Home Buying in Paramus>Question Details

Carmelo Oliv…,  in Oradell, NJ

A few years ago while real estate prices were on the rise, thousands of people where nuts to find a home. Now

Asked by Carmelo Oliveri, Oradell, NJ Fri Dec 21, 2007

that prices are coming down, no buyers in site, is something wrong with this picture? I dont remember the last time a retailer said We are going to raise all of our prices 20% today please come shop People only flock if its a good deal, falling prices is a great deal, where is everyone???

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It's partially psychological. People are scared of the market, and correctly so. Prices have fallen, true, but there's a reasonable likelihood that they'll fall further. Few buyers want to buy a home today at $300,000 that'll only be worth $275,000 next summer. And that's their perception, correct or not. (And in some cases, that's likely to be correct.) So, a lot of people are holding off until they sense that the market has bottomed out or is going up again.

And as for people trying to buy when prices were going up, Google "greater fool theory." Plus, people feel far more confident if they're following the herd. If everyone else is buying, it must be the right time to buy. If everyone is bidding up the price of houses, that must be the right thing to do. And once they saw their neighbors buying a house for $300,000 and selling it a year later for $450,000, they wanted to get in on the action, too. Greed had something to do with it.

Now there's fear. Lot of potential buyers are hunkered down. That's what's happening.
4 votes Thank Flag Link Fri Dec 21, 2007
Don Tepper, Real Estate Pro in Burke, VA
MVP'08
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WoW , i must be the only Realtor who can see whats going on . There are plenty of buyers available , one of the problem is the banks aren't approving anyone for a mortgage , I just had a deal die and the buyer had 820 credit score and it was all because the underwriter waited till the last minute to say she didn't like how the package looked.
Then there are the insurance companies ,refusing to write new policies in certain areas & canceling existing policies .
Then there are some banks again requesting minimum of 10% down for 1st time home buyers !!!!!
Not to mention the amount of conditions that must be satisfied before a final mortgage approval , buyers basically must provide information on their family tree before their loan will be considered.

Bottom line is the buyers are available but the banks aren't lending & insurance companies are redlining + the appraisal values are less than the contracted price et. etc.
1 vote Thank Flag Link Fri Jun 6, 2008
Well, I think that the buyers still feel that the prices are still too high and/or the prices have not come down enough to offset the tremendous profits that they heard some sellers made during those times. The boom times are going to have to be a distant memory before buyers come out in large enough numbers.
If tghey don't need to buy, they're sitting. The sellers need to forget the boom years, too.
Web Reference: http://www.i-teamhomes.com/
1 vote Thank Flag Link Fri Dec 21, 2007
Well it is a trend and you are right, the same thing with the stock market, Prices go up and people buy thinking that it is a great deal lets make money and when prices go down people still wait to get it cheaper! Some smart investors do not follow these trends and they make the big money.
How many people did not get stuck with a house that is worth hundreds of thousands of dollars less this year? Now they have no money and can't make a move.
1 vote Thank Flag Link Fri Dec 21, 2007
lenders are going way overboard.
Bought a home in late 07 from Weichert Relo.
Would have been happy to finance my 417K thru them, too.
They approved my loan but wouldn't match another prospective
lender and waive about $600 in closing costs!
No skin off my back, I went elsewhere.
0 votes Thank Flag Link Thu Jan 15, 2009
10% down is a lot of money, but that's the point isn't it? The lenders don't want to own homes, they want to make sure people stay out of foreclosure and demanding a reasonable percentage of the price as a downpayment is easily the best way to ensure this. During the crazy lending boom, there were a lot of models built with the assumptions that a person will do everything possible to pay their mortgage because historically, this had been true. But historically, you had to put 10-20% of your own money into a downpayment and non-payment meant walking away from that money. When you're talking 0% down, and your house has lost 20%, non-payment of a mortgage doesn't have any consequences, actually, there are advantages to going into foreclosure as your housing costs will come way down.

I realize this does restrict the number of buyers, but the problem is more that housing is unaffordable more than buyers have been unfairly restricted.

Zack
0 votes Thank Flag Link Wed Jun 18, 2008
the reason I have an issue with the 10% down is because my market is an urban area and 10% down is allot of $$$$$ for most of these buyers not to mention the additional 5-6% closing cost. I guess its FHA's turn , I see allot of "creative" FHA programs coming to life now , 6% DPA (down payment assistance program) + 6% seller concession ( guess this is the FHA version of 0% down payment ) , I seeeeeeeee allot of HUD foreclosures in the future .
0 votes Thank Flag Link Wed Jun 18, 2008
Don Tepper consistently gives some of the best and well thought out answers I see on this site. Kudos to Mr Tepper. Anyway, as a buyer, his post hits my thoughts exactly. I'm probably overly analytical, but all the data i've looked at and debated with other people on this site point to declines almost everywhere and when they end, a long flat period. With inflation going crazy, this long flat period (especially in NY where closing costs are obscene) is very painful also. You've tied up a ton of capital and are constantly adding more into something that is losing real value. I was shopping in westchester county in NY and recently stopped. The entire county has been declared a declining market by the United Guaranty Corp which only adds to buyers being skittish. One of my train buddies closed in november 2007 and constantly monitors listings watching everything in his area decline and it bothers him. I'm the same way, it would bother me which is why I know I'm not ready to buy.

Andre said: "Then there are some banks again requesting minimum of 10% down for 1st time home buyers !!!!! "

This is a bad thing? The banks are lending you money and if you have no skin in the game, what is the motivation to pay it back. The contracts written in 2003-2006 with all these bizarre mortgage products were moronic and its coming home to roost now with the market decimation especially in places like california that had huge numbers of exotic mortgages. 10% down should at least make people think 3 or 4 times before mailing the keys to the lender.

Zack
0 votes Thank Flag Link Wed Jun 18, 2008
Carmelo,

You are correct that there are not many buyers, but I disagree with the board that funding is the primary reason. In my opinion, while the reduction in funding is playing a role, the larger factors are:

1. Sellers aren't selling, and when sellers sell they become buyers. We all know that down markets benefit people getting in, and hurt people getting out. Here in the Northeast, it seemed as if every house for sale was the result of an older couple selling and buying a house in Florida and a condo up here. People had so much equity in their homes that this was possible. So, when they moved, they became buyers of condos here, and homes in Florida. Now, most people are not selling unless they have to, so they are not becoming buyers. When I was looking for a house a year ago, I knew exactly where I wanted to live, how much a house in that neighborhood would cost (give or take $50,000), and knew that there where about 100 of the homes I wanted in that neighborhood. But, none were for sale because nobody needed to sell. So, I sat on the sideline waiting.

2. Young starter families are waiting to see what will happen with the market. They are afraid of buying now and losing any equity in the first year. Starter families are, in my opinion, the most important part of the real estate cycle as they are needed to buy the small homes that people are selling when they want to move up to the bigger home. If the buyers are not there to purchase the starter home, the next family can't sell and buy the bigger home.

And then, when the starter families decide to buy, is when the lack of financing plays a role.
0 votes Thank Flag Link Wed Jun 18, 2008
Hi Carmelo, you got the juices flowing - great question! Buyer hesitancy is a big issue - the combination of the near constant barage of negative media coverage and high inventory levels meaning loads of choices has a dizzying affect that has led to near paralysis. Most buyers I am working with still believe the market will decline further, and so the "wait and see" attitude persists. Of course, timing any market is impossible, and we'll likely recognize the bottom on the bounce.

In terms of financing, I agree that guidelines have tightened without question, additional appraisals are ordered - overall, everyone is concerned with trying to get it right or covering their backside. But we are getting deals done - is it more difficult, YES, and it requires a great deal of effort to keep the calm so that all parties stay the course.

Do I think it is a great time to buy? YES, and I tell my buyers so. I'm doing some deals but it is tough to get folks to act!

Best,
Jeanne Feenick
Weichert Realtors
http://www.feenick.com
Web Reference: http://www.feenick.com
0 votes Thank Flag Link Wed Jun 18, 2008
I would say ...Its the bank.Banks are afraid to give loans due to the foreclosure scenario.but US is still great.This economy is not new to US .Ups and downs are there.Outsourcing is not the reason.There is something beyond that.you cant blame everything in one pot always.
its the fed cuts and so.The banks will be at loss if they provide loans at present.but how long would they not lend money.they cannot survive too with closed doors.So hopefully after the election in 6 months I strongly beleive the market will stabilize.So asking 10% down shoudnt be a problem.If buyers want home they have to put min down.I am a home owner.I want to sell Its still in the market since a month.I too want to sell.hardly 4 buyers visited and no offer but all liked my home.
Its the bank..I am here in this property for 4 years now.I have spent enough ....I cant sell it for loss thouhg.

once bank open doors it should be fine.So lets see.
0 votes Thank Flag Link Tue Jun 17, 2008
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