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Old 02-03-2009, 12:58 PM
 
509 posts, read 803,015 times
Reputation: 137

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Quote:
Originally Posted by NatasNJ View Post
This is the part the makes me insane.

I am currently renting. But eventually plan to buy. I have so much fear that I will end up buying right before a major price decline. And at the sametime I want to buy so I can feel like I move on/forward with my life. Very frustrating...
It is frustrating but a mortgage is for 30 years, and it would be better to gut it out for a year or two at the possible expense of gutting it out over 30 years. The job markets are the most volatile markets we've all seen in our lifetimes. Borrowing money to buy something today is a dangerous game for anyone that doesn't have a proper safety net, which may need to be 2 or 3 years living expenses at this point.
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Old 02-03-2009, 01:05 PM
 
71 posts, read 238,750 times
Reputation: 37
Quote:
Originally Posted by halfoffpeak View Post
OK. I will not argue about the "economists" predictions. Prices will go eventually back to their historical average, independently what government does. Maybe not in 2009. HOWEVER, if buyers are educated and aware of the inflated prices, we will reach 50% sooner than later.
More than once, you've mentioned an "historical average". As we all know, averages need a fixed set of data, so what is yours? I.e., over what time frame is your "historical average" calculated, and why?

I ask because I do not believe you are interpreting Case-Shiller correctly. The value of 100 does not represent an historical average - it represents a fixed point in time (Jan 2000) against which the data for other points in time are to be measured, just as the CPI index uses 1982-84 as its "100" period. And speaking of CPI, you know the values in the index aren't adjusted for inflation (core, wages, etc.), right?

Your hypothesis, therefore, is that prices need to drop to where they were exactly in January 2000, without adjusting for inflation or wages. Do you agree? If so, can you explain why?
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Old 02-03-2009, 01:07 PM
 
263 posts, read 462,450 times
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Quote:
Originally Posted by theoakman View Post
it's not about that. It's about the government disrupting the market forces involved. You are looking at it from a free market perspective, and I would agree with you, the free market would easily have housing prices at 50% below. Had the government not stepped in by bailing out Fannie and Freddie, housing would be doomed.
Agreed. They cannot prolong it forever though. They are not that powerful. Unless they fix prices and currency, ie like china, price will normalize even if it takes inflation to bring this correction.

Also, I am not sure that they try to avoid social unrest. They try to avoid "social elite" unrest (bankers, ceos, funds, etc). Whatever benefits remain to us (homeowners, unemployed, etc) are sort of secondary. It should have been the other way round.

**********Bid half off peak******************************
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Old 02-03-2009, 01:11 PM
 
Location: NJ
12,284 posts, read 30,935,086 times
Reputation: 5190
Quote:
Originally Posted by NatasNJ View Post
This is the part the makes me insane.

I am currently renting. But eventually plan to buy. I have so much fear that I will end up buying right before a major price decline. And at the sametime I want to buy so I can feel like I move on/forward with my life. Very frustrating...
i can totally understand that. i feel for you!
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Old 02-03-2009, 01:28 PM
 
263 posts, read 462,450 times
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Quote:
Originally Posted by mcf17 View Post

I ask because I do not believe you are interpreting Case-Shiller correctly. The value of 100 does not represent an historical average - it represents a fixed point in time (Jan 2000) against which the data for other points in time are to be measured, just as the CPI index uses 1982-84 as its "100" period.
You are right. The historical average for the last 30 years would bring the index below 100 so the correction should be even worse! But if you think that 2000 is inappropriate then think that 1999 was about the last time in recent years where prices were sort of affordable and when the bubble started according to other indices. Before that prices were even lower according to the index in the NYC area.

I do not adjust for inflation because *real* wages were actually decreased in the same period (2000-2008).
However, the most important factor which should be reflected in the CS index soon is NY economy. One should not expect the traditional overinflated premium (due to wages) for NYC proximity.

**********Bid half off peak******************************

Last edited by halfoffpeak; 02-03-2009 at 01:43 PM..
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Old 02-03-2009, 01:29 PM
 
1,536 posts, read 4,041,558 times
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Quote:
Originally Posted by theoakman View Post
Borrowing money to buy something today is a dangerous game for anyone that doesn't have a proper safety net, which may need to be 2 or 3 years living expenses at this point.
Excellent point!
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Old 02-03-2009, 01:58 PM
 
100 posts, read 349,467 times
Reputation: 39
Wow, this got more traction that I expected.

In our situation, a number of the houses that we are looking at were initially priced in the high 600s (679k) or even 700s within 2-3 years ago.

Most have now dropped around $150-200k in price and now sit in the mid 500s, with a few updated exceptions at $620-$650k.

With the updated houses, they're still not THAT much updated over the mid-500 houses.

$550,000 = $495,000 at 10% off
$650,000 = $585,000 at 10% off

But, since the $650k is overpriced in the market, my trick is figuring out how low to go on the inital offer. It seems like even $540k or $550k is reasonable as a starting point for the pricier houses, since it's still $50k above the probable actual sale price of the "non-updated" comps, even though it's $100k or more off of asking.

Half-off peak would put these at $350k-$375k. I don't that's 100% feasible or correct, but I could see these houses being in the high $400s when you take common incomes for the area into account.
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Old 02-03-2009, 02:06 PM
 
Location: Martinsville, NJ
6,155 posts, read 10,890,837 times
Reputation: 3938
Quote:
Originally Posted by NatasNJ View Post
Median price 2006 = $432k.
Median price 2008 = $406k (decrease of 6%)

Where are you getting the .25% drop?
The .25% drop is from 2007 to 2008. As I said in the post to which you responded (#11 in this thread) in 2007, the median price was $407,000. The drop in median price from '07 to '08 appears to have been .25%. The drop you quoted was over a TWO year period, starting at what appears to have been the peak year in Bridgewater, during which the median sale price was $432,000.
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Old 02-03-2009, 02:11 PM
 
Location: Martinsville, NJ
6,155 posts, read 10,890,837 times
Reputation: 3938
Quote:
Originally Posted by davenj08 View Post
a drop of median price from $432k in 2006 to $406k in 2008 is a drop of almost 6%. even that looks understated to me. a few houses that were valued at around 650-670k in 2006 peak are selling for around 525k now, which would be a drop of more like 20-22%. if people are still buying houses at or near asking price, its their mistake.

i wouldn't agree with the OP that prices are going to drop by 50% neither with Bill that Bridgewater has only seen a 6% drop since 2006.
You're looking at "a few houses" and coming up with an opinion.
I went to the data collected by my MLS, and reported it. I didn't pull out a selected few houses, I reported the median of all the data. I didn't give an opinion, I just did the math & layed it out. You can choose to disbelieve the data I reported if you like, but it is what it is.
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Old 02-03-2009, 02:12 PM
 
71 posts, read 238,750 times
Reputation: 37
Quote:
Originally Posted by halfoffpeak View Post
You are right. The historical average for the last 30 years would bring the index below 100 so the correction should be even worse! But if you think that 2000 is inappropriate then think that 1999 was about the last time in recent years where prices were sort of affordable and when the bubble started according to other indices. Before that prices were even lower according to the index in the NYC area.

I do not adjust for inflation because *real* wages were actually decreased in the same period (2000-2008).
You mean "real wages", as in, wages already adjusted for inflation?

You're basically saying that housing prices should remain flat over time, without any adjustment for inflation, wages, etc. Okay, but why? And why 30 years? Why not 10, or 50, or 100? I mean, based on historical averages over the last 100 years, I'm guessing prices should drop by something like 90%. Sure, why not?
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