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Boston ITer
Joined: 11 Jan 2010
Posts: 269
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 Posted: Wed May 11, 2011 8:51 pm GMT Post subject: |
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| Beaumontv wrote: | | More simply put, if there are 100 homes for sale and only 30 people who can afford the down payment on them, prices must decline...or the market has to go illiquid. |
The asset bubble is now global. Look at Toronto Cn, they have salaries below that of metro Boston (my company alone tags 'em at a ~35% salary discount) but they've had a housing run up, since 2007, in much of the same vein as here before the '08 crisis. Canada's major cities are being propped up by a combination of global investors and speculators.
If Boston goes illiquid, Intl REITs can still pick up individual properties, as they become available for let's say a Singaporean's portfolio. All and all, when housing became its own type of security vis-a-vis non-coupon bond, market fundamentals gave way to this type of price distortion/manipulation. |
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JCK
Joined: 15 Feb 2007
Posts: 559
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| Posted: Wed May 11, 2011 9:42 pm GMT Post subject: |
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| Boston ITer wrote: |
So while the house below has nearly same amount of sq footage and baths as my apartment... to purchase the following (with 20% down), within striking distance of the city [circa Alewife T or Bus 77-79], it'll be ~$2.8K per month (not including any additional expenses like prop taxes, maint, heating, etc) |
OK, so it's a "what I'm renting now vs. what I would consider buying" comparison. Not apples to apples. |
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Boston ITer
Joined: 11 Jan 2010
Posts: 269
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| Posted: Wed May 11, 2011 11:15 pm GMT Post subject: |
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| JCK wrote: | | Not apples to apples |
The majority of the Boston area is apples to pears, given the lack of stock. I think that's where the three bears: GenXer, Balor123, & I are in accordance.
Sure, I could buy a dilapidated condo or buy in a less safe section, for the same (or less) as my rent in a better section with access to the mass transit and highways. Instead, I'd rather be physically safe and have certainty that when this job goes belly up, that I can take that job in Houston w/o carrying a 2nd mortgage & a haircut when my primary residence doesn't sell at its original buying price.
Likewise, since John P's original argument towards homeownership was retirement, it looks like I may even be able to buy my final home in VT, w/o a loan by simply not buying here. The reality of the situation is that no one wants a mortgage during retirement but during our most vital working years, it's not a bad idea to have the flexibility of moving to expanding job markets like TX or NC. |
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GenXer
Joined: 20 Feb 2009
Posts: 703
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| Posted: Thu May 12, 2011 1:39 pm GMT Post subject: |
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| Beaumontv wrote: | More simply put, if there are 100 homes for sale and only 30 people who can afford the down payment on them, prices must decline...or the market has to go illiquid. The latter assumes that all sellers can afford to stay meaning no layoffs, no job changes, no need to move, etc.
My calculations suggest that the inventory. Is about 2x of the pool of potential buyers. When th conforming limits and other changes go into effect on sept 30, 2011, the pool of buyers will get smaller.
This is true everywhere that homes run well above the conforming limits. How many people can buy a $1m home? And how many homes are on the market for $1m. Simple economics, more sells than buyers means price decline. We only had more buyers than sellers in the first place because of the liberal credit markets. |
The answer is, they can buy even though they can't afford it. You are right - it is availability of credit. I think we are not out of the woods yet with foreclosures. If the job market does not improve/gets worse, expect more of the same. The thing is, it will be a slow bleed, not a drastic change, so most people won't notice it. But this can last for years. Many people can barely make it, as long as they have their jobs. Thus, rents will have to decline further, just like prices. It may take many years though, so anybody who is looking to buy will be very much disappointed.
However, there is a possibility for big downside, though it hinges on what happens on the Fed/State level as far as the budgets. There are absolutely no upside potential in the future given that the 'best' case scenario for housing is slow decline simply because of near guarantee of budget cuts in the future. |
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Beaumontv
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| Posted: Mon May 16, 2011 2:39 pm GMT Post subject: |
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Boston ITer:
I agree with you on the global securitization of the real estate market. One pending questions is whether mortgages with be transferable via MBS in the future. The new rules require that a bank hold onto its loans unless it meets very stringent requirements such as 30% down payments on the loans.
In the US 90% of all home loans are funded by Fannie and Freddie. So while I agree that easy money could pour in from Singapore, right now it appears that very little money is actually doing so.
Above the conforming limit, there appears to be a pervasive contaction in lending. |
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