Home Buying in 96793>Question Details

Jeffery Grif…, Real Estate Pro in Wailuku, HI

How much do prices have to fall before Buyers will make an offer?

Asked by Jeffery Griffin, Wailuku, HI Wed Jun 20, 2007

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I find it interesting to read through this almost a year later. I think you should have an answer by now.

Home prices will decline until they are at a point people can afford. By that, I mean banks are starting to revert to old time trends giving leases that people can afford on 1/3 of their take home pay. If a family makes $52,000 per year their take home will be about $3200 per month, 1/3 of which is $1075. My guess would be that prices will bottom out at about the $1200/month payment level for the average home in such an area. Some areas will, of course, be more expensive than others. But there must be an entry level market for move ups. I do not think Hawaii will be any different although prices may trend lower as other costs are higher and the recession is likely to limit the second home market for folks from outside the state.
1 vote Thank Flag Link Sat May 9, 2009
Great Post by John the Bruce...

"The anti-market timing Realtors® argument about “missing the bottom” is just a different flavor of the “if you don’t buy now, you’ll be priced out forever” argument. Both are equally worthless.

The market will not skyrocket up when it bottoms out; it will bounce along the bottom for a number of years. If the last downturn is any measure; and the current downturn appears to be much worse, you should note the following. During the 13-year period from 1987 until 1999, real home prices stayed roughly within the range of $125,000 to $150,000 – national average.

“Sold my home” said it best – the downturn is accelerating. Pricing will not get better until inventory stabilizes; and we’re a very long way off.

10 years is a long investment horizon. That being said, you can save a lot by waiting another 12 to 18 months. If you’re dying for a home, you should wait until at least September. Many markets will be having their “capitulation” moment come school-opening."

PRICES are going to keeping FALLING
1 vote Thank Flag Link Tue Aug 19, 2008
BEST ANSWER
Hawaii Home Prices will have to fall to 2004 levels or below.

Hawaii Sellers still believe in the $100,000 per year value increase. (Bought for $700,000 four years ago, their home is now worth $700k + 400k or $1,100,000).

NOT GOING TO SELL in this market. Realtors continue to take listings at unrealistic prices. STOP ALREADY.

That $100,000 a year rule of the past just does not work any more. How do these realtors explain recent price reductions from $200,000 to $2M?

Yes, prices will go up again in a year or two, but not as was seen in the "Bubble" period.

Real Estate agents with that 6% attitude can say the "medium" price is up, but that does mean that a Sale of $10,000,000 and a Sale of $750,000 have any relationship to what that house down the street will now sell for. Hawaii prices can vary greatly by a block or two.

Prices are going to continue to FALL. If Seller's are looking for Offers, than adjust to today's market.
1 vote Thank Flag Link Fri Aug 8, 2008
It's basic economics. There is a price that will bring offers and there is a price where EVERYONE is a buyer. If you are using a Realtor find out for the area, what's the market value... as it is listed you can monitor it. No showings means you're 10% or so off!
Web Reference: http://www.jrjarvis.com
1 vote Thank Flag Link Thu Jun 21, 2007
Joshua Jarvis, Real Estate Pro in Duluth, GA
MVP'08
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The only person that dictates maket value is a buyer. Today there are so many variables effecting current market conditions. With the sub-prime fallout and reductions in creative financing, you are seeing lower numbers of buyers and an increasing number of new listings. Price is the ultimate gas pedal in a transaction. The harder someone pushes the faster the process will go. There is no calculation or percentage that will answer this questions. The truth of the matter, is that you need to closely pay attention to your competing inventory and the absorption rates in your area to get a firm idea of where you might get a bite from a buyer.
Web Reference: http://www.myABQagent.com
1 vote Thank Flag Link Wed Jun 20, 2007
There's obviously not an easy answer to that question. You control the price you ask for your home. Your Realtor controls how much exposure it gets on the market. But no one controls the market, and this is a significant influence on selling price. Unfortunately for a lot of buyers, now that the skyrocketing market has settled down to something closer to normal, the prices that spiked upward with the market have been far more sluggish in coming down. Many sellers bought at inflated prices and now can't afford to sell their homes at a price the market will truly bear. But so many factors affect the competitiveness of a listing that it's really not possible to say where the watershed moment for that home's price will be.
1 vote Thank Flag Link Wed Jun 20, 2007
Aloha Jeffery,
A buyer's needs and personal situation determines the price a buyer will pay. If you are concerned about making a good, "safe" investment, then there is a formula you can use for yourself which will allow you to invest in real estate at a "good" point in time. Your available cash for downpayment, your other debts, your income, the prevailing interest rates, monthly loan payments. taxes, insurance are all important factors. Then I like to use prevailing rental income for the property you are looking to purchase as one of the key factors in determining it's value as an investment, even if you are not intending to rent it out. The reason I like to use this factor in my equation, is that in a worst case scenario, if you were to lose your source of income, then instead of losing your home by getting foreclosed on by the bank, how close do prevailing rents come to matching your total housing costs? The reason I like to use this factor is that you could always move out and rent a cheaper place for yourself while renting your home, thereby, keeping that home instead of losing it to a bank. I'm not saying that you always need to have a positive cash flow, which is the most desireable situation, but which is often near impossible in places like Maui, and most places in California, but I'm saying,to take a look at how much negative cash flow can you afford. There is also a formula for that based on a person's tax bracket and financial information. It's much more concrete than just saying that the market is bottoming out, so I better buy now or it's the top of the market so I should not buy or letting one's emotions play into their decisions. This way you are able to hold on to a property thru the bad times and benefit in the good times. Eighteen years in the lending business in both California and Hawaii, makes me always look at the financial side of real estate as I've seen alot of people make a ton of money and alot of people lose a ton of money, been through alot of booms and alot of recessions and still learning from each one! So if someone were to ask me when is a good time to buy, my answer is "it depends..." as price is not the only important factor.
0 votes Thank Flag Link Tue Aug 19, 2008
Last month, the Wall Street Journal had an article titled:
"The Housing Crisis Is Over"

http://online.wsj.com/public/article_print/SB121003604494869…

Also, listen to this NPR audiocast. An excellent summary!
http://www.npr.org/templates/story/story.php?storyId=90327686
0 votes Thank Flag Link Tue May 20, 2008
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