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PostPosted: Thu Jul 27, 2017 10:13 pm GMT    Post subject: Reply with quote

Anonymous wrote:

I think that you are comparing per capita GDP to total. The metro area total GDP can be found at FRED. It doesn't decrease as much.


Good point, I didn't notice that. I don't know whether per capita or total is better for this exercise, but the same should obviously be used for both Boston and the US to make the comparison equivlanent. Looking at the total metro GDP, it is still a decline, though, at least for the most recent recession. The FRED data doesn't look like it goes back far enough to cover the one before that.

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PostPosted: Thu Jul 27, 2017 10:35 pm GMT    Post subject: Reply with quote

admin wrote:
Anonymous wrote:

I think that you are comparing per capita GDP to total. The metro area total GDP can be found at FRED. It doesn't decrease as much.


Good point, I didn't notice that. I don't know whether per capita or total is better for this exercise, but the same should obviously be used for both Boston and the US to make the comparison equivlanent. Looking at the total metro GDP, it is still a decline, though, at least for the most recent recession. The FRED data doesn't look like it goes back far enough to cover the one before that.

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Population growth often drives total GDP growth (which from my perspective is the endpoint we care about). For housing, increasing population is favorable (though I believe it negatively correlates with the GDP per capita statistic).
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PostPosted: Thu Jul 27, 2017 11:17 pm GMT    Post subject: Reply with quote

Real Estate Guy wrote:
People choosing to buy houses these days seem to feel the need to justify that we're not in a bubble, or that somehow Boston is exempt.


To be fair, people who want to buy houses also feel the need to to justify why prices are always in a bubble and will come back down soon when it's not true. In the past 200 years, the rising price part of real estate cycle always lasts at least a decade. We're only halfway to the top.
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PostPosted: Fri Jul 28, 2017 3:37 am GMT    Post subject: Reply with quote

Anonymous wrote:
Real Estate Guy wrote:
People choosing to buy houses these days seem to feel the need to justify that we're not in a bubble, or that somehow Boston is exempt.


To be fair, people who want to buy houses also feel the need to to justify why prices are always in a bubble and will come back down soon when it's not true. In the past 200 years, the rising price part of real estate cycle always lasts at least a decade. We're only halfway to the top.


The prevailing thought is that interest-rate increases will lead to a fall in home prices. For those purchasing with a mortgage (20% down), a 20% reduction in price accompanied by a 2% increase in lending rates doesn't really help affordability (monthly payment). Helps with the down payment, though! Obviously different for cash investors.
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PostPosted: Fri Jul 28, 2017 11:41 am GMT    Post subject: Reply with quote

Anonymous wrote:
Anonymous wrote:
Real Estate Guy wrote:
People choosing to buy houses these days seem to feel the need to justify that we're not in a bubble, or that somehow Boston is exempt.


To be fair, people who want to buy houses also feel the need to to justify why prices are always in a bubble and will come back down soon when it's not true. In the past 200 years, the rising price part of real estate cycle always lasts at least a decade. We're only halfway to the top.


The prevailing thought is that interest-rate increases will lead to a fall in home prices. For those purchasing with a mortgage (20% down), a 20% reduction in price accompanied by a 2% increase in lending rates doesn't really help affordability (monthly payment). Helps with the down payment, though! Obviously different for cash investors.


Many other factors influence housing prices other than interest rates. In a low employment economy, rising interest rates reduced the supply of buyers and the rate of appreciation. It won't lower prices as long as there are more buyers than houses for sale. Rates would have to double to have any meaningful impact on prices. However, recessions do have a meaningful impact on prices. Anyway, given the deep structural problems with the US economy, we will not see high interest rates for decades.
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PostPosted: Fri Jul 28, 2017 12:09 pm GMT    Post subject: Reply with quote

Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Real Estate Guy wrote:
People choosing to buy houses these days seem to feel the need to justify that we're not in a bubble, or that somehow Boston is exempt.


To be fair, people who want to buy houses also feel the need to to justify why prices are always in a bubble and will come back down soon when it's not true. In the past 200 years, the rising price part of real estate cycle always lasts at least a decade. We're only halfway to the top.


The prevailing thought is that interest-rate increases will lead to a fall in home prices. For those purchasing with a mortgage (20% down), a 20% reduction in price accompanied by a 2% increase in lending rates doesn't really help affordability (monthly payment). Helps with the down payment, though! Obviously different for cash investors.


Many other factors influence housing prices other than interest rates. In a low employment economy, rising interest rates reduced the supply of buyers and the rate of appreciation. It won't lower prices as long as there are more buyers than houses for sale. Rates would have to double to have any meaningful impact on prices. However, recessions do have a meaningful impact on prices. Anyway, given the deep structural problems with the US economy, we will not see high interest rates for decades.


Agree with the lower-for-longer rates prediction. In terms of recession impact on housing prices, it depends a bit on the driving factor. 2001 recession did not slow the home appreciation in Boston despite the rise in unemployment; money rotated from inflated equity markets into real estate. 2007/8 credit recession obviously had a much bigger impact.

To me, there seems to be a bit of a secular shift away from Mcmansions in the suburbs to small homes in the cities. This applies to boomers and millenials alike. Businesses also seem to be migrating to "hubs", reinforcing the trend. Urban prices will be under pressure for a sustained period of time when this reverses.
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PostPosted: Fri Jul 28, 2017 12:55 pm GMT    Post subject: Reply with quote

Anonymous wrote:
In the past 200 years, the rising price part of real estate cycle always lasts at least a decade.


Could you provide a source that shows the 200 years?

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PostPosted: Fri Jul 28, 2017 1:14 pm GMT    Post subject: Reply with quote

These arguments against the current bubble we're in seem to miss the fact that from 2009-2012 Boston market was dead as a door nail. We all know about the financial crisis and it's effect on National real estate. Boston was not exempt. The arguments also don't account accurately for the corrections Boston has seen: 1987, 2000/2001, and of course 2007/2008. It also negates the fact that NEVER in history has the Fed Fund rate been at or near zero for so long, a decade! Then of course, the argument also fails to realize the impact of QE 1, 2 and 3. Four and a half trillion of money printed to debt to but back treasuries and artificially suppress the long term(mortgage rates). For all these reasons, looking at past data is not worth any value in my opinion.This manipulated economy will adjust as can never be analyzed from the past because the data doesn't exist. As far as rates staying low forever: What happens when other Countries like China continue dumping our treasuries as they realize how broke we are now? You make an assumption that if "we want to" we can just keep rates low forever. That is not accurate either. The yield curve is effected by the supply and risk correlation of short term and long term treasuries. Now it's flat because of the Fed Banks past decade of bullshit. However, it's starting to arch. As the Fed releases their printed money balance sheet, the curve will continue to arch and the false(non free market) suppression of long term interest rates(mortgages) will rise. As for the assumption that the Fed can merely stop this process does not account for the fact that the countries we owe our 20 trillion to also hold these. In case you haven't noticed, they have been releasing them back to market as well. Of course all of this will aid inflation as well. Hence why Yelled is so confident inflation will rise, and soon. Mortgage interest are not just up to the Fed, and now that our Country is broke, we will not be able to use the same bull shit again. The world is watching, knows we're broke, and if we keep printing money the bottom will fall out of the dollar. There are no history charts for this.
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PostPosted: Fri Jul 28, 2017 5:14 pm GMT    Post subject: Reply with quote

Real Estate Guy wrote:
These arguments against the current bubble we're in seem to miss the fact that from 2009-2012 Boston market was dead as a door nail. We all know about the financial crisis and it's effect on National real estate. Boston was not exempt. The arguments also don't account accurately for the corrections Boston has seen: 1987, 2000/2001, and of course 2007/2008. It also negates the fact that NEVER in history has the Fed Fund rate been at or near zero for so long, a decade! Then of course, the argument also fails to realize the impact of QE 1, 2 and 3. Four and a half trillion of money printed to debt to but back treasuries and artificially suppress the long term(mortgage rates). For all these reasons, looking at past data is not worth any value in my opinion.This manipulated economy will adjust as can never be analyzed from the past because the data doesn't exist. As far as rates staying low forever: What happens when other Countries like China continue dumping our treasuries as they realize how broke we are now? You make an assumption that if "we want to" we can just keep rates low forever. That is not accurate either. The yield curve is effected by the supply and risk correlation of short term and long term treasuries. Now it's flat because of the Fed Banks past decade of bullshit. However, it's starting to arch. As the Fed releases their printed money balance sheet, the curve will continue to arch and the false(non free market) suppression of long term interest rates(mortgages) will rise. As for the assumption that the Fed can merely stop this process does not account for the fact that the countries we owe our 20 trillion to also hold these. In case you haven't noticed, they have been releasing them back to market as well. Of course all of this will aid inflation as well. Hence why Yelled is so confident inflation will rise, and soon. Mortgage interest are not just up to the Fed, and now that our Country is broke, we will not be able to use the same bull shit again. The world is watching, knows we're broke, and if we keep printing money the bottom will fall out of the dollar. There are no history charts for this.


I don't think the discussion misses the 2009-2011 downturn. Credit and lending tightened, the recession was severe, and nominal prices in town decreased 15% on aggregate. Those that were unfortunate enough to purchase a home at the peak are now in the black, though.

Current mortgages are great inflation hedges. Mortgage rates could very well increase suppressing housing prices, but as a previous comment mentioned, the affordability for most folks would not improve substantially apart from the down payment. (Different story if the purchase is in cash...)
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PostPosted: Fri Jul 28, 2017 5:56 pm GMT    Post subject: Reply with quote

Demographics is destiny. Much of Boston's home prices can be viewed from a combination of the white Millennial boom and empty nesters going into the city for retirement. That population is finite, the young generations after the Millennials are much more Hispanic and come from poorer households who are much less likely to come up with down payments that support a $500k starter condo. Most importantly those Millennials are now at an age where they are having children. In the next five years many of these kids will be school aged. Some may stay with BPS but unless BPS changes fundamentally many will seek good school districts in the inner ring suburbs.
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PostPosted: Fri Jul 28, 2017 6:21 pm GMT    Post subject: Reply with quote

Quote:

Current mortgages are great inflation hedges. Mortgage rates could very well increase suppressing housing prices, but as a previous comment mentioned, the affordability for most folks would not improve substantially apart from the down payment. (Different story if the purchase is in cash...)


I much prefer a higher interest rate and lower purchase price. Especially in the modern job market where you may have to relocate on the dime or seek greener pastures elsewhere. A million dollar home dropping just 10% in value can be financially crippling or entrapping if you don't have the cash flow to cover the loss when you need to move. A lower purchase price also gives you the flexibility to pay off your loans earlier to decrease your interest payments.

The biggest problem is that higher interest rates may not actually cause purchase price to go down at all. At least in the short term of a couple years. Or inflation may be such that home prices keep going up despite high interest rates (like the 1980s).
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PostPosted: Fri Jul 28, 2017 6:56 pm GMT    Post subject: Reply with quote

Anonymous wrote:
Quote:

Current mortgages are great inflation hedges. Mortgage rates could very well increase suppressing housing prices, but as a previous comment mentioned, the affordability for most folks would not improve substantially apart from the down payment. (Different story if the purchase is in cash...)


I much prefer a higher interest rate and lower purchase price. Especially in the modern job market where you may have to relocate on the dime or seek greener pastures elsewhere. A million dollar home dropping just 10% in value can be financially crippling or entrapping if you don't have the cash flow to cover the loss when you need to move. A lower purchase price also gives you the flexibility to pay off your loans earlier to decrease your interest payments.

The biggest problem is that higher interest rates may not actually cause purchase price to go down at all. At least in the short term of a couple years. Or inflation may be such that home prices keep going up despite high interest rates (like the 1980s).


yeah, it depends on the time horizon. Even just dealing with closing costs and commissions takes a reasonable chunk. Lower purchase price also potentially sets up for greater appreciation. It isn't a magic bullet for home-affordability, though. (Who knows what will precipitate the next downturn, I suppose!)
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PostPosted: Fri Jul 28, 2017 10:34 pm GMT    Post subject: Reply with quote

College enrollment has dropped like a rock in recent years as the Millennials exit. To make matters worse, the newer college enrollees tend to be first generation college goers, need more financial aid and don't see the appeal of a $50k/yr liberal arts degree. It will be interesting to see how the higher ed bubble pops.
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PostPosted: Sat Jul 29, 2017 11:25 am GMT    Post subject: Reply with quote

Anonymous wrote:
College enrollment has dropped like a rock in recent years as the Millennials exit. To make matters worse, the newer college enrollees tend to be first generation college goers, need more financial aid and don't see the appeal of a $50k/yr liberal arts degree. It will be interesting to see how the higher ed bubble pops.


The colleges and universities where no one wants to live are and will continue to be the ones closing down. The popular universities in the urban areas will keep charging more and students will still be lining up. It would be good if Boston area colleges were to go out of business and we could use their campuses to get more/cheaper housing but that will never happen. In fact the opposite is true, the Boston area colleges and universities are expanding. Look at the booming private schools. The people who can afford to send their kids to private school at 40k/yr for up to 12 years can afford to send their kids to college at 70k/yr for 4 years.
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PostPosted: Sat Jul 29, 2017 4:56 pm GMT    Post subject: Reply with quote

Anonymous wrote:

The colleges and universities where no one wants to live are and will continue to be the ones closing down. The popular universities in the urban areas will keep charging more and students will still be lining up. It would be good if Boston area colleges were to go out of business and we could use their campuses to get more/cheaper housing but that will never happen. In fact the opposite is true, the Boston area colleges and universities are expanding. Look at the booming private schools. The people who can afford to send their kids to private school at 40k/yr for up to 12 years can afford to send their kids to college at 70k/yr for 4 years.

Domestic college enrollment is declining in Boston area too. Much of the difference is being compensated by increasing international student enrollment.

At some point there is real value proposition in a cheaper college in the middle of nowhere over an urban college.
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