East Boston and the Subprime Mortgage Crisis

East Boston has not been immune to our country’s mortgage crisis. Between 1995 and 2005, East Boston properties multiplied in value. A three-family that might have sold for $150,000 in the mid 1990s sold for as much as $550,000 to $600,000 by 2005. Sadly, in retrospect, we realize buyers willing to pay the most for properties were the riskiest buyers with respect to financing. Very seldom were a bank’s terms and details known or questioned. The goal was to make sure a buyer had secured financing. Sellers entered into agreements with buyers because they were offering high prices for properties—most of the mortgages were approved and houses sold.

While some homeowners are currently in trouble, between 1995 and 2005, other homebuyers made huge profits. Real estate professionals saw dozens of buyers purchase real estate for $100,000 using risky mortgages and then resell those same properties for $200,000. Similar “subprime” loans were used for buyers of $300,000 properties who then resold them for $400,000. It was not unusual for buyers to make $100,000 to $300,000 profits on properties. Only when property values plateaued and there were no more windfall profits did the media and the country realize most of these properties were purchased with little money down and with very risky mortgages…the subprime mortgages that have lead to the crisis requiring a $700 billion bailout. East Boston is a great case study on “what went wrong” with our mortgage industry.

Please check back as we continue to update you on East Boston real estate happenings. To see all our listings, or to search MLS properties, head to the Tony’s Realty Website.

Email Tony with your questions or comments.

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