1. You are reading and processing national real estate, economic, and mortgage data. And true, national data has impact on local data. But across the country, there are markets that (a) have not peaked yet (i.e., prices still going up), (b) are just peaking, but very slowly, and having experienced a smaller bubble, and (c) have peaked 2 years ago and come down from the highs as much as 10 - 15%.
Yours could be in any one of those situations. And in any of those 3 situations buying vs. waiting is a tough decision.
Just because you think prices are going down does not mean that today you can buy at a price which would be prevalent a year from now. A year from now prices may very well be LOWER, but the market participants will set the price and transactions following will have to use that price as a basis.
So if you wanted to put your money where your mouth is, you SHOULD wait. This is my first point in why you are wasting your time.
2. Are you familiar with the paradox of lemons? Someone got a Nobel prize for that idea. Imagine 10 used cars, each offered at $5,000. The owners of 9 of the cars TRULY believe that their car is worth $5,000, and the owner of one of them knows that his car is worth $4,000.
You don't that one of the cars is worth $4,000, and you don't know which one it might be. You go see each of these cars, and don't see any substantial difference between them.
You then try your approach, i.e. low-ball all of them at $4,000, e.g. by sending a fax to each of them. And boom, to your delight, you get a response back. One of the owners accepted your $4,000 offer.
Now - if you think you are smart - which one of the 10 owners do you think accepted your low-ball offer?
This is a pretty standard setup in economics / game theory.
I am not saying you will end up buying a lemon. All I am saying is that you will attract lemons by making offers to everyone and their mother-in-lawl. Your offer will only get accepted by those who hold lemons, and, hopefully, you will find this out LATER. But in the process, you will have wasted your time.
3. It sounds like you have access to some scattered national data, but you don't have access to local data, and you are feeling frustrated. One part of you is pulling to buy, thinking this is the right time. Another part of you thinks, oh, wait, what about all this negative news, etc, etc.
You should make up your mind by studying the local data and your own situation (financial, family, etc). If you are buying something with the hope of appreciation, I think you will be disappointed, because most likely there will not be much appreciation in the next 5 years or so (some decline for a year or two to come, plus some slow appreciation).
If you are trying to get a good deal, IMO you should compare how good a deal is relative to your income, situation, and preferences. No one wants to buy a depreciating asset, but that depreciation might take 1, 2, maybe 3 years or more. While you might be correct in your opinion that prices are headed lower, suppose, for a minute, that they WILL be lower in 2009 than today. But for that price to realize you will have to WAIT until 2009. You are suggesting walking up to a seller, and saying, "Mr. Jones, I know your house is worth $400K today, but it will only be worth $350K next year. I suggest you do yourself a favor and see ME that house for $350K today."
Do you think any rational seller would do that?
All local markets are different. While I do not know anything about the local market in Virginia Beach, make sure you understand that even different neighborhoods within Virginia Beach will have different market climates.
There have been lots of Trulia Voices Q&A regarding this same topic. There is no good blanket answer to your question, because the strategy regarding each individual property should differ depending on the property in question itself, where it is located, the recent comparable sales data, it's asking price, the seller's circumstances, what entity you are actually negotiating with, etc.
I do not recommend throwing out lots of lowball offers just to see what sticks...doing so is no better than tossing darts at a dartboard with your eyes closed, and it will prove to be a big waste of time. I suggest carefully evaluating each situation individually with your agent. I have represented buyers where we have offered more than 15% below the asking price...on the other side of the coin, I have represented buyers where we have offered more than the asking price (yes recently) because there have been other offers on the table from other parties. There are so many factors to take into consideration!! Don't navigate these waters without a skilled agent...
I think you're on the right track. Low Ball them all. This over-priced market stems from the ones that are now saying that things arenâ€™t that bad. The greedy realtors and lenders, all of whom are commissioned based. If realtor truly cared about there communities, how about giving back. Maybe instead of working for a commission. Look at a flat fee approach. And stop taking bonuses from the seller when representing the buyer. Iâ€™ll never use a realtor again.
"Every property ownership carries plenty of tax write offs that are by far better than renting. Also homes always appreciate in value, kind of like a low risk stock. You have to be in it for a while to see a good return."
This is the kind of dribble from realtors that created the bubble. Thanks Irena. By the way, you are wrong. Housing right now is like a high risk stock. Why take chances. Rent, wait for the bottom. No need to gamble with your future.
So, it depends on the local market. Homes will always increase in value, but it may take a long time, such as a decade. You must do your homework, checking the local values, so you can recognize a good investment when you see it.
You, like the current owners, can't read the future, so you can't tell when or why you will sell in the future. "Why" is the big question that helps you find a good choice. Not every seller is just testing the market. Every seller has a background--how much they have invested in the property and their tax situation. This is, I think, what helps to determine what they will accept.
Besides, when I read about the prices in NC here, I see them as dirt cheap compared to CA. Out-of-state buyers from a richer market may keep the prices up to a degree.
Ox, the challenge for you will be that many good Realtors will quickly dismiss you as a buyer. Some of my best clients are highly educated. I respect them, and they respect the knowledge and experience I bring to the table. I prefer to work in relationships of mutual respect. If I picked up that attitude represented here in your posts, I would simply allocate my time in a different direction. Ultimately you create your own self-fulfilling prophecy, since many knowledgeable agents will quickly dismiss you and you will be left to choose from those who need to or are willing to accept your disrespect.
No disrespect? How can I not feel disrespected when you spit on a profession I have poured my heart and soul into?
I have no commission and livelihood at stake answering your questions...and if you want to throw your many darts at the large dartboard at your disposal, go for it. You will waste tons of time by thinking the shotgun approach is any kind of "strategy." Please go get your real estate license, since you obviously feel any monkey with internet access can do a Realtors job, and that Realtors add no value to real estate transactions.
If the home is already priced correctly (aka at the current market value), then it will sell at or very near it's list price minus seller concessions for closing costs (2 to 3 percent) - hence the over-90% sales to list price ratio. If it's overpriced, it's usually due to seller's greed and ego, which makes it even harder to negotiate the price down.
Just like you don't pay 15 percent less for a brand new car because it loses that much value within 5 minutes of you driving it off the lot, real estate is sold based on recent comps and today's market conditions, not what you speculate they will be 6 months from now.
And a home is just that - a home/shelter. It's a home/shelter #1 and an investment #4 or #5. It's amazing that people will buy a car even though it loses 15 percent of it's value the second they drive it off the lot, but they won't buy a house for fear of it depreciating short term while increasing in the long-term.
None of us can predict the future so that's your call on whether you wish to rent for some time and then buy or buy now. Either way though, if you're in it for the long haul, you'll end up ahead in the end.
As far as what to bid on a property, talk to a good Buyer's Agent who will go over the comps for the specific property you're interested in and guide you on what to offer and how to best negotiate the price and terms.
And ARMs started adjusting a while back hence the "mortgage crisis". More will adjust in the future, but the market has already felt the brunt of it.
My office serves the Manhattan market which seems to be one of the few strong markets. However I am intimately aware of the surrounding suburban neighborhoods where homes are lingering on the market. And from my scouting, my assessment is that the properties are simply overpriced. So my advice remains make an offer that you think the property is worth and ignore any type of "%" discounts. They are simply not applicable.
"the seller could not accept it because the new loan amount could not satisfy their current mortgage payoff"
uh, that's CALLLED a "Short-Sale"!!
You are right, agents livelihood are at stake, which means most of the not so serious agents are getting out of the business. I would disagree with the grocery store clerk that it is a good time to flip houses. If you are looking at your purchase as an investment and not putting a roof over your head, you will want to be able to hold on to it for a few years anyway. Maybe purchase - rent it out to all these folks afraid to buy and then sell it later. Even with smaller appreciation precentages the advantages of homeownership far outway thowing your hard earned dollars on rent - never to be seen again.
As far as the NAR putting a positive swing on the real estate market, they keep repeating that real estate is local. Yes - in some areas of the country average sales prices have gone down i.e. florida. Maybe some local numbers will show you that it isn't as bad here as the rest of the country and the national news want you to think.
I am an agent on the peninsula, so here are some numbers for the peninsula - two different areas - two completely different price ranges and types of buyers.
South York County
jan-oct 2003 avg price $237,728 Days on market 30 total sold 554
jan-oct 2004 avg price $270,736 DOM 29 total sold 510
jan-oct 2005 avg price $325,000 DOM 33 total sold 594
jan-oct 2006 avg price $340,314 DOM 48 total sold 531
jan-oct 2007 avg price $374,823 DOM 80 total sold 521
South Newport News
jan-oct 2003 avg price $67,235 Days on market 73 total sold 230
jan-oct 2004 avg price $73,867 DOM 76 total sold 269
jan-oct 2005 avg price $106,955 DOM 56 total sold 303
jan-oct 2006 avg price $119,553 DOM 56 total sold 336
jan-oct 2007 avg price $136,367 DOM 77 total sold 227
As you can see the average sales price has gone UP in both areas. Yes days on the market is longer - that means you, the buyer, has a choice of homes (you don't have to settle for a house that is just "OK" and you don't have to write a contract on the hood of your agents car). The drop in volume for this year in south newport news can most likely be contributed to many of the subprime lenders going belly up this year, so fewer buyers are qualified. But number of homes sold it is still very close to 2003 when the boom was starting.
Interest rates are still at historical lows and in Hampton Roads homes are keeping there value and appreciating. Why not buy?
Your agent should be able to show you the same type numbers for the area in virginia beach you are interested in - maybe values are going down there - but your agent is an expert in the field and should be able to tell you. If you don't have a buyer's agent, you should get one. If you don't want to talk to one at this point, let me know what area of virginia beach you are looking at, and I can pull up the same numbers for that area.
You are 100% correct and people, especially Realtors, just don't get it. And to make matters worse, it is hard to get people to change in this country. We like to see ourselves as the most intelligent people in the world but the reality is that we are far from it. Check out this link, I plan to post it in a few places, but to be honest, I've given up on trying to talk to these so-called "Real Estate Professionals". There are opportunities in this chaos to help people and make money, but it requires "free thinkers" and America is really short on that. Peace.
zip code 23693 - resale detached homes built after 1995 between 2300-2700 sf 4 bedroom 2 bath
year list price sales price #of homes
2003 255,162 255,243 21
2004 293,525 293,513 16
2005 344,718 344,700 19
2006 375,148 374,196 25
2007 389,422 384,452 27
Still going up - and there are more sold in 2007 - and the year isn't even over yet. (this may be different in a different zip code)
As for current homes on the market price reductions - there are five homes that have been on the market over 30 days that match the same search criteria. Only one has reduced their price to slightly below the average sales price from $405,000 (hmm....that seems to be about $20K high) to $379,900 - maybe if he had priced it right to begin with it would have sold at the average in a timely manner. Let's see, there is another one that bought in '05 for $429 and wants to sell it in '07 for $535,000 hmmm.....overpriced you think? maybe this one you can take a bigger reduction on b/c it is over priced by so much. (See every home is different - if I was a buyer's agent in this situation, I wouldn't let you offer anywhere close to $535 - this home would be a case of the 20% you asked about in your first post - but are you really getting a deal, or are you buying it at market value?) So the question is - is the seller losing $100K when he does eventually lower the price or did he never have the $100K to lose?
That's all from me. I hope your buyers agent charges you a retainer fee :)
I think a buyer should bid at least 30% - 40% in markets that are really overpriced and about 20% in other markets.
Just saw this. Bubble Boy, I have news for you: it isn't the OLD people I see upside down in their houses and it isn't the OLD people I see who bought a brand new house 4 years ago for 250,000, pulled out another 250,000 from a home equity loan, have a handful of small children, stay at home mom, 2 brand new SUVs, all new furniture that looks like it was just delivered from Pottery Barn, an in ground pool and all top of the line appliances and now tell me the "have to get 550,000" for a 400,000 house because they want to make "a LITTLE profit". NEWSFLASH! You MADE the profit, sorry but you spent it already. This OLD PERSON was 50 before I bought an all new living room set, uses grandma and grandpa's antique (old) bedroom set still, and has never bought a new home OR a new car. This is not to say we are poverty level, in fact we have a 6 figure income, but we also have our priorities straight. I see twenty somethings paying over 1,000 a month on a LEASED car. It used to be you bought a house and lived with the kitchen. "Redecorating" meant painting the walls a different color and cleaning the rug the previous homeowner left. If there is anything us OLD people are responsible for, it is enabling these spoiled brats.
I will compile a list of my desired homes and low ball all of them.
Go for it! And good luck, you may get one!
What will you do then? Flip it for quite a bit more than you paid, and become yet another seller who will be low balled by folks like you? ;)
If the listing service was made public, many agents would be out of a job.
No we wouldn't, Ox. Last I looked, my dues paid for that listing service. We would just not pay for it and take all listings private and cobroke them, like we did before MLS existed.
Although days on the market have increased in the last few years, home prices in the Hampton Roads area are standing their ground. In some areas they actually increased slightly. We also don't have as many foreclosures as the rest of the country. The national news paints a picture of gloom and doom in the real estate market, but remember the real estate market is regional - it's not as bad as it seems.
A lean-to is a "shelter". Even people who have retirement savings utilize the equity they have in a home for retirement. My parents bought a house in Huntington for 48,000 in 1968. Is it permissible that they sold it for almost a million PRE bubble, around 1999? And used the proceeds in their retirement. My grandparents, who were around during the depression had nothing BUT their homes as retirement income. Get a grip, life is not fair, if you can't afford a home either get a different job or look for a home you can afford, Mr. Bubble.
I read your article on your website:
What does a â€œMarket turn aroundâ€ mean?
April 30th, 2008 . by Mike Kelly
I always wonder what the consumer and/or talking heads mean by the â€œMarket turning aroundâ€? What? Back to the days of 20% yearly appreciation? Affordablity? Sane underwiriting guidelines? I heard a talking head stating the Fed was going to try and stop the â€œspiral downward of home pricesâ€. Huh? The fed is NOT going to restore property values to a level where those now facing the ravages of â€œneg-amâ€ loans, option arms payments and nothing down scenarios will stay put in their homes. These folks, the vast majority who should NOT have been allowed to buy homes to begin with, are looking at increased loan payments with falling values and thinking, â€œWhy am I paying this monthly payment to live here!??â€ Your loan adjusts, youâ€™re paying $4,000 per month to live in a modest production style home while you could â€œrentâ€ a much nicer place with litle or no reponsibiliies. They move! They bail! Itâ€™s O.K. to bail now! Itâ€™s socially acceptable! Iâ€™m a victim of bad Realtors, lenders, Wall Street, everyone but my own actions.
That being saidâ€“is it a bad time to buy when the REOâ€™s I have listed get 15-20 offers and overbid on the home driving the cost skyward? Should we allow 3% down with 580 FICO scores? Sub-prime scammers on the prowl again? Nope!! FHA!!
I got news for yâ€™allâ€“itâ€™s the wild, wild, West out here in the Greatest State of California. The timid need not apply!
How many bank owned REO listings do you have? I think they raised the limit on the FHA so the timid people in cali can buy high priced homes.