bostonbubble.com

[john p]

melonrightcoast:

I agree with you about the quality of the home and the maintenance. I think Brian C's photographs scare the bejeezus out of many who aren't as handy.

The breakdown I provided is basically like the design of a beam:

http://www.strucalc.com/engineering-resources/structural-analysis-of-a-beam/

The first part of the exercise is to determine the loads and where the bending moment and shear is at any given point, then you have to compare it to what you're talking about which is THE PROPERTIES OF THE MATERIALS. You could run the same calculation for a wood beam or a steel beam.

In the market today the properties of the buyers and sellers and the housing stock is different. For example, the natural properties of a young professional who works in IT who does contract work might be different than someone who works for the MBTA. Further, buying a newly built condo might be a good match for certain buyers, while a fixer-upper might be a better match for a Brian C. In any given market you need to assess the nature of the buyers and the nature of the sellers and the nature of the properties being sold.

Now in a beam, the bending might be greater at certain sections than in other sections. Sometimes we use a uniform steel wide flange shape across the whole beam, when if the beam was shaped more efficiently you could put more steel where the bending and shear was greater. I think an understanding of the housing market is sort of like this. Because different price strata feel the stresses differently, you have to shape your understanding accordingly and the resultant of this understanding take a certain form that keys into the dynamics of the market. Instead of just having a uniform simple wide flange "I" beam understanding, it needs to be more sophisticated and dynamic and the understanding has to look something like these diagrams:

http://www.tfischer.de/candy/theorie/calatrava/alamillo/alamillo2.gif

http://www.tfischer.de/candy/theorie/calatrava/alamillo/index.html

http://www.prism-magazine.org/nov07/images/con-bri-11-image-01.jpg

[Brian C]

[john p]

Brian C:

You're the perfect example of the median right now, because that place is smack dab in the median range.

So you're paying $1,800 per month. I'm assuming that that doesn't include the tax shelter on real estate taxes and interest? Also, did you put enough down to avoid PMI, or did you do a piggyback?

So if the $1,800 doesn't include your tax shelter, I'd venture to guess that you'd be saving about $500 in this tax shelter, so in essence you're really paying $1,300 per month, and if you set aside $450 per month for maintenance, that balances to the $1,750 a month rent.

This is an inflection point in the market. I don't think that this match has occured in many other regions along the price strata as Admin points out and in certain towns (with good skools) as melonrightcoast points out.

[Brian C]

[melonrightcoast]

john p: i'm not an engineer, but i do have a degree in geology and have worked at two engineering firms, so i especially like your analogy. I think you are trying to say that this it is a very complex equation because of individual circumstances, preferences and choices of buyers and sellers. So, not to sound to Matrix-esque, but there is a bit of an intuitive art to understanding how it all works. I agree with that. Geology is similar (lots of complex data, and interpretting the data is the art) so maybe that is why economics/housing market is so interesting to me (in another life, i'll study economics instead).

Now, as for your cable-stay bridge design, do you mean that the design only works if all the cables are functional? If the higher cables break, then the lower cables will break, and vice-versa, and the span will likely collapse? So... the cables represent price-levels of housing and the span represents our economy? Isn't that comparison eerily similar to a pyramid-scheme?

I would like to expand on your analogy a bit:

From my experience and observation, it seems the architecture and design of large structures is greatly influenced by two things: the subsurface that you are building upon and how much money the builder can spend. If you do not have a competent substrata (i.e. bedrock), then you need to be creative with the design and/or subsurface engineering in order to support the large structure. And if you can spend as much money as you want, then you have much fewer building constraints.

I think this is an excellent analogy to our current housing market: we do not have a competent substrata (sufficient income levels) to support such a large structure (high property prices) and therefore we got creative in the design of the structure (NINJA and pick-a-payment loans for people without enough income), which has now required significant subsurface engineering ($8000 first time home buyers credit, mortgage interest deduction, 30year loans) in order to support the large structure (high prices).

In engineering and architecture, a project will be abandoned if the design becomes too costly; buildings will be tore down if it becomes too costly to maintain or fix. UNLESS it is a public works project that will doom an entire population if it was abandoned (Big Dig). I think the same "logic" will apply to the housing market and that the government is going to keep on trying to support what is already built, because if they tore it down right now, it would destroy our economy and society.

My great hope is that someone in charge realizes they cannot afford to continue supporting the existing housing market and they will try to slowly dismantle the current structure (slowly deflate the bubble) to something that only needs some subsurface engineering (30 year mortgages, mortgage interest deduction).

Unfortunately, I do not think it is possible to get back to building on bedrock (buying homes with a 5 year or less mortgages OR incomes rising significantly) without economic and societal collapse. But that is just MHO .
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melonrightcoast ... are you?

[john p]

Hey, if you want to talk subsurface, that is great.

I've been thinking alot about thermodynamics in the market, meaning if there is a constant heat, certain people feel the heat differently, meaning if you've got a big emergency fund, this year might not have melted you down. The "immune towns" are said to have a lot of fireprotection on them so they don't tend to deform under the economic heat.

So basically, the structural properties can deform under the economic meltdown and what I was saying is that a metamorphic understanding is kind of like sculpting the beam to provide the material where it is needed. In the cable bridge, the reason why it is higher in certain areas is because the flow of forces flow laminar and the leverage or catanary shape is formed where the flow of forces are. The dialogue between different price strata is kind of like the resonnating waves that create turbulence in a market like one of those bridges that starts to bounce in a rhythm. The FED is trying to dampen the turbulence. Certain areas like California and Florida totally collapsed, while other areas that weren't overhanging with respect to House Price to Household Income ratios stayed a bit more stable.

I think lots of home buyers look in one area and not be aware of other areas. What Brian C represents is the notion that Quincy Public Schools might have the potential to become better in time and even within the Quincy Public Schools, if you're in the Honors Program, you might be getting the same education as the kid in Hingham. In more affluent communities, parents make education a priorty and tend to hound the kids to make sure they've done their homework. I liked to raise hell and my parents knew it so they sent me to a private prep school and made me take courses on how to improve my SAT scores. So, I would venture to guess that the top students in any High School are going to be pretty strong, but the affluent towns don't get the scores averaged in for the kids that don't have any ambition to go on to college or school isn't a priortity. Bottom line, I'd be curioius to know if you sampled the Honors Program at Quincy High and the Honors Program at Dover High School if there would be that much of a difference. Having lived in this State for decades, I have seen certain towns emerge and others losing their standing as far as test scores. If enough parents care about education, eventually any town will emerge, and regardless if you care about your kids education, chances are no matter where you live, they'll be ok. If your kid see pictures of you gutting a place and building his dream so you can build yours, perhaps the kid will end up with a good work ethic.

The new dynamic to this whole thing is the Internet. I was in Italy and met a mother and daughter, and the daughter was home schooled and she had passed AP exams in a variety of subjects.

What melonrightcoast brings up is the deformation / reformation that takes place in the thinking and priorities once you get kids. I went to a prep school that had plenty of kids from Lynn, Peabody, Salem and lots of those kids went on to great colleges. Keep in mind that some of these towns have reputations from the 70's and chances are in 30 something years THEY HAVE THE CAPACITY TO CHANGE.

[melonrightcoast]

I wouldn't have made the connection to thermodynamics, so thanks for spelling it out . It is interesting and funny how each of our perspectives is influenced by our experiences and specific knowledge, but c'est la vie.

Homeschooling. In theory, a great idea, and I have thought about doing it. But honestly, I think it heavily depends on the child's and parent's personalities, and what is in the best interest of the child. Some children will do better home schooled and some children will do better at school. If necessary, i will home school one or both my girls. The area that I live in has many resources for home schooling.

As for taking the risk on a school district improving, now that my oldest is almost school age, it is a risk I'm not willing to take. That is essentially what we did when we moved to Arlington, as we would have 12+ years before middle school when we bought in 2003. We knew the mid & high schools weren't excellent, but they seem to have gone down hill in the past 5 years. Or maybe it is just that we now know more people with kids that age in the Arlington schools.

In retrospect and in talking with people, I now know that the high school that I graduated from was horrible, and although I was a good student, I definitely felt that I was behind so many of the other kids when I went to college. I do not want to repeat that mistake with my kids.
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melonrightcoast ... are you?

[shivan128]

[GenXer]

Just imagine how much money you can save while homeschooling. You can rent or buy in a cheap town. You don't need a six figures job which keeps you away from your kids practically forever. And what for? Just to be able to afford the house? I think homeschooling is good for any kid. Its the parents who may not be up to it. It requires being proactive, but most parents just don't have the entrepreneurial spirit. And a very good organization. A home schooled kid will probably do much better at being able to adapt to different environments, and they can be taught life skills as well. We are going to make our kids help us in our businesses, and they will learn things most people don't learn until they hit college (and possibly even graduate school). This way they will not have to go to an expensive college, but we are hoping that they will know 100% what they want to do by the time they hit college, having been exposed to many different businesses (our family has 3 completely different ones). Not only will we save a bundle on college expenses, we hope that our kids will either join our businesses or open their own. This way they avoid repeating the same mistakes everybody else is making (9-5 careers, public schools for kids, college expenses), all of which takes away from everybody's lives. Not going to be easy, but I think it will definitely be a LOT more fun (hence, kids will almost certainly like it more than boring school).

[john p]

I have a friend who I ride the train with. He wants to send his kid to a super expensive college so she can follow her dream to work in the Arts. I told the guy if he put all that money aside and invested it, he could give her a million dollars when she was 40. If he lived in a cheap town and saved even more, he could perhaps give her $2 Million.

How much money should you burn through to give your kid their dream? I mean if you live in an expensive town and your kid is saddled with a ton of student loans when they get out, then they are financially bonded. I mean hopefully they'll fall in love and want to build their own lives and provide for their kids so unless there is a big payoff in living in these immune towns, I'd consider saving as much money as you could and providing financial stablity.

It is very nice to hear that people make sacrifices for their kids. It is very honorable. I'm just saying if you can get a place in Quincy or Wakefield for $325k or get the same sort of house in Wellesley for $650k, wouldn't you be better off saving all that money so you could actually afford college for your kids? I totally get that it is better to be in the Wellesley social orbit where your kids will meet families who are CEO's.

I grew up in a wealthy town and a lot of kids had their head in the clouds. If your kids need to sweat it out because you won't have a trust fund for them, if you grow up in these immune towns you almost have to provide another type of home schooling for other values they might not get otherwise.

[melonrightcoast]

[melonrightcoast]

[WestCoastXPlant]

[renterstill]

I am signed up with both NewEnglandMoves and Zip and they are not in sync. NEM is ALWAYS a few days later than Zip. Not sure how redfin compares.

[melonrightcoast]

so, i'm signed up for Redfin, Zip, NEmoves, and a local realtor's direct MLS feed. my results so far on which is the fastest is: 1)the direct MLS feed 2) Redfin 3)NEmoves and 4)Zip.

Actually, Zip shouldn't be counted because I have not go any updates from them and I cannot figure out why; they aren't going to spam, i've made sure they have my e-mail address, I've made sure it is set up to send me an e-mail, and I'm still not getting updates from them. I've even cancelled and reset up the search and e-mail, and that has not helped. Any suggestions for getting the Zip e-mail alert to work?
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