Home Buying in Basking Ridge>Question Details

Wayne Happ, Other/Just Looking in Califon, NJ

Are buyers misinterpreting the current market conditions?

Asked by Wayne Happ, Califon, NJ Sun Dec 2, 2007

I'm a looking buyer in North Jersey. I'm baffled by what I'm seeing on the ground. I hear that it's a buyers market. On the one hand, 4 of the last 5 houses I looked at were sitting empty. (A couple for months - This must be expensive, having a house sit empty) Yet the sellers asking prices are mostly holding steady, even though the number of for sale signs increase every week. It seems to me like sellers think that if they hold on for a few more months, things will get better. Buyers on the other hand are evaluating prices based upon ideas about where the economy is going, most;y down. I guess this is more of a request for comment rather then a question.

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Hi Wayne,

I think the problem is a disconnect between what the national media is reporting, and what we are actually seeing. The disconnect stems from the fact that our market here in northern NJ is simply sluggish, and not truly depressed. Whereas in California, Nevada, Florida, and the rust belt, it really is depressed to the tune of prices dropping 20-30%. For example let's look at Bernards Twp. The median home price in 2007 has dropped to $805,000 from $869,000 in 2006. And in Bernardsville, the median home price in 2007 has dropped to $745,000 from $815,000 in 2006. Although this is not great news for sellers, it's not like the wheels have come off entirely. So there are still plenty of sellers who are going to remain stubborn.

If I were in your shoes as a buyer, I would be very aggressive and unafraid to lose a few houses on the way to winning the right one at a price that seems reasonable to you. How to do this? Let's say you see a house you like that has been on the market for quite some time. IGNORE the list price. Have your Realtor basically do a realistic CMA on the house based on current closed sales and make your sensible offer based on that data. INCLUDE THE CLOSED SALES WITH YOUR OFFER. I'd just make them part of the contract as an addendum. Call it a "pricing rationale" addendum. Even better: If your agent has a strong personality, have him present the offer in person to the sellers with the written "pricing rationale".

Many times the selling agent on an overpriced listing is playing "last man standing" with the seller, afraid to sit on him too hard for fear of losing the listing after having spent a fortune on advertising. Meaning he is trying to just outlast him until he weakens and finally drops his price. Your offer, submitted with hard data, might just be compelling enough to roll the seller over. It might not work the first time. You might have to try it on a few different homes. Or you might have to do it more than once on the same home over a period of time.

I do believe it is a buyer's market, but that doesn't mean sellers are just waving the white flag. You still need a crowbar, and good hard data on recent closed sales of similar homes is the best tool for the job. Especially in the hands of a strong buyers agent.

Good luck and keep up the good fight Wayne!

-Marc
Web Reference: http://www.marcpaolella.com
5 votes Thank Flag Link Sun Dec 2, 2007
Buyers are not misinterpreting the market conditions. They are like you , using common sense and gathering data to make their buying decisions. The Basking Ridge market itself is slowly changing to fit this market. As one of the previous answers said, prices are down from their highs of 2005-2006 and the unsold inventory of home is down over 10% from the same time last year. Those conditions lead to a market finding its balance. Another point to consider is that the time it takes to sell house is not normally what it has been for the last 3-5 years. The average time for a home to be on the market in market conditions like these is not 30 days. Fairly priced homes may take 60-90 days to sell. If you are a buyer looking for an investment, you will have to be careful that your purchase is significantly below market value . If you are looking for a home to live in, this is market represents a great situation to move up because there are choices for you. Do your home work, work with a realtor who knows the market, and you can find a great home a fair price.
3 votes Thank Flag Link Mon Dec 3, 2007
Sellers can only keep their asking prices high only for so long. Sooner or later reality will kick in once the sellers start making two mortgage payments. The prices in your area will definitely come down. Make sure that you buy only a discounted property.
Web Reference: http://www.doyenrealty.com
3 votes Thank Flag Link Sun Dec 2, 2007
Well in my opinion you need to first figure out what your GOAL is here. Are you looking to FIX and FLIP? Are you looking to buy a place to live for yourself and your family for the next 5-10 years and trying to TIME the market perfect. If you're going to buy to live for a bit of time, I would suggest that we have some really good deals in today's market and although prices MAY come down a little more in NJ, I STILL think it's a great buying opportunity. If rates continue to come down, the this is the FED trying to stimulate purchases which could keep prices flat to slowly rising. I wish you the best.

Keep in mind the media hasn't been too nice with their interpretation of DOOM and GLOOM.
Web Reference: http://eee.isellroxbury.com
2 votes Thank Flag Link Thu Dec 6, 2007
Here we go again. You can not buy a house based on where you THINK the market MAY be going. You have to deal with fair market value as it stands TODAY. Use the comps of recently sold homes and also check out expireds (homes that didn't sell.)

I do agree with John, that some buyers are just being ridiculous. Homes in the tristate area have not tanked at all and in some areas they are still rising. There are also sellers that are overpricing their homes like its 2005. The trick is to pick out what is a decent buy and what is simply overpriced. Bottom line, there are good deals and a good buyers agent can help you find that deal. But you aren't going to just steal a house for half price. You need to set that pipe dream aside. Until you do, you are not really a buyer.
2 votes Thank Flag Link Sun Dec 2, 2007
Hi - There is is a similar thread underway. This is for a different state, but the discussion might interest you. Here's the link:
http://www.trulia.com/voices/Home_Selling/Are_sellers_disill…
2 votes Thank Flag Link Sun Dec 2, 2007
Many buyers have this question and it is a relevant question, even though it was asked several years ago. it's just that the answers are different from when it was originally asked.

We all know that the real estate market is ever changing and it's different in every State and Community. Trulia does not remove questions due to the age of the question. And consumers will still find old questions and want information. I think it is to the consumers benefit to answer old questions with new answers that are current answers with current information. Consumers understand that Real Estate Markets are ever changing. IMHO
1 vote Thank Flag Link Wed Dec 8, 2010
Within the marketplace are some sellers who are highly unrealistic, and some who are extremely motivated and very flexible. What I see are both types of sellers.

From buyers, what I see are those who are sitting on the fence, or those who are waiting for prices to come down. The fact is, even if the average price comes down, that may not be reflective of the property that you, as a buyer, has an interest in purchasing. The property that catches your eye, may have a seller behind it that is stuck in 2005 mode, or it might have a seller behind it that is highly motivated and would sell at 10% below a fair market value. I see some buyers waiting for the market to come down another 3-5%, while not taking action on properties where sellers would sell at very attractive prices today.

The more flexible you are on your proeprty choice, the better fiancial deal you can strike. And, that can be now.

As a buyer, do your comps (with your Realtor) and make an offer predicated upon what the data can support. If your goals are realistic, you will find a local Realtor who will work very hard for you. Biz is tough right now, and a Realtor will value a serious buyer. Even if it means having to write a few offers before getting one accepted. While I would shy away from totally unrealistic buyers, I do not shy away from a buyer who is serious and looking for motivated sellers.

When the stock market, or an index, moves "x%", there are still individual stocks that drastically differ from that average. While real estate is not as volatile as stocks, the general principle is the same. Buyers who are simply not buying because they think the market will be 3-5% lower in the future are passing up opptys right now. Buying when average prices are low does not mean that a given buyer bought their property at the lowest possible price.
1 vote Thank Flag Link Sat Dec 8, 2007
Deborah Madey, Real Estate Pro in Red Bank, NJ
MVP'08
Contact
Yes, buyers and sellers and media and (gulp) even many agents are misinterpreting market conditions. Here it is, almost 2008. Sellers want to get the prices from 2005 but are willing to settle for 2006. Buyers on the other hand want to get prices from 1998 but are willing to settle for 2001.

The media reports last months statistical news as if it is next months TREND.
Realtors need to be courageous and pounce like Tigger ( singing "and I'm the ONLY one!")

Explain to sellers that yesterday is history, those prices aren't coming back anytime soon, and to buyers that the discount in market values exists now. All they have to do is ignore list prices, and ignore dumb formulas like "offer 20% below list price" and simply offer 95% to 97% of FAIR MARKET VALUE
1 vote Thank Flag Link Fri Dec 7, 2007
Jim Walker, Real Estate Pro in Carmichael, CA
MVP'08
Contact
Look at the prices on real estate historically. It is human nature to believe that the sky is falling and try to capitalize on the the bad news the "drive by" media reports.

I guess the quesion you should be asking is how long will you hold this investment before moving on to the next level home. Most home buyers are purchase homes in phases, improving living conditions every 5 to 7 years. Do you think you'll be able to buy a home 5 to 7 years from now at today's prices, even if we are experiencing a market correction (and I don't mean an economic depression in real estate, well that depends where you're looking at this point in time)?

But in North Jersey, prices are remaining steady with very little depreciation in home values. There are still a considearable amount of home buyers who feel they've missed the glory days of the real estate bubble, but for now many of these home owners no mortgage to pay on homes (just taxes and home upkeep). These homeowners can afford to wait the market out until the market correction provides a more balanced equilibrium for them and potential home buyers.

In the mean time, never lose sight of the fact that you still have to qualify for a conventional loan since many mortgage brokers are no longer pushing creative financing. In the end, you as the buyer need to balance your emotional needs and your future financial obligations.

Good luck and happy home hunting.

Carmelo Torres

ct@ctorres.com
1 vote Thank Flag Link Thu Dec 6, 2007
Unless you simply must make a purchase (for tax reasons or whatever), I would wait another year or two. Things are going to get really, REALLY cheap as we brace for the largest housing crash in history.

Housing crash exceptions: Ultra exclusive towns (or condo buildings) where homes are purchased with cash. Retiring baby boomer owners who can afford to let the house they bought in 1974 for $80K sit empty.
1 vote Thank Flag Link Mon Dec 3, 2007
Good question , my answer is that buyers in NJ & NY are being cautious about buying because of the media. Yes the market is BAD in Virginia, Atlanta, Ohio, Kentucky.. and a few more. BUT it is not AS bad here in NJ 10 - 20 miles outside of New York City.

Some buyers are being ridiculous. I have had people wanting to bid 100 - 150 under asking price because they see the news.. and say.. prices are down.. it says so on the TV.. read the news.

I respond with... a 400,00 house is a 400,000 house. regardless. ( It may be listed at 440k )
You ARE NOT going to get a 400,000 house for 250,00.00 it just ain't gonna happen. This is not 1985, prices are not going to go down to that level and people are not going to take a 100k hit on anything if they don't have to.

There are plenty of good buys out there in NJ.. plenty. And the time is now or you may end as one of those.. oh wow, I should have bought that house back in 2007 guys.... standing outside looking in.
1 vote Thank Flag Link Sun Dec 2, 2007
Wayne:
The housing market located along the NYC train line in Northern NJ is holding up pretty well. The old saying goes: location, location, location. Depending on your area of interest, some home prices may be steady to increasing and the farther you get from major transportation the prices may be decreasing. Since the pool of buyers is very small, it takes a longer time to sell a property at the desired price. It does not necessarly mean the home is overpriced (it may be) . THere is just a reduced buyer pool. Real Estate is very localized, so the buyers agent must provide local data to fairly evaluate a homes value. Not generalized data based on an economy as a whole.
0 votes Thank Flag Link Wed Dec 8, 2010
Wayne was being specifically addressed and solicited.

That has nothing to do with the original topic.

If you think this topic is relevant (and I would agree that it is), I would suggest starting a current thread and leave this dude in peace.
0 votes Thank Flag Link Wed Dec 8, 2010
Wow, apparently I can't count or I am having a tough time keeping track of the year. Yes, a 3 year old question. Even better.
0 votes Thank Flag Link Wed Dec 8, 2010
Back in 2007, there were not as many short sales, and things were very different. Maybe we should have another thread addressing the changes between 2007, when the mortgage meltdown started, and now. That would make a lot more sense that someone being gung-ho now that they discovered Trulia, and writing a book about a 3 year old question.
0 votes Thank Flag Link Wed Dec 8, 2010
Wayne: The reason that so many homes are sitting empty is that the short sales are taking a long time to process and days on the market doesn't mean that no one wants to buy the homes that are sitting. Many have offers on them, back up offers and are just waiting for the banks to complete the short sale through all of the steps of the legal process of completing the short sale.

Once a home is owned by the bank then it does not sit as long as a short sale. Banks were never meant to be owners of property only lending entities. The legal process for the banks to take over their assets due to borrower default is very time consuming.

~~~
0 votes Thank Flag Link Wed Dec 8, 2010
2 year old question. Can't imagine that Wayne is still looking for an agent's services at this point.
0 votes Thank Flag Link Wed Dec 8, 2010
Wayne - a buyers market is where inventory exceeds the demand. Ultimately, it has to be a win-win for both buyer and seller. Many sellers just can't sell below a certain price at this time due to no equity for a variety of reasons. So you need to find a MOTIVATED seller, which there most definitely are. It seems that your experience has been with UNMOTIVATED sellers, so you just have to move on. HOWEVER if you find the home that you really like, and the seller just can't go below a certain price, you may consider coming up in price - if you goal is to live in the home and enjoy it. If it's for investment, then stick with your plan and find the MOTIVATED ;). I work almost exclusively in the Basking RIdge area, so am happy to help you find your good deal :) - Lynn

Keller Williams Towne Square Realty
908 256-0508 direct 908 766-0085 office
dachisen@gmail.com
0 votes Thank Flag Link Wed Dec 8, 2010
Most of the responses below were solid info, but the one lacking piece of data, or I should pieces of data is- Recently settled comparables. In some sub-markets there are more than a handful of comps. But in other micro and sub-markets, there is simply not enough or even none. The meaning of comparable is; being Similar .

Now I understand that one persons perception of similar varies to the next. But, this is where CMA's/BPO's and Evaluations lose credibility. Using just 2 or 3 comparable properties is not enough, ideally you want to have at least 5 or 6. But that is just not possible in most markets. So analysis becomes even a tougher job.

If the subject in question is 3 br, 1.5 bath then the comps need to be just that. At most you could utilize a 3 br 2 ba, but not a 2.5 bath. CMA's/BPO's typically do not allow for adjustments for the crucial differences of each house. Subsequently, a typical 4 br colonial shopper is not going to consider a 3 br ranch or split. Yes, there are those who will, but the majority will not. Using comps Similar to the subject is a key factor in determining value. Also keep in mind that Market value is determined by the seller, the buyer and market forces.

I do absolutely agree that most active homes in my area are overpriced, from a small amount to a large amount. The most common reason I have found is that typically, the owners paid too much during the bubble and/or owe more than what reasonable market value is. Whether that was done through re-financing or taking equity lines. Not too many owners that are selling are free and clear or have low mortgages.
The fact is that these sellers are unrealistic in their expectations and do not understand the
economic model.

We are currently in a Value Pricing Model economy, despite what some people will keep saying.
Beyond intrinsic values, the contributory values of years gone by are not valid selling points right now.
Buyers want Value, period. Again, while there is a large portion of intrinsic value in homes, the perceived value is often miles apart from buyer and seller. Sellers tend to attach too much emotion to their asset.
Understandably, a home is more than just an asset, but economically, a home is AN asset. Traded on the markets like stocks, bonds and commodities. Something a lot of sellers aren't aware of.

The overall Somerset market has declined 12% in the past 6 months.
In the Basking Ridge market (all homes- condo/sf detached/etc) has declined 18.7% in the last 6 months.
The median settled price has gone from $590k to $480k.

Now, you can certainly macro analyze several micro/sub-markets. You could breakout just sf detached, just condo's, etc. You can show a rise in certain sub-markets. Just as you can show a decline or rise in almost any sub-division in town. The analysis could even breakout the values on a bedroom count level, etc. But if we are talking about a township wide macro analysis, then values are Declining. That is a fact.

Sellers need to be educated by their agents. Instead of being placated to and agreeing that yes, your house really is worth $. In some cases, it may be worth the amount a seller thinks, bit it is rare. Subsequently, most agents are guilty of recommending an overpriced listing.

The clear undeniable evidence of this is in the Days on Market. Now, the published DOM on the MLS's is mostly false. Agents and brokers do not like to tell or publish this fact. The MLS data suggests that houses have been selling in 60 to 90 days, when in fact it more like 90 to 180 and beyond. Also, the LP to Sp Ratio is also false. Most agents will tell you that homes have been selling for 95% to 97% of their asking price!
Well, no not really Dorothy.

The problem lies in the system itself. When a listing is withdrawn or expires, the DOM gets reset. When a listing has a price reduction, the original price does not factor in the LP/SP Ratio. Often times the true DOM is one third to a half more than what gets published, as well as the LP/SP %. Which is typically 80% t0 85% of the ORIGINAL asking price. What this data backs up, is the initial overpricing issue.

So, it comes down to knowledge and understanding- from buyers, sellers and agents. I have always said that Real Estate is not really a Sales profession as much as it is a financial/economic profession. Knowing just more than the basic supply/demand concept of economics 101 is required today. Buyers are much more savy and are armed with much more information, thanks in part to technology.

While there are still some justified high prices in certain micro markets, most sellers need to realign expectations and remove the emotional equation out of their thinking. Just because your home is in a certain zip code, doesn't mean it is worth a half, three quarters or a million dollars. Thorough Research and Analyses are an agents best bet.
0 votes Thank Flag Link Mon Dec 6, 2010
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