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Overpriced Boston
Guest
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 Posted: Mon Mar 02, 2009 4:45 pm GMT Post subject: |
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| BelmontRenter wrote: | | Hard Rain wrote: | "There are many elderly in Newton who need to sell for retirement as their investments have lost at least 40%, they will rush for the exits when they start seeing prices soften "
Guest brings up an excellent point I haven't seen discussed ; I'd guess that many people are in panic mode (for good reason) after watching their wealth/retirement evaporate. It stands to reason that in order to limit further losses they will act quickly and sell at whatever the market will bear, they saw what standing pat did to their 401k's..... |
I disagree entirely. Those owning homes in the relatively desirable towns won't panic and sell for 50 cents on the dollar. Rather, they will hold out and hope that the market recovers. That, IMHO, is why we see so few quality properties on the market. People are holding out.
Selling now locks in the losses. For the same reason it's probably not a good idea to liquidate your 401(k) today, it's not a good reason to lock in a major loss on a home.
Your assumption that people will panic and sell for low prices begs a few questions. Where will they move to, for example? |
I think you may bein complete denile if you think older people (working and currently retired) will not be forced or feel the need to sell thier homes in this crashing stock market as well as having unemployment spiking the way it is. One cannot go to the grocery store and buy groceries, pay for their medical bills, or live the comfortable lifestlye by paying for these things with the equity they have in their homes.
With the stock market under 7000 and still plummeting as we speak the retirements of these older people (working and not working) are being cut by 50% of more. In addition the decrrease in comsumer confidence and increase in unemployment thus far make the demand for these homes to go down further and further. There is a direct correlation between increase in unemployment decrease in the stock market and decreasing home prices. These are historical facts. As these two measurement parametrs change the market in almost all places wll change. Read this post in Fall 2009 and see how right I am. Those areas that have been largely unaffected by the bubble will start to feel a lot of pain. That's without any increase in mortgage rates. If mortgge rates go up by even .5% this will significantly increase the drop of home values in this area. Again, come Fall 2009 you will find most of this to be true. |
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GenXer
Joined: 20 Feb 2009
Posts: 703
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| Posted: Mon Mar 02, 2009 5:24 pm GMT Post subject: |
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I don't know about other towns, but in Newton, retirees are now an active voting block against new taxes and overrides. They did buy their houses a while back, but most are living on fixed income, and if anything happens to them where they need money, they will have to sell their house quickly. Many are not rushing to sell right now, and most likely they would transfer the house to their kids (or to a trust with kids as beneficiaries) if they'd really like to do it right. However, these are probably tiny, lower quality older houses which need to be torn down anyway (or seriously reconstructed).
Anybody for whom a house is the only source of retirement money (which is probably most retirees) will definitely be hurt by this crisis. Even though they paid very little, they will not get 'inflation' if they try to sell now. This is a lesson to anybody who thinks that buying a house is not risky long term. |
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balor123
Joined: 08 Mar 2008
Posts: 1204
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| Posted: Mon Mar 02, 2009 5:47 pm GMT Post subject: |
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| GuestN wrote: |
Things are still quite expensive (more so than in Boston) in areas where most people would actually want to live. By analogy, prices in Boston are also quite low, if you consider cheap places in Dorchester et al. |
Those places look pretty nice and very central. I wouldn't want to live in Dorchester. |
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JCK
Joined: 15 Feb 2007
Posts: 559
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| Posted: Mon Mar 02, 2009 6:16 pm GMT Post subject: |
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| Overpriced Boston wrote: |
With the stock market under 7000 and still plummeting as we speak the retirements of these older people (working and not working) are being cut by 50% of more. |
I'm no financial planner or expert, but wouldn't most retired people have moved the vast majority of their assets into more conservative investments? I'm sure some retired people are over-invested in stocks, but I imagine that most have their portfolios heavily weighed into fixed income vehicles, annuities, bonds, etc.
Those whose home is paid off and have assets in safe vehicles should not be under much pressure to move, regardless of the economy. |
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JP
Guest
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| Posted: Mon Mar 02, 2009 6:43 pm GMT Post subject: |
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| JCK wrote: | | Overpriced Boston wrote: |
With the stock market under 7000 and still plummeting as we speak the retirements of these older people (working and not working) are being cut by 50% of more. |
I'm no financial planner or expert, but wouldn't most retired people have moved the vast majority of their assets into more conservative investments? I'm sure some retired people are over-invested in stocks, but I imagine that most have their portfolios heavily weighed into fixed income vehicles, annuities, bonds, etc.
Those whose home is paid off and have assets in safe vehicles should not be under much pressure to move, regardless of the economy. |
I would be curious to know what "conservative" investment has not gone down a decent amount in the past 12 months other than nonliquid holdngs such as CDs or bonds? Almost everythng has taken a hit even the conservative holdings. I would think most retirees have not placed the majority of their retirement in CDs or bonds espcially sicne the stock market was doing very very well the last few years prior to the crash and everyone wanted in to some extent. Maybe not straight stocks but something like a money mkt or mid range mid agressive mutial funds. Heck even the low risk mutual funds got (are getting) killed. Just my thoughts. |
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Hard Rain
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| Posted: Mon Mar 02, 2009 6:48 pm GMT Post subject: |
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"WASHINGTON -- Wisconsin Sen. Herb Kohl said that many baby boomers nearing retirement have their money in risky investments that are losing value.
Kohl said a Senate committee investigation found many people who plan to retire next year are invested in target-date funds that are losing value. The funds are supposed to shift money to safer bonds as investors' retirement nears.
But Kohl said surveys show many target-date funds are keeping money in volatile stocks. He said one such fund lost more than 40 percent of its value last year."
"Boomers between 45 and 54 have lost 45% of their median net worth, leaving them with just $80,000 in net worth, including home equity, according to the report.
Older boomers have fared marginally better. Those between 55 and 64 have lost 38% of their net worth, leaving them with $140,000. But this group is rapidly nearing retirement age and they have few working years left to make up the losses" |
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JP
Guest
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| Posted: Mon Mar 02, 2009 6:48 pm GMT Post subject: |
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| JCK wrote: | | Overpriced Boston wrote: |
With the stock market under 7000 and still plummeting as we speak the retirements of these older people (working and not working) are being cut by 50% of more. |
I'm no financial planner or expert, but wouldn't most retired people have moved the vast majority of their assets into more conservative investments? I'm sure some retired people are over-invested in stocks, but I imagine that most have their portfolios heavily weighed into fixed income vehicles, annuities, bonds, etc.
Those whose home is paid off and have assets in safe vehicles should not be under much pressure to move, regardless of the economy. |
Another thought that came to mind is there are many many people in these areas who are close to retirement (60 or so) who are not necessarily retired and have not yet moved a large portion of their retirement into more secure holdings. If this is hte case some of these people have taken a big hit and may not NEED to sell but may feel as though they would be better off having liquid funds available or to possibly reinvest in this much lower market. Just another thought. |
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JP
Guest
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| Posted: Mon Mar 02, 2009 6:58 pm GMT Post subject: Boston RE prices WILL come down |
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If you think the prices in the Boston area are not set up to take a big drop read here. 30% of Boston areas jobs are in FIRE (Financial, Insurance, and Real Estate), as well as a good portion in retail, and manufacturing. What I cannot figure out is how the Healthcare industry (mostly hospitals in this case since its the biggest employer of the Bosoton area) will be effected by the bigger upcoming spike in unemployment. Either case with the unemployment continuing to rise in the Boston area less people are working thereofore less demand and more supply of homes.
http://www.bostonredevelopmentauthority.org/pdf/ResearchPublications//pdr509.pdf |
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JCK
Joined: 15 Feb 2007
Posts: 559
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| Posted: Mon Mar 02, 2009 7:10 pm GMT Post subject: |
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| JP wrote: | | JCK wrote: | | Overpriced Boston wrote: |
With the stock market under 7000 and still plummeting as we speak the retirements of these older people (working and not working) are being cut by 50% of more. |
I'm no financial planner or expert, but wouldn't most retired people have moved the vast majority of their assets into more conservative investments? I'm sure some retired people are over-invested in stocks, but I imagine that most have their portfolios heavily weighed into fixed income vehicles, annuities, bonds, etc.
Those whose home is paid off and have assets in safe vehicles should not be under much pressure to move, regardless of the economy. |
Another thought that came to mind is there are many many people in these areas who are close to retirement (60 or so) who are not necessarily retired and have not yet moved a large portion of their retirement into more secure holdings. If this is hte case some of these people have taken a big hit and may not NEED to sell but may feel as though they would be better off having liquid funds available or to possibly reinvest in this much lower market. Just another thought. |
Good point. That's the thing with these speculations; it really comes down to the relative numbers in each group. I have no idea what the numbers actually are. If there are, as you suggest, a lot of 55-65 non-retirees with significant stock holdings and a big mortgage, they may be forced to sell in order to retire comfortably..
But absent hard numbers, it's pretty tough to know how this shakes down. |
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JCK
Joined: 15 Feb 2007
Posts: 559
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| Posted: Mon Mar 02, 2009 7:13 pm GMT Post subject: Re: Boston RE prices WILL come down |
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| JP wrote: | If you think the prices in the Boston area are not set up to take a big drop read here. 30% of Boston areas jobs are in FIRE (Financial, Insurance, and Real Estate), as well as a good portion in retail, and manufacturing. What I cannot figure out is how the Healthcare industry (mostly hospitals in this case since its the biggest employer of the Bosoton area) will be effected by the bigger upcoming spike in unemployment. Either case with the unemployment continuing to rise in the Boston area less people are working thereofore less demand and more supply of homes.
http://www.bostonredevelopmentauthority.org/pdf/ResearchPublications//pdr509.pdf |
Unless I'm reading it wrong, that document only focuses on the largest private employers, not total employment. These "largest private employers" make 21% of the private sector jobs in the city. |
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melonrightcoast
Joined: 22 Feb 2009
Posts: 236
Location: metrowest
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| Posted: Mon Mar 02, 2009 7:17 pm GMT Post subject: Re: Rent vs Purchase Home |
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| JP wrote: | | I am in the process of moving to Boston area from Philadlelphia. I was shocked to see how insane the prices are in this area for some homes that are basically a POS (a little exageration here) in areas such as Lexingon, Newton, Cambridge, and other places with top school districts. My wife and I have a household income of around $275K a year and could probably afford a decent home in one of these areas but we refuse to pay the asking prices of the home owners/builders. My anaology is why would anyone pay $25 for a Hersheys chocolate bar just becasue everyone else on your block is when it is only worth .65??? I just don't understand this mentality. |
Did you also make $275K/yr in Philadelphia?
You, me, and many, many other people are continuously shocked by how much people are willing to pay for housing here in Boston. I like your Hershey bar analogy ... it could be used for other things in our society purchased with credit, too (college, cars, vacations...).
Renting is always a good idea when moving to a new area, but I wouldn't hold your breath while waiting for Philadelphia housing costs in Boston simply because too many people are willing and able to pay more. Hopefully I'm wrong and we'll be able to afford a house soon, but I'm skeptical it'll happen in the next year. We'll see, though. We'll see soon enough.
_________________
melonrightcoast ... are you? |
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Guest
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| Posted: Mon Mar 02, 2009 8:22 pm GMT Post subject: Re: Boston RE prices WILL come down |
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| JCK wrote: | | JP wrote: | If you think the prices in the Boston area are not set up to take a big drop read here. 30% of Boston areas jobs are in FIRE (Financial, Insurance, and Real Estate), as well as a good portion in retail, and manufacturing. What I cannot figure out is how the Healthcare industry (mostly hospitals in this case since its the biggest employer of the Bosoton area) will be effected by the bigger upcoming spike in unemployment. Either case with the unemployment continuing to rise in the Boston area less people are working thereofore less demand and more supply of homes.
http://www.bostonredevelopmentauthority.org/pdf/ResearchPublications//pdr509.pdf |
Unless I'm reading it wrong, that document only focuses on the largest private employers, not total employment. These "largest private employers" make 21% of the private sector jobs in the city. |
Good catch. I need to do some more research to figure this thing out then. Once I find it I will pos the link. I think this will be only one good piece of info to try to predict where this RE market is heading. |
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Guest
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| Posted: Mon Mar 02, 2009 10:13 pm GMT Post subject: Re: Rent vs Purchase Home |
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| melonrightcoast wrote: | | JP wrote: | | I am in the process of moving to Boston area from Philadlelphia. I was shocked to see how insane the prices are in this area for some homes that are basically a POS (a little exageration here) in areas such as Lexingon, Newton, Cambridge, and other places with top school districts. My wife and I have a household income of around $275K a year and could probably afford a decent home in one of these areas but we refuse to pay the asking prices of the home owners/builders. My anaology is why would anyone pay $25 for a Hersheys chocolate bar just becasue everyone else on your block is when it is only worth .65??? I just don't understand this mentality. |
Did you also make $275K/yr in Philadelphia?
You, me, and many, many other people are continuously shocked by how much people are willing to pay for housing here in Boston. I like your Hershey bar analogy ... it could be used for other things in our society purchased with credit, too (college, cars, vacations...).
Renting is always a good idea when moving to a new area, but I wouldn't hold your breath while waiting for Philadelphia housing costs in Boston simply because too many people are willing and able to pay more. Hopefully I'm wrong and we'll be able to afford a house soon, but I'm skeptical it'll happen in the next year. We'll see, though. We'll see soon enough. |
We made a bit less in Philly than we will in Boston. Even with the increase I am still not willing to pay these crazy home prices. I will rent for a few years until my job or my wifes job take us back to Philly. I don't need to show off my home or the city of my mailing address to impress people. I guess that's part of the attraction around Boston and other areas with the crazy asking prices.
It's funny how Obama calls people who make 250K "rich" or "wealthy" I can tell you I am far from driving around in Mercedes or high end BMWs, living in a million dollar home, going out an eating at fine dining establishments on a consistent basis. In fact, Applebees, and Boston Market and Pizzeria Uno are places we frequenst the most. I drive a company owned Ford Explorer and my wife drives a S40 (lowest end model availalbe) Volvo. We do have an investment property but other than that we live fairly modestly and comfortably. We save a good amount every month but again we are hardly living the high life and rolling in the dough here. I am very very confident the home prices of builders and home owners will be taking a dive in late fall 2009. |
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BelmontRenter
Joined: 29 Dec 2008
Posts: 52
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| Posted: Mon Mar 02, 2009 10:40 pm GMT Post subject: |
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| Overpriced Boston wrote: | I think you may bein complete denile if you think older people (working and currently retired) will not be forced or feel the need to sell thier homes in this crashing stock market as well as having unemployment spiking the way it is. One cannot go to the grocery store and buy groceries, pay for their medical bills, or live the comfortable lifestlye by paying for these things with the equity they have in their homes.
With the stock market under 7000 and still plummeting as we speak the retirements of these older people (working and not working) are being cut by 50% of more. In addition the decrrease in comsumer confidence and increase in unemployment thus far make the demand for these homes to go down further and further. There is a direct correlation between increase in unemployment decrease in the stock market and decreasing home prices. These are historical facts. As these two measurement parametrs change the market in almost all places wll change. Read this post in Fall 2009 and see how right I am. Those areas that have been largely unaffected by the bubble will start to feel a lot of pain. That's without any increase in mortgage rates. If mortgge rates go up by even .5% this will significantly increase the drop of home values in this area. Again, come Fall 2009 you will find most of this to be true. |
I hope it's true, as I've been in the market for 6+ months, and as I've been posting here from time to time, there are a dearth of properly-priced sfh's in the "resilient" towns. I'm holding out with the homes that your prediction comes true, but I submit that up 'til now it hasn't. I guess we'll know when it happens as a bunch of reasonably-priced sfh's will come on the market, right? I'll be watching . . . |
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JCK
Joined: 15 Feb 2007
Posts: 559
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| Posted: Mon Mar 02, 2009 10:52 pm GMT Post subject: |
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| BelmontRenter wrote: |
I hope it's true, as I've been in the market for 6+ months, and as I've been posting here from time to time, there are a dearth of properly-priced sfh's in the "resilient" towns. I'm holding out with the homes that your prediction comes true, but I submit that up 'til now it hasn't. I guess we'll know when it happens as a bunch of reasonably-priced sfh's will come on the market, right? I'll be watching . . . |
My sense as well too. People have been saying that prices have been too high since about 2003. A subset of those folks have been claiming the entire time since 2003 that lower prices are just around the corner.
The people claiming that prices are/were too high are certainly being vindicated today, but no one seems to have a good handle on the timing of the declines.
That's not to say prices won't be significantly lower in six months; I just wouldn't count on that being the case. |
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