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Guest
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Posted: Thu Feb 02, 2017 10:41 pm GMT Post subject: Re: Not predictable |
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admin wrote: | Anonymous wrote: |
According the the Federal Reserve in 2013, the average home owner has a net worth 36x more than the average renter. I'm sure the difference is much greater now. Buying a house is like going to college to make more money in your lifetime. Most people will be better off going to college, but not the people who borrow 200k to study art.
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Correlation does not equal causation. It could be that people with more than a tiny net worth to begin with are more likely to buy a home.
- admin |
Yes, my point is what do you have to lose? You can put 3.5% down and end up with 36x in 20 years. If you end up in foreclosure, you lose your 3.5% but you get to live a few years for free while you fight the foreclosure in court. You still come out ahead and a few years later, you can try again. The system is stacked in your favor and against renters. You take this bet every time. |
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Guest
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Posted: Sat Apr 01, 2017 6:09 pm GMT Post subject: |
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Another data point:
This house has been listed since Nov 2016. Its only several blocks from all the other houses listed on this thread
https://www.redfin.com/MA/Newton/41-Lodge-Rd-02465/home/11433705
Nov: 945k
Today: 865k
Is this house really that much worse than the others mention or has the market started shifting?
From the look of things:
- house is about 500-600 sqft smaller than the other houses mentioned
- doesn't seem to have much character, and is a corner lot
- most ppl probably hate the swimming pool (upkeep)
Thoughts? |
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Former Arlingtonian
Joined: 23 Oct 2013 Posts: 141
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Posted: Sat Apr 01, 2017 6:39 pm GMT Post subject: Cost of borrowing is going up |
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I try to explain this to friends who can'g get their heads around the idea that the value of their home is TIED to Mortgage rates.
Mark Hanson said it best in this post https://mhanson.com/3-16-hanson-house-purchase-power-slammed-going-spring-busy-season/
IF you own a home that you purchased in the 2011-2017 period and way in the future you are forced to sell during a period of higher interest/mortgage rates you cannot expect to sell the home for what you paid!
Having a pool and a very dated interior only adds to the home owners sales problem. The couple will find a buyer at some price - some time in the future - the price will be lower than they dreamed because the sellers don't understand the REAL ESTATE is all about either LOW RATES! |
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Guest
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Posted: Sat Apr 01, 2017 7:50 pm GMT Post subject: Re: Cost of borrowing is going up |
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Former Arlingtonian wrote: | I try to explain this to friends who can'g get their heads around the idea that the value of their home is TIED to Mortgage rates.
Mark Hanson said it best in this post https://mhanson.com/3-16-hanson-house-purchase-power-slammed-going-spring-busy-season/
IF you own a home that you purchased in the 2011-2017 period and way in the future you are forced to sell during a period of higher interest/mortgage rates you cannot expect to sell the home for what you paid!
Having a pool and a very dated interior only adds to the home owners sales problem. The couple will find a buyer at some price - some time in the future - the price will be lower than they dreamed because the sellers don't understand the REAL ESTATE is all about either LOW RATES! |
That small house is priced to high. Any house on the market longer than a few weeks is priced to high.
Rates only matter when there are just as many buyers as sellers. When there are more buyers than houses for sale, prices will be high even when rates are high. When rates go up, buyers shift downstream and cause prices in the downstream markets to go up. If you want a bargain, wait for a recession when no one wants to buy. |
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Guest
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Posted: Sun Apr 02, 2017 3:21 am GMT Post subject: |
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Quote: | Rates only matter when there are just as many buyers as sellers. When there are more buyers than houses for sale, prices will be high even when rates are high. When rates go up, buyers shift downstream and cause prices in the downstream markets to go up. If you want a bargain, wait for a recession when no one wants to buy. |
Disagree. When we review drastic home price upswing for the last 4 to 5 years, we need to understand the major root cause of it, before we could foresee how market changes when mortgage rate goes up.
The root cause of home price big upswing, is the ultra low interest rate, plus large amount of funny money print out of thin air, which is pushed back into equity market chasing asset that can retain capital value during inflationary market condition; and or generate return that beats current market CD rate. For now, options are stock and housing. Stock index is at all time high, and so is housing price.
Think about this. Currently rent and mortgage payment for the same house is very close, rent might be a hair cheaper, but buying will have tax benefit. Also USD's purchase power is decreasing quickly due to inflation, so house buying demand is high. But high home price makes buying a very difficulty option to execute, as coming up with large down payment is not easy, even though low interest rate and decent economic condition still supports people to explore buying as an option.
If interest rate goes up, and affect mortgage rate to go up to a point, which add 10 to 20% to current monthly payment, for the same house with same price. What will happens is people will start evaluating rent vs buy option, and if renting is 20% cheaper than buying per month, people will choose to rent. AND, during the mean time, higher interest rate will encourage people to park money in the bank to earn safer interest return, instead of betting on housing market with higher risk. This will hurt the housing market from 2 fronts. First front is from crushing buying demands and keep people in rental market. The second front is from extracting investment liquidity from housing market, and park it in CDs and fixed assets, with much better return rates.
If you can keep up my writing until now, it is not hard for you to see that IT IS ALL ABOUT INTEREST RATE, OK? You know it, I know it, so is the FED and every big players in the capital market. The makes and breaks of the current housing bubble will depend on how high the interest rate being jack. The FED and Trump administration are not fools, there is no reason to kill the housing market yet. And since it is all about interest rate, then WHY THE HECK would they raise interest rate to a point to burst it?
Last point I would like to make is. It is true that housing price will at its low point during recession. BUT, your purchase power and purchase desire will also be at the rock bottom as well. DO NOT THINK it will be any easier to buy during recession, unless your job is recession proof, and you still have large amount of cash in hand after recession for down payment. So don't just simply wait(hope) for the day of recession, and wishfully thinking that when blood on the street, you can pick things up cheap on the street. As the ugly true is, you might be well be one of many bleeding when the worse finally hits. |
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Guest
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Posted: Sun Apr 02, 2017 5:05 am GMT Post subject: |
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Anonymous wrote: | Quote: | Rates only matter when there are just as many buyers as sellers. When there are more buyers than houses for sale, prices will be high even when rates are high. When rates go up, buyers shift downstream and cause prices in the downstream markets to go up. If you want a bargain, wait for a recession when no one wants to buy. |
Disagree. When we review drastic home price upswing for the last 4 to 5 years, we need to understand the major root cause of it, before we could foresee how market changes when mortgage rate goes up.
The root cause of home price big upswing, is the ultra low interest rate, plus large amount of funny money print out of thin air, which is pushed back into equity market chasing asset that can retain capital value during inflationary market condition; and or generate return that beats current market CD rate. For now, options are stock and housing. Stock index is at all time high, and so is housing price.
Think about this. Currently rent and mortgage payment for the same house is very close, rent might be a hair cheaper, but buying will have tax benefit. Also USD's purchase power is decreasing quickly due to inflation, so house buying demand is high. But high home price makes buying a very difficulty option to execute, as coming up with large down payment is not easy, even though low interest rate and decent economic condition still supports people to explore buying as an option.
If interest rate goes up, and affect mortgage rate to go up to a point, which add 10 to 20% to current monthly payment, for the same house with same price. What will happens is people will start evaluating rent vs buy option, and if renting is 20% cheaper than buying per month, people will choose to rent. AND, during the mean time, higher interest rate will encourage people to park money in the bank to earn safer interest return, instead of betting on housing market with higher risk. This will hurt the housing market from 2 fronts. First front is from crushing buying demands and keep people in rental market. The second front is from extracting investment liquidity from housing market, and park it in CDs and fixed assets, with much better return rates.
If you can keep up my writing until now, it is not hard for you to see that IT IS ALL ABOUT INTEREST RATE, OK? You know it, I know it, so is the FED and every big players in the capital market. The makes and breaks of the current housing bubble will depend on how high the interest rate being jack. The FED and Trump administration are not fools, there is no reason to kill the housing market yet. And since it is all about interest rate, then WHY THE HECK would they raise interest rate to a point to burst it?
Last point I would like to make is. It is true that housing price will at its low point during recession. BUT, your purchase power and purchase desire will also be at the rock bottom as well. DO NOT THINK it will be any easier to buy during recession, unless your job is recession proof, and you still have large amount of cash in hand after recession for down payment. So don't just simply wait(hope) for the day of recession, and wishfully thinking that when blood on the street, you can pick things up cheap on the street. As the ugly true is, you might be well be one of many bleeding when the worse finally hits. |
But you are wrong. If you were right, rising rates would cause prices to go down, but prices are still going up. Rates has risen 15%, but yet prices continue to rise. When rates were falling in the last recession, prices were falling too. Rising rates limit your ability to buy and that's it. You need to ask yourself, if you are so smart, why are you still renting and why aren't you rich? |
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admin Site Admin
Joined: 14 Jul 2005 Posts: 1826 Location: Greater Boston
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Posted: Sun Apr 02, 2017 12:07 pm GMT Post subject: |
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Anonymous wrote: |
But you are wrong. If you were right, rising rates would cause prices to go down, but prices are still going up. Rates has risen 15%, but yet prices continue to rise. When rates were falling in the last recession, prices were falling too. Rising rates limit your ability to buy and that's it. You need to ask yourself, if you are so smart, why are you still renting and why aren't you rich? |
You're assuming that the effects would be instantaneous, singular, and 100% correlated. When rates were falling last recession, then eventually did help to stop the price declines - it wasn't immediate, and it wasn't the only factor.
- admin |
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Former Arlingtonian
Joined: 23 Oct 2013 Posts: 141
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Posted: Sun Apr 02, 2017 3:49 pm GMT Post subject: Well said by Admin |
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The snarky comment about "why aren't you rich" - very few appreciate how rare and unorthodox this past few years has been.
Quantitative Easing, invented by Ben Bernanke, drove interest rates to levels no seen since the World wide recession of 1958. The six month recession of 1958 was the first post World War II recession and the Central Banks from around the world worked in a coordinated strategy to drive interest rates down to restart the economies of the world. But, the intervention only took 6-10 months before the economies around the world took off.
Think of how different the World was and countries came to the USA to borrow money to expand their economies. Today the United States borrows from around the world to invest in mixed retail real estate, Cloud computing , and electric car companies.
House prices rise every where when interest are are generational lows - even Sydney Australia - no different than what's happening in Boston, Lexington, or London. Its not about schools, or local economy, its all about mortgage rates!
![](http://www.acting-man.com/blog/media/2016/02/1-Sydney-House-Prices-Interest-Rates.png) |
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Guest
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Posted: Sun Apr 02, 2017 4:16 pm GMT Post subject: |
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Anonymous wrote: | You need to ask yourself, if you are so smart, why are you still renting and why aren't you rich? |
This is precisely the hallmark of a bubble, the attitude that only "owning" a home can make you rich.
Here's an example, in 2004 I was at a waiting for lunch, the 2 chefs in front of me were talking. The guys asks why he is is so lazy, the other guys says he doesn't care about working and will retire early because he just bought a house...
We are not quite 'there' yet as most people are still buying to live in the houses... |
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Guest
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Posted: Sun Apr 02, 2017 4:59 pm GMT Post subject: |
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Anonymous wrote: | Anonymous wrote: | You need to ask yourself, if you are so smart, why are you still renting and why aren't you rich? |
This is precisely the hallmark of a bubble, the attitude that only "owning" a home can make you rich.
Here's an example, in 2004 I was at a waiting for lunch, the 2 chefs in front of me were talking. The guys asks why he is is so lazy, the other guys says he doesn't care about working and will retire early because he just bought a house...
We are not quite 'there' yet as most people are still buying to live in the houses... |
There are many ways to save. In 2012, real-estate prices in Boston had declined about 30% from peak in real terms (despite ultra-low interest rates). That provided a good buying opportunity. The US stock markets have also seen healthy returns. None of these options are completely devoid of risk, but savers are only lagging if they are exclusively in CD's, money markets, etc. Diversification is key.
It is interesting that most folks only focus on the run-up in nominal prices since ~ 2012, but do not acknowledge the 8 or so years when nominal prices were more or less flat. That was a lengthy consolidation. Even your chef example probably accrued quite a bit of value if still in the home. |
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Guest
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Posted: Sat Apr 08, 2017 1:44 pm GMT Post subject: |
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This Newton flip is one of the most optimistic I've seen (given the location)
https://www.redfin.com/MA/Newton/265-Jackson-St-02459/home/11462171
purchased 2 years ago for 720k
now on market for 1M more -> 1.8M
- 3 houses away from Route 9. WTF? for this price
- not a teardown, but looks like a gut + rennovation
- the 4000 sqft includes the basement. I guess the only way they could justify such a price. No one wants to sleep in the 'dungeon' at this price
I really cannot see this selling for more than 1.3 or 1.4 max given the proximity to highway. Perhaps this is a sign of the 'weak' (last fool) developers/flippers jumping into the market |
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Guest
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Posted: Sat Apr 08, 2017 10:19 pm GMT Post subject: |
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Anonymous wrote: | This Newton flip is one of the most optimistic I've seen (given the location)
https://www.redfin.com/MA/Newton/265-Jackson-St-02459/home/11462171
purchased 2 years ago for 720k
now on market for 1M more -> 1.8M
- 3 houses away from Route 9. WTF? for this price
- not a teardown, but looks like a gut + rennovation
- the 4000 sqft includes the basement. I guess the only way they could justify such a price. No one wants to sleep in the 'dungeon' at this price
I really cannot see this selling for more than 1.3 or 1.4 max given the proximity to highway. Perhaps this is a sign of the 'weak' (last fool) developers/flippers jumping into the market |
What a fugly house. Not one in his right mind would even pay even 1.3. |
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Guest
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Posted: Sun Apr 09, 2017 12:30 am GMT Post subject: |
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Anonymous wrote: | Anonymous wrote: | This Newton flip is one of the most optimistic I've seen (given the location)
https://www.redfin.com/MA/Newton/265-Jackson-St-02459/home/11462171
purchased 2 years ago for 720k
now on market for 1M more -> 1.8M
- 3 houses away from Route 9. WTF? for this price
- not a teardown, but looks like a gut + rennovation
- the 4000 sqft includes the basement. I guess the only way they could justify such a price. No one wants to sleep in the 'dungeon' at this price
I really cannot see this selling for more than 1.3 or 1.4 max given the proximity to highway. Perhaps this is a sign of the 'weak' (last fool) developers/flippers jumping into the market |
What a fugly house. Not one in his right mind would even pay even 1.3. |
This is a perfect example of "contractors special"
- ikea kitchen
- mass produced suburbia exterior
- zero period details or moldings in the rooms
Could they really find a 'tasteless' buyer willing to pay anything close to 1.8m in that location? I really think the market is closer to 1.3 for this house.... |
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Guest
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Posted: Mon Apr 10, 2017 1:58 pm GMT Post subject: |
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Anonymous wrote: | This Newton flip is one of the most optimistic I've seen (given the location)
https://www.redfin.com/MA/Newton/265-Jackson-St-02459/home/11462171
purchased 2 years ago for 720k
now on market for 1M more -> 1.8M
- 3 houses away from Route 9. WTF? for this price
- not a teardown, but looks like a gut + rennovation
- the 4000 sqft includes the basement. I guess the only way they could justify such a price. No one wants to sleep in the 'dungeon' at this price
I really cannot see this selling for more than 1.3 or 1.4 max given the proximity to highway. Perhaps this is a sign of the 'weak' (last fool) developers/flippers jumping into the market |
For 1.8M, you can get a nicer house in Wellesley, which is a way better town with a way better school system. The seller is nuts to think he can ask for top dollar for that house in that location. Newton is over rated anyway. |
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Guest
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Posted: Fri Apr 28, 2017 8:59 pm GMT Post subject: |
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Just to close off this thread. The house listed for this post sold for ask 875k.
Seems to be inline with the other comps mention in the thread, as its slighter smaller and smaller lot |
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