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And yes, toud have to imagine that those buying in today's market in upper Montclair and glen ridge or any of those towns are likely in the top 10%. And demand is greatly outweighing supply. 450k not so much, but definitely there doesn't seem to be a shortage of younger couples in their 30s with 250-400k dual income that still have career growth and can stretch into todays current market values. The open houses are 10x subscribed with these people.
I would say 400k combined income is the lowest reasonable income for a house that is close to 1 million. Anything lower is asking for trouble. And what happens when someone loses a job in a recession, has a health issue or a difficult pregnancy or a child that just refuses to be in day care...
True. 400k could get tight. At least if that represents maxed out income potential and a full family. And yes, you need to have cash on reserve for emergencies but that doesn't necessarily translate to carry cost off your income.
Everyone has their own opinion. Some believe that younger buyers should stretch to get the maximum house you could comfortably afford as it leaves more home value to appreciate. I personally think that is a bit risky, but just saying you have a full spectrum of opinions. There are plenty of threads that come to a standstill as to how much income you need for a1mm house. Some say 250k other say 500k+.
Let's also not forget that those upsizing from NYC to move to the suburbs have also learned how to budget their income for housing expenses. The average NYers spends how much of their income on rent? If the average 1 bdrm is 4000 a month and they could afford it, Its not far fetched to say they can't stretch a bit more on mortgage plus tax on a house if dual income isn't getting hit with 3.5% NYC tax. Build equity get some tax deductions. Yes there is transportation and home repair too. But there is also no more NYC cabs and expensive restaurants that could end up chewing into a majority of your credit card bills. It's totally reasonable to say these ppl can afford it. If they strangely end up maxing out their income potential in their 30s and can't cover childcare costs etc amongst other things in the future, then that's the gamble they are taking.
True. 400k could get tight. At least if that represents maxed out income potential and a full family. And yes, you need to have cash on reserve for emergencies but that doesn't necessarily translate to carry cost off your income.
Everyone has their own opinion. Some believe that younger buyers should stretch to get the maximum house you could comfortably afford as it leaves more home value to appreciate. I personally think that is a bit risky, but just saying you have a full spectrum of opinions. There are plenty of threads that come to a standstill as to how much income you need for a1mm house. Some say 250k other say 500k+.
$250k seems about right if you have the 20% down payment. For round numbers: 4% interest, 3% tax, that gives you DTI of about 30%, which is not at all unreasonable. People just tend to freak when you get to 7 figures.
For a 3000 SF turn key, forever house, great neighborhood, great public schools, and 40 min DIRECT train to Manhattan, absolutely I think under 1mm is of value.
Short Hills
Millburn
Summit
Garden City
Great Neck
Manhasset
Bronxville
Scarsdale
Rye
Larchmont
and the list goes on...these towns are all over 1mm...half the towns have starter houses breaking 1mm
OP, one advice I give it to you when buying a house is not get emotional to a particular town or house, yes going with your gut feeling is one thing but seems more like you are justifying these towns based on your emotions.
Get out of the bubble, get different perspective, consider other towns in Somerset, Middlesex, Monmouth or Mercer county. Here is the starting point, West Windsor, it gets you from Princeton Junction to Penn Station for 50 minutes.
And schools, well none of the above can beat West Windsor.
The listing we bid on for 799 went under contract for 930-940. But it was turn key and the seller has put a least 200k into the house over the past few years. Nuts. Not sure if this is the opening gate of the new season, or if this will just drive up prices as the year goes on. Maybe we could potentially be locked out of the market at our budget until there is another market reset. I.e. This feels like 2005ish with maybe another year or two of craziness. One hand says get in now, as it feels the market has at least another year or two of growth, or maybe the season will get less crazy in the second half of the year. Putting fictious listing prices aside, I do still believe that relatively speaking these houses are of value. What surprises me more is that they were 100k to 200k less just three to four years ago. Then again, these towns have JUST breached pre recession values. So it's been a long 10 year run to get back to these levels.
The listing we bid on for 799 went under contract for 930-940. But it was turn key and the seller has put a least 200k into the house over the past few years. Nuts. Not sure if this is the opening gate of the new season, or if this will just drive up prices as the year goes on. One hand says get in now, as it feels the market has at least another year or two of growth, or maybe the season will get less crazy in the second half of the year. Putting fictious listing prices aside, I do still believe that relatively speaking these houses are of value. What surprises me more is that they were 100k to 200k less just three years ago. Then again, these towns have JUST breached pre recession values. So it's been a long 10 year run to get back to these levels.
Hell the market might get crazier as people rush to move before the school year starts. Things should settle down come september but also there will be less inventory.
I think it will get crazier. September cool down is relieving. BUT inventory is super low, and the nicer homes are generally put on the market now when it's more competitive. Plus, given the blind sealed bid process you won't know how much to bid during the summer cool down. And if you lose on let's say two bids during the off season, chances are you may not even see that many houses you like to afford to lose two of them.
Wife and I have been on the sidelines for about a year now just observing and tracking the market, and are now ready to start bidding. In short, we are deadset on these two towns, and would prefer not to renew our NYC lease come end of this year. Ideally, we would want to bid towards the end of the school cutoff (no kids yet) when the market cools, and close on a home towards end of year.
We are looking to spend in the $700-$800k range. i.e. stay under $5k/mo between taxes, insurance, and mortgage (20% down). This gets you roughly a $800k house with $22k in taxes.
There have only been maybe 10 houses we have seen over the past year that we really liked. And all of them went for $50 to $150k OVER the ask. I.e. a $700k listing going for $850k. That's a 20% premium over the ask!
Our broker is telling us what you would think - dont worry about comps and PSF metrics, if you like the house, do whatever it takes to get it. But that really throws out all rational thinking. I am also concerned that the home doesnt appraise out, and we need to come out of pocket for the difference. I have also heard of bidders throwing out their mortgage contingency clause, etc which is some scary stuff.
I am also fearful that overpaying for a house will reset the taxes from $20k levels to $25k, which is practically the carry cost equivalent of $100k more in mortgage. That's a double whammy. The listing is $700k, you pay $800k, taxes go up, and now your carry costs are as if you own a $900k house.
I am unsure if the market is peaking, and we should wait to let it cool off, but who knows. Maybe there are some good bidding techniques we could use, albeit the window to bid is only like 36 hours (sunday open house; bids due Tuesday morning).
Any residents care to share their thoughts? Anyone recently purchase a home in this area that could share some advice on bidding techniques?
I can't speak to GR at all as I have no experience there, but I can speak to Montclair. Yes, houses are selling for more than asking price. All? Of course not. The ones I've seen are in, of course, nice areas/sections, nice streets, etc. I haven't see houses sell for 20% over asking price, but if you have, yes, that tells you something, but also, I am not sure it is indicative or reflective of the entire marketplace in Montclair. If you are saying $50 to $150k over -- at $700k, 50k is approx. 7%, while 150k is 22% -- then roll up your sleeves and get to work. See what you really like and throw your hat in the ring when you are ready.
In today's day and age -- in a town like Montclair -- supply and demand still rules. Anywhere in the US, while it sounds obvious, a house is worth what someone is willing to pay. Period. That's what you have to deal with. But what's also true -- like any marketplace -- if you have the right product, there is always going to be someone willing to pay for it. They may not pay what you want, but the product will sell. A client of mine put his house on the market and it sold in one week, for about 7% over the asking price (in the price range you mentioned). However, he priced it very aggressively, was in a nice neighborhood, nice street, etc. -- and there was strong demand in that neighborhood/on that street (there was another that sold similarly).
I don't know about the re-assessment, however, is Montclair a town where that happens (vis a vis sale -- or is it done by a scheduled re-assessment, meaning the entire neighborhood, town, etc.)? Is the market peaking? No one knows! LOL. As far as strategy and all that -- you have nothing to worry about if you have the right broker, the best broker. One who does this, successfully, day in and day out, multiple times a day. There's a reason why the best is the best, and if it's for valid reasons -- go with the best.
Seasonality plays some role, Spring being the most competitive market. That being said, homes closing in summer will set a baseline for fall prices. Consider buying a home that needs some work. People don't have the time or inclination to renovate. Look at houses in the 900+ range where there is much less traffic and consider a tax appeal. If your assessed value is within 96.8% of purchase price you may be eligible to reset to the average ratio of 84.17%.
Eliminate as many contingencies as possible before offering, especially the sale of your existing home.
Find out what closing date or other terms are important to the seller and try to accommodate them.
Starting early, consider solutions to significant potential hurdles.
– For example, if there is potential for a difference between the price and appraised value, offer a solution at the time of offer.
Inspection Considerations
– Outline what you intend to accomplish with your inspection. If there is deferred maintenance that you plan to do after close and not ask the seller to address, state that with your offer.
A couple points that are right on the money- buyers have sold city apartments for more than they could have imagined 5 years ago and are coming out here with equity so appraisals aren't critical. We're still cheap compared to the towns cited (though a few have lower taxes e.g. millburn and summit, but comparable to westchester). There is value here compared to NYC, hoboken and, now Jersey City.
I consider one of main sources of competition to be other areas of the country if people can find work- Denver area. Austin, parts of VA, nashville, etc. Some poeple are just packing it in on the NE.
What happens when someone purchases at 150k over the ask? the outgoing assessment is like 60-70% of the new purchase price. You mean the taxes will jump up to at least 84% of the purchase price? Most of these turn key homes break 900k now and have 22k taxes. Which will go to 25-27k ??
Last edited by JaRuss01; 05-04-2016 at 07:36 AM..
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