by mid '08 will prices fall even more or stabilize? (for sale, real estate)

[ahmino]

i'm asking this cause my fiance and I are eyeing a brand new 700K home right now on 1 acre . Also do you thinks developers will drop their prices for inventory not being sold. We want to put down 25% and 30 year fixed.

Thanks.

[Sage of Sagle]

I think really good money could be made for anyone who knows the true answer to that question...

I personally think taking an informed look at the development will help you determine if it's overpriced. For example, if this place you're looking at is in the second or third phase of a development, go talk to the homeowners who bought in phase one. Chances are, if prices went up dramatically in phases two and three and phase three has a lot of unsold units, then the prices are inflated and the homes are probably worth more in the range of the phase one homes. If there are only a couple unsold units, I think you'd be a bit safer on value.

You may want to talk to your lender. If they think the house is overvalued, they will let you know they expect a LTV issue to arise. If they're telling you that your 25% down payment just became a 15% down payment because the house isn't appraising out, that's a real sign that the developer is a bit delusional on their pricing. At least this is my lay-person's view...I'd ask a professional...

[ahmino]

when you say the "25% down just became 15%" do you mean the value of the home has decreased or increase.

[Need_affordable_home]

Wow what city is this and what size house? Ill check comps. for you. I can tell you that CA is extremely expensive in many locations. I dont mean to be personal but can you really afford a $700k house without risking forclosure? Explain why. I worry because many thousands in my city are ending up forclosed as they become broke from spending it all on a house! Hope this helps

by the way, prices are falling in most places in the states. What city are you looking to buy? I can check if prices are falling or not

[Kingsnkali]

I think it all depends on interest rates. If they went up significantly you could precipitate a real estate meltdown because of all the people with ARM's etc. If rates stay like they are now, you may be seeing a bit of a price trough now. Home prices are expensive as heck and will likely not see much appreciation for at least the next few years in California.

There seems to be fewer listings now than say 6 months ago at least in my town (Sac suburbs). People have pulled their homes off the market and seem to realize that the easy cash-out days are over. Now it's a market where you put your home for sale if you have a job transfer etc. and not just a rush to bail out.

[Sage of Sagle]

If the purchase price is $700K, then 25% down is $175K.

Let's say the house is way overpriced and it appraises at 620K. You would be expected to make up the difference. So $80K of your cash goes to that, and then your remaining $95K would be just about 15% down payment.

You would at that point only have $95K equity, since if a lender (if you're taking a second mortgage or equity line) would calculate LTV on an appraised value, not whatever pie-in-the-sky dollar figure was actually paid for the property.

Again, that's my lay-person's understanding. Maybe a RE professional can correct any mistaken assumptions I'm making in this area...

[NYSD1995]

Assuming there is no major economic shock (including a big rise in interest rates) and it doesn't appear there will be, my guess is that prices will most likely stagnate / slightly fall / slightly rise for a couple years.

New construction is the wildcard because it's a lot easier for a builder to drop the price than a homeowner. That said most builders offer incentives rather than drop prices. Assuming they have already built-out the development they will be loathe to undercut the existing owners.

I would definitely do my homework on the development and the builder, see what their track record has been during the slowdown. Are they cutting prices or offering incentives? Realize that the majority of the housing slowdown is happening in new home and condo sales.

As for "losing your downpayment" in a down market, remember that your downpayment money is still equity. Even in a falling market you build equity by paying down your debt. Even if home prices fall 25% and never recover, you will eventually own the home free and clear someday.

[NYSD1995]

Originally Posted by Need_affordable_home

I dont mean to be personal but can you really afford a $700k house without risking forclosure? Explain why.

NAH, It's not polite to ask this question, especially to people you don't know :-)

[benkhanobi]

People need services- they need teachers, fireman, barbers, hairdressers, workers in restaurants. The down side to these expensive homes is where will these service workers live? Some Florida businesses on the coast are now having to bus in workers form 30 or more miles away to do the menial work for the high rise condo dwellers. I feel a big crash coming, precipitated by an outside event.

[snb3]

depends on where you're at. Parts of IE I've been to the last month has been relatively soft, all makers are giving incentives of $20k-$40k. Not sure of resale in those areas. Metro LA has been slow but prices have been holding. It is likely that rates will fall this spring. If it does, there might a slight upsurge but how long that lasts, who knows.