bostonbubble.com

[tztthinkagain]

Hi, does anyone know where can one find information on how many mortgages in Massachusetts (by county or town) are Option ARMs / Alt-A mortgages? From what I know these will start resetting peaking around 2012.

I want to find out how healthy/sick the Massachusetts housing market is, particularly in towns like Canton, Norwood, Needham, Acton, etc.

As bad as the subprime debacle is affecting the nation, Massachusetts seem to do a lot better than CA/FL/NV, etc. I want to know if the more Prime mortgages will cause housing in MA value to go down further.

I am debating should I wait until then for a cheaper house but risk having a bigger 30yr fixed rate, or buy it now if price won't go down any further because mortgages are healthier in those area.

Thanks.

[balor123]

Larger 30yr rate => lower price
Lower price => lower risk

I don't think houses in nice neighborhoods suffered so much from creative financing but rather large leverage due to low interest rates. Typical households are borrowing 5-7x income, which exposes you to a lot of interest rate risk. Furthermore, the likelihood of people continuing to pay these premiums for housing here depends on what the price is relative to other cities, where the price has been dropping. It appears as if the MA economy is lagging the rest of the economy for the moment and that will put pressure on incomes. My plan is to hold out until interest rates rise to historic norms and see where prices settle then. Personally I'd rather not set sail in the middle of a hurricane just because the seas have been relatively calm so far knowing that there's turbulent water all around.

[john p]

Your position seem to be popular. Could you offer some more context around the strategy?

For instance, if you plan to relocate within a certain amount of time, or you have so much for a down payment, etc.

I heard this great guy on the radio this weekend; a personal finance guy. He said that although he didn't recommend leasing a car, that it was a decent option for someone who had trouble getting credit. He said that if you leased a car and made the payments on time, you'd build up credit so the next time, you could buy a car....

There are two types of risks for banks: first, that borrower won't pay back the money regardless of the economic condition, and second, the economic condition and future cost of capital (inflation premium).

What I'm saying is, if you're waiting for the good old days for historical norms, they also included 20% down payments so be sure that's in your plan.

One potential mistake or assumption I have made is that I thought that you can't really have inflation without growth, meaning if inflation goes up quickly so too will my cost of living adjustments at work so I'll be making more in four or five years and I'll eventually grow into the house I bought (like in the 80's).

I'm coming to understand that there is a possiblity that we can have inflation and not have domestic growth. This is due to the US Dollar falling among other currencies. Economists like Krugman say that this will help exports, but your buying power does diminish for foreign products.

This fear is called Stagflation:

http://en.wikipedia.org/wiki/Stagflation

from link above:

[john p]

One other thing, I don't think this is an argument about Keynes or Friedman, it is about rapid globalization.

[tztthinkagain]

It is good to keep an eye on the interest rate. Waiting now is a good idea.

I think the cash for clunkers and housing credit, student loan, government subsidies are bad for the economy in general and especially for those who are late to the party, usually people who save and are responsible.

Wall street/Washington/fascism/corporatism/cronyism/insiders/etc., they just keep destroying the hard working people, even though some probably deserved it.

One good thing comes with this crisis is that it wakes me up to pay more attention to what s really going on.

Thanks for sharing.

[balor123]

[balor123]

[Renting in Mass]

[Renting in Mass]

To expand on my previous post, I consider anyone who bought a house for more than 3.5 times their income or took on a PITI of more than 28% or a total debt load of more than 42% a risk taker. Same goes for those who put less than 15% down.

Those numbers are approximate. What I'm getting at is that somebody with a household income of 75K who bought a 400k house with 5% down isn't "innocent."

I can't imagine that too many people who bought houses using the metrics I described are losing their homes.

[admin]

[Renting in Mass]

[john p]

I don't want responsible people like Admin and Renting to be punished for being responsible, but the choice is either pay a premium on your home due to irresponsible people, or lose a decade of your career or at least some major potential of your career due to living in a dead economy.

I graduated college in 1992 and many people didn't have a chance to get experience so they were learning in their 30's what they should have in their 20's. I think this is worse than paying an extra 10% on your house because we only live once and if you don't gear into your professional career in your 20's and early 30's it puts pressure on the expenses of having kids and such.

I honestly care about you guys and have gathered that you're not mean spirited, but if you weigh in your minds the current situation and see through the prism that the current Administration is seeing things, new first time buyers might be collateral damage in saving this Economy, so I want you to have your eyes open to the potential government interaction and take measure of how significant government interaction in the past has had significant impact on the market. Further, the current interaction might have more of an impact than the Community Reinvestment Act/ Dot.com bubble, the changes to the tax rates in the 80's etc.

I think the big thing to weigh in your mind is running two models: first the risk of buying a place today to have it worth 10% less next year, versus buying a house next year at a much higher mortgage rate. Because the Government has stake in the banks, they can't afford a housing market plunge so what happens to prices if mortgage rates can't stay low?

Geitner said the key to everything is GROWTH. If first time home buyers can see wage inflation, their focus will be on their plan to be a player in the industry and they will be more prone to settling in to build a career. I'm saying the growth might be in exports because we all see the dollar weakining which means that exports is the potential area of growth, so no matter what gearing into growth is the key strategy as Geitner said no matter whether you buy or rent...

[admin]

[Renting in Mass]

[john p]

Admin said: