bostonbubble.com

Kaidran · Joined: 17 Mar 2010 Posts: 289

I have been reading this site for about a year and have been looking at the Boston area for the past 3 years. I and early 30s, have have one salary income and 2 kids and enough income for a large downpayment (20%+) and to live off for 2 years if TSHTF. I rent now and would like to buy but I am thinking that I should actually just keep saving until I can buy something outright and bypass the entire mortgage process. I live very frugally and can save about 25-30k/year. I think prices are still on the way down but the Boston market just seems crazy in general so I have no idea how much or if it will be in my timeframe. It would be about 5-10 years before I could buy anything in a mid-range town (eg Melrose) at todays prices.

With such crappy interest rates for savings is there a way to measure the value of being so risk averse?

When I think of buying I think of the "bigger idiot" principle which has been mentioned before. I think I could handle being the last idiot if it was my money but being beholden to the bank if anything happened just seems like a miserable existence.

Renting in Mass · Posted: Wed Mar 17, 2010 1:27 pm GMT Post subject:

I don't think it's too extreme. I'd be thinking along the same lines if it wasn't for the fact that my wife would leave me if I told her I wanted to wait another 5 or 10 years Wink

If you've got the patience and the ability to save that much, I don't think it's a bad idea. I think that (at best) prices are going to move sideways over that time frame.

The one wildcard that could burn you is inflation. If we get really high inflation, you'd be better off taking on some debt rather than watching the value of your savings disappear.

I don't think there's much downside risk to watching and waiting while you save a bunch of money every year. There's still plenty of downside risk to buying now.

Renting in Mass · Posted: Wed Mar 17, 2010 1:30 pm GMT Post subject:

Boston ITer · Joined: 11 Jan 2010 Posts: 269

Boston ITer · Joined: 11 Jan 2010 Posts: 269

Chee · Guest

Kaidran, It is not extreme thinking at all!
My husband and I are in exactly the same situation as you and worry about the same thing.

We bought some gold/platinum 3 years ago and adding a little every month, so far, it is a success.
We have some saving in yen, which is also 30% worth more against dollar than 3 years ago.
We have a little in I-bonds bought while ago, when the rate wasn't that bad.

But we still discuss:
If we don't buy a house when we have 2 kids, when will we even need a house?
But the home price and quality in MA just doesn't make sense!
Are they ever going to be cheaper?
Looks like every people like us want to live in the same town and those towns only have 2 decent houses! Where are those foreclosed homes??

Then, I found that there are so many houses in 90+days over due and not yet in foreclosure process.
here is the Mass Housing Partnership's report:
http://www.mhp.net/vision/resources.php?page_function=detail&resource_id=380

I believe there is more risk to buy a house now than inflation.

I think when the home price is affordable enough, the inflation can motivate people to take debt and might pushes the home price to go up.
But now, most people can't afford the higher interest rate. So, I doubt the home prices are going to suddenly shoot up even in inflation. I think that people saved money will win anyways.

balor123 · Joined: 08 Mar 2008 Posts: 1204

Boston ITer · Joined: 11 Jan 2010 Posts: 269

GenXer · Joined: 20 Feb 2009 Posts: 703

One more vote for homeschooling. Why mortgage your retirement? That's what people are doing in effect. This leads to paying for ivy league schools. Downward slope, if you ask me. More responsibility, for sure. But then you can live on one income.

Renting in Mass · Posted: Wed Mar 17, 2010 3:16 pm GMT Post subject:

Doesn't inflation lead to dollar devaluation by definition?

I agree that we aren't in an inflationary environment right now. I'm saying there's a risk that we will be over the next 10 years.

I agree that housing prices and mortgage rates wouldn't immediately shoot up. I'm talking about the general trend over the course of the next decade. If two years from now, I thought that inflation would be running at 10% for the next eight years, I'd be much more willing to move my cash into a mortgage, even if I thought prices were still high.

As far as the government buying all of the mortgages, I believe that can't continue forever. The FHA's cash reserve numbers are getting pretty dire. Sure, they could print more dollars to buy more mortgages, but that leads back into my inflation worry.

Renting in Mass · Posted: Wed Mar 17, 2010 3:18 pm GMT Post subject:

I really want to homeschool my daughter when the time comes. I haven't figured out how that's going to work with me and my wife working full time though...

Renting in Mass · Posted: Wed Mar 17, 2010 3:51 pm GMT Post subject:

Recent evidence that inflation isn't a problem in the short term.

In my opinion, this just strengthens the case for waiting and saving. I think it also means that interest rates aren't going to rise very much even after the Fed stops buying MBS at the end of the month.

Kaidran · Joined: 17 Mar 2010 Posts: 289

Thanks for the advice. The recent storms really made me glad not to own.

Are schools here really that bad? I am originally from England. When I think back to being 16-18 I cannot imagine being able to teach unfamiliar subjects at that level. You would need an actual subject expert. I have a PhD in Chemistry so I could manage that and probably handle Physics and Biology without much difficulty but I'd struggle with math, let alone English in England. Are the standards so much lower that you can teach without the exert knowledge, or do the college credit courses actually come with college teachers?

I've wondered about the social aspect of schools. My daughters are both very bright so I have no worries about their ability, so I wondered about staying in Watertown, at least in the early years so they might learn how to stand up for themselves with other children. Both are pre kindergarten age at the moment.

GenXer · Joined: 20 Feb 2009 Posts: 703

Watertown...good luck as far as schools. Its a can of worms, actually. Some people swear by certain schools. Having been to local schools, all i can say is, if your kid is a self-starter and goal-oriented, maybe they'll do well regardless of where they will go. This is not true for most kids. Homeschooling is a way to teach your kids the values you want and the life skills, not just the subjects. They can be lightyears ahead of the other kids. Homeschoolers do better on average than public school kids, and most do quite well in college.

As far as teaching stuff, do you really think kids learn that much in school? I went through middle/high school and I didn't learn much English from the teachers. Most of what I've learned happened on my own, and whatever i did learn can easily be taught to your kids. As long as they love to read - that is the most important lesson of all. You don't need to be a teacher to teach. Every kid is different, and every kid learns their own way - no teacher can match what the parnets can do for their kids. I bet most parents have enough education to teach better than most teachers at school. But if you are interested, here's a link for you:

http://www.ahem.info/index.htm

We haven't started this yet, but we have made up our mind.

Boston ITer · Joined: 11 Jan 2010 Posts: 269

Well, as far as one's kids being *normal*, I think attending elementary to Jr high is somewhat important but not so much from the stance of actual educational material but more from the socialization p.o.v. There's also the Girls Scouts which is really good for group related activities and basic teamwork. For that, you don't really need to venture out of town, provided that the kids there are at least somewhat 'nice' and you don't have a type of gang culture, in the early years of a child's development.

Unlike let's say a decade ago, there are lots of tools to help your children learn different subjects. See below for Math...

http://www.mathtutordvd.com/products/item7.cfm

And even for English Composition, there are online offerings w/ feedback system...

http://www.straighterline.com/courses/descriptions/developmental-writing/syllabus/

The point that I'm getting at here is that your child may learn more from these type of outside offerings than the actual material offered in class. The class is more designed to enforce attendance rules, fitting in, and basic respect for authority. Unfortunately, given that many of us, on this forum, are somewhat anti-teachers' union, I don't think it's an acceptable practice for one's child to kow-tow to a person, who isn't committed to helping one actually learn. I agree that we all kow-tow to our bosses but at least they pay us for our work. In our kids' situation, it's more a state of learned helplessness.