Stephanie Th…, Real Estate Pro in Southport, CT

What will it take to get this market started??? In 25 years, I have never seen lower prices and lower interest rates. When will buyers realize this???

Asked by Stephanie Thompson, Southport, CT Sat Jan 16, 2010

In Fairfield,CT., we have corrected prices over 30%. The rates won't stay this low forever. It seems impossible to get this fact out in the open.

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Richard Leci…, , Tucson, AZ
Sat Jan 16, 2010
Can't buy until people have jobs and those that do have a job need to feel secure.
2 votes
Lisa Jones, Agent, Westport, CT
Sat Jan 16, 2010
Larger numbers of buyers will get active when our country sees an overall economic upturn offering stability. People are stil buying and selling so I try to focus on delivering the ultimate service while participating in the business that I do drum up.
1 vote
Disgruntled…, Home Buyer, Milford, CT
Mon Jan 25, 2010
So, if the rates won't stay this low forever, and rising rates brings prices down further, why exactly are we supposed to buy now?

Hint: we're not buying because we KNOW prices have a lot further to go. $950K median listing price for Fairfield? When median income is $140K? We call that a B U B B L E.
0 votes
Dan Chase, Home Buyer, Texas City, TX
Sun Jan 17, 2010
Mack, the problem this time is the banks. They have been bit hard by all the foreclosures. They are nowhere near as likely as they were last time to increase house values so quickly and easily. It is true history repeats itself. But sometimes when a few factors change that do not follow the old path things go differently.

Stephanie, look at Mack's list. I just saw a lot of lower prices over the past 25 years.
0 votes
Ron Humes, , Lexington, KY
Sun Jan 17, 2010
Great question Stephanie. The only answer that has made any sense to me so far is that it is not about home prices or interest rates - it is about lack of job security & tightening lending restrictions. Let's add some jobs and see what happens.
0 votes
Kirk Dirksen, , Sioux Falls, SD
Sun Jan 17, 2010
As soon as the national media admits that our economy is actually on an uptic and starts to states the actual unemployment numbers not their twisted numbers and the American peolpe feel secure again is when people will start to buy. Before you start bashing me I know some parts of the country are seeing much higher than ussual unemployment most areas have seen only slight increases in unemployment. If someone told you you looked sick everyday eventually you would probably go see a doctor to get checked out even if you felt good. If the media keeps telling us we're sick we are likely going to believe them.
0 votes
Mack McCoy, Agent, Seattle, WA
Sun Jan 17, 2010
You'd think so, Dan, but back during the Last Great Inflation, house prices in Seattle rose, too.

Year Avg Price Int% Annual Increase
1978 $58,090 9.6% 38.0%
1979 $73,344 10.8% 26.3%
1980 $77,001 14.4% 5.0%
1981 $80,240 16.8% 4.2%
1982 $81,076 15.2% 1.0%
1983 $82,225 13.1% 1.4%
1984 $88,761 13.8% 7.9%
1985 $92,588 12.7% 4.3%
1986 $93,366 9.8% 0.8%
1987 $98,650 10.1% 5.7%
1988 $105,451 10.5% 6.9%
1989 $127,174 10.3% 20.6%
1990 $169,987 10.1% 33.7%
1991 $171,117 9.3% 0.7%

How 1988 and 10.5% interest rates and 1990 and 10.1% interest rates were different, I don't know, but prices sure jumped.

BTW: The interest rate is an annual average from a Federal Reserve printout I found some years back.
0 votes
Dan Chase, Home Buyer, Texas City, TX
Sun Jan 17, 2010
If interest rates actually went up to 10 or 15%, (if hyper inflation hits those could be exceptionally low numbers) Who would be able to buy a house? How many houses would be able to sell? Most important question, what would house prices do then? (Go down obviously.)

A lot of people realize the federal reserve has printed far to much money. Once it is starting to be spent hyper inflation is a serious potential problem. If rates went up from 5% to 7% just 2% higher people would lose 24% of their buying power.

When buying power is reduced by 1/4 what will house prices do? Go down by about the same 1/4 right?

Low interest rates are a big part of the problem in housing, they are NOT the solution.
0 votes
Dan Chase, Home Buyer, Texas City, TX
Sat Jan 16, 2010
We have had about 30% inflation since 1998.

Look at house prices in 1998. Add that same 30% for inflation. Are prices at that price, below that price, or above that price?

Most of the country is still above that price. As such, a house is still expensive.
Buyers do know that. That is why a lot of buyers have turned into fence sitters instead. They are waiting for the prices to hit a realistic range with the bubble deleted.

There are places prices are in fact reasonable. Some places are way under a reasonable price. That means they actually have fantastic prices. Sadly, much if not most of the country is not there yet.

As far as interest rates go. I would rather pay more for interest and less on a house. By making extra payments I would be way ahead.

when interest rates go from 5 to 7% what happens?

A 5% 30 year $100k mortgage will cost $536.82 monthly
A 6% 30 year $100k mortgage will cost $599.55 monthly
A 7% 30 year $100k mortgage will cost $665.30 monthly
That is NOT including taxes, insurance, or anything but the mortgage itself.

Can you imagine what happens to people's ability to buy a house when interest rates go to 7%?
a $300k house just increased by $385.44 each month. At 6% the payment went up by $188.19
at 6% interest rates the effective buying ability drops by about 10%.
at 7% interest buying ability dropped by about 24%
All from a small 2% increase in interest rates.
(thanks to trulia's mortgage calculators)

when buying ability goes down by 24% how can house prices stay anywhere near what they are today?
0 votes
Anna M Brocco, Agent, Williston Park, NY
Sat Jan 16, 2010
Unfortunately, and as already stated by Richard, the unemployment issues are a big factor -- some of those who are employed are afraid to jump in as they fear their own job loss.

0 votes
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