bostonbubble.com

[Xenos]

I have been living outside Mass for more than a year now, and am wondering whether the 'immune' towns have remained immune this summer. I can see some listing for not-quite-top shelf houses are lower in Newton, for example, but it is hard to sense the broader market changes from a distance.

So, is immunity holding? Is it slipping in some places? I would expect some towns to remain immune no matter what, given that there is a narrow elite that will always be willing to get the trophy house in certain neighborhoods in Brookine of Weston. But in a deflationary economy that might not hold forever.

[dude1040ez]

1. it won't fall untill you see hospitals start laying off doctors and nurses.

2. check the rent from brookline and weston, see how high it is.

3. what make you think we are in deflationary market? Check how much you are paying at McDonalds these days.

[admin]

I suspect that there are not nearly enough doctors to go around for all of the "immune" towns. Assuming that your property value is safe because all of your neighbors are rich doesn't offer safety in practice when your neighbors are making the same assumption. Yes, there probably are a disproportionate number of doctors in Brookline, but are there enough? Look at the household income distribution and house value distribution for Brookline about a quarter of the way down this page: http://www.city-data.com/city/Brookline-Massachusetts.html The vast majority of households there earn less than $150K. This does not align with the house value histogram right next to it.

Layoffs are also by no means the only thing that would put a dent in the purchasing power of high paid health professionals. Cost controls were always meant to follow the first phase of Obamacare (though who knows what will come there). More importantly, I maintain that the "immune" towns share a single point of failure with everywhere else: interest rates.

- admin

[CL]

From an simple economic point of view, as buyer you want a shift in supply curve to the right. But in towns like Brookline that is already built out, it is hard to increase supply via new construction. In addition, unemployment is very low in these towns (~4% in Brookline and Newton), which means foreclosure/forced selling is not likely for a lot of families.

If the supply curve don't shift to the right, the only way to get a lower equilibrium price is via demand curve shift to the left - which can be caused by, for instance, a spike in mortgage rate. The problem is the demand curve shift lower BOTH price and volume. Which means even if the price is lower, it will be increasingly hard to transact as seller refuses to sell.

[john p]

For really rich people, a down period is a buying opportunity.

I would look at it like a portfolio of rich people. Depending on the job market in a reasonable distance from a town, you have to look at what industries are growing and what ones are hurting. If a certain town is a bedroom community that serves a high percentage of one or two major industries and both of those industries are hurting; you might see that town suffer even though it was considered an "immune town".

With all this Federal Spending, it is funny that the Washington D.C. area actually saw house price growth during most of this "Worst Recession since the Great Depression".

For the medical industry the new Health Care Bill will change things. I am not in that industry so I haven't a clue as to how much it will affect the incomes and job security. I'm pretty sure what I've been hearing is propaganda by special interests. The aging baby boom will always provide ample supply and the more people think their Health Care is subsidized in this era of preventitive care, I think more people will be showing up at the doctor's office. I think we may see a spending spree for a couple of years and then some regulations to clamp things down in some ways.

For the financial industry, the Dodd Frank Bill will change things. How much people make and what types of trades will be affected. I think you'll see lots of extra reporting, so you may see more mid level jobs pop up but the big swinging salaries might drop so that might affect the rich towns.

Derivatives are that artificial debt based vapor atmosphere of wealth. Many have gotten rich from the expansion of credit. Any industry that has profited on may have trouble.

I think you have to also consider two things: what segment of the population overextended during the bubble and haven't already been stung, and what segment of the population bought prior to the bubble and now can refinance, shorten their term significantly in like the 3's for a mortgage rate. The latter is in a position to refinance and have more buying power because they have equity and qualify. They are in a position to either move up in property value or save. The generation that is able to cash in on this also has to worry about getting their kids into expensive colleges. I don't know if the numbers work for buying rental properties however.

I think also you have to take measure to whether or not we get a double dip. For this you've got to really take a temperature reading on other areas. Reading a few articles of the "Economist" will help. The charts on the back are really good.

[guest]

Crowed in Lex, Newton and weston are from Pharma industry, medical docs and high paid from education institution. I dont see any of these sources are in trouble so as long as they are doing fine. These towns will remain immune

[CL]

Boston Magazine did their school system ranking. They have a lot of criteria but I only focus on academics so I rework the data a bit. I calculate the zscore for average elementary, middle and high school MCAS score then SAT z-score (SAT counts double in my calculation). Here is the result -

Ranking School District TOTAL Zscore
1 Lexington 8.70
2 Acton-Boxborough 8.31
3 Weston 7.99
4 Winchester 7.89
5 Wayland 7.46
6 Westford 7.44
7 Concord-Carlisle 7.35
8 Dover-Sherborn 7.35
9 Belmont 6.59
10 Newton 6.52
11 Lincoln-Sudbury 6.33
12 Wellesley 6.27
13 Needham 6.07
14 Westwood 5.98
15 North Attleborough 5.98
16 Sharon 5.94
17 Medfield 5.45
18 Hamilton-Wenham 5.41
19 Hingham 5.30
20 Brookline 5.25

[FreedomCM]

CL, could you link the article?

And if you have calculated down farther (to 100?) could you post those results?

TIA

[CL]

The link, via Boston Magazine -

http://www.bostonmagazine.com/best-schools-in-boston/index2.html

My version of academic ranking result, in full

Ranking School District TOTAL Zscore
1 Lexington 8.70
2 Acton-Boxborough 8.31
3 Weston 7.99
4 Winchester 7.89
5 Wayland 7.46
6 Westford 7.44
7 Concord-Carlisle 7.35
8 Dover-Sherborn 7.35
9 Belmont 6.59
10 Newton 6.52
11 Lincoln-Sudbury 6.33
12 Wellesley 6.27
13 Needham 6.07
14 Westwood 5.98
15 North Attleborough 5.98
16 Sharon 5.94
17 Medfield 5.45
18 Hamilton-Wenham 5.41
19 Hingham 5.30
20 Brookline 5.25
21 Andover 5.13
22 Holliston 5.08
23 Nashoba 4.78
24 Masconomet 4.66
25 Marblehead 4.62
26 Hopkinton 4.60
27 Lynnfield 4.56
28 Cohasset 4.56
29 Manchester Essex 4.40
30 Norwell 4.36
31 Medway 4.11
32 Northborough-Southborough 4.07
33 Arlington 4.04
34 Bedford 4.00
35 Natick 3.70
36 Franklin 3.35
37 Reading Memorial 3.23
38 Duxbury 3.19
39 Newburyport 2.88
40 Scituate 2.84
41 Canton 2.58
42 King Philip Regional 2.51
43 Mansfield 2.33
44 North Reading 2.31
45 Easton 2.26
46 Ipswich 2.22
47 Pentucket 2.16
48 Walpole 2.09
49 Old Rochester 2.04
50 Ashland 2.04
51 Georgetown 2.02
52 Chelmsford 1.84
53 Swampscott 1.60
54 North Andover 1.51
55 Millis 1.40
56 Braintree 1.34
57 Littleton 1.27
58 Marshfield 1.11
59 Freetown-Lakeville 0.98
60 Burlington 0.93
61 Amesbury 0.91
62 Wilmington 0.91
63 Foxborough 0.79
64 Milton 0.72
65 Hanover 0.59
66 Wakefield 0.51
67 Norton 0.38
68 Triton Regional 0.37
69 Dartmouth -0.03
70 Rockport -0.08
71 Dedham -0.17
72 Melrose -0.26
73 Silver Lake -0.51
74 Somerset -0.58
75 Pembroke -0.70
76 East Bridgewater -0.72
77 Carver -0.76
78 Billerica -0.81
79 Framingham -0.82
80 Danvers -0.95
81 Plymouth -1.04
82 Stoneham -1.04
83 West Bridgewater -1.09
84 Whitman-Hanson Regional -1.18
85 Hudson -1.34
86 Swansea -1.42
87 Beverly -1.62
88 Norwood -1.82
89 Dighton-Rehoboth -1.89
90 Seekonk -1.97
91 Abington -1.99
92 Stoughton -2.08
93 Tewksbury -2.09
94 Bellingham -2.11
95 Maynard -2.15
96 Weymouth -2.27
97 Westport -2.50
98 Hull -2.52
99 Bridgewater-Raynham -2.71
100 Fair Haven -2.81
101 Attleboro -2.93
102 Watertown -3.04
103 Middleborough -3.05
104 Marlborough -3.21
105 Medford -3.39
106 Peabody -3.44
107 Cambridge Rindge and Latin -3.48
108 Gloucester -3.49
109 Dracut -3.52
110 Woburn -3.56
111 Waltham -3.63
112 Winthrop -3.70
113 Quincy -3.76
114 Avon -4.33
115 Saugus -4.79
116 Rockland -4.92
117 Taunton -4.95
118 Malden -5.42
119 Haverhill -5.69
120 Methuen -5.98
121 Holbrook -5.99
122 Revere -6.00
123 Wareham -6.24
124 Somerville -7.23
125 Randolph -7.53
126 Salem -7.99
127 Lowell -8.60
128 Fall River -8.84
129 Brockton -9.27
130 Lynn -9.31
131 Everett -9.36
132 Boston -9.72
133 New Bedford -11.17
134 Chelsea -11.20
135 Lawrence -14.67

[dude1040EZ]

Looks like Action is the true bargain in this list, let's buy house there!

[CL]

I actually like Acton a lot, would have bought there if my work is not based in Boston.

[Xenos]

I am now living in a similarly immune area, and it looks very similar - overpaid professionals make up the majority of the residents, and even though the European banking systems appears to be on the edge of implosion, values are holding up, and people are still able to get mortgages at 3% with 2% down. This could go on for years - that seems to be the lesson from Boston.

[admin]

[Xenos]

[quote="admin"]
The question is, are they overpaid enough to support the local housing prices?
- admin[/quote]

Incomes at the high end are quite high (this is a bit if a tax shelter), but the key thing is easy mortgage money at very low rates. Houses are built to last 500 years, due to very tough building standards, and families are small. So while the flow of mortgage financing is strong, people are willing to invest a lot into a house that may be in the family for generations.

If the financing stops, due to a collapse in the euro or the local economy, I expect that the market will lock up for decades.

[admin]