Calling all Real Estate Bears (sale, lease, mortgages)

[xmonger]

First of all, I am a real estate bear. Everything points to substantially lower prices for real estate in NJ for the months and years to come. It is hard to argue otherwise (and Lusitan will rip you a new one when you do )

Here is my situation, comments welcomed:

I lived in NYC until 2004, when I took a job down south for 1 year. Upon my return to the area I settled on living in Holmdel NJ. (A well to do town, excellent schools, great for raising a family.)

I didn't buy a house in 2005 because the real estate valuations were complete bs. Therefore, I leased a nice home, abeit a little expensive. Every year since, I have revisited the thought of a RE purchase. Finally, this year I decided that I do not want to renew my lease. I've had enough of having my family stay on the sidelines due to the poor financial decision-making by idiots which have pushed this country towards ruin.

Financially I am in good shape:

credit score in the 800's - check
20% down payment - check
pre-approved mortage - check
stable job - not really, I am in financial services
wife's job - she lost it recently but see next line
reserve fund to carry home costs + living expenses after purchase- check, for several years I might add

Ok, so I want to buy now. I know the longer I wait the better the pricing...but there is value to having your own home and being able to change things as your heart desires. I have already benefited by > $100k by renting vs. purchasing in 2005.

I put an offer in today on a home in Holmdel. The offer is at 69% of what the previous owner paid for the home in 6/05 and is circa 03 pricing. I am sure it won't be accepted. I am willing to go up slightly.

Am I making a mistake?

[ghuber]

I think you did the right thing by putting in a lowball offer, but if your job is not stable why risk buying right now?

[clevedark]

Many people's jobs aren't stable right now. But I think it's ok to buy on the decline. Nobody can predict a bottom.

[xmonger]

Originally Posted by ghuber

I think you did the right thing by putting in a lowball offer, but if your job is not stable why risk buying right now?

I guess my job is as stable as any in the NYC area. No one knows how bad it will get before a recovery occurs. Also, I do have the reserves to carry the home and all living expenses for a long clip so the financial pressure will be manageable.

I also want to add that the offer is at 77% of the current listing price. The owner is already taking an 11% hit + commissions if he gets list. That being said, there is no way he is getting that price, unless an idiot rolls into town. However, idiots aren't getting mortgages anymore.

[clevedark]

OK you have to keep us real estate junkies posted on your progress... Good luck!

[halfoffpeak]

Unfortunately, sellers and RE agents are in denial. Otherwise they would have priced their property correctly. If you see a house listed for 550K (2008 price) then sellers are looking for a sucker to unload it for 500K. They are not looking for a lowball offer of 400K. If you need to lowball then chances are your bid will not be accepted. Have patience and be prepared to move on. When you would not have to lowball it would be the right time to buy. Hope this helps.

By the way, your budgeting shows you are the perfect buyer except perhaps the finance job. This is in risk no matter what they tell you.

[JG183]

Originally Posted by xmonger

Am I making a mistake?

hell no.

[clevedark]

Another thing to consider is this--a really grotty buyer's market can mean that no matter how low a seller prices their property no one will buy it. I live in Mass now and I've seen properties go down incredibly low and still there are no takers.

A property is either desirable or not in this market. Gone are the days when you were virtually guaranteed a sale by pricing the property "right."

[xmonger]

Originally Posted by halfoffpeak

Unfortunately, sellers and RE agents are in denial. Otherwise they would have priced their property correctly. If you see a house listed for 550K (2008 price) then sellers are looking for a sucker to unload it for 500K. They are not looking for a lowball offer of 400K. If you need to lowball then chances are your bid will not be accepted. Have patience and be prepared to move on. When you would not have to lowball it would be the right time to buy. Hope this helps.

By the way, your budgeting shows you are the perfect buyer except perhaps the finance job. This is in risk no matter what they tell you.

Thanks, I think that's a good way to look at it. I don't think my 03 level offer is a "lowball" but that shows you the dellusional world sellers and RE agents operate in. If one believes that there will be a reversion to the mean in RE prices, I will be underwater for a while. In fact, having watched financial markets most my life...if anything, RE prices will overshoot on the way down. Oh and that's in a normal cycle. Our banking system is currently insolvent.

[kalim2008]

Originally Posted by xmonger

reserve fund to carry home costs + living expenses after purchase- check, for several years I might add

is this assuming just your wife having no job or BOTH of you having no job?