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

[bigchiller]

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?

[ThePythonicCow]

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

I don't think you can tell if this is a good buy from pricing history on that one condo unit.

Rather, I would be more concerned with the future occupancy rate of the entire condo complex. If there are many vacancies now or in the next year or two, then I would not want to live there. Vacancies lead to crime, disrepair and pricing collapse.

And, as it always should be, of course, one has to consider ones own financial situation and housing needs. It is best, especially in times like these, to be very conservative in commitments of future cash flow. Can you make the condo mortgage payment if you lose your job ... that sort of question? Can you find a more economical way to live?

Condos seem to get hit harder than some other forms of housing, so I personally would not touch one with a barge pole.

[bigchiller]

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

I don't think you can tell if this is a good buy from pricing history on that one condo unit.

Rather, I would be more concerned with the future occupancy rate of the entire condo complex. If there are many vacancies now or in the next year or two, then I would not want to live there. Vacancies lead to crime, disrepair and pricing collapse.

And, as it always should be, of course, one has to consider ones own financial situation and housing needs. It is best, especially in times like these, to be very conservative in commitments of future cash flow. Can you make the condo mortgage payment if you lose your job ... that sort of question? Can you find a more economical way to live?

Condos seem to get hit harder than some other forms of housing, so I personally would not touch one with a barge pole.

I agree with you. I only have about 60k saved up so purchasing that condo for 300k would wipe out my savings. I don't think I'm willing to risk wiping my entire savings in this economic environment.

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?

When do you think the right time to buy is?

[cjppjc]

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

I don't think you can tell if this is a good buy from pricing history on that one condo unit.

Rather, I would be more concerned with the future occupancy rate of the entire condo complex. If there are many vacancies now or in the next year or two, then I would not want to live there. Vacancies lead to crime, disrepair and pricing collapse.

And, as it always should be, of course, one has to consider ones own financial situation and housing needs. It is best, especially in times like these, to be very conservative in commitments of future cash flow. Can you make the condo mortgage payment if you lose your job ... that sort of question? Can you find a more economical way to live?

Condos seem to get hit harder than some other forms of housing, so I personally would not touch one with a barge pole.

Vacancies also lead to higher maintanence fees. Since the common charges must be split with the current owners. If it is a newer building, and there are less owners. The developer will initially keep the maintenance fees low, but after a while....

[cjppjc]

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

I agree with you. I only have about 60k saved up so purchasing that condo for 300k would wipe out my savings. I don't think I'm willing to risk wiping my entire savings in this economic environment.

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?

When do you think the right time to buy is?

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.

[labasta]

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

If this is the case then certainly I want to have a big mortgage out at a low rate?

BUt with super high inflation will your mortgage remain at a super low rate? Or will it jump up to a super high kick in the balls make me instantly bankrupt kind of rate?

Of course, if you can fix your mortgage for 10 years...

But the above comments about unemployment etc. are just as valid, if not more so.

[bigchiller]

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

BUt with super high inflation will your mortgage remain at a super low rate? Or will it jump up to a super high kick in the balls make me instantly bankrupt kind of rate?

Of course, if you can fix your mortgage for 10 years...

But the above comments about unemployment etc. are just as valid, if not more so.

30 year fixed is 30 year fixed, right? I should get to keep the house at 5%

[ricket]

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?

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??

[Captain3D]

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

I think 30 year fixed mortgages are fairly unique to the US. I know you cant get them in the UK. I am somewhat on your side with the idea that a big mortgage now is a good inflation hedge. I have opted to do it with rental property rather than my own place (I rent).

cheers...phil

[ThePythonicCow]

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.

Not so, trivially. I have taken quite a few loans in my day, and paid them all back just fine. So I am sure have many others on this board. Indeed, I'd be surprised if you yourself have never taken and paid back a loan. Very few of us have sworn off credit our entire adult lives.

You have taken the purist argument against usury, that it cannot work in an economy with a fixed supply of money because the sums to be paid back exceed the sums loaned out, and incorrectly restated it as an absolute indictment against all interest bearing loans.

So long as there are imbalances or growth in the money supply, some interest bearing loans can function just fine. Money supply growth need not even be inflationary, if the "real wealth" of goods and services purchasable with that money grows similarly.

Loans are a useful way to exchange money between individuals or companies or governments which place differing values on short versus long term liquidity.

Like all useful items, including food, drink, guns and government, debt can be used to excess.

[Sharky]

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

A few things to consider:

1. When inflation hits, it may not impact assets like housing. The impact is more likely to be in the things you consume than in the things you own.

2. If it's a good deal now, it may be even better deal in a few years. RE prices have shown no signs that they are anywhere near bottoming. Lots of Alt-A and prime mortgage resets are due this year.

One approach I've seen a few people do recently that you might consider is to rent with an option to buy. Seems to be acceptable to some would-be sellers as a way to at least have the building occupied and generating some kind of return, rather than just sitting vacant.

[ThePythonicCow]

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

When do you think the right time to buy is?

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.

I speak from experience .

Currently, I remain very liquid, being more concerned with volatility, cash flow and counter party risk than with long term investment strategies. My days of the nice house, big BMW and well dressed wife are over. I still miss that inline six - a fine engine.

[metalman]

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

'everything you know is wrong'.

remember... this spooky shit was written in 2005...

http://www.itulip.com/housingbubblecorrection.htm

where in this do you want to buy???

[ricket]

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

Not so, trivially. I have taken quite a few loans in my day, and paid them all back just fine.

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.

So I am sure have many others on this board. Indeed, I'd be surprised if you yourself have never taken and paid back a loan. Very few of us have sworn off credit our entire adult lives.

Unless I can pay for it outright or borrow the money at 0% interest and while also not having the authority to print my own Federal Reserve Notes (a.k.a. counterfeiting), and that right only being delegated to a quasi-public, but somehow unabashedly independent entity such as the Federal Reserve...then yes, I swear off credit. I do not, nor will I ever, intentionally ask to be and accept being stolen from by means of taking out a loan from any Bank that exists today in our current monetary system.

You have taken the purist argument against usury, that it cannot work in an economy with a fixed supply of money because the sums to be paid back exceed the sums loaned out, and incorrectly restated it as an absolute indictment against all interest bearing loans.

It *is* an indictment of all interest bearing loans, so long as it exists in our current monetary system, and the right to issue that money continues to be held by only a select group of people. It is a purist argument allright, because every single penny of the currency that I use for exhange of the goods and services that I offer to the economy is *purely*, as in 100%, aka the term 'pure', created from interest bearing loans. Inflation is always 100% inevitable in this situation. The supply of money *literally* has to grow just to continue servicing the debt. Inflation is, and always shall be, a monetary phenomena.

So long as there are imbalances or growth in the money supply, some interest bearing loans can function just fine. Money supply growth need not even be inflationary, if the "real wealth" of goods and services purchasable with that money grows similarly.

The flaw in your reasoning is that you are of the impression that the prices of goods and services ALWAYS go up. Again, you argue that I am being a purist, yet you see in absolutes just as I. There is no way to escape someone abusing the system, unless to just have no system *at all*. All men are incapable, for an infinite about of time, to stay 100% free from manipulation. The only way to prevent them from manipulating the money supply to their advantage, is to never allow ANYONE to regulate the money supply directly. If this had been done accordingly, we would NOT be using US dollars today (at least in their current form), we'd be using some other currency. But because of the blatant manipulation, we are still tied to the slavery that represents the US dollar hegemony.

Loans are a useful way to exchange money between individuals or companies or governments which place differing values on short versus long term liquidity.

Since when did "trading money" ever become a profitble business? This is applying some "value" to the money itself. But that's a MAJOR flaw in your reasoning. Money is the *medium* of exchange, not the *exchange* itself. Money is not a commodity. I also never said that the concept of loans was bad. I only say interest bearing loans, in the closed money supply of the US, where only a select group of policy makers determine who/what/how our money is controlled is detrimental to the prosperity of the United States. This is, unfortunately, the sad situation we find ourselves in now.

Like all useful items, including food, drink, guns and government, debt can be used to excess.

Debt is used as leverage for setting up a legal framework to loot and pillage those who unknowingly submit themselves to the scam that is interest bearing loans in our current monetary regime combined with the unregulated authority to create money via fractional reserve lending. Our whole financial system is a fraud, and those who call the shots (you know *someone*, *somewhere* is attempting to use the system to their advantage), and I refuse to participate anymore in it.

[ThePythonicCow]

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

The flaw in your reasoning is that you are of the impression that the prices of goods and services ALWAYS go up. Again, you argue that I am being a purist, yet you see in absolutes just as I.

My better judgement tells me that this little discussion we two are having here is futile.

However I will make one more feeble effort.

My reasoning in no way presumes prices ALWAYS go up. I have at times even borrowed money in what I expected to be a declining price market, if the value of that money to me was in sufficient backwardization to more than compensate me for the losses encountered repaying it with more expensive dollars.

Your bald claim that my reasoning presumed prices ALWAYS rise is baseless. The mental model you are imposing on the world is not valid. However it will almost certainly require more lessons from the school of hard knocks to demonstrate that invalidity to you than I have the will or means to apply.

May you live long and prosper and be so fortunate as to never need to make sense of my lunatic ramblings.