bostonbubble.com

[Hard Rain]

Beautiful house (love the great room) and location. That said, a 10k tax bill with a rate of 16.53 would scare the hell out of me....

[GenXer]

A bigger concern is if her husband loses his job and wouldn't be able to find one that pays even 1/2 of what he gets paid now, provided he can actually find a job. Things don't stay the same way forever. Loans are practically forever. Can they survive on an unemployment paycheck for a year or two? What about on a much smaller paycheck? Hope does not beget 'change', we've already learned that much. With adequate savings it may be possible to pull this off. However, what if they have to move for the next job, and the house prices keep falling? In our world, jobs are 'global' and people move all over the place. Nobody knows how long anybody would stay put, and this should also be another consideration when assessing the risks of having to sell early. If approached from the risk management perspective, most people can not afford the houses they are buying, pure and simple. If only people actually understood and were able to protect themselves from such risks, but that is not the case (as we can readily observe from what's happening all over the country).

[john p]

What you're talking about might be a cultural lag from one economic era to another. It was like families having 8 kids because the farm cultures like the "Waltons", it was common and when people moved to the cities it made less sense. It took a generation or so to shift that trend. What you're saying is kind of like in the future people might decide to rent and invest in order to better align with the risks and challenges of today's reality.

I know extended families that still have Sunday dinner. I knew a guy that had to buy in Melrose. His wife gave him no other option and even within Melrose, there were certain neighborhoods that they had to target.

I think if you're in and industry that you're a professional migrant worker, you govern yourself accordingly. I agree that the trend is what you're talking about in that flexibility and less of a financial burden are what can keep you from being buried.

My point is that you don't want to play to the rules of some game that prevent you from being yourself. It's a balance. On paper, it made sense for my parents to move to Florida. I'd bet when all is said and done they'd have rather been closer to their grandkids in MA.

Gaming out the downside. If people go belly up they'll just go through bankruptcy and be on their feet again in five years or so. If you live close to family, you can live with them if things go bad.

Money is just a means of exchange to facilitate trade. Money will deform, devalue, etc. to serve the needs of the masses. People are just doing what they want and are imposing their will on the economy, kind of the power of the herd to deform the rules. I don't think society is ready to have home ownership as a vestige of days gone by. GenXer, you're way ahead of the curve. You remind me of Ebeneezer Scrooge who shows all these fancy people a mass produced chair. He said that this mass production and assembly line were the future. He was laughed at even though he was right. My point is that the people who laughed at him most likely had hand made chairs and were happy with them and lived out their years happily without being on the bleeding edge of reality.

I agree with you, all the scenarios that you've gamed out, I hope they have a plan for them because in today's economy even great people are losing their jobs.

[melonrightcoast]

Thanks for the congrats . We love the great room, too, and that the house isn't a typical cookie-cutter colonial. Taxes are very high in Acton and I wasn't considering it for a while because how high they are. Then I found out about the elementary school choice and concluded that we could change schools easily in Acton, if necessary, and not have to stress about having to pay for private schools or try to sell our house to move to a different school or district. Thus, I concluded that $850/mo is MUCH cheaper than private school for one or both my kids .

As for GenXer's comments, my husband and I have discussed moving, and we've decided that even if he has to leave the area for a job, I won't be moving with the kids. I have a hard time digesting what you are preaching GenXer: don't go into debt to own a home because you run the risk of financial ruin. Well, like it or not, our society has departed from that way of thinking many decades ago. What are the chances that we'll ever go back to that way of thinking/living? I think only if our economy and society completely collapses. What are the chances that we'll inflate our way out of this mess, similar to what has happened in the past several decades? Much higher. Do we know for certain what is going to happen in the future? No. Nobody does. Best we can do is live well-within our means based on the information we currently have and what history has taught us. Life is full of risks. You choose the risks you are willing to take, and I'll choose mine. And I hope you are happy with your life and your decisions, as I am with mine.
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melonrightcoast ... are you?

[GenXer]

melonrightcoast: I didn't mean to put you on the spot - I tried to make my comments as generic as possible, but you just happened to buy a house

The point is simple.

1) Understand your risks
2) Plan accordingly.

Thats it. Pretty simple, really. I hope for the best, but plan for the worst. Does it mean 'oversaving'? For many people, yes, that would mean they would have to save more than they do. Would they be able to afford what they buy in that case? Probably not. Here's the deal though. Many would be spared, but those who get into a tight situation can be hurt disproportionately. Can we plan for everything to come? The answer is no, but given that many of the risks are relatively easy to identify (and are mostly financial in nature, or have consequences that are financial in nature), we can try to plan for these by having bigger savings available.

The problem? Most people don't save even CLOSE to being able to protect themslves. This is why I keep preaching the same thing. I wish many people saved more. Nobody knows how much is enough, but definitely more than they do now - and this is pretty easy to see. All you have to do is ask a couple of questions (i.e. can you live on an unemployment check for a year or two), and you'll quickly discover that most people are woefully unprepared even for the most basic risk of losing a job (which is extremely high given today's economic condition). Now add to that any type of medical and/or legal emergency, and many people are simply waiting to go bankrupt. A simple solution? An extra $100k in the bank. Or even better, $200k+ if you have real estate. In fact, I claim that you need to have the amount of your loan in the bank, but thats on the extreme end.

Ultimately, nobody knows what will happen, but we have enough examples of what happens when such planning isn't done. Its always nice to think that bad things happen only to the others. Even attempting to run through 'what if' scenarios can help with the understanding the kinds of risks many are taking with their finances.

[Boston ITer]

[Hard Rain]

"Thanks for the congrats Smile. We love the great room, too, and that the house isn't a typical cookie-cutter colonial. Taxes are very high in Acton and I wasn't considering it for a while because how high they are"

Therein lies the problem, many folks feel the same way and reasonable so. High taxes exclude a large pool of potential buyers which drive home values lower. Take a look at other high tax communities and values are falling off a cliff , Hamilton and Wenham are two excellent examples. The biggest concern is there doesn't appear to be an end to these tax increases....

[melonrightcoast]

GenXer, you are responding to a thread titled "Guess what town melonrightcoast bought in", so I did take what you said personally. And I absolutely agree that is is prudent and wise to have as much money in the bank as you say, especially since it is not feasible for me to work for another three or four years.

HardRain, we bought expecting prices to continue to go down another 20%. This is not a "stepping" house, but a house that will work for our family for 20 or more years.

If we did not have kids reaching school age, we would not be buying right now. One of my favorite quotes sums up my sentiment perfectly: "Anything I've done up till 27 May, 1999 was kind of an illusion, existing without living. My daughter, the birth of my daughter, gave me life." Johnny Depp
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melonrightcoast ... are you?

[Guest]

[john p]

Who told you guys that you've got to make sure your town doesn't hire more and more and more people. Read this about Acton.

http://www.wickedlocal.com/acton/news/lifestyle/columnists/x1382800475

Although their tax rate is like $15.25 or something per thousand, a house that is worth $565k in Acton would be worth $650k plus in Concord so it lessens the impact a little bit.

Guest said:

[melonrightcoast]

Guest: to each their own, i guess. our price range would have got us an old, small house or maybe a big old house on a busy street in towns within 128 that tend to have lower tax rates (newton, arlington, belmont). we had an old house in arlington on a busy street, and i didn't want to do it again. absolutely no way, i'd rent until my kids were grown before i bought another 100 year old house with plaster and old wiring while i have young children. And many people do move shortly after their kids graduate high school in Acton. we are planning on it.

john p.: this sort of thing happened when i lived in Arlington, too. the town asked for a tax increase to support a budget increase and everyone voted "no". they came back a year later with their act together and the town voted "yes" to the tax increase. we'll see how it plays out in Acton. most the sellers that we met this year that were selling after their kids graduated were moving to neighboring towns. one was moving to NYC for work. these people aren't that old, early 50s... certainly not FL age .

admin: i'd be happy to share school info once i start attending open houses in January.



I hope I haven't come off sounding like i am a housing bull, or that everyone should buy a house now. It has worked for us, but that doesn't mean that buying now is right for everyone. Do what is right for you, your family and your situation.
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melonrightcoast ... are you?

[balor123]

Agreed. Free markets in general are highly unpredictable, especially with potential for so much intervention, making market timing difficult. You have a little wiggle room buying in winter vs summer but that's about it. Your family situation is really the best guide about when to buy. Just as well, sometimes you have to take even a bad deal if its the best one you've got. That said, I won't stop trying

[Guest]

Although their tax rate is like $15.25 or something per thousand, a house that is worth $565k in Acton would be worth $650k plus in Concord so it lessens the impact a little bit.



ACTON 2009 TAX RATE IS 16.53. JUST AN FYI.

[john p]

2009 TAX RATE- 16.5 ---- woof!

let's recalculate that premium for the good school.

$565k @ a fairly decent tax rate of $11.5 per thousand - $6,500 per year.

$565K @ $16.5 per thousand - $9,323 per year.

the difference is $2,823 so it is another $235 per month.

So to this buyer, that $235 was worth it because she felt that the school system was cheaper than private schools. When you think of it, in today's money that's like $35,000 more in taxes you're going to pay over the course of 1st to 12th grade so that's like a year of college tuition or a year at a fancy prep school.

It also sounds like they got a hell of a house that would have been much more in other surrounding exclusive communities like Lincoln or Dover.

What is kind of interesting is that people that really value academics aren't necessarily rich. These young families that want the best education for their kids need an affordable town that values education. These towns are typically what I call "up and coming". Many exclusive towns today were affordable years ago, so I believe that the exclusive towns of tomorrow are the affordable towns that have improving school systems.

[Guest]