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The best way to guage housing is demographically Thats why imo housing isnt going anywhere until 2030 ! 80 million baby boomers will be attempting to unload their homes on 65 million generation Xer’s who earn less than their parents, marking down prices as fast as they can. As a result, the Federal Reserve thinks that 50% of American homeowners either have negative equity, or less than 10% equity, which amounts to nearly zero after you take out sales commissions and closing costs. That comes to 70 million homes. Don’t count on selling your house to your kids, especially if they are still living rent free in the basement(Not that that would ever be the case on LI) The good news is that the next bull market in housing starts in 20 years. That’s when 85 million Millennials, those born from 1988 to yesterday, start competing to buy homes from only 65 million gen Xer’s. By then, house prices will be a lot cheaper than they are today in real terms. The next interest rate spike that QEII guarantees will probably knock another 25% off real estate prices. Think 1982 again. Fannie Mae and Freddie Mac will be long gone, meaning that the 30 year conventional mortgage will cease to exist. All future home purchases will be financed with adjustable rate mortgages, forcing homebuyers to assume interest rate risk, as they already do in most of the developed world. With the US budget deficit problems persisting beyond the horizon, the home mortgage interest deduction is an endangered species, and its demise will chop another 10% off home values.
For you millennials just graduating from college now, this is a best case scenario. It gives you 15 years to save up the substantial down payment banks will require by then. You can then swoop in to cherry pick the best neighborhoods at the bottom of a 25 year bear market. People will no doubt tell you that you are crazy, that renting is the only safe thing to do, and that home ownership is for suckers. That’s what people told me when I bought my first New York coop in 1982 at one tenth its current market price.
Just remember to sell by 2060, because that’s when the next intergenerational residential real estate collapse is expected to ensue. That will leave the next, yet to be named generation, holding the bag, as your grandparents are now.
This is hysterical. Like the fed in cahoots with wall street won't find a way to replace fannie/freddie with an even MORE lax lending system. There is big money to be made for them. Do you REALLY expect us to believe they'd give it up? If the current credit tightening lets up even a little (and it already has based on auto deals), the mortgage tap will get turned right back on. Wall Street cash cows don't die that easily. People have very short memories to corruption as long as they can get a house or car at a decent rate.
I am glad someone added this link to this discussion with 100s more out there about the NARR reports.
I think people who look into RE alot know that the NARR reports are a joke. They never match up with any other report. It's only good for that quick trade for traders, and also RE brokers trying to sucker people into buying or selling.
I think the LI RE market is basically slow. Slow to sell. Slow to buy.
We bought into LI in 2009 when it "supposedly" bottomed out. The way I saw it was that, in 2007 & 2008 when we were looking, we couldn't buy the house we wanted to buy, and in 2009, prices were dropping significantly where we can buy into it without getting into financial trouble. It was not an investment tactic. It was so we can have a standard of living that was good for the family. I check for comparables all the time. It's slow as heck, but for the homes that do sell, I bought more or less at what the market is willing to pay. Fast forward to 2011 now, and it's about the same but still slow going.
Now that we have added a few kids, we are already thinking down the road for the "upgrade".... I am glad to see that even though my "starter" 3bd home hasn't lost that much value (lost value due to inflation and closing costs), I am seeing that those 5bed homes nearby are getting significant price drops recently in 2010 and into 2011.
The way I see it as both a future buyer and seller in the Northshore area of LI, my starter home might loose it's value, but relatively speaking, not as significantly in terms of dollar for dollar with the larger homes. Some lucky family will see my home, and most likely be happy knowing that they bought maybe $10k-$50k less then what I paid, but I will be trilled knowing that I will buying a home that is $100k-$500k less then what they used to be selling for. I can't complain.
There's supposed to be a another wave of foreclosures coming (so what's new?), and when they hit the market, that's what keeps the prices of houses down. Which is why I said yesterday that we're not at the end of this housing crisis. We haven't hit the point where things have stabilized and prices will start heading upwards. People are still losing jobs - that alone creates downward pressure on prices. Will prices start rising soon? Odds are not. Will they decline more? The houses that are overpriced in relation to the economy will have to come down in price or be taken off the market. Houses priced correctly = what someone thinks it's worth = will sell.
And yes, there will always be locations that command a higher price. A desirable area will be stable regarding prices. It's real estate 101.
If I was in a position where I knew I was staying on LI for the next 10 years for whatever the reason, and I had the financial position to buy a house, I'd go for it now. It's definitely a buyer's market. You can ask for things like the sellers putting in a new fence, new paint, etc. And negotiate that price down as far as the seller will go - it all depends on how desperate they are.
Considering that you're really only taking home about 60K and then 7K of that will be for property taxes.
Crazy stuff. A young couple very close to me are looking hard for a house. Their combined income is around 140 and both of their jobs are stable (1 government and 1 in a solid industry). They are eminently qualified as buyers, but they are just no going to put an offer in on the junk that they are seeing and at the asking prices. 400K for something in East Northport with a kitchen from 1980? They'll keep renting for $1500 and saving. There are not enough suckers out there to keep this market going.
I am not trying to insult real estate companies but they certainly have an interest in stirring up buying and selling. Renting is certainly an attractive option right now for couples like the one you described as the housing market is still unsettled and likely to go down over the next three years. Putting $1,500.00 a month into a decent house and avoiding property taxes, repairs, and maintenance is a good move. If they were to buy now and try to sell within the next three years they would definitely take a loss AND would have payed about $1,000.00 per month in property taxes.
Sellers have not adjusted to the new reality and I am not at all sure they are being advised properly on pricing. At the same time it is difficult for sellers to accept the fact that their homes are literally worth much less than they were worth four or five years ago and less than they were worth last month.
Aggressively priced homes will sell. In other words, the house that sold for 525,000.00 with $9,000.000 taxes four years ago must be on the market today for $375,000.00 with 11,000.00 taxes to sell. Unaggressively priced homes will not. It is a buyers world out there - I almost pity sellers whose homes have been on the market a month...guess what...YOU ARE OVERPRICED!
I am not trying to insult real estate companies but they certainly have an interest in stirring up buying and selling. Renting is certainly an attractive option right now for couples like the one you described as the housing market is still unsettled and likely to go down over the next three years. Putting $1,500.00 a month into a decent house and avoiding property taxes, repairs, and maintenance is a good move. If they were to buy now and try to sell within the next three years they would definitely take a loss AND would have payed about $1,000.00 per month in property taxes.
Sellers have not adjusted to the new reality and I am not at all sure they are being advised properly on pricing. At the same time it is difficult for sellers to accept the fact that their homes are literally worth much less than they were worth four or five years ago and less than they were worth last month.
Aggressively priced homes will sell. In other words, the house that sold for 525,000.00 with $9,000.000 taxes four years ago must be on the market today for $375,000.00 with 11,000.00 taxes to sell. Unaggressively priced homes will not. It is a buyers world out there - I almost pity sellers whose homes have been on the market a month...guess what...YOU ARE OVERPRICED!
No one should buy a home in any market if they think that they are going to move within three years. Real estate is a long term investment for which you need at least a ten year time horizon.
One of the factors that led to the bubble and burst was that people stopped treating homes like homes and started thinking of them as short term speculative instruments.
In any market you will have overpriced homes that are "priced to sit". On the other hand, nobody likes to leave money on the table.
There is a huge disconnect between buyer and seller expectations today. Just as many sellers are unrealistic in their asking price, many buyers are unrealistic about what offers they believe will be accepted.
I feel bad for people who have bought homes over the last few years, because it seems the worst is yet to come...I am second guessing the purchase of a home here on long island within the next half yr or so...What to do , what to do....
Thoughts?......
Curious why you feel bad?
The people who bought have a home to live in. Their payment hasn't changed-nothing changed for them. What's to feel bad about?
I've noticed it's the less expensive homes that sell and proportionately haven't gone down in asking price as much as the more expensive ones have. Well, I think that's what I've been seeing, anyway.
I've noticed it's the less expensive homes that sell and proportionately haven't gone down in asking price as much as the more expensive ones have. Well, I think that's what I've been seeing, anyway.
Yep, seeing the same too. There seems to be a bottom for the cheaper good homes since it's an equation about affordability. People have families. They need a place to call home, raise a family, and work. Manhattan is still very expensive.
we bought our new place at about $20k higher about 5 months ago. It evens out because we sold our previous home at about $20-30k more than it would now. Checking current selling prices at our old town confirms this.
Last edited by ovi8; 02-23-2011 at 06:55 PM..
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The good news is that the next bull market in housing starts in 20 years. That’s when 85 million Millennials, those born from 1988 to yesterday, start competing to buy homes from only 65 million gen Xer’s. By then, house prices will be a lot cheaper than they are today in real terms. The next interest rate spike that QEII guarantees will probably knock another 25% off real estate prices. Think 1982 again. Fannie Mae and Freddie Mac will be long gone, meaning that the 30 year conventional mortgage will cease to exist. All future home purchases will be financed with adjustable rate mortgages, forcing homebuyers to assume interest rate risk, as they already do in most of the developed world. With the US budget deficit problems persisting beyond the horizon, the home mortgage interest deduction is an endangered species, and its demise will chop another 10% off home values.
What's to feel bad about?
