bostonbubble.com Forum Index bostonbubble.com
Boston Bubble - Boston Real Estate Analysis
 
 FAQFAQ   SearchSearch   MemberlistMemberlist   UsergroupsUsergroups   RegisterRegister 
 ProfileProfile   Log in to check your private messagesLog in to check your private messages   Log inLog in 

 
Go to: Boston real estate bubble fact list with references
More Boston Bubble News...
DISCLAIMER: The information provided on this website and in the associated forums comes with ABSOLUTELY NO WARRANTY, expressed or implied. You assume all risk for your own use of the information provided as the accuracy of the information is in no way guaranteed. As always, cross check information that you would deem useful against multiple, reliable, independent resources. The opinions expressed belong to the individual authors and not necessarily to other parties.

Why prices might go up in 2008
Goto page 1, 2, 3, 4  Next
 
Post new topic   Reply to topic    bostonbubble.com Forum Index -> Greater Boston Real Estate & Beyond
View previous topic :: View next topic  
Author Message
hackamada_the
Guest





PostPosted: Wed Jan 09, 2008 5:08 pm GMT    Post subject: Why prices might go up in 2008 Reply with quote

I have a reason to believe that real estate prices might go up in 2008 in Massachusetts. May be not for long term and not in all segments though.

I am an H1B visa holder for almost 7 years. My green card application process has been started almost 4 years ago. The first step of obtaining green card is the Labor Certification (LC). This used to be a pretty fast step and used to take about 6 months but my LC process took 3.5 years and has been approved in July 2007. The same thing happened to almost everybody applied in 2004-2007 and even to some guys applied before.

Usually guys like me do not want to buy a home until they receive some kind of status better then H1B visa. And approved LC gives them a lot of possibilities - you can file I-140, I-485, receive EAD (employment authorization documents) for wife which increase household income etc. And all LC applications filed in 2003-2007 have been approved momenterely at the same time in June - July 2007. This is a huge number of applicants. I cannot find official statistics but all eligible medical offices were full of guys like me (but mostly from India) in June - August 2007 to get the medical exams needed for further processing done.

Many of these guys will start looking for homes at some point. Some of them will wait for EAD documents (I've got them in November), some of them will wait for advanced parole or approved I-140, some of them will wait until the end of their current rental agreement, but many of them will be looking for houses.

To show you the importance of this factor I can give you some observations. I rent an appartment in Westborough in a big complex. The complex has 3 buildings. 8 floors each. More than 20 appartments on each floor. There are almost no vacant apartments - everything is rented. There are 3 persons live in each apartment at average. This mean that about 20*3*8*3=2520 people live in the complex. There are total ~20000 people live in Westborough. This means that at least every 10th person live in this complex. And I would say that almost every 2nd family is in the same situation as I am.

I expect a significant increase of people interested in buying a house/condo for $200K-$300K in 2008 and expect prices to go up in Massachusetts (we have a lot of IT jobs and H1B holders here).
Back to top
john p



Joined: 10 Mar 2006
Posts: 1820

PostPosted: Wed Jan 09, 2008 7:15 pm GMT    Post subject: Reply with quote

How's the exchange rate? Isn't India an "emerging market"? Why would someone from India want to leave a booming area and come to a market where top economists are giving a 50% plus prediction that we're going into a recession? I mean if you started the process before when things were better, I can see wanting to see thing through, but wouldn't you want to be where the action was? I know many folks from Brazil are leaving.
Back to top
View user's profile Send private message
BK
Guest





PostPosted: Wed Jan 09, 2008 7:34 pm GMT    Post subject: Contracting Credit Reply with quote

I disagree with your Hypothesis- but, I hope you are right.

Problems:

1. Banks are going to get more selective about who they lend money.

2. This may put new immigrants at a dis-advantage because there is always a risk on Mortgage Payee leaving the Country - Obviously, there are lots of immigrants that save more money than native born Americans. But, it is likely that Banks will expect a fairly high down payment to minimize their Risk.

There may in fact be a number of immigrants that could buy a Condo for Cash without a Mortgage - but , many would require some sort of Mortgage.

The Problems at Citi Bank, Merrill lynch, State Street, and Bear Stearns demonstrate the chaos that is going on in the secondary Mortgage Market. When the Secondary Mortgage Market (large Financial Instititutions) is in Chaos there is less money flowing into the Real Estate Market.

Again, I hope I'm wrong and you are right......- I fear the facts may be on my side.
Back to top
hackamada_the
Guest





PostPosted: Wed Jan 09, 2008 8:23 pm GMT    Post subject: It is still very easy to get financed Reply with quote

> Isn't India an "emerging market"?...

It does not look like anybody really wants to leave. I am not leaving myself (I am from Russia). Of course if they loose their jobs...

> Banks are going to get more selective about who they lend money...
> This may put new immigrants at a dis-advantage...

I am looking to buy a home myself and I investigated the mortgage possibilities about 2-3 months ago. It is absolutely easy to get 100% financed. I have excellent credit score (>750) and I think that most of these guys from India too (they pay loans for their cars, have credit cards etc). I could get $200K-$300K mortgage at 6.7% without any PMI, points etc. to finance 100% of the home price. They almost do not care about my H1B status
Back to top
BK
Guest





PostPosted: Thu Jan 10, 2008 3:23 pm GMT    Post subject: Reply with quote

The question is will the Credit picture worsen??

You have great credit -and the Credit Crisis began (publicly) in August 2007- so, this down turn in Credit is less than 5 months old. We see where prices have declined as a result of a 5 month long credit cycle. What will credit availability be like after this Credit Crisis is 1 year old and where will Home prices be.
Did you hear the talk of a possible CountryWide Financial bankruptcy yesterday - you need to see what kind of damage happens in the Mortgage/Banking Industries to know where Real Estate is heading.

Remember, a credit down turn feeds on itself. Has credit tightens the asset value support existing mortgages drops - the Big financial institutions that buy Mortgages (this is why you are offered a Mortgage in the first place) will get more nervous and increase their requirements - making it tougher to get a loan.

Have you considered that 'Not Buying" a home in the next few years may be the Best Financial Move your family can Make?

Your Money needs to be invested to keeep pace with inflation, but it gives you the ability to move if you have to (and avoid owning Real Estate when it is declining in value).
Back to top
dudeman
Guest





PostPosted: Thu Jan 10, 2008 6:23 pm GMT    Post subject: wow Reply with quote

how could only 20000 people live in westboro? number sounds too small. If the price of housing goes up, it is not because of new buyer, but most likely be the inflation the FED keep creating. Stupid assholes in the FED try to rob everybody in US to save the big corperations, by lowering the FED rate again and again and again.
Back to top
hackamada_the
Guest





PostPosted: Thu Jan 10, 2008 8:09 pm GMT    Post subject: some answers Reply with quote

> The question is will the Credit picture worsen??
This is a very good point. If there is no way to get a mortgage with no or low down payment then the prices will fall for sure. But I do not think this is the case for nearest future (we are talking about 2008). There are too many banks willing to issue such credits right now. And rates only go down. It may take time until the law changes to prohibit this. All this may have a good sense for 2009-2010. But there might be other factors in 2009-2010 and I do not want to look that far

> how could only 20000 people live in westboro?
According to this:http://money.cnn.com/magazines/moneymag/bplive/2007/snapshots/CS2575015.html Westborough's population is 19000. There are other sources which show almost the same numbers

> Have you considered that 'Not Buying" a home...
I am not convinced myself yet. But... Friend of mine rents a townhome/condo in Boylston for 1400/month. Couple of month ago the very similar townhome in the same complex with the same floor plan has been sold for 185000. I've seen both of them and they are almost the same. Another one is listed for the same 185000 (mls#70681899) but I have not seen that one. Lets do some math based on 100%/30yr financing at 6.7%:
payment: +$1194
condo fee: +$285 (including water, sewer, master insurance, exterior maintenance etc)
tax: +$190
tax deduction: -$160 (at least)
===================
$1509
Ok, this is $100/month more then rent. And I would add $100-$200/month for repairs. But anyway this seems pretty comparable. And this is not the best deal around, just one I can honestly compare. I'll not loose much if buy a home instead of rent.[/url]
Back to top
BK
Guest





PostPosted: Thu Jan 10, 2008 9:07 pm GMT    Post subject: Reply with quote

Regarding you buying the Townhouse scenario for $185,000.

Two things to consider:

1. The Home goes down in Value by additional 20% - 30% = $36,000-$50,000 - I know you'll tell me this is not possible. People can very rarely predict how high prices will go up and yet folks always say prices can never go to such lows.

2. If you need to move to find employment because Job market contracts? You are on the hook for Mortgage, fees , and taxes.

3. The Condo fee sounds very low - is it possible that it is lower than it should be? I know a number of folks who own Town homes/Condos and they see capital improvement fees of $3000-$5000 every 5-10 years. You need to put that into your calculations

Please read Federal Reserve Chairman speech - http://www.federalreserve.gov/newsevents/speech/bernanke20080110a.htm

He is not describing a healthy Housing Market and he wouldn't make these comments unless the problems were obvilus to lots of market players.

Don't forget there are lots of unforeseen expenses when you buy a Condo/Townhouse/ or House. When you rent you are on the hook for the monthly rent and little more.

I've been I home owner and I look forward to owning again when the market conditions are right.
Back to top
admin
Site Admin


Joined: 14 Jul 2005
Posts: 1823
Location: Greater Boston

PostPosted: Thu Jan 10, 2008 9:29 pm GMT    Post subject: Re: some answers Reply with quote

hackamada_the wrote:
And rates only go down.


I wouldn't take that as given. The Fed rate looks like it will be headed down for awhile, but the effect on mortgage rates is indirect. Mortgage rates tend to follow Treasury yields. See:

http://www.frbsf.org/education/activities/drecon/2002/0206.html

Treasury yields have been lower than normal in part because of foreign investment (e.g., China). Lower Fed rates could compound the growing devaluation of the dollar and eventually trigger a reversal of foreign investment, consequently causing mortgage rates to rise.

This is not a prediction of what will happen, it's just an identification of a possible risk.

- admin
Back to top
View user's profile Send private message Send e-mail Visit poster's website
spork



Joined: 23 Oct 2007
Posts: 25

PostPosted: Fri Jan 11, 2008 1:38 pm GMT    Post subject: Reply with quote

I see your arguement (prices increase 2008) about this but very unlikely..for several reasons mentioned and other major reasons including but not limited to:

the fact that price and sales data lags 1 to 2 months depending on the report

the reports will probably be get worse and worse-deeper sales price figures(compunding throught the winter)

setting up a hard sell on spin for the spring mkt for the real estate community in april/may when horrific feb/march numbers are coming out

slowing economy/recession..very bad 1st have of 08 for equity mkts...my feeling it has been bad and will get worse...

the incoming number of 08 mortgage resets

the general need for the mkt to correct to normal levels

It is like a freight train...once it picks up steam like it has, it will speed up b4 you can level it off and start to slow it down--lowering interest rates, economic stimulus, etc are only little bumps-pushes against the locomotive picking up steam down the tracks on this downturn-they help but can't stop it immediately

consumer sentiment and water cooler talk (gereral perception) also weigh more than people think-(self fufilling recession issue/prophecy/whatever in respect that the more it is talked about-the more pressure it put on it to actually happen


Overall, i see your point(i also think you have a personal bias based on your situation)-but those number of buyers are just another slight push to slow the freight train down...it will help but it won't stop it(will not be a tipping point)...maybe i am wrong but i would say the probability is with the bears in the housing mkt...and it is high

foreign real estate investment in the us will not be the answer either- maybe hot spots city of boston- areas like Manhattan has shown signs of stablization/growth/being recession proof so far...but will it as this roles out? i haven't had a chance to study it but from what i understand-europe/UK has a bubble problem too?

...best case sceario for BOS metro mkt i think is bottom at march-09...
Back to top
View user's profile Send private message
JCK



Joined: 15 Feb 2007
Posts: 559

PostPosted: Fri Jan 11, 2008 2:26 pm GMT    Post subject: Reply with quote

BK wrote:
Regarding you buying the Townhouse scenario for $185,000.

Two things to consider:

1. The Home goes down in Value by additional 20% - 30% = $36,000-$50,000 - I know you'll tell me this is not possible. People can very rarely predict how high prices will go up and yet folks always say prices can never go to such lows.

2. If you need to move to find employment because Job market contracts? You are on the hook for Mortgage, fees , and taxes.

3. The Condo fee sounds very low - is it possible that it is lower than it should be? I know a number of folks who own Town homes/Condos and they see capital improvement fees of $3000-$5000 every 5-10 years. You need to put that into your calculations

Please read Federal Reserve Chairman speech - http://www.federalreserve.gov/newsevents/speech/bernanke20080110a.htm

He is not describing a healthy Housing Market and he wouldn't make these comments unless the problems were obvilus to lots of market players.

Don't forget there are lots of unforeseen expenses when you buy a Condo/Townhouse/ or House. When you rent you are on the hook for the monthly rent and little more.

I've been I home owner and I look forward to owning again when the market conditions are right.


The Condo fee isn't necessarily unreasonable. Frankly, if there's a $5000 repair every 5 years, that's what, less than $100/mo on average?

In any case, it's always worth asking about assessments. I know some associations have assessments every year so they can advertise lower monthly fees.

Also check the financial health of the condo association. Do not buy until you get some balance sheets. You don't want to be purchasing debt left over from past mismanagement.

But BK is right. Home or condo owners generally have a lot more expenses than renters. Friends of mine got their house painted recently, which set them back around $13k...

But then again, many of the expenses are voluntary. My friends didn't have to get their house painted...
Back to top
View user's profile Send private message
JCK



Joined: 15 Feb 2007
Posts: 559

PostPosted: Fri Jan 11, 2008 2:46 pm GMT    Post subject: Re: some answers Reply with quote

hackamada_the wrote:
I have not seen that one. Lets do some math based on 100%/30yr financing at 6.7%:
payment: +$1194
condo fee: +$285 (including water, sewer, master insurance, exterior maintenance etc)
tax: +$190
tax deduction: -$160 (at least)
===================
$1509
Ok, this is $100/month more then rent. And I would add $100-$200/month for repairs. But anyway this seems pretty comparable. And this is not the best deal around, just one I can honestly compare. I'll not loose much if buy a home instead of rent.[/url]


You can do a lot better than 6.7%.

I would strongly suggest saving for at least 5% down. Most brokers will be able to put together a two mortgage package (one fixed rate, one home equity line of credit (HELOC)) that will give you better rate.

Conforming 30 year mortgages can be had for around 5.5%-5.625 with no point paid these days.

Even with a higher rate HELOC, you'll come out ahead of the 100% financing scheme you're proposing.
Back to top
View user's profile Send private message
PL
Guest





PostPosted: Fri Jan 11, 2008 5:14 pm GMT    Post subject: no surge due to H1B holders Reply with quote

I was in the same situation until last summer when I finally became a permanent resident. Many of my friends and coworkers who were in the same situation (H1-B visa) didn't wait to become permanent residents before buying a house so your argument doesn't sound convincing to me.

Another thing is that there aren't that many H1-B newcomers in the area. Definitely not as many as when I first came to Massachusetts ('99). So while it's true that there is some pent up demand due to some of us escaping from limbo I'm pretty sure this will have a minor impact at best. In my opinion there are many more sellers who tried to wait out the downturn (see the severe decrease of house sales) than buyers like us.

BTW, I have ABSOLUTELY no plans to buy in 2008 even though I'm a permanent resident and I saved enough for a very substantial downpayment. I'm happily renting and I'm paying the same rent as I did nine years go, in absolute value!!!
Back to top
johnnylest
Guest





PostPosted: Fri Jan 11, 2008 5:41 pm GMT    Post subject: Reply with quote

So, you estimate that almost 13 percent of the entire population of Westboro lives in one apartment complex? Sounds fishy to me.
Back to top
Booba Kastorsky
Guest





PostPosted: Fri Jan 11, 2008 5:54 pm GMT    Post subject: Re: Why prices might go up in 2008 Reply with quote

With all my respect, people who will rush to buy something just becuase they reached some certain point in the immigration process are stupid.
Sorry, but this is true, no offense! Embarassed
1) Your speculations about length of the different stages of imigration process now based on nothing. I waited for GC for 5 years, others who applied in the same month and under the same circumstances were waiting for 2, 5 or 7 years. This is completely unpredictable! Sad
2) Only completely ignorant person will buy something as big as real estate or a big chunk of stock only because he feels like, don't you think?
Did you read all of those "sad" stories about loosers that ended up with foreclosure? Most of them start with: "They decided they want to be homeowners"... Rolling Eyes
If the intelligence of those potential "buyers" doesn't stratch beyond coding on Java, I'm really sorry for them!
I work in IT, and in my department four people, including me and Global IT boss, want to buy a house. And we all have been waiting until prices will come to reasonable level, although our salaries are far higher than averge in MA.
And the funny thing is we all have Green Cards or American citizenship! Confused
Howevet, this fact doesn't make us rush to the falling market and bury our money into falling real estate! Laughing

According to my observation, a significant part of those loosers that bought houses in 2004-2007 were Indians.
This is really amaze me, because Indians are famous for their savvy approach to money.
Most Indians, unlike most Americans that spend everything they have and they don't Razz , save money and can be even called skinflints.
Which is a good thing, because I'm a bit skinflint too! Smile
Besides, unlike most Americans, Indians are smart enough to not take "exotic" mortgages and ususally put healthy downpayment.
Yet when it comes to buying houses Indians loose their minds! Embarassed Rolling Eyes
I still cannot explain this! Rolling Eyes
I'm not surpriced that sales are going down. I'm surprised that so many people still buying now!
Amd many of these people are not only brainless red necks that listen to real estate "professionals" and so lazy to think a bit, but also well-educated people that must be able to perform some basis analysis of status quo!
Back to top
Display posts from previous:   
Post new topic   Reply to topic    bostonbubble.com Forum Index -> Greater Boston Real Estate & Beyond All times are GMT
Goto page 1, 2, 3, 4  Next
Page 1 of 4

 
Jump to:  
You can post new topics in this forum
You can reply to topics in this forum
You cannot edit your posts in this forum
You cannot delete your posts in this forum
You cannot vote in polls in this forum


Forum posts are owned by the original posters.
Forum boards are Copyright 2005 - present, bostonbubble.com.
Privacy policy in effect.
Powered by phpBB © 2001, 2005 phpBB Group