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Will the Boomers ever sell in Greater Boston?
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MR
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PostPosted: Fri Oct 03, 2014 7:28 pm GMT    Post subject: Will the Boomers ever sell in Greater Boston? Reply with quote

I was in a couple of open houses for SFHs and I noticed a lot of buyers were Baby Boomers themselves. The few younger couples I ran into were Asian. And we all know Massachusetts is a pretty old state with a median age over 42.

Are many Boomers just buying property for their children who are understandably struggling to buy a $500k house on a $70k income? Unfortunately for me and my wife, our Boomer parents are in Arkansas and equity poor, so we're on our own. The small inventory is absolutely crushing our hopes of finding a decent place that doesn't lead to bidding wars. We said to ourselves in 2013, that maybe inventory will pick up and we can find something more of what we want in 2014. Guess what, prices went up 6% in a year (our incomes barely 2%), and inventories still feel incredibly thin.

Will the Boomers ever retire and sell their homes en masse? or is this trickle inventory going to persist for another 2 decades as the Boomers hold onto their properties or give them to offspring?

So frustrating living in this limbo. If I know for a fact that prices are going to continue going up and inventory will remain low, I think I'll just bite the bullet now on a so-so place and be done with it. I feel like we as a family need to move beyond this stage and get on with our lives. This whole experience has been something of a nightmare, makes me just wish we could live in another city.
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balor123



Joined: 08 Mar 2008
Posts: 1204

PostPosted: Sat Oct 04, 2014 1:39 am GMT    Post subject: Reply with quote

It's worth noting that a 2% increase in salary shouldn't result in a 2% increase in prices. Homes in Boston run about 5 times income but you only expect to pay about 1/3 of your income towards housing so that should be about a 4% increase. Your raises may be a bit low for the area.

Last time we looked at this topic it seemed like the boomers wouldn't start selling in the area until ~2020 and would take about 20 years to materialize. Over that time period, changes in immigration could easily make up for extra supply. I'd be more concerned about a potential rise in interest rates.

The Boston SFH market is exceptionally unattractive. You have to grow up in the Northeast to appreciate the stock available b/c anyone with any standards wouldn't touch those properties with a 10-ft pole (even buyers in SF expect properties in better condition and the market is more expensive).

There's some really nice apartments in Waltham which are exceptionally cheap and commutable. There's two new large complexes going up. If I were there, then I'd aim to live in one of those and private school. Alternatives would be to look for a place in Cambridge or Brookline. Only problem is Brookline is relatively expensive b/c you don't need to private school. There's not so much of a boomer effect in these areas and if prices drop, they'll drop the slowest. Otherwise, if you insist on buying and don't want MFH, then your best bet would be a newish townhome. Ones big enough for a 4-person family can be found for as little as $450k in immune towns.
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wornout2
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PostPosted: Sat Oct 04, 2014 3:39 pm GMT    Post subject: my thoughts exactly Reply with quote

I can 100% relate to you! My husband and I make an income of 300,000 and we can't find a place to buy. We have been trying for over 2 years. At this point I'm wondering if we should increase our budget. But even then it's not easy. Homes at 1 mil have multiple bids. #low inventory. We have been looking at homes up to 800,000 but so far no luck. Out bid by others every time. Do people in Boston spend more than 2 1/2 X their salary? I don't want to make a mistake but I'm sick of small apartment living at 3,000 a month rent. I'm ready to move states too.
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PostPosted: Sat Oct 04, 2014 6:57 pm GMT    Post subject: Reply with quote

Yeah, we have a household income of over $200K and can't find jack crap. I have $200K in down payment ready to go, but nothing to spend it on.
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balor123



Joined: 08 Mar 2008
Posts: 1204

PostPosted: Sun Oct 05, 2014 6:22 am GMT    Post subject: Reply with quote

Ugh yeah 2.5x is really low for Boston or any major metro. Hack, that's even pushing it for low cost rural areas. Boston averages 4.5x - 5.5x. Under 30% of income is considered affordable. Under 20% is being a saver. Under 15% is being crazy cheap. You are at 14%, at the top of your budget! Increase your budget.

With a $200k HHI, I'd be looking at $700k - $800k homes. With a $300k HHI, I'd be looking at $1mil - $1.2mil homes. But that's me. I'm conservative but I like having a nice place to live. In the latter range, you can buy a tear down and Newton and build whatever you like, likely making a little money in the process too.

In that budget you should be able to build a 3500sf high end home with a ~$600k tear down, of which there are plenty on the market right now. When finished, you'd save about $200k - $300k relative to buying one already built. And you could avoid cheaping out like most builders here do, getting a functional floorplan and nice design finishes. Timeframe is well less than 2 years (typically 6mo but they'll quote 4mo). Even in the former case it's possible but among immune towns only Arlington and it's hard to find a good lot.
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PostPosted: Mon Oct 06, 2014 12:33 am GMT    Post subject: Reply with quote

balor123 wrote:
With a $200k HHI, I'd be looking at $700k - $800k homes. With a $300k HHI, I'd be looking at $1mil - $1.2mil homes. But that's me.


That's insane, IMO. I'm the guy with a ~$215K HHI. We have a budget of $600K, with $200K for the down payment.

But then, I have 1 kid in day care ($2K/mo), and I put away about $2K/mo in retirement & college savings. I bust my ass and earn a good income for the expressed purpose of one day breaking free of the rat race. Can't do that with a huge mortgage.
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balor123



Joined: 08 Mar 2008
Posts: 1204

PostPosted: Mon Oct 06, 2014 6:48 am GMT    Post subject: Reply with quote

As I mentioned, taxes are low in MA so it's actually not that bad. I didn't appreciate that when I lived there. But that's what rat races are. If you don't like them, then big cities aren't for you or you can just rent. It's ok.. really. I know people who've raised 3 kids in 2-3 bedroom apartments and who are perfectly happy doing so.

But run the numbers and you'll see that my proposed budget is very affordable. The main problem is that you're highly leveraged and could lose a lot of money in a housing downturn. And those do happen. The last one was in the early 90s. A friend of mine there was (30%) upside down on a condo for about a decade then. Another friend of mine lost $100k on a townhome. I asked him how he manages and his response was simply "I try not to think about it".
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PostPosted: Mon Oct 06, 2014 12:57 pm GMT    Post subject: Reply with quote

balor123 wrote:
If you don't like them, then big cities aren't for you or you can just rent. It's ok.. really. I know people who've raised 3 kids in 2-3 bedroom apartments and who are perfectly happy doing so.


No point in renting a mediocre 2-bed at $1800 (not including oil heat) when I can pay a ~$2500 mortgage before my tax deduction and expect a lesser portion of my growing income to go toward housing each year. That is, if I can find a decent house.
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Former Arlingtonian



Joined: 23 Oct 2013
Posts: 141

PostPosted: Mon Oct 06, 2014 1:06 pm GMT    Post subject: Signs of an over heated market Reply with quote

Name the 3 periods in the last thirty years when its been hard to find a good real estate location for someone with good income and cash down payment?

1986-1987 Unemployment was falling during these times - from 8.0 in 1984 to 5.4 in 1988. Interestingly unemployment was still falling as the real estate markets began to collapse in late 1980s
http://portalseven.com/employment/unemployment_rate_for_president_term.jsp?president=Ronald%20Wilson%20Reagan

1999 House prices were on fire and I found myself in a bidding war for a home in Arlington. When houses began to decline the unemployment rate was still falling: http://www.aei-ideas.org/wp-content/uploads/2012/10/101012unemployment.jpg

2002-2004 Take a look at unemployment falling as the real estate market begins to collapse in 2006, :http://www.aei-ideas.org/wp-content/uploads/2012/10/101012unemployment.jpg

If you have $200K down payment and can't find a great home it is a sign that you should wait for real estate fever to subside.
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PostPosted: Mon Oct 06, 2014 5:05 pm GMT    Post subject: Re: Signs of an over heated market Reply with quote

Former Arlingtonian wrote:
Name the 3 periods in the last thirty years when its been hard to find a good real estate location for someone with good income and cash down payment?

1986-1987 Unemployment was falling during these times - from 8.0 in 1984 to 5.4 in 1988. Interestingly unemployment was still falling as the real estate markets began to collapse in late 1980s
http://portalseven.com/employment/unemployment_rate_for_president_term.jsp?president=Ronald%20Wilson%20Reagan

1999 House prices were on fire and I found myself in a bidding war for a home in Arlington. When houses began to decline the unemployment rate was still falling: http://www.aei-ideas.org/wp-content/uploads/2012/10/101012unemployment.jpg

2002-2004 Take a look at unemployment falling as the real estate market begins to collapse in 2006, :http://www.aei-ideas.org/wp-content/uploads/2012/10/101012unemployment.jpg

If you have $200K down payment and can't find a great home it is a sign that you should wait for real estate fever to subside.


Yeah, I pretty much agree. That's why I backed out of a deal to buy a $515K 1200SF mediocre Arlington house last year. Because it just doesn't make any sense.
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Bostonian
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PostPosted: Tue Oct 07, 2014 2:07 pm GMT    Post subject: Boston area homes Reply with quote

Most people in MA will inherit a house from their parents, and if they cannot afford to pay for mortgage/rent they will happily convert parents' home into a 2 family and live there, so waiting for the baby boomers to retire is not logical.

That being said, it is almost impossible to find high quality homes within 128 less than $1 million, actually more like $1.5 million in most nicer towns.

In a state where income is less than $70K that is a tough situation for new comers and/or people who do not inherit a home from their parents. Rule of thumb of lending is not to borrow more than 3 times your annual income. If you do not want to work like a maniac all your life, it is best to even borrow 3 times of one spouse's income and keep the other for emergencies. Nowadays they are forcing people to be knee deep in debt, and it is just unsustainable.

For people who do not have roots in MA, it is best to move away ASAP and build a life elsewhere, because $200-$300K/year will not go far if you pay over $1 million to a home and over $10K for real estate taxes.
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Former Arlingtonian



Joined: 23 Oct 2013
Posts: 141

PostPosted: Tue Oct 07, 2014 2:46 pm GMT    Post subject: Every Massachusetts native is a multi-millionaire Reply with quote

Bostonian,

You are so right!

In the coming years every Boomer home will pass to their only child, and very little property will come available.

Families with multiple children will very politely determine which child deserves to home most and deed the property over (no need to sell because every Massachusetts native is flush with cash).

Most families in Massachusetts never have squabbles and there would never be a forced sale because of the need to pay property taxes or to access cash to send children to college or to eat.

Those only children who don't live in Massachusetts will convert the home they inherit into a single family rental as being a landlord is the way to wealth. No need to even consider selling the home because real estate in Massachusetts goes up in value over time and isn't dependent on interest rates or a thriving tech industry or massive employment in Universities and colleges from the education bubble.

If you are renting and not making $250K or more you should leave the state immediately. Wink
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Richthofen



Joined: 02 Apr 2014
Posts: 69

PostPosted: Tue Oct 07, 2014 6:59 pm GMT    Post subject: Reply with quote

I feel like a total chump. Here I was, thinking how lucky I was compared to the rest of my friends, making $115K. My wife is home full time with the baby, we don't pay daycare, we have zero payments except rent (car's paid for, no student loans, no debt). And then I read all these responses and realize that I'm broke compared to most in MA. Our parents don't have any money so if anything we'll end up having to house one or both sets when they go broke (already happening to my wife's parents).

No wonder we can't find housing when there's people in the wings with $200K downpayments and $300K incomes.

And yeah, we're renting for $2400 a month.
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admin
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Joined: 14 Jul 2005
Posts: 1826
Location: Greater Boston

PostPosted: Tue Oct 07, 2014 7:14 pm GMT    Post subject: Reply with quote

Richthofen wrote:
And then I read all these responses and realize that I'm broke compared to most in MA.


You aren't. Most in MA aren't earning $300K, nor anywhere near it. You're fairly close to the median income for the quintessential "immune" town, Newton, and I would wager you are well ahead once you factor in the day care trade off. If you look at the actual income histograms on city-data.com, the myth that everybody else is rich and propping up housing prices doesn't hold up for most towns (it does for a few). Look at the histograms - they are a great sanity check.

- admin
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Richthofen



Joined: 02 Apr 2014
Posts: 69

PostPosted: Tue Oct 07, 2014 7:40 pm GMT    Post subject: Reply with quote

admin wrote:
Richthofen wrote:
And then I read all these responses and realize that I'm broke compared to most in MA.


You aren't. Most in MA aren't earning $300K, nor anywhere near it. You're fairly close to [url=http://www.city-data.com/city/Newton-Massachusetts.html]the median income for the quintessential "immune" town,


Well I can definitely not afford to buy a SFH in Newton. There's nothing in Newton under $450K right now, which is my ceiling. ($450 is 4x my income and brings a payment with PITI and PMI to $2800, which is a huge frigging stretch. 'only' have $60K for a downpayment)

There's nothing but garbage under $500K in Arlington, Newton, Watertown, Belmont, even West Medford.
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