bostonbubble.com

[North East Corner]

Heya folks -

First a little background:
For two years I have been carefully watching the the real estate market in Massachusetts as my family has out grown our very small starter home in Lexington and we need to buy up. I thought that would be a natural process, like my fathers before me, and I'd be in good shape to do that, having an above average salary and above average home (small, but in a great town/neighborhood).

Well imagine my shock two years ago to find I was priced out of moving up in the town... and, in fact, using the age old fuddy-duddy rules of salary:mortgage I was priced out of everywhere!! That's when I discovered the irrational bubble and started waiting for the collapse. Sitting on my - comparatively - small mortgage and paying it down I have waited and waited... now I am close to desperation as the kids are older and we are jam packed into my small house which I now hate because we are on top of each other. As my kids are about to go pre-teen it's only gonna get worse

Sorry for the sad tale - but one I think many of you may share or empathize with - and now for my comment and observations about the Mass Bubble.

I have been tracking prices asked and prices sold for in my own spreadsheets as well as collecting summary data from organizations in the towns out along the route 2 corridor. Basically, Lexington out to Acton, with a few towns a little further off the corridor like Sudbury. Towns with good schools, a fairly easy commute into Boston, good local shopping and public facilities. They also tend to be on the wealthier side (avg income and average net worth).

I find that the bubble hasn't burst at all along that corridor. Yes, prices are somewhat down from the peak around summer 2005 (by about 10%) but houses in those towns continue to move (albeit a little slower), inventory is not building up terribly quickly, and the foreclosure rates while higher are insignificant - doubling the NOD rate from two per year to four per year is small number statistics and is too small in number to move any markets.

Not only was there a small correction, much smaller than I expected, but open houses in places like Acton are generally abuzz with people. And in Lexington there really are multiple bids for a few properties - agents told me this and I didn't believe, but confirmed with a few owner sellers back channel

My question is, is this all the correction we are going to see in some towns like Lexington, Acton, Concord, Lincoln and Sudbury and from here on out prices and inventory are pretty much flat to pre-1994 'normal'? Even if some towns in Mass are seeing more severe drops in prices and lots of foreclosures I am beginning to suspect the town I mentioned are pretty much immune from large scale changes. After all, few people in those towns have ARMs, Option ARMs, neg Am, toxic product loans. And they have generally already moved up once or twice and so cashed out during peak times and have little reason to panic. Or even move fro that matter!

On the other hand, my hope (but unsupportable as a theory) is that even in those towns prices may just be very sticky a little longer than the surrounding communities, but will eventually correct more severely if the leaky bubble persists long and deep.

Unfortunately, it is really HARD for me to wait this out anymore in order to buy a house at a reasonable 3-4x salary (no, not looking for a steal.. just don't want to never take a vacation again because I bout a 3 bedroom house!!!)

What do others think about this 'local' affect?

[admin]

[john p]

The Route 2 corridor seems to have a lot going for it. I think the biggest major thing is that they are quiet towns with excellent school systems. They were originally farm towns and were quiet areas with factory towns pretty far away: Lowell, Framingham, what's north hmmm, anyway the quiet, safe place with great schools was a tremendous magnet.

What I always never understood was that if you told someone you lived in Massachusetts and you were then asked where the best place to live; I think many people would be surprised if you didn't tell them it was along the coast.

This is my moon bat segment (a Boston Herald term for you out of towners). I wonder if anyone on the Route 2 corridor even reads the Boston Herald. In all honesty whenever you see an area succeed in something they usually have the fundamental value for whatever it is they are good at. They are wicked well at being wicked smart because they value education. I think that it takes a critical mass and a history of a community valuing something before you start to see results. Then, after time it attracts the right type of people that share those values. When it becomes too expensive it sometimes keeps the right people out. The goal of the ultra rich is to give their children opportunities that they might not deserve. The risk is if they fall flat they could embarrass and ruin the family name, cough Bush, cough, and cough.

So stepping back if someone out of state were to look at a map of Massachusetts wouldn't they be surprised to see that they could get more house in Acton than Lynn, which is much closer to Boston and is right on the ocean.

Some emerging towns like Hopkinton, Medfield, and Harvard have evolved into top tier bedroom communities. I think some of the towns you mentioned are past their prime. Sometimes there is too much of a premium to pay for something. With tomorrow's internet almost anything is possible for our kids. You can figure tons of stuff out by doing some quick research online today; imagine what tomorrow will be like. I think independent learning will be the new thing for our future leaders as it was for some of our past ones like Ben Franklin. Because the information is so accessible now, I think you don't need to pay too much of a premium to be physically next to it. The truth is if you financially bond your children with huge student loans they lose the flexibility to be the independent leader/risk taker that tomorrow's achievers need to be.

Find a place or subject for your kids to inspire and allow the spirit to move them to explore their hearts and minds. Wherever that happens for them will be their home. Although there is a lot of stimulus in the Cities, they are not safe right now. A kid needs to learn street smarts somewhere though. The academia bubble gets you a programmed life that seems to get you right back where you began (in a suburb like where you grew up). The most successful people I know are high energy and are stimulated by what they do (the two feed off each other). The place that fosters this is different for each child. I wouldn't get financially strapped and put your kids in a situation where they have huge student loans. You need both Boston Globe and Boston Herald smaaats. Think about Lynn, the physical location is just part of the equation.

[john p]

The Boston Globe is about opening up your mind. The Boston Herald is about opening up your eyes. If you can't see beyond the Route 2 corridor or the Ivy Leagues you don't have much of an open mind do you?