Thinking of Buying (Condo) for First Time (West New York, Hackensack: real estate, condos)

[Dancingtickmark]

Hi new to forum.

I am a 26 year old who is thinking of buying property for the first time and after seeing some good posts here thought I'd try.

Currently I work in New York and am trying to lighten my commute a bit. I was looking online at some decently priced condos in the Guttenberg/West New York/Fort Lee areas. After buying a new car and student loans I don't have as much saved up as I'd like. Was looking to spend up to $150K. Any thoughts? Is this worth it? Am I buying into a trap? Would I be better off saving the extra $50k and maybe going for a cheap house around $200K?

Your $.02 is greatly appreciated.

[elflord1973]

Originally Posted by Dancingtickmark

Hi new to forum.

I am a 26 year old who is thinking of buying property for the first time and after seeing some good posts here thought I'd try.

Currently I work in New York and am trying to lighten my commute a bit. I was looking online at some decently priced condos in the Guttenberg/West New York/Fort Lee areas. After buying a new car and student loans I don't have as much saved up as I'd like. Was looking to spend up to $150K. Any thoughts? Is this worth it? Am I buying into a trap? Would I be better off saving the extra $50k and maybe going for a cheap house around $200K?

Your $.02 is greatly appreciated.

The upside of saving an extra 50K is that by the time you've done that, there will be more places that have fallen under 200k.

[Newarkbomb]

Hackensack's highrises along prospect ave can go for that price for a one bedroom..

Check this out! it's only 110K
280 Prospect Ave Unit: 11H, Hackensack, NJ, 07601 - MLS ID#2900710 - Condo/Townhome/Row Home/Co-Op real estate - REALTOR.com®

[Bill Keegan]

Originally Posted by elflord1973

The upside of saving an extra 50K is that by the time you've done that, there will be more places that have fallen under 200k.

In your opinion. You can't present that sort of opinion as if it's a fact. It may or may not happen.

[DodgeViper01]

I agree with Bill but I am almost 100% sure that unless we have some major event this is not going to happen. And besides with the tax credit for first time buyers and the LOW 5% interest rates, you can save a lot more now than ever before. If you buy a house now for $25K more than next year but interest rates are 6% next year, you are still coming out ahead $20K at the end of the mortgage.

[elflord1973]

Originally Posted by Bill Keegan

In your opinion. You can't present that sort of opinion as if it's a fact. It may or may not happen.

It's not merely an opinion, it is a prediction. It is a prediction I can support with plenty of data. Which type do you prefer -- valuation indicators ? trend indicators ?

My personal favourite is a purely market-driven valuation indicator -- the Case Shiller futures market. This basically creates a market for future values of the index. What I like about these is that they are market driven numbers, so they are a pretty good estimate given the facts on the ground today (to put it another way, it's today's market value of tomorrow's house).

[elflord1973]

Originally Posted by DodgeViper01

I agree with Bill but I am almost 100% sure that unless we have some major event this is not going to happen.

By "this", I take it you are referring to the proposition in my post -- more places falling below 200K. If you are arguing that this won't happen, is it your position that prices will not fall unless there is a major event ? Or is it your position that prices in aggregate will fall, but that the lower end of the market is immune to price drops ?

If it's the former, this not only doesn't require a "major event", it merely requires more of the same. As a real estate agent, you surely pay attention to trends like the Case Shiller index which shows a steady stream of downticks.

If the latter, well that's just false, and stratified price indices show it.

And besides with the tax credit for first time buyers and the LOW 5% interest rates, you can save a lot more now than ever before. If you buy a house now for $25K more than next year but interest rates are 6% next year, you are still coming out ahead $20K at the end of the mortgage.

Loans have an embedded option. Here are three basic facts about the embedded option:

(1) you can make prepayments or refinance any time. This amounts to a "call option on your debt".

(2) the option is worth more if the rate is higher. That is, suppose you have a choice between a low rate loan with a high principal, and a high rate loan with a lower principal, and the payments on both loans are the same. Then you should always take the loan with the higher rate.

(3) higher rates put downward pressure on prices. If rates are going to get higher, then prices have to get lower.

[Bill Keegan]

Originally Posted by elflord1973

It's not merely an opinion, it is a prediction. It is a prediction I can support with plenty of data. Which type do you prefer -- valuation indicators ? trend indicators ?

My personal favourite is a purely market-driven valuation indicator -- the Case Shiller futures market. This basically creates a market for future values of the index. What I like about these is that they are market driven numbers, so they are a pretty good estimate given the facts on the ground today (to put it another way, it's today's market value of tomorrow's house).

Case Schiller is widely publicized, and often pointed to as some sort of authority on the housing market. But it's got a major flaw in that it takes all it's data from the 20 largest markets in the US. The 20 most heavily populated cities. I contend those cities are not a benchmark for the rest of the nation. That being said, I'd also ask how CS "predicts" future values. What data does it look at to decide in what direction and by how much the prices will move. I'll admit I've not studied the CS methodology, but on the surface it simply says the downward trend will continue at the same angle. Why do they believe that to be the case? Why do you?

[elflord1973]

Originally Posted by Bill Keegan

But it's got a major flaw in that it takes all it's data from the 20 largest markets in the US. The 20 most heavily populated cities. I contend those cities are not a benchmark for the rest of the nation.

I partly agree with you. Those cities are a benchmark for those cities.

People who work in Manhattan, like myself, are very interested in the NY Metro numbers, because these are a broad average of counties near Manhattan (basically all that a sane person commuting to NY would consider, and some a bit further out)

That being said, I'd also ask how CS "predicts" future values. What data does it look at to decide in what direction and by how much the prices will move. I'll admit I've not studied the CS methodology, but on the surface it simply says the downward trend will continue at the same angle. Why do they believe that to be the case? Why do you?

The index itself doesn't predict future values.

There is a market for predicting future values of the Case Shiller index on the CME exchange (where futures are traded)

Basically, it lets you "buy" the Case Shiller index at a future date. The (futures) contract at expiry pays the difference between the actual index at expiry, and the value that was agreed to when the contract was entered into.

So recent futures prices of the contract reflect a market consensus on the future value of the Case Shiller index.

http://http://www.cmegroup.com/trading/real-estate/files/spcaseshiller_fact_card.pdf

Here's the market last time I checked for NY metro

[GiantRutgersfan]

Originally Posted by DodgeViper01

I agree with Bill but I am almost 100% sure that unless we have some major event this is not going to happen. And besides with the tax credit for first time buyers and the LOW 5% interest rates, you can save a lot more now than ever before. If you buy a house now for $25K more than next year but interest rates are 6% next year, you are still coming out ahead $20K at the end of the mortgage.

prices are not going to go up anytime soon tho. Interest might go up however. but you can always refinance so it isnt nearly as important as the price