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Actually - in response to previous posts - I think we're actually "above typical" when it comes to our status as buyers. We're currently looking in Rockland and northern NJ, because my job is in NYC and my wife works in Rockland.
Both my wife and I make strong incomes, FICO over 800, but of course...
A mortgage on a $500k-$600k house PLUS $10-$15k+ in taxes, and you're looking at needing roughly $75-80k cash for a 10% down payment plus closing costs (worse in NY I think, with mortgage tax). So you need $100k of cash-on-hand if you want money left over OR you've got to go FHA. If you're a first-time buyer, that's pretty steep, particularly in this economic climate with everyone worried about layoffs.
Obviously, looking at that chart, the housing market is way overpriced compared to incomes, even today. You need (2) six-figure incomes or more to comfortably afford a house in the $500k-$600k range once you add in childcare, insurance, utilities, commuting, groceries, real estate taxes, etc..., if you want anything left over.
Most of the $500k-$600k houses we looked at had a combination of most of the following: bad layouts; major replacement needed (roof, siding, flooring); multiple windows that need to be replaced; bathrooms and kitchens that hadn't been updated in 30 years; no basement or unfinished basement, uneven landscape, major roadway, outdated appliances, etc...
I'm happy to put money back into the house, but if you need to start the equation with roughly $100k in cash, and then you need $50k in additional to make fixes and updates, then you've got to get pretty creative in how the offer or mortgage is going to proceed.
I don't think we're that picky....we're happy to make compromises, renovate and even have a "small" house. We want a little land and to be off a major roadway in a good school district. But the list of compromises on many places can get pretty long for the amount of money going in - and it's sad to see total gut-jobs in this price range.
For people going FHA OR having previously owned a house and having made money off it, the story might be different, but it has been very tough to confidently commit to specific houses when they need lots of work (which requires lots more cash).
Then you are looking for the wrong size home for your income. Time to come to reality. Unless you are going to look in a different area where homes are less expensive, looking at more homes is a total waist of time for you and your poor Realtor.
It doesn't take an economist to see where this is going.
People are losing jobs left and right, the economy is tanking, and the worst is yet to come -- housing is always a trailing indicator (i.e., people lose their jobs first, and then months later they figure out they can't afford to keep their house and that's when prices start to drop).
Americans have had negative "savings" rates for the past few years, and look where that got us. People must start to save, be responsible with money, and not take on more mortgage debt right now, especially with house prices continuing to fall.
Loved this part of your post. If readers actually think about what you've written, maybe some heads will come out of the sand.
Wishing does not lead to effective planning. Reasoning does. Nice job.
Then you are looking for the wrong size home for your income. Time to come to reality. Unless you are going to look in a different area where homes are less expensive, looking at more homes is a total waist of time for you and your poor Realtor.
Most of the homes we're looking at are 3-4 bedrooms, which is typical for the area. I've seen very few 2-bedroom houses on the market. If you're in Rockland, Bergen, Westchester (and in a decent school district) or the surrounding area, many "decent" single family homes start in the 500s, unless you buy a condo or something next to a train line, on a main road, or something that needs lots of updating.
Our income is fine - and I'm not saying that as a self-compliment - I'm just saying it because it can be shocking that two good incomes can have a hard time breaking into the market. We're not looking at $800k homes. We're not even looking at $650k homes. We're not even looking for new kitchens or bathrooms or anything of the sort.
This isn't exactly shocking. If you look at home values vs. incomes, home values (and I use that term loosely) have grown disproportionately. If you look up the sales history of some of these houses, people have knocked $200k off of the house and they haven't sold for three years. And yet people are still trying to get $600k+ for a house they paid $295k for in 1999 with very few updates since 1974. Which means that people were trying to get even MORE before the price slash.
The bubble is still out there and was caused by easy credit (which no longer exists), fat corporate bonuses (which no longer exist), and obviously, people who got in over their heads by either taking advantage of easy credit, feeling pressured to jump in, or buying into the idea that "real estate never goes down." Job security is gone - we've seen tens of thousands of layoffs this week alone and taxes are astronomical. We had an energy and groceries bubble for awhile, so everyone's expenses were going up as well.
Seller's (really, everyone's) expectations will need to be adjusted accordingly. We spoke to a real estate agent this weekend at an Open House who basically acknowledged that the house she was showing was way over-priced for the bad condition it was in, but people are fearfull of being low-balled in this market, so they're padding at least $50-60k in response, which is a turnoff to buyers because the perceived value of the property is much lower. People have a hard time digesting that the Jones's down the street sold their house for $700k in 2004, but now their house is only worth $500k.
Obviously, I think that helps feed into lots of searching by buyers, who can't believe how little you're getting for (2) full-time professional incomes, which is a lot less than what you could have gotten proportionately years ago.
At the end of the day, though, "value" is highly affected by the capacity of what the market can pay. Houses are selling, but there are plenty of houses that we've seen that have been on the market for 2 years or more, and I've run the numbers on houses in our area - many are going for as much as $25k-$50k less than asking, when they're being sold at all.
Last edited by Scott99999; 01-28-2009 at 05:25 AM..
Actually - in response to previous posts - I think we're actually "above typical" when it comes to our status as buyers. We're currently looking in Rockland and northern NJ, because my job is in NYC and my wife works in Rockland.
Both my wife and I make strong incomes, FICO over 800, but of course...
A mortgage on a $500k-$600k house PLUS $10-$15k+ in taxes, and you're looking at needing roughly $75-80k cash for a 10% down payment plus closing costs (worse in NY I think, with mortgage tax). So you need $100k of cash-on-hand if you want money left over OR you've got to go FHA. If you're a first-time buyer, that's pretty steep, particularly in this economic climate with everyone worried about layoffs.
Obviously, looking at that chart, the housing market is way overpriced compared to incomes, even today. You need (2) six-figure incomes or more to comfortably afford a house in the $500k-$600k range once you add in childcare, insurance, utilities, commuting, groceries, real estate taxes, etc..., if you want anything left over.
Most of the $500k-$600k houses we looked at had a combination of most of the following: bad layouts; major replacement needed (roof, siding, flooring); multiple windows that need to be replaced; bathrooms and kitchens that hadn't been updated in 30 years; no basement or unfinished basement, uneven landscape, major roadway, outdated appliances, etc...
I'm happy to put money back into the house, but if you need to start the equation with roughly $100k in cash, and then you need $50k in additional to make fixes and updates, then you've got to get pretty creative in how the offer or mortgage is going to proceed.
I don't think we're that picky....we're happy to make compromises, renovate and even have a "small" house. We want a little land and to be off a major roadway in a good school district. But the list of compromises on many places can get pretty long for the amount of money going in - and it's sad to see total gut-jobs in this price range.
For people going FHA OR having previously owned a house and having made money off it, the story might be different, but it has been very tough to confidently commit to specific houses when they need lots of work (which requires lots more cash).
I don't think you're being picky, Iit's just that you're shopping in desirable areas... hence the reason you are finding fixer uppers for 500 to 600K.
I just purchased brand new construction for 379K ... but with that said..I'm an hour from NYC without traffic.
Keep searching... you'll eventually find the right house
If you have looked at 100 and haven't bought. You don't want to buy, you want sombody to give you a house.
E
Not true at all. We have found a few properties that we liked enough to consider an offer. And the one property we should have made an offer on sold while we were still trying to figure out where and what we wanted.
2 houses were priced a tad above our range. We made offer on 1 of them but they held at their number. Upper 300's.
1 house was priced under 300 and needed work but had a layout we liked and located across from a park. Since it was one of the first houses we went to see and was sitting on market for months we weren't ready at that time and by the time we realized it was better than everything else available it was sold.
Just saw another house this weekend and it has potential. Priced right around 300. (275-300 is my ideal price range) But it needs a TOTALLY new kitchen. But everything else in house is fine. (except for 1 bathroom that surely could be updated) But a VERY similiar house sold 2 months ago in same area for $285k. And this house is asking around 20k more. And the sold house had better location by far. So considering making offer but not sure where to start in at. Having realtor pull other comps.
But I will 100% agree I am scared to buy. Why?
Decling values are a sure thing. Job security. (I feel safe as does wife but you never know) Down payment cuts my nest egg/savings/emergency fund into a fraction of what it is now. (Still a years worth but not sure that is enough these days) And this house even if purchased I will still have to sink money into the kitchen and bathroom fairly soon. (20k+ easy)
We want to buy. But the news and reality of the economy is scary so I am surely leaning on the side of "better get the perfect house" a tad more than I think I typically would. IN addition this house is expected to be our last house really. We have settled in on the location we want to be in long term. We both have jobs we like and would love to stay with till retirement. So with all that being said we really want to be extra picky and wait till the "right house" is there. Even if we know we are going to lose value in it short term if it is the right house we will make the jump.
Most of the homes we're looking at are 3-4 bedrooms, which is typical for the area. I've seen very few 2-bedroom houses on the market. If you're in Rockland, Bergen, Westchester (and in a decent school district) or the surrounding area, many "decent" single family homes start in the 500s, unless you buy a condo or something next to a train line, on a main road, or something that needs lots of updating.
Our income is fine - and I'm not saying that as a self-compliment - I'm just saying it because it can be shocking that two good incomes can have a hard time breaking into the market. We're not looking at $800k homes. We're not even looking at $650k homes. We're not even looking for new kitchens or bathrooms or anything of the sort.
This isn't exactly shocking. If you look at home values vs. incomes, home values (and I use that term loosely) have grown disproportionately. If you look up the sales history of some of these houses, people have knocked $200k off of the house and they haven't sold for three years. And yet people are still trying to get $600k+ for a house they paid $295k for in 1999 with very few updates since 1974. Which means that people were trying to get even MORE before the price slash.
The bubble is still out there and was caused by easy credit (which no longer exists), fat corporate bonuses (which no longer exist), and obviously, people who got in over their heads by either taking advantage of easy credit, feeling pressured to jump in, or buying into the idea that "real estate never goes down." Job security is gone - we've seen tens of thousands of layoffs this week alone and taxes are astronomical. We had an energy and groceries bubble for awhile, so everyone's expenses were going up as well.
Seller's (really, everyone's) expectations will need to be adjusted accordingly. We spoke to a real estate agent this weekend at an Open House who basically acknowledged that the house she was showing was way over-priced for the bad condition it was in, but people are fearfull of being low-balled in this market, so they're padding at least $50-60k in response, which is a turnoff to buyers because the perceived value of the property is much lower. People have a hard time digesting that the Jones's down the street sold their house for $700k in 2004, but now their house is only worth $500k.
Obviously, I think that helps feed into lots of searching by buyers, who can't believe how little you're getting for (2) full-time professional incomes, which is a lot less than what you could have gotten proportionately years ago.
At the end of the day, though, "value" is highly affected by the capacity of what the market can pay. Houses are selling, but there are plenty of houses that we've seen that have been on the market for 2 years or more, and I've run the numbers on houses in our area - many are going for as much as $25k-$50k less than asking, when they're being sold at all.
I still stand by my belief that you are looking in an area that you cannot afford. I would not go shopping for a 4 bedroom + home in the Short Hills section of Millburn with a 600K budget and expect to find anything. As a example from my area.
Sounds like you expect there to be something, where you are looking, that does not exist. If you have really looked at 50 to 100 homes, you have seen a good representation of what that market is going to be like for probably the next 12 months or more.
Adjust your desires, or look someplace else, or stop looking, your waisting everyones time otherwise.
If you keep doing the same thing over and over again, is your expectation to get different results a valid expectation??
Nothing against you, and I don't know the market area you are looking in, but I do know that once you get past 30 homes seen, for your standard home search the problem more than likely is with the buyer than with the homes being looked at.
Ether your not a motivated buyer
Your expectations are to high for the area you want
Your budget is two low
Your too fussy
Or
You cannot make a decision for some other reason
When I go out with clients we set expectations very early so as to not waist their time or mine. We have a hart to hard about their expectations, and the realities. An example of that, was a couple recently who wanted to buy new construction. They had selected 14 homes they were interested in, half of which were 90+ minutes commute into NYC and half were an hour or less. In talking with them in the office we were about to take half out because of distance, and able to take a further 2 out because of the towns they were in, and 2 more because even though the property tax was not listed, they were in a town known for very high property taxes.
Basically the conversation was, is there any possibility mr + mrs buyer that you will write a offer on a home with a 90+ minute commute? NO ok no need to waist our time looking at those homes.
What is your budget again Mr + Mrs buyer, Oh so if the home has 15K in property taxes that would make your payment such, even if we were able to get a 20% discount off the price, is that affordable to you? NO eliminate.
You say you want this, this, this, and this. are any of these things you will do with out? No ok eliminate these as well.
Ether you Realtor is scared to bring you to reality, or and I have seen this as well, your switching Realtors when ever one does try to bring you to reality.
We want to buy. But the news and reality of the economy is scary so I am surely leaning on the side of "better get the perfect house" a tad more than I think I typically would. IN addition this house is expected to be our last house really. We have settled in on the location we want to be in long term. We both have jobs we like and would love to stay with till retirement. So with all that being said we really want to be extra picky and wait till the "right house" is there. Even if we know we are going to lose value in it short term if it is the right house we will make the jump.
Ok there is a issue, and many Realtors have a hard time managing this expectation depending on the client including myself. There is no perfect house, what is perfect for you stinks for someone else. The perfect house is what you make of it once you own it. 100 is way to many
Ironically, there's an article in the Journal News today that's got quotes that directly follow this thread...I'm writing on my phone, but I'll link to it later on.
I think the fundamental issue is one of value...perceived value vs actual cost vs market value. If these homes were "worth" the asking price, homeowners wouldn't be knocking 200k off of their asking price as the houses sit for 2 years and then accepting offers 10% below asking.
I understand the previous point...the reality of the metro NYC region sucks and buyer expectations should be adjusted to match...but it's also true that prices have been artificially inflated for years and sellers can set any price...which ultimately becomes moot if there's no one who can confidently pay.
I was just in a local Day Care yesterday and was told that lots of people had pulled their kids because they either lost their job and/or were forced to move.
Ok there is a issue, and many Realtors have a hard time managing this expectation depending on the client including myself. There is no perfect house, what is perfect for you stinks for someone else. The perfect house is what you make of it once you own it. 100 is way to many
To give a better example of my 100 number. We moved to NJ in July. At that time I still owned a house out of state. So the houses we looked at initially (open houses only) added up to probably 20-40 of the houses I have seen. Maybe 10 of those houses I would have checked out with realtor but we were in no rush since I still had to sell my house.
My house sold in Sept. So in Sept (beginning of bad market listings in terms of volume) we started looking with a realtor in addition checking out more open houses when it was something we had not seen. This was around 40 more houses from mid Sept - mid Nov. Made 1 offer in that time period and also adjusted our price range from 200-450 to 200 - 400. And really anything over 350 is not goign to happen but since we have seen houses listed at $429k drop to $349k and still sit we wanted to just have an eye on the houses above $350 but nothing way above it.
In late Dec we got a new realtor (that is a whole other story) and have looked at probably 20 houses. 1 of which we really like. Sure it is not PERFECT but it has majority of our must haves. (location, family room, master bedroom decent size, etc...) Needs other things to make it closer to our perfect house but those things we can make happen over time.
But now it comes down to price. If a VERY SIMILAR house in a better location sold for 20k less than this house months ago then this house is overpriced. So I can either wait for a price drop of 10k or so which tends to happen in 30-45 days in or offer now but at the low number which they may balk at. Still deciding on it.
So really if you break it down I have looked at over 100 houses.
40 of them open houses. (some we would actually consider some just for fun)
60 houses with realtors. (30 of those in a town we have now crossed off our list)
So really 30 houses that we HOPED to like or were in the town we like at all different prices.
Is that crazy? Maybe. Will I find the perfect house? No.
But do I believe I can find a house better than everything we have seen for a price I like? Yes. Now if Spring comes and the big batch of new listings come out and there is NOTHING out of it throughout the summer than obviously I have issues. But if this one house pans out I may not care about the summer crop.
I assume you have already browsed Realtor.com because it is a quick way of searching for houses based on location, price, size, age, etc. They even indicate the elementary, middle, and high schools for each home. The photos are a bonus to view the homes interiors.
Just a thought.
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Nice Reasoning
... but with that said..I'm an hour from NYC without traffic.
But if this one house pans out I may not care about the summer crop. 
