bostonbubble.com

fred · Joined: 07 Jun 2009 Posts: 7

Hey guys, I'm new to the forum. I peruse it on occasion to see what others are thinking about the Boston housing market. Now, if I may ask my question: what are sellers thinking? Are these prices sustainable? Am I insane, or are they?

Check out this place:

http://www.redfin.com/MA/Newton/21-Boylston-Rd-02461/home/11449392

A 2 bed 1 bath 1100 SF on a busy street, for $600K! What!?! Zillow estimate ranges from 377-464K (no WAY I would pay $377K for this POS).

GenXer · Joined: 20 Feb 2009 Posts: 703

They watched too much reality TV shows, and they believe that if there is 'appeal', then even the worst shack could sell for a lot if it is dressed up nicely. But then again, it is spring madness, and totally crazy parents buy houses believing that they are doing this for their kids...

Didn't you know, this is a 'starter home' given Newton's prices. Realtors would like you to buy one, just so that you sell it when you (inevitably) have kids. Most people who buy houses can't do even the most basic math. My rent is 1700 a month, utilities are about 70 a month for a 2b/2b condo in Newton with 1160 sf in a decent neighborhood. A few hundred more can get you a luxury condo in a new construction. Go figure.

Also, a lot of 'new' houses just came on the market, and sellers are told by the media and the government that the recession is over, which means prices are back to normal (whatever that means). So, there may be a couple of buyers crazy enough to believe this. Give it a year or two, we'll see what happens when unemployment rate hits 15% and the interest rates spike.

renterstill · Guest

They are so underwater. Bought the place in 2006 and trying to recoup as much as they can.
I have been watching Arlington, Winchester market. Early spring SOME pretty nice places were listed at $210-220/sqf. We even went to a few open houses. Lately though the listings for SFH are over $300/sqf. This is probably a knee-jerk reaction to all the "good news" from NAR that sales have picked up. Oh, and people also panic because they want to lock in at a still low interest rate, so they hurry and act irrationally on the herd instinct.
I was amazed at some open houses how poorly informed some first time buyers are. They would ask a realtor: what is a short sale (sic!), if they can do HELOC, how much down should they put etc.. This is the largest financial decision of their life and they ask a person, who inherently has a conflict of interest with, how they should spend their hard-earnead $$$$.

BTW, despite of all the conomic doom and gloom, recession, defaults, amount of debts I really do not see this looking around: same highway traffic on weekends, same insane overflowing parking in malls (the parking lot in Burlington mall was absolutely full), same waiting time at the restaurants etc.

Teavo · Guest

balor123 · Joined: 08 Mar 2008 Posts: 1204

No it's just that a significant percentage of MA residents are employed (well) by the government. What remains are unions (GM plant was saved!) and businesses that feed off these.

GenXer · Joined: 20 Feb 2009 Posts: 703

The taxes can only go up so much before people do something about it. For the next couple of years, MA will post an enormous deficit, and we'll see how the government reacts. Without severe cuts, there is no way they can keep this up. The printing press controlled by the teleprompter will not help them.

john p · Joined: 10 Mar 2006 Posts: 1820

My wife and I were at the Burlington Mall on Thursday night. I was at a wake earlier and had a friend drop me off to meet her there. We experienced the same thing you said, it was about 8:45 and the place was full. That Cheesecake Factory was packed. I thought it was Christmas season.

My guess is that 9-10 percent of people are out of work and it is typically like what, 4-5%? Anyway, for the rest of the 95%, they are getting some great deals because the sales on stuff are great. I also think that there is a basal metabolic rate for consumption of goods and when you have eight or nine months of pent up demand, any signs of good news will open the valve for certain types of spending. We were getting a wedding shower gift for a cousin...

I mean everyone needs work clothes, many need the seasonal change of winter stuff to summer stuff so people are putting the ski jacket in the storage bins and getting their drawers filled with the lighter stuff.

Also, on our way home from a family visit on Sunday, I kind of had this desire to go out for dinner. I mean my wife and I work a lot and we used to go out once or twice on a weekend and it was sort of a reward for a productive week. I think the people who are working are having to work harder because they don't have the full staff they're used to so people are a little fatigued and if they're not at home when they're hungry, a lot of time they just decide to eat out and that they just don't have the energy to prepare dinner and they want their unwind time to just unwind because they're spent.

Did anyone see that program last night with all the CEO's talking about their take on the economy? They had Jack Welch, the CEO from BlackRock, etc. They were saying what a lot of us are saying which is that they need to get some security with the Government and some basic expectations about what the rules are going to be. They are unsure if the government is going to change the whole capital structure regulations on them, which will send them scrambling to buy and sell stuff to meet the new allocations etc. The metamorphic nature of our economy is adding quite a bit of risk.

Hard Rain · Guest

"A 2 bed 1 bath 1100 SF on a busy street, for $600K! What!?! Zillow estimate ranges from 377-464K (no WAY I would pay $377K for this POS)."

Ahh Newton, one of the most frequently mentioned "immune" towns. I follow Newton closely, it's taking an absolute beating. As of today there are 129 properties priced at one million or more, in May there were only four sales over a million...

The good news for Newton sellers is there was a sale today, although only one. Now the bad news, the seller received 60,000,00 less than they paid in 2005....

46 Court st.

balor123 · Joined: 08 Mar 2008 Posts: 1204

It's actually not on rt 9 just has the same name if you look at the map. I would value this, based on ridiculous Boston guerrilla math, at around $300k - $350k today based on comparables, not that I would pay that much.

fred · Joined: 07 Jun 2009 Posts: 7

BelmontRenter · Joined: 29 Dec 2008 Posts: 52

JCK · Joined: 15 Feb 2007 Posts: 559

balor123 · Joined: 08 Mar 2008 Posts: 1204

Makes you wonder if we let the big banks fail gracefully if we really would have had Armegeddon...

Hard Rain · Guest

GenXer · Joined: 20 Feb 2009 Posts: 703

Without examples of the 'doomsday' scenarios, the discussion is pointless. I do not pretend to be able to predict anything, hence I don't take anybody else's predictions too seriously. While I do have certain expectations of what may happen, the reality usually turns out to be different (otherwise we would have had a number of people who could consistently predict the future, whereas in reality, every time it seems a different person got this and that by pure lucky guess, and even possibly a lucky streak of guesses, which seem to fizzle after a while).

So, what makes you discount one scenario in favor of another? In my book, all scenarios are more or less likely, and the 'doomsday' one is just as likely as the 'rosy' one. You wait long enough and we'll see a large spectrum of possibilities unravel before us. It takes a good degree of arrogance to say that this is more likely than that. Based on what analysis? Circumstantial evidence? House prices going up because sellers in Newton all of a sudden put their houses up for sale while asking 2006 prices? I think it is silly to even discuss this 'evidence', which is more like confirmation bias than anything else.

The housing index is not a predictive tool, and not a single economic 'indicator' is a predictive tool, but in aggregate, the evidence points to a possibility of a larger housing downturn. This is not a prediction and we can not assign a probability to this statement, but it is a likely scenario, just as it is likely that all of a sudden everything goes back to 'normal' tomorrow. In which case, expect another housing crash in a few years, and another downturn or a recession. Do you see the fallacy? Many people simply think that this is a once in a lifetime event, while this is simply one OF many possible future events which may bankrupt a large number of people who are careless enough to start 'projecting' linarly into the future without realizing that nothing is linear or predictable, especially far into the future (i.e. years ahead).

The question you have to ask yourself is this. Under which scenario do you stand to lose a lot of money? The answer is, under a realistic 'doomsday' scenario. Loss of job, relocation to another job, huge health expenses, housing prices going down, what have you. Hence, if you plan for one or several such scenarios, you will be better of than somebody who simply goes on like nothing happened (or can happen). I'm sure many of those whose houses were foreclosed will continue doing exactly the same thing given another chance. People are just like that. Why have life and health and car insurance? You are fine now, so why need it? Do not ignore risk selectively. This can be bad for your finances.