bostonbubble.com

Guest · Posted: Thu Jul 19, 2007 5:17 am GMT Post subject: Boston's Crumbling Economy

Read this link:

http://www.safehaven.com/article-7983.htm

Housing Prices · Guest

But if the local Boston economy is so bad, then why are housing prices so out of line with incomes? Will we ever go back to historical levels with respect price to income ratios?

I've seen some discussion on this forum about this, but there was no conclusion. What should a new buyer with a household income of $90K pay for a median home in the burbs?

Any comments are welcome. I'm not good with numbers or finance, so please keep it simple!

Guest · Posted: Thu Jul 19, 2007 1:26 pm GMT Post subject:

Thats an interesting link, but it seems to not jostle with what I've seen. It seems like the tech companies in Greater Boston are hiring like crazy, and every time I speak with recruiters they go on about how hard it is to find good people.

Though I could easily see high technology booming while things like restaurants/law offices/boutique services being down. The photos in question seem to be a ride down Mass Ave and not a drive on I-95; high tech is more likely to be on the latter.

admin · Posted: Thu Jul 19, 2007 1:37 pm GMT Post subject: Re: Real estate prices

Guest · Posted: Thu Jul 19, 2007 2:00 pm GMT Post subject: Stupid question again

Admin,

Thanks for the feedback. What do you think will be a good point to buy a home at in the near future? Specifically, what price to income ratio, or is that a bad metric to use?

I'm trying to make sure I don't buy and then prices drop further. If I lose my job in the near future then I'd be in serious trouble if I can't sell the place I bought for at least he same price I paid for it.

Boston ITer · Guest

JCK · Joined: 15 Feb 2007 Posts: 559

This isn't even anecdotal evidence. No comparison is being made; just a few pictures of "for lease" signs. Third rate Italian restaurants and couple movie rental places go out of business and economy of the whole city is crumbling? Please.

I've seen recent reports that the downtown office market is doing very well. Vacancies are lower than they've been in years, and office rents are reported to be rising. Someone must be occupying that space.

This sort of "evidence" needs to be taken for what it's worth.

Guest · Posted: Thu Jul 19, 2007 3:09 pm GMT Post subject:

[quote="Boston ITer"]

admin · Posted: Thu Jul 19, 2007 3:14 pm GMT Post subject:

admin · Posted: Thu Jul 19, 2007 3:25 pm GMT Post subject:

AgentGrn · Joined: 28 Sep 2006 Posts: 82

john p · Joined: 10 Mar 2006 Posts: 1820

Admin:

If the P/E ratio for homes ranges from 3 to 5. What do you think the range is for interest rate? I mean the corresponding interest rate affects affordability and the percentage of household income to service the mortgage is really the best measure for the fundamentals right?

If you look at the history of interest rate here:

http://mortgage-x.com/trends.htm

Would you say that since the early 90's the average mortgage rate is somewhere around 7%, so if the P/E range is from 3-5, would the average 4 times average salary be associated with the 7% and this see-saws up and down on either side - P/E on one side, interest rate on the other keeping the percentage of household income to service the mortgage a steady trend? I'm trying to find that chart which courses this.

I think the anecdote is great, it's part of the overall mosaic, but I too think that it seems to be a trip down Mass Ave. It begs the question, why are these types of businesses hitting the skids or are rents getting so high that we are having a sort of commercial gentrification in this neighborhood. This is important; I know people from NYC would tell me that they would see grocery stores closing up shop and seeing dry cleanings opening up (a tell sign that it was becoming more white collar).

I think what the anecdote also points to the fact is that perception is reality. If you're buying or selling to someone, take a ride down the streets that they are traveling each day (figuratively and literally if you can). See what they are seeing, that is their reality. We had a guy saying that the high end condo market was taking off in the early winter. He got paddled by a bunch of people because it defied the seemingly common perception. Later we did find out that there was a new segment of "wealth" buyers, the lower dollar value brought in foreign buyers, and the big year in stocks brought in some of the financial people. We had a price segment align with a segment of the population that was winning when many were staying flat. I love trying to assess each anecdote and see if it fits in like a piece of a fractal to an overall ecosystem.

I do think that people put out disinformation though, it is unprofessional, but it happens. Over the last few months, I have been starting to think about the real estate agents for commercial properties. I wonder what the typical length of rental or leases that people sign on for and what the associated square footages are i.e. someone wouldn't rent 100,000 square fees for a 1 year lease. So if Boston is becoming more of a feast/famine type of place and we have an uneven demand, what is going on with commercial properties? If Boston is an expensive place to do business is it partly because commercial rents are overvalued? I think the commercial rental brokers are certainly arm-chair economists and will be cheerleaders that things are going to go through the roof. I wonder if commercial properties rents are going through a correction as well. I do find that this segment of businessmen spend a lot of time and money to glad-hand politicians so that they are in a positive light in the community.

Guest · Posted: Thu Jul 19, 2007 4:41 pm GMT Post subject: Interest rates

John p,

Interest rates impact the price to income ratio, for certain. However, if you are worried about the resale value of a home, then I would argue that it is best to buy when rates are high and coming down, rather than when rates are low and going up. Don't you are agree?

Buying real estate in Boston, when a downtrend is firmly in place is a fool's game. See the Case-Shiller index which shows that the downtrend in Boston housing market is firmly in place. Prices will keep dropping.

http://macromarkets.com/csi_housing/MSA/boston.asp

john p · Joined: 10 Mar 2006 Posts: 1820

I agree, get the lowest possible principal amount.

What is tough though is that sometimes you have to play the hand you are dealt. If its going to take a decade for something to happen, thats a big chapter of your life.

I further agree that you'd be a fool... Which is why my wife and I decided that whatever we bought, we'd be happy for at least a decade and if we hit a downward cycle we could still swing it and be happy there.

I think there is another way to look at it however. As an architect sometimes we separate things in plan and sometimes in section; meaning in New England the private areas are separated mostly in section: a second floor. In Florida it is typically separated in plan: a bedroom wing. Can you get the best of both worlds? I think that if you choose the right town you can get an affordable place to live and still cash in on Boston salaries. I see that the places that house the people who have seen unsustainable salary bubbles as the places that will see the correction. What I find unusual is that some of the people that are talking "Bubble, Bubble" are also talking about Brooklines, Newtons, and other expensive area. Why wouldn't someone move to Avon or Wilmington or Melrose? Run the numbers, it's not as bad.

Boston ITer · Guest