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Month over month, it is up in two months in a row in Boston
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balor123



Joined: 08 Mar 2008
Posts: 1204

PostPosted: Thu Jul 31, 2008 5:13 pm GMT    Post subject: Reply with quote

Speaking of desirable places to live, did you all notice that CNN lists Waltham as a top100?
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manuvaram
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PostPosted: Fri Aug 01, 2008 3:26 pm GMT    Post subject: two housing markets in one Reply with quote

I should clarify some of the quick comments I left here a few days ago. I agree that the increase in median price is because of a change in the mix of what is selling. Also agree that there would be very few 7 figure earners in any single town.

What I wanted to say was that there are two very differently behaving housing markets right now. Higher priced market is selling just fine while the mid and low tiers are suffering. A good test case is Wayland. Compared to Weston, Wellesley, Newton, Wayland is much more uniform and upper-middle class. Wayland's data therefore reflects the ongoings in the mid-tier market and you can clearly see that the prices are down by a good amount. Newton on the other hand, has seen very little adjustment. Sure stupidly priced homes have come down in price - but if you see the sold homes - the gap between list and sold prices is not spectacular for most places i.e. people are getting very close to the price they ask for.

I believe I saw a very similar report about New York too where prices for high-end condos are up YOY.

Finally - the point is that the well-paying jobs are around and don't appear to be going away. Increasing unemployment appears to be a result of jobs going overseas or companies cutting down in mid-low tiers due to productivity gains. Unless something changes on this front, we will continue to see this kind of disparity.

I am a pretty strong believer in capitalism but the reality of today has to make any humane person feel bad for the poor people in this country.
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JCK



Joined: 15 Feb 2007
Posts: 559

PostPosted: Fri Aug 01, 2008 4:46 pm GMT    Post subject: Reply with quote

I think there is some truth to this. I think some of the "status" towns (e.g., Wellesley and Weston) may be generally overpriced due to status vs. Wayland, for example.

That doesn't mean prices can't or won't come down in these towns (or that they're "immune" or not overpriced), it just means that different forces are at work. What's driving the market in the $350-500k range may not be same forces in the $700k-$1.2m range...

I imagine the groups of people looking in these two ranges are pretty much a non-overlapping set.

There are other factors as well; baby boomers who bought 30 years ago and have accumulated equity vs. people starting out. If I'm 65 years old, retired, but have a $1m home with the mortgage paid off, I can outbid you, even if you make $200k a year, and my now income is fairly modest.

Looking at median income:price ratios won't necessarily help you in these towns...
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PitchPole
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PostPosted: Sat Aug 02, 2008 12:23 am GMT    Post subject: Unemployment bites... Reply with quote

Let's see how many of those seven figure finance jobs are around in a year or so after the off balance sheet garbage comes back onto the books. High end isn't immune.

Pitch
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manuvaram
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PostPosted: Sat Aug 02, 2008 1:41 am GMT    Post subject: Job market Reply with quote

If you look at the S&P earnings. So far the impact of recession has not been felt outside the banks. In fact, this is a good time to buy banks. The write offs are killing them but their core operations are quite profitable. A dip in US consumption is being made up for by exports. Have any of you been to NYC this summer? It is chock-full of European tourists. More than I've ever seen in the past.

What we are viewing is a re-balancing of a variety of factors. The trend is pushing home prices down but you have to admit that the pace is not very dramatic in several high-end Boston suburbs.
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samz



Joined: 19 Feb 2008
Posts: 102
Location: Medford, MA

PostPosted: Tue Aug 05, 2008 3:58 pm GMT    Post subject: Reply with quote

JCK wrote:

...
I imagine the groups of people looking in these two ranges are pretty much a non-overlapping set.

There are other factors as well; baby boomers who bought 30 years ago and have accumulated equity vs. people starting out. If I'm 65 years old, retired, but have a $1m home with the mortgage paid off, I can outbid you, even if you make $200k a year, and my now income is fairly modest.

Looking at median income:price ratios won't necessarily help you in these towns...


I think this is a really excellent point -- we often talk about affordability as if everyone is a first-time home buyer.

The only caveat is that someone has to buy the baby-boomer's $1m home in order for that dynamic to take effect.

I saw an interesting variant of this situation recently at an open house. A 40-something man was looking to buy the house, which was out of his price range (around $490K -- *way* overpriced, IMHO). In order to buy it he had his *mom* there to give him a big chunk of money.
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JCK



Joined: 15 Feb 2007
Posts: 559

PostPosted: Wed Aug 06, 2008 7:23 pm GMT    Post subject: Reply with quote

[quote="samz"]
JCK wrote:


The only caveat is that someone has to buy the baby-boomer's $1m home in order for that dynamic to take effect.


It can be bought by a kid whose parents just sold their $1m home in Newton and bought themselves a Florida condo for $400k for retirement...

I think we need to look at wealth, in addition to income, when looking at housing prices, especially in the "higher end" towns. I don't think income is whole story here.
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RealEstateEconomist
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PostPosted: Thu Aug 07, 2008 6:06 pm GMT    Post subject: Home value to income tool Reply with quote

Historically, home prices have been 2-4 times local income levels. This ratio makes sense when you realize that in normal times, sensible lenders will only allow a borrower to use a maximum of 28% of their income for mortgage payments and associated expenses. During the boom this ratio went up to 10 to 1 in some areas. People were using all the purchasing power a lender would loan them, even if it meant using a negative amortizing loan to get in on the boom.

Now that lending standards have tightened, prices are being pushed down back to their historical ratio. What happens to prices? It depends on the area and how much it bubbled up. There is a nifty tool at www.UsHousingMeltdown.org where you can type in your zip-code and see the historical income to home price ratio and what happens prices when we return to the normal ratios. Look for the Home Price Ceiling fundamental. If an area went up to 8 to 1 and the historical norm is 4 to 1, you can expect prices to correct about 50%.
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JCK



Joined: 15 Feb 2007
Posts: 559

PostPosted: Fri Aug 08, 2008 10:04 pm GMT    Post subject: Reply with quote

I agree that home prices can't be completely out of whack with incomes forever. And that website is great, BTW.

But I think income:price ratio is simply only part of the picture. I think focusing on rental rates (as admin suggested on the other thread) is a good starting point.

I just think there are a lot of people who've lived in their homes for 50 years, retired and thus don't have a lot of income, but have a very valuable house. Price:Income is relevant for first time buyers, but not so much for people who have owned for many years with substantial equity. So we should factor wealth, in addition to income, into the equation.

Again, I'm not suggesting that home prices in, say, Newton aren't due for a correction. I just think that people holding back until Price:Income drops to their magic number may be waiting a looooooooooong time.
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