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Boston Real Estate Now | Scott Van Voorhis

Home prices heading up, while pay still down

Highlights from the Boston Real Estate Now blog.

Housing bulls, you’ve had a great run lately.

The Great Housing Market collapse that all those gloomy housing bears were growling about — in which prices in Greater Boston would fall another 30 to 50 percent — is like a joke right now.

Continue reading below

Boston-area home prices are on a double-digit tear, driven in part by all our knowledge industry workers.

“Unemployment rates for the well-educated are strikingly low and income growth for these ‘knowledge workers’ has been solid,” notes the latest report from MassBenchmarks, an economic journal put out by the Donahue Institute at UMass Boston in collaboration with the Federal Reserve Bank of Boston.

So yes, housing bulls, prices are rising and sales just continue to go up.

But there are some reasons for concern as well. For starters, this housing recovery is being underwritten by the Fed, which is keeping interest rates at rock bottom lows with its policies. That amounts to a massive subsidy for home buyers, who can afford to pay about a third more than they would in a more normal interest-rate environment.

And frankly, many buyers need all the help they can get, especially if they are not fortunate enough to work for some hot tech or biotech firm.

Despite a slight increase in 2012, median family income in Massachusetts remains 5.4 percent below what it was before the downturn, the Massachusetts Budget and Policy Center reports.

And many workers, especially those just starting out, are still struggling, MassBenchmarks notes in its report.

If you are a young college grad stuck in a part-time job, you won’t be buying a house or a condo anytime soon.

Got $15 million to spare?

OK, now tell me Boston prices aren’t going nuts again.

For just a shade under $15 million, you can become the proud owner of 211 Commonwealth Ave., Boston’s largest townhouse, or at least the largest one currently on the market, according to Coldwell Banker, the listing agency.

The 1880s mansion features 12 bathrooms, 11 bedrooms, and 15 fireplaces spread out across 13,400 square feet. It was built in 1883 by William Powell Mason and his wife, serving as the family home until 1950, when it was converted to commercial use. In 1998, the current owners scooped up this mega-sized townhouse for $5.3 million and reconverted to residential living.

Among the highlights clipped directly from the press release:

“Expansive music room with fluted marble columns where some of the world’s greatest musicians and composers performed.”

“Entrance hall with twin crystal chandeliers and grand staircase of carved mahogany; a rooftop terrace with panoramic city views.”

“Large elevator, a heated garage that can accommodate up to six cars.”

Ready to pony up a cool $15 million?

Down payment help, at a steep cost

Apparently, the real estate market casino is back in full swing.

With home prices on a tear of a kind not seen since the bubble years, FirstRex is ratcheting up its marketing aimed at buyers who don’t want to sink all their cash into a single, illiquid investment.

The San Francisco-based niche lender will cover half your down payment in exchange for a 40 percent share of the profits when you sell your house.

FirstRex is seeing increased demand as lenders demand huge down payments and home prices spiral upward again, as a recent Bloomberg piece notes.

The company’s home territory is on the West Coast, but FirstRex now plans to expand into Massachusetts and Connecticut, the Bloomberg story says.

No surprise there.

At 20 percent down, you’ll need to come up with $120,000 to get into that $600,000 home, hardly an outrageous number within the 128 beltway.

Still, are you really ready to trade away a big chunk of your future home gains?

As home prices get crazy, it’s not so hard to see how services like this could become a crutch for home buyers.

Or, given human nature, this may also help some buyers stretch to buy more home than they could otherwise afford.

Either way, buyers are trading away their future gains to get into a house. When it is framed that way, it suddenly sounds like much less of a good deal.

Scott Van Voorhis is a freelance writer who specializes in real estate. For the full Boston Real Estate Now blog, visit www.boston.com/realestate.
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