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For those who say this isn't going to happen to them...
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GenXer



Joined: 20 Feb 2009
Posts: 703

PostPosted: Fri Nov 13, 2009 5:45 pm GMT    Post subject: For those who say this isn't going to happen to them... Reply with quote

Read this:

http://finance.yahoo.com/career-work/article/108129/life-on-severance-comfort-then-crisis.html?mod=career-salary_negotiation

Everybody needs a dose of reality. Everybody is 'fine' right now, with 2 people working, yadda yadda. What happens if the largest earner/both earners are unemployed at the same time, and CANT FIND A JOB?

Very much possible. Happening all over the country to the same people who thought it would never happen to them.
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admin
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Joined: 14 Jul 2005
Posts: 1823
Location: Greater Boston

PostPosted: Fri Nov 13, 2009 5:52 pm GMT    Post subject: Reply with quote

Yeah, this is why I'm baffled by the question of who is buying in "immune" towns. At the prices given, not only do you need the high income(*), but you also need that income to be stable. I cannot think of any profession that is secure.

- admin

(*) Assuming a normal down payment. Obviously, the more you pay in cash, the less future income you need.
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john p



Joined: 10 Mar 2006
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PostPosted: Fri Nov 13, 2009 5:55 pm GMT    Post subject: Reply with quote

Add to that, the fact that most recent home buyers NEEDED two incomes to cover the nut.

Do you think that this new money will "trickle down"?
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GenXer



Joined: 20 Feb 2009
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PostPosted: Fri Nov 13, 2009 6:12 pm GMT    Post subject: Reply with quote

I think these people are gambling, as simple as that. They simply don't realize that until it hits them like a freight train. Then they dump, and the next in line tries to pick up where they left off. So yeah, this can last forever, until such time when there won't be anybody to pick it up anymore. So in this game of musical chairs, the last one in can still lose a lot (that is why anybody who's now buying houses with the expectation of having the same income several years into the future is a gambler).
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john p



Joined: 10 Mar 2006
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PostPosted: Fri Nov 13, 2009 7:45 pm GMT    Post subject: Reply with quote

To give you some context, I know a bunch of people that bought during the bubble because it was my generation that was in the crosshairs (at the peak buying age) when it hit.

The prevailing thinking during the time was that people didn't want to "put their life on hold". They also said the same thing about having children and often times would say that "God has ways of making things work out..." There was a lot of "If it was meant to be it was meant to be..."

Now, although I am spiritual, I think we need to take active steps to be responsible. I pray, but I think it is kind of an imposition to be reckless and then ask God for a "Bailout". I kind of saw Obama as believing in the tooth fairy and that sort of thinking was what caused people to be easy prey.
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JCK



Joined: 15 Feb 2007
Posts: 559

PostPosted: Fri Nov 13, 2009 8:00 pm GMT    Post subject: Reply with quote

admin wrote:
Yeah, this is why I'm baffled by the question of who is buying in "immune" towns. At the prices given, not only do you need the high income(*), but you also need that income to be stable. I cannot think of any profession that is secure.

- admin

(*) Assuming a normal down payment. Obviously, the more you pay in cash, the less future income you need.


I think you answered your own question; they're not first time buyers.
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admin
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PostPosted: Fri Nov 13, 2009 8:24 pm GMT    Post subject: Reply with quote

JCK wrote:

I think you answered your own question; they're not first time buyers.


That sounds plausible, I wish there were a simple way to find out the typical down payment by zip code. I still have my doubts, though. Many of these towns have "good schools" as a strong selling point, and that implies younger families, which in turn implies a lower likelihood of high equity from a previous home.

- admin
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JCK



Joined: 15 Feb 2007
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PostPosted: Fri Nov 13, 2009 9:02 pm GMT    Post subject: Reply with quote

Might be worth poking around the registry of deeds to see the mortgages that people take out when they buy places that you consider in your target range.

If I had to guess, the "profile buyer" for the $650k-$1000k properties in Newton is someone like who bought in the 1998-2002 range and has significant equity from appreciation. If you bought later than that (or not at all) you're basically priced out of that market, unless your income is very high, or you have substantial savings.

This example is just one person, but I think it's illustrative. A co worker of mine bought a Cambridge condo in 1998. Sold in 2003 or so with about $250k in gains, and was able to swing a nearly $1m place in Lexington, with only about a $500k mortgage (based on the registry of deeds).

Now granted, they timed everything perfectly and must have been saving aggressively in the meantime, but I think you're still in competition with a lot of these types.
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Rental Lease



Joined: 28 Jan 2009
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PostPosted: Wed Dec 09, 2009 2:51 am GMT    Post subject: Reply with quote

It's true, no industry is safe right now, and many people are rushing to buy properties because of the more affordable real estate market, despite their job insecurity.
In some ways I almost feel lucky that I was in the mortgage and real estate industry, so I had my reality check and financial collapse before everyone else did. My income is a lot more stable now, although I don't feel quite as secure in it as I used to.
As for being able to tell what people owe, I believe Massachusetts has property sale dates and sales amounts online as public records. While it doesn't show what they owe, it does show when they bought it and how much they paid, and you can be pretty sure that someone who bought in July 2006 for $500,000 has a hefty mortgage.
Good luck keeping your finances under control,

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balor123



Joined: 08 Mar 2008
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PostPosted: Wed Dec 09, 2009 3:51 am GMT    Post subject: Reply with quote

admin wrote:

That sounds plausible, I wish there were a simple way to find out the typical down payment by zip code. I still have my doubts, though. Many of these towns have "good schools" as a strong selling point, and that implies younger families, which in turn implies a lower likelihood of high equity from a previous home.

- admin


My observation is that people around here don't have kids until they're old enough to need assistance. We had our first a few months ago and everyone thinks we're so young to be having kids (she just turned 30!).
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balor123



Joined: 08 Mar 2008
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PostPosted: Wed Dec 09, 2009 3:54 am GMT    Post subject: Reply with quote

admin wrote:

That sounds plausible, I wish there were a simple way to find out the typical down payment by zip code. I still have my doubts, though. Many of these towns have "good schools" as a strong selling point, and that implies younger families, which in turn implies a lower likelihood of high equity from a previous home.

- admin


You can infer the downpayment from masslandrecords. That's how I know that the prices in Waltham are inflated - most of our competition when we were looking (Spring '0Cool were putting only 5 - 10% down and they don't seem like wealthy people. I would like to see a feed of these details: couple making X bought a house worth Y with downpayment Z.
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admin
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PostPosted: Wed Dec 09, 2009 4:00 am GMT    Post subject: Reply with quote

balor123 wrote:
admin wrote:

That sounds plausible, I wish there were a simple way to find out the typical down payment by zip code. I still have my doubts, though. Many of these towns have "good schools" as a strong selling point, and that implies younger families, which in turn implies a lower likelihood of high equity from a previous home.


You can infer the downpayment from masslandrecords.


Right, you can do that for an individual property, but it would be a tad tedious to come up with a median or average, which is what I had in mind. Maybe a bit of programming would help, though I have my doubts about that being a simple task.

- admin
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melonrightcoast



Joined: 22 Feb 2009
Posts: 236
Location: metrowest

PostPosted: Wed Dec 09, 2009 1:07 pm GMT    Post subject: Reply with quote

Quote:
My observation is that people around here don't have kids until they're old enough to need assistance. We had our first a few months ago and everyone thinks we're so young to be having kids (she just turned 30!).


Congrats balor! Hope all is well with your new little one. I had the same experience when I had my first at 31. I was always the youngest mom by at least a few years at all the playgroups/library. I think this is partly driven by the fact that MA makes it mandatory for insurance companies to cover IVF treatment, so many families here don't even bother trying to have kids until they are in their mid thirties. I know too many women who were surprised that it took them a while to get pregnant at 35, then had to do IVF for their second child, some successfully, some not. Well, they shouldn't be surprised, as the science and data show that it is much more difficult to get pregnant after 35, and that is a major reason why we started our family when we did.

Anyway, to continue my completely off-topic rant, whenever I read articles about how expensive the MA mandatory insurance is, I am completely blown away that the IVF coverage hardly ever comes up. I think it should be the first thing to go so that everyone else can save on their premiums.
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melonrightcoast



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PostPosted: Wed Dec 09, 2009 1:20 pm GMT    Post subject: Reply with quote

Quote:
Right, you can do that for an individual property, but it would be a tad tedious to come up with a median or average, which is what I had in mind. Maybe a bit of programming would help, though I have my doubts about that being a simple task.

- admin


Yes, i think this would be a tad tedious, but if you focused on a certain price range, say $600K-$1M, then it wouldn't be too bad since not that many homes are selling in that price-range anyway. From what I've seen in Acton, a good portion of the properties that sell in that price range have 30%+ down-payments. This was why I was thinking that the bank would ask us to put more than 20% down, which we could have, but would rather have kept the cash. What I wonder is how much money people have left in the bank after they have put $300K down on a house... Razz
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GenXer



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PostPosted: Wed Dec 09, 2009 2:27 pm GMT    Post subject: Reply with quote

Actually, you don't have to wonder. The answer is...zero, or a lot!

We know that wealth distribution is a downward ramp, with less than a fraction of 1% being truly wealthy. Many people don't have that much savings, so unless they got a huge inheritance or are paid astronomical money, they don't have much left. Let me put it this way. Why would somebody who's making a ton of money or who has a lot of money in the bank pick Acton? These are probably families with kids. They don't have a lot of money left after a downpayment like that. Or, the husband or wife can be a CEO of a profitable company, in that case it could be chump change for them. But the probability of that being the case is VERY SMALL! So if I was to bet, I'd put a bet with 95% confidence on that family not having a ton of resources left after a 300k+ downpayment. Being cash-flow rich (i.e. somebody making $250k+) and asset poor (excluding the house) is more a norm than an exception, but that does not make one rich! Having real assets makes one rich. And families with kids are much less likely to retain cash after an expensive house purchase than a pair of older professionals without kids (who would probably not buy in Acton anyway). Young professionals nowadays have so much debt that unless they land those $400k a year jobs, they would be asset poor for a long time.
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