Let me share some thoughts..... At one point in my career, I worked for a community bank [there are very few left today]. That was before there was a product called home equity loans or home line of credit. It was also a time when the mortgage lender verified your income and used a ratio to calculate the maximum mortgage credit allowed. Way back then it was something like two weeks pay for your mortgage principle, interest, taxes and insurance. Buyers were required to make a down payment -- 10 or 20%.
Fast forward and we no longer have lending guidelines, the big banks created home equity lines of credit and the bank appraisal departments inflated the values of homes to give more credit. Foolish homeowners borrowed against their over appraised homes. Foolish buyers bought homes without income or down payments. Big banks sold these credit debit obligations to other countries. Then the house of cards came tumbling down!
Now, banks will not lend to those who can afford to borrow and appraisers are devaluing homes by comparing market prices to distressed sales, foreclosures and short sales.
Buyers and Sellers beware! It is still a good time to buy; however, buy what you can afford --- no more than 1.5 weeks pay to cover a monthly mortgage payment. Sellers, do your homework. Do not let a realtor tell you what your home is worth ---- remember any fool can make numbers tell any story. One thing still holds true ---- location, location, location!
Yeah, it looks like i will have to wait awhile until the market naturally comes down to where it should be. It's frustrating though bc you are seeing prices coming down 50% in some cases in NYC and Hamptons but not in suburbs (see above articles). Why exactly would you look foolish for offering 30% or more below when the market is clearly headed in that direction. And finally, I would love for someone to explain to me why real estate in towns like Darien, New Canaan, or Greenwich should be priced at 6x income when the 50 year average in this country has been 2.75x.
Iâ€™m also concerned that despite falling around 20% since 2006/2007, prices in NYC suburbs (Fairfield County in particular) are still overvalued on a price to income basis. The median Darien, CT family income is 218k and the median home price is 1.22mil. The median New Canaan family income is 231k and the median price is 1.47mil. The median Westport income is 193k and the median price is 1.20mil. Paying 6x your annual income for a house is what got this country into this mess in the first place. The 50 year average in the U.S. is 3-4x which means prices would have to drop 35-50% to reach the long term equilibrium. For me to consider buying a home in this environment I need to be convinced that these types of drops are very unlikely going forward. Any feedback would be appreciated. Thanks.
Message received. Tell me if I follow your logic.
Everyone who didn't buy last year is happy that they didn't buy except those truly blessed souls that purchased last year in Greenwich. Because, as we both know, "It's different here.â„¢." Good thing prices in Greenwich didn't go down in the past 12 months.
But wait. Prices in Candy-land, i.e. Greenwich, did go down. How does a 29.1% decline in median sales prices grab you? Actually, I guess the real question is how does that grab all your happy clients that took your advice last year to buy?
Me thinks not too much.
Your comments, as well as the question from Jon (home buyer) are all very interesting. Let me respond to each of you separately:
John the Bruce-I understand your attitude, it's true for most areas, however, I know many buyers in Greenwich who are very glad they purchsed a home in the last 12 mos. Why? because they were able to buy a home, at a substantially lower price, IN Greenwich. Julie is right: 'location, location, location' is critical; I 'd add and "timing is everything". Greenwich, CT is a top location for a large market of buyers. The real estate downturn has made it possible for many families to buy a home in Greenwich, who could not have afforded to, in the past. These people are glad they bought a home here in the last 12 mos, because now (6/10) the word is out and 1st time home buyers, investors (who "get:" the ebb and flow of the market), and scores of NY residents are rushing in to find a property here, because finally prices have come within their reach. They recognize that the "location" value of Greenwich hasn't gone down a basis point! It's still a town the size of Manhattan with only 60,000 citizens, where they can enjoy low taxes, great schools, beautiful beaches, parks, museums, bike routes, marinas, restaurants, Shakespeare in the Park and live a family centered lifestyle. All things that make their purchase here, a deal they are glad to have made.
As for your comments Julie, I agree that the downturn has meant that buyers today must be more financially sound, less leveraged and that is a good thing. But, of course, I disagree with your recommendation not to let a realtor advise a buyer or seller about what a property is worth. Buyers and Sellers need to be careful who they choose as an agent. Don't use your mother's best friend, or your best friend. Selling and buying a home is serious asset management. You don't want someone who is uncomfortable telling you the truth. Julie, remember that sellers often choose the agent who values their home at the highest price, a price the sellers have usually suggested. Pick a broker who has lots of buyers and knows what they like, and can help a seller step back and see thier home as an "asset" to market. I like to take my clients to see other homes offered in a specific price range. I want them educated and working with me. I put them on an automatic email so they see when their competiton lowers a price, or sells. I don't take listings from sellers who, I believe, have an unrealistic opinion about their home's market value. Who wants to be the bad news messenger week after week, or pay for marketing false hopes. This is business, commodity trading, buyers who "get" it are buying up the good homes, priced fairly.
Buyers also need a good agent, who knows the inventory on and off the market. Buyers need a contracted agent bec the myth that a listing agent will give them a good deal, is myth. All agents in CT work for the seller UNLESS they are in a contract agreement with a buyer. Buyers need an ally to help naviigate which "listed price" may have a deep discount, and which doesn't and why. Most buyers in Greenwich need an agent who knows the whole town, not just one area. And today, buyers need an agent who acts like an asset manager, working confidentially and loyally for their client in an effort to uncover not just a home for the family, but a smart investment suited to the clients' financial strategy.
It's a differnt business today, and depending on your financial goals, Greenwich is agreat place be.
It has been almost a year since your "you'll be dissapointed next year"[if you don't buy now] call. I have yet to meet a person who has said, "Gee, I wish I bought last year."
My best wishes on your continued market acumen.
As an educated home buyer, youâ€™ve got a better grasp on the dynamics of this market than the professionals that â€œansweredâ€ this question. I, too, am a student of the Fairfield County market and can tell you, unequivocally, that weâ€™ve got a way to adjust on the downside before reaching a market clearing price. Itâ€™s an economic certainty.
You correctly point out the fact that the median income should be enough to buy the median priced home. It Fairfield County, it is not. The market is in a state of disequilibrium that is obvious to even the most casual of observers.
Median prices are still far too high compared to median incomes. Both numbers are falling. People are scared. Now is not the time to be making what Realtors call â€œmarketâ€ offers. Unless you understand, as you clearly do, that â€œmarketâ€ means 30% (or more) off â€œwishingâ€ prices.
BTW - Iâ€™d use 1999-2000 pricing as a better rule of thumb compared to a percentage off the wishing price.
Wall Street salaries/earnings have been the crutch that has kept Fairfield and Westchester Counties from collapse in the face of the national downturn. That crutch has been so rudely kicked away. Incomes are hurting. Employment numbers are a horror show. Foreclosures are setting market prices. Inventory is growing, not shrinking. Case-Shiller is showing ACCELERATION in the downturn. Weâ€™re very far away from the bottom. So very far away.
I live in CT and work in NYC. I can tell you â€“ the fear on the street (lower case â€œsâ€™) is palpable. A sea-change of sediment against all types of investments is percolating in the collective consciousness of the sheeple; with real estate being the worst of them all.
And a note about offers. I hear stories of open houses that are attended solely by the sellerâ€™s RealtorÂ®. Nobody shows up. So, RealtorsÂ® mean to tell you that by looking at a property and then being interested enough in the property to make an offer is somehow an insult? Sellers should be happy to get any interest these days, let alone an offer.
And if youâ€™re RealtorÂ® isnâ€™t embarrassed to make your offer, then youâ€™re offering too much.
Good luck, Jon.
There is really no guaranteed way of understanding a seller's level of motivation short of serious negotiations.
Our view is you have nothing to lose and much to gain by remaining actively involved in the market by both monitoring it and persuing property that appeals to you.
Make no mistake, there are sellers that are as aware as you are about the current market values but still have the need to sell. This may be where the best opportunities exist.
However, we can tell you that the NYC market is very different than the suburbs. Oftentimes, including in the recent past, the two head in different directions - while the suburbs, including Fairfield County, were beginning their price declines, NYC was still experiencing a healthy sellers' market with price appreciation.
Also, keep in mind that you're talking about listing prices of apartments in NYC. These homes didn't sell at their previous listing prices, so they've been reduced. Perhaps they were originally overpriced?
If you want to wait to buy until the market has hit bottom, then watch closing sales prices in your area of interest. Once they start to rise, then you'll know we're most likely rebounding from the bottom.
The market has not been dropping 20-30% each year here in Connecticut. On average, single family homes have been down 8-10% in a year, depending on the town.
I doubt you will see a 20-30% price drop in the next year, especially with interest rates still so low.
If you need a home, prices are good and interest rates are great.
If you do not need a home, then you may want to wait it out to see what happens. However, none of us will know we've hit the bottom of prices until the prices start going back up. Timing the market is tricky and I've seen far too many people over the years wait too long.
Offers 30% below list price will probably not be accepted. If you want a home, then I would suggest writing offers just below current market value.
If you have patience to wait, then the many short sales out there may be a good idea for you. They usually sell for just below market value. However, you will wait 1-3months or longer just to find out if your offer has been approved by the seller's lender, and then the sale will be strictly as-is. There are also bank-owned properties available but, again, they are strictly as-is sales.
If you're looking for an investment, prices on multi-family homes in many towns have dropped considerably and are selling at bargain prices right now - especially those in need of work.
I think you have a pretty good grasp of the situation and the pros and cons. The best way to know what a home is worth is to look at comparable sales in the past 6 months. I understand that you feel the market is overvalued, but in general, CT didn't experience the crazy appreciation that some other states did, like Florida and Nevada.
Many sellers would be offended by a really lowball offer and won't even negotiate with you. That being said, you have nothing to lose by trying. But I'd really urge you to look at "the comps". If you have a realtor, he or she can guide you with that.
If you're not committed to a realtor, I'd be glad to help. Please let me know if I may be of further assistance.
Gillette Real Estate
860 221 8971