Is now a good time to buy? Seems so... Boston area

[Sharky]

Re: Is now a good time to buy? Seems so... Boston area

For California, the right time was in the early 1980's or before, and the right time to sell was a couple of years ago.

Cool. I bought my first house in California in 1979, traded up regularly and sold my last in 2006 and 2007, before and right after moving to NZ.

I only wish my timing on other aspects of my life had been as good...

[Sharky]

Re: Is now a good time to buy? Seems so... Boston area

That's because the extra cash in this closed system you seem to have come across, by 'making it' of course, was actually brought into existence in yet another interest-bearing loan. You didnt 'make it' at all and certainly didnt print it yourself. Either your employer has taken a loan out to 'expand' his business, or you yourself as an entrepreneur has taken out a small business loan to get your business off the ground. Or, the business is only open/profitable because all of the customers have opened HELOCs (with interest), or credit cards, or *their* employers have taken out loans. 100% (or enough to make it effectively 100%) of our currency is created by loaning it out, with interest.

Yes, 100% of currency and credit is created through debt.

The flaws in your logic are that money can only be used one time and that money has to be created in order to be earned or spent. Money circulates. Here's a simple example:

I have $100, and loan it to you at 10% interest. There is no other money in this closed system.

When a loan is paid back, interest is paid first. So you pay me $10 in interest. Now you have $90.

Next, I hire you to do some work for me. In payment for that work, I give you the same $10 you previously gave me for interest. Now I have zero and you have $100.

Then you pay me back the $100 principal. Viola. Loan and all interest fully-paid. No magic or infinite money is required.

The danger comes when interest is paid by borrowing. The laws of compound interest will quickly catch up with you -- which is of course what the government is doing.

[ThePythonicCow]

Re: Is now a good time to buy? Seems so... Boston area

Cool. I bought my first house in California in 1979, traded up regularly and sold my last in 2006 and 2007, before and right after moving to NZ.

I only wish my timing on other aspects of my life had been as good...

Nice timing. With that, you should be wealthy enough that the rest doesn't matter ;).

[Glenn Black]

Condo No Go

Recent court case in Canada has resulted in condo owner losing everything. Major repairs were needed for 1 unit. Common account for maintenance didn't have sufficient funds, so all codo owners were asked to vote on increase, and it was turned down. Condo unit owner with problem sued, judge decided that all units must be sold and proceeds divvied up among condo owners, next owner can fix problem. Selling broken building in down market caused everyone to lose shirt and condo, proceeds insufficient except for 1st & last months rent in apartment. Bye-Bye home equity. Condo is really bad move in this market. Fee simple home deed gives you better protection, but only in good area. I agree with others that we are still a long way from real estate bottom. Sub-prime ($1 trillion) has passed through. Next is Option-ARM and Alt-A worth about $1T each, so we are only 1/3 done. Guess which way property value will go when that sh*t hits the fan?

[ThePythonicCow]

Re: Is now a good time to buy? Seems so... Boston area

judge decided that all units must be sold

King Solomon -- deciding that all the kids in the class must be cut in half, because one of them had disputed parentage :eek:.

Either I don't know all the relevant facts of this case (most likely), or else that judge is a freakin' idiot (equally likely :rolleyes:.)

[ASH]

Re: Is now a good time to buy? Seems so... Boston area

But on the other hand so many people on this forum believe SUPER high inflation is coming sooner than we think. If this is the case then certainly I want to have a big mortgage out at a low rate?

Here's another question in the "will I be able to stay employed?" vein: in the event of high inflation, will your income keep pace? The idea that you can pay your loan back in devalued dollars is all very well and good, but it's not a given that the real value of your paycheck will be preserved. There is more than one type of inflationary mechanism. If we got a classic price-wages spiral, and you stayed employed, then yeah -- phat city if you've got a big fixed rate mortgage. On the other hand, iTulip is expecting cost push inflation from a sudden weakening of the dollar for foreign exchange. Just because it costs more to import energy and manufactured goods doesn't mean your paycheck will be any bigger.

The advice I've read on these pages has been overwhelmingly in the negative, as to whether now is a good time to buy real estate. If you are so sure that super-high inflation is on the way that you'd buy a condo on that basis, then a better plan is to take a healthy fraction of that $60k, invest it in something that will do well in a highly inflationary environment, and then buy the condo with that later. (Although I'm prejudiced against condos, so I would never buy a condo myself.)

[jimmygu3]

Re: Is now a good time to buy? Seems so... Boston area

There is never a "good time" to get scammed.

Every loan that is ever issued that charges interest, is mathematically impossible to pay back due to the very nature of how money is issued by the Federal Reserve.

Unless you can put 100% down and/or get a 0% interest rate, you are being stolen from and should never take the loan out. Would you willingly go to a bad part of town so someone could hold you up at gunpoint and steal all your money out of your wallet? No? Then why would you let a bank steal your property from you by promising to give up your property if you cannot pay back an impossible contract??

Because your assertion is false.

[jimmygu3]

Re: Is now a good time to buy? Seems so... Boston area

Is now a good time to buy a 2br condo in the Boston area?

Lets use an example property: Watermill place in Arlington, MA, a large condo complex built in 1988

I looked at a fairly nice 1000sqfoot condo on the 4th floor which was Listed at 300k. From public record I discovered that they paid 180k in 1997 for this place. Units in this building were selling near 400k at the peak and they've come down drastically. They might go lower, still.

Lets compute the total mortgage principal + interest payments assuming 30 year fixed and 20% down for the 1997 purchase and a hypothetical 2009 purchase. Using zillow's mortgage calculator (http://www.zillow.com/mortgage/calculat ... ulator.htm)


1997
Purchase Price: 180,000
Mortgage: 144,000
Down Payment: 36,000 (20%)
Rate: 7.5% (average in 1997)
Monthly principal and interest payment $1,006.87

2009
Purchase Price: 300,000
Mortgage: 240,000
Down Payment: 60,000 (20%)
Rate: 5.0% (I was pre-qualified yesterday for 5%.)
Monthly principal and interest payment: $1,288.37


Finally, using an inflation calculator based on official CPI numbers (http://data.bls.gov/cgi-bin/cpicalc.pl) I calculated how much 1006.87 would be worth in 2009 dollars. The result:

$1,006.87 (1997 dollars) = $1,324.57 (2009 dollars)

So buying this condo now at 300k will give me a better monthly payment than I would have gotten in 1997 at 180k. Sure, people that bought in 1997 were able to refinance and get their rates down below 5%. If I purchased now at 300k I doubt rates would ever decrease substantially enough so that I could refinance, but I find it very likely that rates will go up, and way up once the Obama inflation bills start hitting the system. Once inflation hits over 5% then I start profiting from the inflation by making my mortgage smaller in real terms.

Maybe I'm wrong, but I'm concluding that if one believes high inflation is a few years away, then now is a great time to buy. If there will be no inflation, then I would say now is not a good time to buy because our economy and job market is much worse today than it was in 1997 and I think prices will continue to slide.

What do you guys think? Good time to buy? inflation or not?

FWIW, I think the time to buy is not now when rates are at historical lows and values are in freefall. The time to buy will be when rates are high. If mortgage rates hit 15%, that same $1288 payment will cover about a $100k mortgage. That's when you come in and buy it for cash.

My sister was telling me how she could buy a condo at auction for for $100k and the rent will cover the payment. I told her to stop thinking about the payment and start thinking about spending ONE HUNDRED THOUSAND DOLLARS you don't have on a condo you don't even want. It's just the lingering housing bubble dogma that makes us even consider these things at a time like this. Once we all wake up from that collective brainwashing, homes will be valued for what they are- a place to live. Their values will parallel incomes. When incomes start to rise and interest rates peak we will see the bottom in housing prices.

Do whatever you want, but I'm keeping my powder dry through all these false bottoms.

Jimmy

[serge_oc]

Re: Is now a good time to buy? Seems so... Boston area

It's the price, not the monthly payment.

If price is low enough, then you can manage to pay it off inflation or deflation or what not.

IMO, it's high time to proclaim 'affordable monthly payments' strategy DEAD.

It is by means of sneaking low-monthly-payments-for-idiot-masses that prices got so high to begin with. Then the music stops and what seemed like a great monthly payment now must be spent to put the food on the table (in your new motorized home).

IMO, it is NOT a good time to buy. Prices will come down, especially when inflation kicks in, because interest rates will skyrocket.

[touchring]

Re: Is now a good time to buy? Seems so... Boston area

What if this?

1997
Purchase Price: 180,000
Mortgage: 144,000
Down Payment: 36,000 (20%)
Rate: 7.5% (average in 1997)
Monthly principal and interest payment $1,006.87

2009
Purchase Price: 300,000
Mortgage: 240,000
Down Payment: 60,000 (20%)
Rate: 5.0% (I was pre-qualified yesterday for 5%.)
Monthly principal and interest payment: $1,288.37

2012
Purchase Price: 180,000
Mortgage: 126,000
Down Payment: 54,000 (30%)
Rate: 10.0%

[Sharky]

Re: Is now a good time to buy? Seems so... Boston area

Nice timing. With that, you should be wealthy enough that the rest doesn't matter ;).

I've never run the numbers, but I don't think I did much better than inflation over the same time period. After taking interest costs, property taxes and agent fees into account, it was probably a net loss -- although of course I had a place to live.

What's more annoying is that I completely missed the tech bubble, even though I was living right in the middle of it in Silicon Valley. It never made sense to me, so I never invested in it, although I did have the "pleasure" of getting reamed working for a few startups. At least I didn't lose my shirt when it collapsed, so maybe it's all good in the end.

[petertribo]

Re: Is now a good time to buy? Seems so... Boston area

Boy. This question gets asked a lot. Do some searches. I'm not being difficult. It's just that some good advice has already been given.

Agreed. In addition no one here knows how old you are, married, kids, occupation, etc. Tolerance emotionally and financially to risk. Most of the factors which would go into the decision are unknown.

I have never bought housing as speculative investments. I bought housing as a place to live and, if I had some extra money, enjoy. Both times I bought, I paid cash. That made me a Homeowner not a Homedebtor.

As far as condos, as some have posted, wow, baby. How about the condo association, your mini version of DC, who runs that? Who will vote to TAX you against your will for some building bailout or unnecessary frill? Will some sociopath take over the condo association? This level of uncontrollable and unpredictable GOVERNANCE draws a thumbs down from me. My wife worked with a naive woman who bought a condo emotionally that had only two other owners. Yes, she was odd woman out with two real party-hearties. Ah, the joys of sleepless nights in your very own condo.

Have you read numerous books about buying your own home? Watch out for FIRE books which will encourage you to buy, buy, buy!

Have you fully researched rent v buy? I made more money renting than I ever did owning housing. Sit down and crunch those numbers. There are books which will show you how to make this comparison. That would be an interesting thread rent v buy present day.

Have you considered all the housing alternatives in your area? For instance, commercial locations that could be used for housing? A lot of urban areas with lofts and commercial space have over the years been gentrified and some folks have enjoyed a unique style of living while enjoying a good investment. I once rented a very large four room unheated flat in a blue collar part of the city. Easy subway ride downtown and to work. It was cheap, cheap and I banked all the profits. I fondly remember the neighborhood and the whole lifestyle.

Without knowing more details, do not buy.

[Jay]

Re: Is now a good time to buy? Seems so... Boston area

Is now a good time to buy a 2br condo in the Boston area?

Lets use an example property: Watermill place in Arlington, MA, a large condo complex built in 1988

I looked at a fairly nice 1000sqfoot condo on the 4th floor which was Listed at 300k. From public record I discovered that they paid 180k in 1997 for this place. Units in this building were selling near 400k at the peak and they've come down drastically. They might go lower, still.

Lets compute the total mortgage principal + interest payments assuming 30 year fixed and 20% down for the 1997 purchase and a hypothetical 2009 purchase. Using zillow's mortgage calculator (http://www.zillow.com/mortgage/calculat ... ulator.htm)


1997
Purchase Price: 180,000
Mortgage: 144,000
Down Payment: 36,000 (20%)
Rate: 7.5% (average in 1997)
Monthly principal and interest payment $1,006.87

2009
Purchase Price: 300,000
Mortgage: 240,000
Down Payment: 60,000 (20%)
Rate: 5.0% (I was pre-qualified yesterday for 5%.)
Monthly principal and interest payment: $1,288.37


Finally, using an inflation calculator based on official CPI numbers (http://data.bls.gov/cgi-bin/cpicalc.pl) I calculated how much 1006.87 would be worth in 2009 dollars. The result:

$1,006.87 (1997 dollars) = $1,324.57 (2009 dollars)

So buying this condo now at 300k will give me a better monthly payment than I would have gotten in 1997 at 180k. Sure, people that bought in 1997 were able to refinance and get their rates down below 5%. If I purchased now at 300k I doubt rates would ever decrease substantially enough so that I could refinance, but I find it very likely that rates will go up, and way up once the Obama inflation bills start hitting the system. Once inflation hits over 5% then I start profiting from the inflation by making my mortgage smaller in real terms.

Maybe I'm wrong, but I'm concluding that if one believes high inflation is a few years away, then now is a great time to buy. If there will be no inflation, then I would say now is not a good time to buy because our economy and job market is much worse today than it was in 1997 and I think prices will continue to slide.

What do you guys think? Good time to buy? inflation or not?

\
I owned a 3br condo in downtown Boston for just over two years and sold April 2006. While I loved living in the city, pre-kids, I would be very reticent to make that decision again. In addition to the advice already given which is solid, I would also consider what happens when/if other units go into foreclosure. Who pays for the loss in condo fees for the building? The common areas need to be maintained and unexpected expenses can and do occur for the building.

[Rafaelloello]

Re: Is now a good time to buy? Seems so... Boston area

We own a 2BR condo in Boston (Aberdeen), purchased in 2002 for $260K with a $90K down payment. We've refinanced once (for less principal, if you can believe that), currently owe $155K at 5.75%. We live in one of the first condo conversions in all of Boston, converted in 1978, constructed in 1928. We have a very stable association with good reserves, extremely high owner occupancy and it's just a really nice place to live. 42 of 50 units are 2BR and 46 of 50 have working fireplaces. Units are mostly 850-1050 square feet. Nice as it is living here, I know of a few owners who are under water and a neighbor of ours made what I feel was a bad decision: she bought a foreclosure in a town nearby and has her beautiful and empty unit here on the market for what it will take her to get out of the unit without bringing money to the closing table. Unfortunately for her it's still priced $25K too high and I suspect she will eventually be foreclosed upon. On top of this, she emptied out her 401(k) to buy the foreclosure she now lives in. It's ironic that she bought a foreclosure to live in and will ultimately be foreclosed on her other property here. If she loses her job she will be foreclosed on both. The values here have plummeted from $360-$420 at the peak (based on unit size/loc) to $300-$360 right now. My neighbor's unit should sell for $300K right now, but she's been lowering her price for months and she's only down to $325K right now, I suspect that's close to what she owes. I think she's doomed. OTOH, if she gets foreclosed, so what? She lives in a home she likes better right now and she only has to make the payments on that one to keep it. I would not be surprised if you see a trend of people buying cheaper across the hall and walking away from their under water mortgage on the unit they just left. So long as occupancy stays high, condo associations won't suffer too much. But if occupancy drops, look out. Though we like owning our property and won't sell as it meets our housing needs, I suspect that prices will continue to fall for perhaps two more years. Interest rates may indeed advance ahead of the housing bottom, so the optimum entry point is still a great unknown. I would wait if I was you.

[flintlock]

Re: Is now a good time to buy? Seems so... Boston area

I think you could flip a coin and won't necessarily go wrong either way on a monthly payment basis.. Historically low mortgage rates are something to consider. So I think your idea does make some sense IF you end up staying in the condo for 30 years and IF the condo doesn't end up with a lot of foreclosures, repairs, or other hazards of multifamily ownership.

As with any condo, you run the risk of being assessed extra for repairs on this 20+ year old building. Something that will become more and more likely in a dropping market where people walk away from their units and prices are falling. Like Ash, I personally don't like the idea of buying a condo. Local markets differ of course and you'd know more about your area than me. If prices fall, and I think they will, what if you need to sell and move? You'll lose the advantage of the low rate( which was a big reason to pull the trigger) AND lose value on the home. Most people don't end up living in small condos long term. Will you?

Another issue you may want to consider is the crime and safety in an urban area if TSHTF. I'd prefer the ability to move unencumbered by ownership. Will the area be one you'd want to live in if crime jumps way up?

What are the rents going for in the building now? Remember, the rent may be higher, but a renter doesn't have to insure the unit, pay taxes on it, and has more flexibility if his situation changes.

Personally, I think buying any home makes less sense if you are not in a profession with solid roots to a particular area. I own my own business and don't need to worry about being transferred or losing my job. I'm basically here for the long haul( I hope!) You might be in the corporate world where almost nothing is safe these days. Or end up having kids and needing more space, or whatever. I think the advice many on here would give you is that keeping your options open may be a lot more valuable long term than saving a few hundred bucks a month short term.

Good luck