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Buyers stretching as prices soar

Posted by Scott Van Voorhis April 29, 2014 09:09 AM

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So just how are buyers managing to keep up with runaway prices, especially here in Greater Boston?

Well low interest rates have certainly helped buyers stretch as they scramble to keep up with a fast-inflating market.

When rates were in the 3s last year, it boosted buying power by as much as 30 percent compare to where rates were before the housing market crash. You can thank the Fed's multitrillion-dollar campaign to keep rates at rock bottom levels for that - it has effectively provided a huge subsidy for buyers.

But buyers are also getting help from some traditional and maybe not-so-traditional sources as well.

Banks and now even grandparents are jumping into the mortgage business, helping otherwise cash-poor buyers who can't afford to put 20 percent down to get into a house.

First the banks. Yes, lenders, are finally easing back into the lending game as well, with a Wall Street Journal piece drawing upon the example of a software engineer in Somerville who took out two mortgages pay for a $465,000 for a two-bedroom condo.

Thanks to gcbma, a regular on the comment board of this blog, for catching this piece and pointing out as well that listing price was $455,000. Evidence of yet another bidding war, real or concocted. (Sorry, it's behind the Journal's pay wall.)

The techie, named Brent, managed to squeeze by with a 5 percent downpayment, having taken out a first mortgage for 80 percent of the cost and a second for 15 percent.

And when the banks won't ante up, some buyers are turning to grandma and grandpa for a mortgage, as Jay Fitzgerald finds in this Globe piece.

Sounds like a recipe for a family meltdown to me, but the story notes that some of these deals are close to the real thing, with strict repayment terms.

Here's a quote lifted from Fitzgerald's piece.

"They treat it as almost a business investment, not just a gift," said Mary Gillach, a real estate agent at the Gillach Group, a Chestnut Hill firm associated with William Raveis Real Estate. "Grandparents want to help their grandchildren obtain the benefits of owning their own homes. So they help in a number of ways."

This blog is not written or edited by or the Boston Globe.
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About boston real estate now
Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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