negative. Mortgage rates began dropping again in 2015 hitting a low around the 2016 election and home valuation gains started to pick up with the eased rates and reduced election panic.

Reality is, even if individuals seek RE to hedge inflation they need to still be able to afford that monthly payment. Unless you’re a fully liquid buyer, rising rates diminish buying power and if incomes don’t rise with rates there is no ability to close that gap. 2018 also showed that equity markets hate a rising rate environment, so I don’t necessarily view the S&P as a great inflation hedge were the Fed to bump rates; i.e., that paper wealth fueling RE gains might dry up rather quickly.

IMO, I also think this board overstates residential RE as an inflation hedge. Typically the investor class is seeking commercial (which includes commercial residential) so that there’s income to offset carrying costs while storing value. Primary homes obviously offer good utility (a roof over one’s head) so I can’t discount that value, but it’s not an equivalent hedge to commercial property investments.

[simplexsimon]

Re: inflation, look into I-bonds ($10k purchase limit per person per year through TreasuryDirect). If you have more money after that, look into TIPS.

[GeoffD]

Originally Posted by Shrewsburried

IMO, I don’t think one needs to reference the ‘70s to understand the potential impact of rising rates.

The 2014-16 period was a recent example which is, IMO, very transferable to the current market. Home prices outside of the immediate Boston market effectively stalled out YoY in q1 of 2015 as mortgage rates rose noticeably throughout 2013-2014. Were the inventory not extraordinary tight (far worse than now) we might have seen the stall turn more overtly negative. Mortgage rates began dropping again in 2015 hitting a low around the 2016 election and home valuation gains started to pick up with the eased rates and reduced election panic.

Reality is, even if individuals seek RE to hedge inflation they need to still be able to afford that monthly payment. Unless you’re a fully liquid buyer, rising rates diminish buying power and if incomes don’t rise with rates there is no ability to close that gap. 2018 also showed that equity markets hate a rising rate environment, so I don’t necessarily view the S&P as a great inflation hedge were the Fed to bump rates; i.e., that paper wealth fueling RE gains might dry up rather quickly.

IMO, I also think this board overstates residential RE as an inflation hedge. Typically the investor class is seeking commercial (which includes commercial residential) so that there’s income to offset carrying costs while storing value. Primary homes obviously offer good utility (a roof over one’s head) so I can’t discount that value, but it’s not an equivalent hedge to commercial property investments.

I'm from the era of Whip Inflation Now buttons and wage-price freezes with all those years of double-digit inflation. I recall my father smiling when he mailed in payments on 1950s and 1960s mortgages. My late-1970s & 1980 school loans were the same way. After a decade, I paid them off because they had become so small relative to my income that they were a nuisance to write a check every month. The inflation-adjusted amount ten years later was 50 cents on the dollar. Generally, you want to be locked in with that low 30 year fixed mortgage where you're paying it back a decade later with inflated dollars.

[Shrewsburried]

Originally Posted by GeoffD

I'm from the era of Whip Inflation Now buttons and wage-price freezes with all those years of double-digit inflation. I recall my father smiling when he mailed in payments on 1950s and 1960s mortgages. My late-1970s & 1980 school loans were the same way. After a decade, I paid them off because they had become so small relative to my income that they were a nuisance to write a check every month. The inflation-adjusted amount ten years later was 50 cents on the dollar. Generally, you want to be locked in with that low 30 year fixed mortgage where you're paying it back a decade later with inflated dollars.

You're suggesting buying with (or during) high-value dollars and paying back with de-valued dollars, correct? A la the Volker era home buyers who bought at 12-18% rates and re-fi’d down to 6-8%.

IMO, only the owners of assets should be celebrating these record low rates ... particularly if selling said assets. Of course these asset owner are the ones trumpeting the bull horn loudest.

My hypothesis: those buying right now better plan to hold for an extended period because rates could easily rise back to 4%+ APRs within the next 24 months and that will impact the W2 towns. We’ve literally seen this play out in the past decade.

[mdovell]

I wonder how much flipping is going to change. I bought a flipped house and I have to say for the most part things are pretty good. There's a house a few houses down that needed probably twice the work that this needs. A flipper bought it and they're selling it for way more than what I paid probably 33% more. And now the rates are starting to increase.

As for housing prices dropping any house will sell at the right price. Now maybe someone might take it off the market but I think any house will generally sell at the right price. The owners might not like to hear that way but depending on their lifestyle what they're willing to sell for they can still sell. Someone on a Facebook group that I go to was showing the photo of our house out in Adams for only $30,000. It's pretty scary and it needs some work but it might actually be worth it.

[msRB311]

Wow 30k for a house in MA?

[mdovell]

Originally Posted by msRB311

Wow 30k for a house in MA?

Actually I think he's down to 25K. It's as is and cash only. It took a bit to find it because there's no google street maps on that street but it's 25 Temple St. It was a two family. It is not habitable. Five bedrooms, two baths and two kitchens. Built in 1890 and had a update in the 1930s. Given the size I'd argue it might be six figures to update but I haven't been in.