February 29, 2008
Beacon Hill/Back Bay: You Can Afford It - and Why You Can’t Afford Not To
O hai, everybody!
Big LOLs to Ben Bernanke’s recent comments on the state of the economy. Even after foreclosures and record oil prices have left the nation utterly pwnt, and now that fiscally irresponsible maneuvers are being fobbed off as a solutions, the fed chief still says there’s no risk of stagflation if interest rates are lowered further. O RLY? The current exchange rate sure doesn’t seem to think so.
So what to do with your dollars to keep them from becoming cents? Traditionally you’d invest in a commodity like oil or gold, but obvs - people have already done that, leading to similar, if less severe, inflation. Yet one the price of one hedge against inflation is lower than it’s been in sometime: real estate.
You might still be wondering if the housing market is safe yet, and frankly you’d be a fool not to. But combine the current, nonsensically low interest rates with the dearth of credit-qualified buyers, and add that to the historically low prices: it’s a buyers’ market like you’re unlikely to see ever again. This goes double if you’re a first time homebuyer, someone purchasing a second property, or any other consumer not looking to sell a home while buying a new one.
Now, this does depend on where you’re looking to buy. You might want to steer clear of Hendry Street (though I hear the mice there are delicious), or currently trendy locations, but traditionally desirable neighborhoods are unlikely to decline steeply, and their high-end improvements aren’t currently over-plumping sales prices.
The worst mistake right now is to assume you can’t afford it - plenty of properties in both Back Bay and Beacon Hill are available for less than 300k. Even if it’s in a basement, the convenient location and long-term desirability will retain value, either as a home, rental property, or investment (though I’d be more cautious with the third option). Here are a few more tender vittles to whet your appetite.
Kthanxbye.
-Econ Cat
Mike said:
Huh, $279k for a 449 s.f. basement is supposed to be a “historically low” price?
February 29, 2008 10:38 PM
Avi Rome said:
Great suggestions Econ Cat. It’s always refreshing to hear someone remind people of the ancient adage about location.
Just fyi, depending on your definition of trendy, the South End has been trendy for about 20+ years and as far as your sound advice about insuring yourself against steep declines, in the early 90s recession and real estate downturn, the most coveted area of the South End at the time (closest to the Back Bay) actually held its value pretty well.
Excellent point about the “dearth of credit-qualified buyers” but something that you or your colleagues might consider writing about soon that hasn’t really made it into the local media/blogosphere is that the guidelines for condos in the underwriting process have tightened dramatically even for buyers putting as much as 20+% down. It’s a good time for various condo associations to be examining their budgets, addressing any arrears in condo fees, etc, something that lenders have been lax about the last 10+ years. A highly qualified buyer can still find trouble financing a home if it’s in an association with a flimsy budget.
March 1, 2008 9:36 AM