Inventory is very high. Prices are on the downtrend, with a 3-3.5% equity evaporation rate per month - per the Case-Shiller index. So, all things being equal youâ€™re looking at a 35 to 40 percent drop at this rate â€“ this year. Let that sink in a minute.
When people tell me, in anything financial that â€œthis time itâ€™s differentâ€ â€“ thatâ€™s usually the high sign to hold onto your wallet because itâ€™s NEVER different. All markets are bound by fundamentals â€“ but this one hasnâ€™t been for the past 6 years. Fundamentals are slowly creeping back into the market. 20% down, income verification. Remember, if you can rent it for less than you can buy it then itâ€™s not a good time to buy it.
The New York City area has been insulated a bit due to large Wall Street bonuses and higher than average salaries. But that too is coming to an end. Ask someone whoâ€™s trying to sell a house on Long Island.
The market is adjusting faster than anyone thought it could because this time it is different. In the history of our economy, there never has been any asset market where a person could control such a high debt level with so little of their own skin in the game. Stocks, equipment, boats, cars, you name it â€“ they all required more money down than million dollar houses. Everyone, including banks, bet that values would go up forever. Because itâ€™s been such a leveraged market, I think the adjustments will continue to come fast.
If you can afford to wait a while, I would. That being said, if you know that you can buy and stay there for 10+ years, youâ€™ll be fine. Good luck.
Your questions and comments are very well thought out and encompass many things that are rarely considered. Having just had an experience with a buyer and our realtor where we provided what I believe were sound arguments as to why a house we were interested with was overpriced, and getting rebuffed by our realtor with arguments that boiled down to the fact they "have faith" the house is worth X.XX, I'm thrilled to see a post like yours on these boards. If all buyers thought rationally like this, the market correction would happen a lot sooner and we could get out from under this bubble.
Thanks â€“ itâ€™s great to get some positive feedback.
With that said; have faith. I see youâ€™re in Westchester. The blood is in the streets my friend. Itâ€™s a horror show. Westchester is already down 20-25 percent and inventory is sitting.
Sit back and enjoy the show. The credit crunch is like the tide going out and now we get to see who's been swimming naked - all the people who bought with "toxic" loans while betting that real estate would go up forever.
And they had to buy with crazy loans because thatâ€™s the only way the average Joe could afford a place around here. That alone tells you that this market is out of equilibrium. The other fact that tells you that is that the rents canâ€™t support the purchase prices.
Westchester has been artificially buoyed by Wall Street and New York City in general. With the MBS/CDO implosion, stock correction and Wall Street employment cuts - you'll see that last crutch of this local market unceremoniously kicked away.
Continue to think critically. Donâ€™t fall in love with any one house and remember that the only way your realtor makes money is by convincing you that this time, like all other times in recorded Realtorâ„¢ history, is a good time to buy.
BTW â€“ switch realtors. In todayâ€™s market, if your Realtorâ„¢ isnâ€™t embarrassed in bringing your offer to the seller, then youâ€™re offering too much.
Best of luck,
- Will the house you like still be available?
Maybe. But if not, countless others will be that are just like it, except theyâ€™ll be selling at a drastically lower price. Over the past 2 years, this market has built 4 million new homes for roughly 2 million new families. There are over 2 million vacant houses - and that's a 2006 number. The reality is probably worse. In the current environment â€“ recession, credit crunch and unemployment up â€“ just how do expect this slack to be taken up and at what rate? If you address no other point, please address this one, Gerry.
- When will the absolute bottom happen occur so you can buy BEFORE prices spike?
Wow, first let me address the faulty premise that this question is based on. First, prices wonâ€™t SPIKE after the bottom. The trends shown in other real estate cycles has shown that price bounce along the bottom for several years.
Now, minus the faulty premise, let me address the main question you pose. Historically speaking the down turn is usually as long as the run up. So, in this case, don't expect an absolute bottom in REAL terms until 2011-12. Prices might stay level in nominal terms, (unlikely) but with inflation running what it is, in real terms real estate in LI, Westchester, Fairfield Counties will be selling at a big discount versus todayâ€™s fantasy prices. Those areas are already down 25 percent in nominal terms.
- Can you guarantee that interests in '09-'10 will be at today's low?
Interest rates are the easiest variable to change after a purchase is made. You'll NEVER be able to change your purchase price.
Whom is prepared to be held accountable for the results of their advice?
Certainly not your Realtor â„¢. HURRY - buy now before youâ€™re priced out for ever!
Mine is hardly a common view, especially here. Iâ€™ve been a RE bear since I started looking for a new home in a new area in 2001 â€“ and the same problem holds true now that held true then. The numbers donâ€™t work. If you canâ€™t rent the place out for what youâ€™re paying, then itâ€™s over priced.
The public have bought into the NARâ€™s dribble for the past 10 years. Buyers listened to Realtors who smiled and said, "OK" when buyers told them they were buying properties with interest only option arms with negative amortization. Yeah, great advise.
Now why don't you address my points instead of labeling them â€œcommon viewsâ€ that are â€œusually wrong.â€
1. you've done your due diligence and saved a hefty down payment for the house AND still have $ for vacations; retirement savings etc;
2. you (and your spouse, etc) have financial stability and your job isn't at high risk (i.e. you don;t work at Bear Sterns);
3. you won't be stretching yourself (to John's point--evaluate the true cost of buying vs. renting); AND
4. (big AND) you love the home and INTEND on staying there over a good length of time (15+ years)
Yes, everything you read points to the fact that we may be entering a recession: newpaper and media headlines, the declining or correcting of housing prices and foreclosures all over the country. Few things to keep in mind about WESTCHESTER--it's unique b/c it's one of the $$$ counties in the nation. In wealthy areas, sellers will sit on their homes if they don;t get the price they want (b/c they have the $ and can) and that could affect/lower the inventory as we enter or get further into the recession. Why sell if you can't get the price you want, you might not trade up, and you have the $ to stay? The flip side of that is that there are always retirees who are pushed out b/c of rising taxes (which are already the highest in the country) or are downsizing--which is true during any type of economic market. Westchester (and many areas around NY) are unique b/c they tend to hold their value (or sellers perceive they do) and don't follow the trend of falling housing prices as quickly as other ares in the country. There are a few articles in the real estate section of the NYTimes that talk about this.
My opinion, with the little I know of your personal finances etc, is that if you are financially stable, absolutely LOVE the home, and intend to stay there (not a 5yr deal) then buy. If you buy and end up staying in the home 15-20-30 years and aren't house poor, you've probably made the right decision. If you are only putting down 5%,10% or even 20% and are stretching yourself--I'd say wait. It's better to save for a bigger down payment, potentially snag a better deal in 12-24 months and see where the market heads.
You have insulted me by suggesting that my mother occupied the same profession as you. Thatâ€™s an interesting piece of logic, Danielle, and might suggest a degree of self loathing. I donâ€™t fault you for it.
In all seriousness, I love Realtorsâ„¢. Comedy like this wouldnâ€™t be possible without you guys.
Now, why donâ€™t you and the others direct some of your wittiness towards rebuffing my arguments as to the state of the real estate market and the fact that the NYC area is grossly overvalued?
Iâ€™ve referenced scholarly studies penned by Yale economists. Iâ€™ve talked about the number of unoccupied homes, published by the U.S. Census Bureau, now standing at an all time high of over 2+ million. Demographics, economics, the MBS/CDO markets, inventory versus sales rates â€“ all things Iâ€™ve spoken about.
Realtorâ€™sâ„¢ responses: â€œNow is a great time to buy.â€ â€œTrust your gut.â€ â€œI caution you from taking advice from people who do not work in the real estate market everyday.â€ This is comedy in its highest form.
Remember people â€“ these are the same â€œProfessionalsâ€ that warned the sheep, â€œBuy now or youâ€™ll be priced out forever!â€ That turned out well for many home buyers circa 2003-2005. Good advice, Realtors â„¢.
Many of your numbers are going back to being bartenders, secretaries and waiters as the current sales volume cannot support your bloated NAR membership.
Good luck to all.
There are a couple of arguments you could make - one being that the tax benefits you'd accrue make up for the amount you'd overpay by, but that seems a bit of a stretch. The other thing you could say is that increased conforming mortgage amounts available until next November make it worthwhile to buy before then - I agree with this if you're looking at something in that expanded price range.
- Will the house you like still be available?
- When will the absolute bottom happen occur so you can buy BEFORE prices spike?
- Can you guarantee that interests in '09-'10 will be at today's low?
- Whom is prepared to be held accountable for the results of their advice?
But let's look at the situation. National Association of Realtors data shows that prices peaked in '05. That means that home prices have been correcting now for almost 3 years. The NYC area economy has continued to grow--as has the population. Demand is down, however, due to a combination of price, access to credit and fears of recession. Recent and future governmental actions seek to shore up home financing. Last I looked the area population was not shinking--and, if anything, City prices are spurring movement from Manhattan, Queens and Brooklyn to inner suburbs such as Pelham. In terms of recession, some authorities (e.g., Warren Buffett) believe we're in one now. Problem is that no one seems to be able to predict when you will set in or when exactly it'll end. By the time experts say we're out of recession and the public returns to normal spending, it'll be at least 3 mos later and the prime buying opportunity will have passed.
So is now the perfect time to buy? Who knows? But as they say, perfect is the enemy of good enough.
If you're concerned that you'll miss out on a further price drop, this so-called "buyers" market expects buyers to dicker. First, make sure you know what the house is worth right now. Many home are still priced above market value. Get pre-qualified for financing, and then make an offer at or bit below actual market value.
Good luck, Gerry
I lived through the bad times in Real Estate during the early 90s and saw our housing prices drop. 1991--Ave .348,422 1992--Ave .323,369. However 1993 Ave--394,590. We have not seen a major price drop in all the time I have been in Real Estate. Our house values have held steady.partly due to the 27 minute train comute to GCT and our excellent schools. The other part is that wonderful people live in Pelham and it is a hard place to leave. It is a family town and the residents are very active in many many different organizations where people quickly make lifelong friends.
I hope you are using a Pelham Realtor who really knows the town.
If you have fopund a house I would suggest you buy it --we never have a lot of inventory . This year the inventory is down due to the homesellers listening to all those people in the media with their crystal balls.
Dear, Pricetellsall: You mentioned that Pelham wasn't very nice. What do you base this on? I'm curious b/c I haven't been able to find any completely candid views on Pelham. I visited and thought it was nice (Pelham Heights & Manor) and did an internet search and my research led me to believe the schools are good. Are you basing your opinion on Pelham's location (next to Mt Vernon & Bronx) or have you spoken to people? If, so please let me know details of what they've said, etc. Many thanks!
This is going to be one of the biggest layoffs in Wall St history. Wall St drives NY area prices, the last time this many people were fired was in the early 90's. That was when they were auctioning apts in Battery Park City for almost nothing. It is not going to be that bad this time around.
As a homeowner I can tell you that apt is going to go down maybe 10% in the near future. It won't be a nosedive cause many people like me couldn't care less because most will not be forced to sell. Some will which will drive the prices down. The real areas that are going to go down a lot more are the fringe areas like Williamsburg, Dumbo, Hoboken, LIC. These areas are not NYC and will never be. They don't have the strong hands there who don't have to sell.
In the surrounding suburbs, the strong rich areas will go down a little not much. Unfortunately Pelham in all honesty is not a great area. It will be hit pretty hard.
This is the strategy I am using and suggest you do the same. Do not pay more than 90% on a "fairly" priced home. If it is overvalued bid them 15% or more under. many will say no but time is on your side. I've am seeing big cuts where I am looking. Eventually you will get hit. And if you get a nice discount, you have effectively bought a house 1 year forward.
you make a good secondary point. If the house you see is a dream for you, them its worth it pay a little extra for it. But you should know, that if you buy a home in say september, and the futures contracts and conventional wisdom is right, in 2009 you will have lost probably 10% of your home value. If you don't look and aren't moving, you don't care, but if you're a smart person and savvy investor that looks at when you can both get a house, and make a solid investment, its time to wait. If you find your dream home and will stay for a while, i agree with you, don't pass up your dream home, since you'll make it back, but if you find homes you like, realize there will be plenty others and don't do something rash.
Your responses are cute, but again, you fail to address any of my points and instead veil yourself in a non sequiturs. Just because you donâ€™t agree with me doesnâ€™t mean I am hostile towards Realtorsâ„¢. I will admit that I donâ€™t like people who donâ€™t know how to argue a point.
The people who read these threads will see the lack of a learned response from any of the Realtorsâ„¢ for what it is. There is no direct response for a reason.
I love myself and I love my clients. Again I am not sure why you hold so much hostility towards Realtors. The future state of the market is unknown, NOONE can predict the future, one can speculate but not predict. Each clients risk is individual based on their current and future situations. That is why any good agent will become very close with their clients to find out exactly what is best for them.
I really hope you get some help to deal with your hostility.
Best to you,
PS- What is your profession?
I know here in Michigan people can almost steal some of these foreclosures. I can't believe what deals! Some of my buyers just bought a duplex where the bank took approximately a $100,000 loss. Now that is a good deal!
What do you want to do? If you like a home and it is worth it to you, then go for it! If it meets your needs and a price you are willing to pay...go for it! If you are not comfortable then don't. However, I caution you from taking advice from people who do not work in the real estate market everyday. I know they are trying to help you, but realize depending on a professional...we are just that professionals and know all sorts of extra pieces of information that someone who bought 10 years ago does not necessarily know since the market is changing so quickly.
My advice is follow your gut instinct. If it is right for you...go for it! If it isn't then wait and see where the market goes.
I hope this information helps! Best Wishes!
From the amount of hostility you seem to have for Realtors (tm) I have come to the conclusion that your mother was a Realtor (tm) and did not hug you enough.
PS- Over under count is 4 minus myself (I never said now was a good time to buy) makes it 3.
Waiting on pins and needles for your next enlightening retort.
If you can read this thread, and specifically my posts in it, and still say "now is a good time to buy" then I doubt you've ever told anyone that it's a BAD time to buy.
In light of current events and the market in particular, now is one of the worst times to buy. What exactly has changed between 2007 and 2008, other than the slope of the decline in prices?
PS â€“ Weâ€™re very close to going â€œoverâ€ the over-under on how many Realtorsâ„¢ would flock to this topic with comments like Karenâ€™s. Current count: 5. Please refer to the oldest post in this thread.
Please tell me the time when you told a client that it WAS a bad time to buy, and Iâ€™ll promptly eat my hat.
Karen said, â€œBy the time prices bottom out you would have missed it... demand would have outweighed supply spiking prices again ('06-'07 was a sellers market, an nobody really saw it coming).â€
Karen, this is just so wrong that I donâ€™t know where to begin. First off, prices are far from bottoming out. Secondly, in previous housing downturns, prices bounced along the bottom for quite some time before any â€œnewâ€ up-trend was established, let alone a â€œspike.â€ The 13-year period from 1987 until 1999, real house prices stayed roughly within the range of $125,000 to $150,000 â€“ national average. This market will move horizontally after we reach bottom; it wonâ€™t spike.
You can only scare people with the â€œbuy now before youâ€™re priced out foreverâ€ line on the way up. On the way down, it just makes you look silly.
Remember going to parties in 1999-2000? People trading tech stock picks, talking about the NASDAQ trading at 5000, etc, etc. Now, if you start talking about tech stocks at a party in 2008, people will laugh at you.
When you go to a party a few years from now and people laugh at you in response to your desire to buy real estate, then youâ€™ll know weâ€™re reached the bottom. Until then, enjoy the show.
1) If you are employed knock on wood! You can apply for financing at extremely lower rates. Those attractive loans that got anyone who wanted a house, a house...No Longer Exist.
2) With so much inventory out there you can bargain (could you do that a year or 2 ago?...Not at all).
3) By the time prices bottom out you would have missed it... demand would have outweighed supply spiking prices again ('06-'07 was a sellers market, an nobody really saw it coming). You will put yourself at a disadvantage waiting for the market to shift cause factors would have changed.
4) If you were a Seller and the price of your house dropped drastically low...Would you sell? I don't know about you but I would hold on to my property until the market shifts again.
5) You might even be able to get your agent to put up some of their commission to get you to closing.
Use the advantages of the current market cause no one knows what the market will do it changes daily. Just a few thoughts.
PS- Try not to listen to everyone, you know what they say about opinions... Good luck!