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 Posted: Fri Jan 06, 2017 4:47 pm GMT Post subject: |
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I agree the 'luxury' tier will go down first when the wind turns, due to following:
1. Luxury means high condo fee, which makes it almost impossible to get a positive rental return at current price, despite saying if the interest rate go any higher than now. Usually you can not sell these type of 'Luxury' condo with high price, due to high cost of condo fee.
2. A lot of 'Luxury' condo only looks luxury as it is, but they are in un-desirable locations, such as right next to highway, somewhere in slump towns, far away from the city etc.
3. There are ton of such un-desirably located Luxury condos being build currently, they will load into housing market in the next couple of years. Developers want to maximize the selling price by putting high end appliances and features into whatever development they can get their hands on. People should realize now or soon that rent is not going up crazy like the last few years, it is stagnating if not falling.
How big the domino effect of the fall of Luxury condo tier is still too early to tell yet, it is depends on how bad Yellen could screw up Trump by jacking up FED rate, before she got booted off the FED a year from now. Political idiocy could join force with over supply of housing and higher gas price(sample of living cost goes up), and come out as something that is not containable. |
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| Posted: Fri Feb 24, 2017 1:35 pm GMT Post subject: Re: I share this guy's consternation |
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| Anonymous wrote: | | http://www.bostonmagazine.com/news/blog/2017/01/27/boston-luxury-condos-video/ |
Causation does not equal correlation. Luxury condos have nothing to do with rents going up on regular housing. In fact, oversupply of luxury condos should cause rents to go down. What's causing the rents to go up are the hordes of millennials who are starting to move out from their parents homes and rooming with their friends into affordable apts.
You are seeing the same thing happen on the housing market as the older millennials get married, have kids and look for houses, but have nothing decent to buy. There are few decent houses under 500k and tons of houses over 1 million. Look at inventory in West Roxbury versus Wellesley which have similar population size, but Wellesley has 8x more houses for sale. |
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| Posted: Sat Feb 25, 2017 8:12 pm GMT Post subject: |
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| Quote: | | Causation does not equal correlation. Luxury condos have nothing to do with rents going up on regular housing. In fact, oversupply of luxury condos should cause rents to go down. |
It could. When luxury condos transform the area to a upper scale, people consider the same area a better location, and willing to pay more to live there. Therefore the rent of the area go up. Take a look at south boston as the example for the last 10 years.
| Quote: | | What's causing the rents to go up are the hordes of millennials who are starting to move out from their parents homes and rooming with their friends into affordable apts. |
This most likely a false assumption. In every given year, there will be youngsters moving out of their parent's home. I don't see major population gain in Boston for the past few years. I rather believe the rent goes up due devaluation of money, directly related to QE and Ultra low interest rate. When the cost of building went up, it transforms into higher rent.
Also there are 2 major industries that have very high margin, due to lack of international competition, which supports major part the Boston Economy, and they are the pharmaceutical/medical and higher education. They are the major forces of pushing up rent and home price locally.
| Quote: |
You are seeing the same thing happen on the housing market as the older millennials get married, have kids and look for houses, but have nothing decent to buy. There are few decent houses under 500k and tons of houses over 1 million. Look at inventory in West Roxbury versus Wellesley which have similar population size, but Wellesley has 8x more houses for sale.
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Nothing under 500k meant the base level of housing cost has gone up. Entry level of SFH used to be in the mid 300k, now it is in the mid 500k. This is stagflation, since salary did not get the 60% increase during the same time.
There are tons of houses over 1 million meant there are not much local people can afford housing over 1 million yet. This is a classic example of over priced housing market.
What is going to happen of current housing bubble is all depends on how big the change of interest rate in the future. We are about couple of years away from the popping time. |
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