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news
Joined: 14 Jul 2007
Posts: 0
Location: Greater Boston
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balor123
Joined: 08 Mar 2008
Posts: 1204
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 Posted: Sat Feb 06, 2010 1:11 am GMT Post subject: |
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| How do they define home equity? Balance paid off mortgage or difference between home value and remaining mortgage balance? If the latter, which I suspect it is, then I'm guessing this means that people in this state just didn't cash out their gains over the last few years, which explains why home values haven't plummeted. |
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JCK
Joined: 15 Feb 2007
Posts: 559
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| Posted: Sat Feb 06, 2010 6:25 pm GMT Post subject: |
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I'm pretty sure equity is calculated as follows:
Home value - Mortgage balance = Equity.
My recollection is that there are a relatively large number of people in MA with no mortgage, and relatively few who used the option ARM loans so popular in CA, AZ, NV, and FL. |
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balor123
Joined: 08 Mar 2008
Posts: 1204
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| Posted: Sun Feb 07, 2010 7:00 am GMT Post subject: |
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| Just a large number of people taking out 30 yr mortgages at 7x income then and/or a large number of bought pre-bubble? |
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CL
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| Posted: Mon Feb 08, 2010 3:51 pm GMT Post subject: |
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My guess is a combination
#1 - A lot of people/families does not have/have very low mortgage balance to begin with
#2 - There is a big professor/doctor community in Boston compared to other metro cities, which is defensive in nature. You can compare the top 100 employer to see that. Thus you have less 20mil+ mansion compared to Los Angeles since we have less super rich, but you have a tier of 1-3mil house supported by tenured/protected income stream of 250K+ every year.
#3 - Does not have the widespread increase volume in new construction compared to CA/FL, thus 1) supply remains constrained to support prices/equity, and 2) the housing stock vintage is tilted towards older houses/older ownership, with more equity.
In short, Boston as a housing market is a much milder (low beta) market than say LA. People here hold houses for longer, doesn't flip as much as in other states in boomtime, income are better protected, so you don't hit jackpot in housing market like you do in LA/Florida but you avoid a total bust as well, since not a lot of people (at least in neighborhood you want to live in) are forced to sell. It also leads to less market volume, slower price discovery, etc. Generally a more "sticky" market and a longer waiting game.
LA rose 63% from 2003 to peak. BOS rose 18% from 2003 to peak. Both has come down to 2002-2003 price level. |
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balor123
Joined: 08 Mar 2008
Posts: 1204
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| Posted: Mon Feb 08, 2010 9:32 pm GMT Post subject: |
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| CL wrote: |
#2 - There is a big professor/doctor community in Boston compared to other metro cities, which is defensive in nature. You can compare the top 100 employer to see that. Thus you have less 20mil+ mansion compared to Los Angeles since we have less super rich, but you have a tier of 1-3mil house supported by tenured/protected income stream of 250K+ every year.
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I know some professors make $250k/yr but most won't make more than $100k - $150k, and even that would be in select fields. I don't think they're pushing up prices much. I think doctors, lawyers, and finance professionals have a much bigger impact.
| CL wrote: |
People here hold houses for longer, doesn't flip as much as in other states in boomtime, income are better protected, so you don't hit jackpot in housing market like you do in LA/Florida but you avoid a total bust as well, since not a lot of people (at least in neighborhood you want to live in) are forced to sell. It also leads to less market volume, slower price discovery, etc. Generally a more "sticky" market and a longer waiting game.
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I don't think I agree that people hold houses longer here. Take a look at MLS listings of townhouses and 3/4 br houses under $500k in the 128 belt and you'll see that most people hold those places for 2-5 years, with 2 not being as uncommon as you would think it should be even today. I think the big difference is that Bostoners didn't use creative financing to purchase their houses but the margin for new buyers is still higher than ever, resulting in a lot of people trapped in their houses. Being a recourse state, they don't want to move, which constrains supply, and with near the highest unemployment benefits in the nation, people aren't compelled to move. We also have a large supply of recent graduates who seem to be willing to take any piece of junk at any price so long as the bank will approve the loan. A city like Boston will feel a lot of pain when interest rates rise because new buyers won't be able to support the same prices as before combined with the lack of equity growth that existed in the past to support those higher end homes. |
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CL
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| Posted: Tue Feb 09, 2010 1:30 pm GMT Post subject: |
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balor123 - professors do earn a lot, especially those with specialized fields. Tenured income from university is one of the income source, but let's not forget consultings and side projects. And you may also have patents if you are in tech. All those income streams are pretty defensive. I don't think they push up the price, but they do buffer the fall and constrain supply since they typically have no reason to firesale and seldom relocate.
When I say people hold house longer, I mean they are fewer flippers in Boston, those who holds house 1-2 months.
I don't think the housing prices will necessarily fall a lot, due to constrained supply and some rather stable appeal. What I do think is the high prices will start driving people (who are mobile enough to move) away. |
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