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Using the Radar Logic site or even Zillow I have noticed that Philadelphia area home prices are down to mid 2005 levels while LA and San Diego are at mid 2003 prices. All the houses I am looking at in the Bucks County, PA area are still way over priced, in my opinion, because if you look at a house bought in 1999 and assume 4% inflation that's 40% price appreciation but the appreciation over 10 years is something like 90%...so the home prices in these areas are 50% over priced right?
I have been waiting to buy a home since 2001 - now I have a wife and 2 kids and am tired of renting. I understand that anytime is a good time to buy if I will live for 5 plus years in the home but at the same time we live in crazy times - I don't want to over pay 100K - I will most likely buy anyway in 8 mos to 1 year - I'm hoping the slow season will help with price reductions. I don't care about 8K govt incentive or low interest rates because they are of no help to my situation.
I'd be very careful about buying in the Northeast in general unless you can get that one good home in a good neighborhood for at least 15-20% off "peak".
Most of the "good deals" are in "up and coming or revitalized" neighborhoods or the middle of tons of foreclosures/short sales.
Remember, areas like NV, FL, AZ started crashing in late 2006 and just about bottomed out end 2008/early 2009.
But the NE didn't really start feeling the major crash until Lehman Bros crash and the credit markets froze. The reason I used pre/post Lehman Bros as a timeline for the NE and parts of the West Coast is because home prices are generally much higher and getting jumbo loans is very difficult without a 20-30% downpayment.
Thus post Lehman Bros. crash have started downward pricing pressure on the 500K and up homes. Those higher priced home prices have started going downwards. It's a domino effect that causes those 300K homes to go further down.
So again, unless you are getting a very good deal, it may be worth it to wait. Housing prices are not going up anytime for the next 3-5 years. It will stay flat for a long time.
The NE (while economically stronger) than the South, parts of the West, is just starting to feel the housing pinch.
I don't give much thought to Zillow. It claims my home in Maryland was worth 80K more than I sold it for. I sold it for 40K less the the official Maryland Property Tax assessment that just came out last month. But I sold it for just below the comps in my neighborhood. The housing markets in the NE are in general "declining"
It is flat out WRONG to look at any property price trend in isolation. Philadelphia is a pretty small market and the factors that drive that economy are more than a bit different than those that move prices in someplace like Las Vegas. I don't recall any move "out of" someplace toward Philly the way people were leaving LA in droves for Vegas' low taxes and acres of brand new houses.
Like many NE areas Philly experienced a fall off in manufacturing employment a long long long time ago. The consolidation of many of industries, from food to insurance to transportation to heavy industries and even shifts in tourism have been decades long. The peak prices of Philly and surrounding areas were bargains compared to other NE corridor areas that frankly boomed a lot 'louder' than Philly.
The "fall" is also understandably not as great.
If the OP wants to to use some ridiculous straight line appreciation calculation and some even more baseless "deflator factor" to justify what they WISH prices to be and then make offers on these numbers I fear they will NOT have much success.
The market does not care that you have been renting for 8 years. It does not care if you have been crammed in with your family. It does not care if you don't want to overpay. The market is set by buyers and sellers coming to agreement on prices that work for both of them. If you find a property you like and the seller agrees to your price that is all that matters.
To get the best value you can choose to look at homes that are in need of some work in areas that otherwise have positive signs and good price stability. If you want a place in top notch condition you will pay much more. If the neighborhood you look at is rock solid the odds of having significant declines over 5-7 years are fairly small.
If you have a LOT of cash and you find a seller whose circumstances may benefit from that may be another avenue to pursue. I am not among those who see interest sky rocketing any time soon, and neither do I see significant price movement in the near term. If you can move quickly and find a property that suits your, with a seller situation that helps you get a good value, I would move on it. As you said renting gets old...
The Philadelphia area did not see the increase in prices on the scale of California, Florida, etc. I personally do not see prices dropping much if at all. Prices are stagnant right now and with mortgage rates where they are I can only see them staying where they are or even rising slightly. Then again I am a Realtor and always see it as a great time to buy!!!
I am also watching the Philadelphia market waiting to buy. It is a confusing mix right now. I am seeing "starter homes" being snapped up quickly (we are looking in Montgomery County). But homes above that are sitting.
We found one we liked that was FSBO. The owner purchased in Jan 2008 for $350,000 and was asking $369,000. Looking at sold comps, we were thinking it should be about $325,000. But being new to the market, they were not willing to negotiate. Fast forward to May when it finally sold with a realtor for $330,000. They would have been better off negotiating with us from the beginning since there would have been no realtor fee.
Then there is another one that has been on the market since last October at $475,000 with no price reductions and is sitting empty. Originally built in 2002 for $280,000. Now I know that the current owners bought in 2006 and they are listing for close to what they bought it for, but again comps show that it should be closer to $400,000.
If I had $100 for every realtor that tells me now is the time to buy, "the Philly market never had as much of a run up, so it won't go down". Maybe I could make enough money to cover the negative equity if I buy now at these prices. I would say that a home that has a 75% increase in just 6 years is a tad overpriced.
It is easy to confuse "lack of buyers" with "overpriced homes", but that is not something that you as a "non buyer" can change. If you make an offer to someone that NEEDS to sell you might enter the market at the right point, however as you cite an example of one home that you thought might sell for $325 when in fact it sold for $330 that tells me that you are at least capable getting in the right ballpark...
If fear of "negative equity" is greater than any discomfort from renting I would encourage you NOT to attempt to enter the market. Focusing on individual homes that you feel are overpriced will not prove productive. If you are a bargain hunter and really want to make to effort to find a home that is in need of renovation / cosmetic work OR work with a seller that is facing financial hardship, and jump through all the hoops that might go with a fickle lender, then the odds of having 'positive equity' much sooner and much more securely increase dramatically.
For every person in every situation there are set of variables that can make all the difference between a particular sale be "right" and not worth it...
"Fear of negative equity"? Negative equity is pretty much a given. Even though people may say Philadelphia will hold value, statistics show that it is a declining market now. In a declining market the last sale becomes the ceiling for the next sale. So by buying I'm pretty much assured that the value of my home will decrease when the next sale happens and my house is used as the comp. Sure it may not drop as far as other markets, but it doesn't take much to make it a bad move financially.
And the argument that if I stay for at least 5 years, I will be fine doesn't add up for me.
For example - If I purchased a $300,000 home when we moved here last year, that home would have lost approximately 8% last year and about 5% this year (and probably some more before the year is over). My home would now be valued at about $265000. For a loss of $35,000 and that would be an actual loss of my money since I would have put 20% down.
So lets just say that I don't lose any more value this year and next year I start getting 4% appreciation per year. I owned the home for 2 years where it lost value and now I have 3 years of appreciation (which I don't think is going to happen, but let's just be optimistic...) My home is now worth $298,000. So in 5 years my house is still approximately at the same value. Of course if I have to sell, I am in a position of lost money again with closing costs and commission.... It takes me another 3 years to make enough to make up for the commission and closing costs if I have to sell. 8 years to basically break even....
When you factor in that I am renting at a lower monthly cost that I would have in a mortgage payment, I really come out ahead.
Could I find a fixer-up in the Philadelphia region that could work financially? Sure. But that is not what I am looking for - I have a family and a busy life and a husband that is not too handy. From the research I have done, sellers are very slow to realize what the market is willing to pay - especially if they purchased in 2005 or later. And unfortunately I also have a very small radius in which to search for a home and I am a picky buyer.
Before anyone jumps on me for being an unrealistic buyer. I was on the other end selling in FL. Our realtor thought we were crazy for how low we listed our home. But we needed to sell and it sold. Many of the homes in that neighborhood that were listed when ours was are still for sale a year and a half later. So I have experienced the pain of selling for a loss.
"When you factor in that I am renting at a lower monthly cost that I would have in a mortgage payment, I really come out ahead.
Could I find a fixer-up in the Philadelphia region that could work financially? Sure. But that is not what I am looking for - I have a family and a busy life and a husband that is not too handy. From the research I have done, sellers are very slow to realize what the market is willing to pay - especially if they purchased in 2005 or later. And unfortunately I also have a very small radius in which to search for a home and I am a picky buyer.
Before anyone jumps on me for being an unrealistic buyer. I was on the other end selling in FL. Our realtor thought we were crazy for how low we listed our home. But we needed to sell and it sold. Many of the homes in that neighborhood that were listed when ours was are still for sale a year and a half later. So I have experienced the pain of selling for a loss."
So you say you are not an unrealistic buyer. Could you please define that for me. Most buyers and I mean most are unrealistic buyers in this economy. ALL SELLERS ARE NOT IN A DISTRESSED SITUATION AND DO NOT NEED TO SELL!!! Crazy concept huh.
When you go to purchase a home you look at the pro' and con's first. Is it close or is there a train close to take me to work? Can my kids ride their bikes to any kind of sport practice? Does the school bus stop near by? Can I walk to a nice restaurant? Does the community as a whole participate in many events?
These are thing the unrealistic buyer's looking for a "deal" do not see. Maybe to you the area does not seem worth the price at the time.Then you buy a home there and say wow this area is great!
As far as i am concerned I hope these buyers sit on the sideline so that the people that are really looking for a place to call home can keep the market moving.
So you say you are not an unrealistic buyer. Could you please define that for me. Most buyers and I mean most are unrealistic buyers in this economy. ALL SELLERS ARE NOT IN A DISTRESSED SITUATION AND DO NOT NEED TO SELL!!! Crazy concept huh.
When you go to purchase a home you look at the pro' and con's first. Is it close or is there a train close to take me to work? Can my kids ride their bikes to any kind of sport practice? Does the school bus stop near by? Can I walk to a nice restaurant? Does the community as a whole participate in many events?
These are thing the unrealistic buyer's looking for a "deal" do not see. Maybe to you the area does not seem worth the price at the time.Then you buy a home there and say wow this area is great!
As far as i am concerned I hope these buyers sit on the sideline so that the people that are really looking for a place to call home can keep the market moving.
KEEP ON RENTING YOUR LANDLORD LOVES YOU!!!
You need to read my first post. I am looking in a very specific area for a home. There are two homes that have come on the market that I would consider buying. First one was FSBO at the time we saw it and the sellers would not negotiate. I was willing to pay $325,000 (home listed at $369,000). Three months later, they sold for $330,000 with a realtor (and I don't even know if the paid any closing costs - net could be lower). Unless I am missing something, my $325,000 without a realtor's commission on either end would have netted them more money.
And the next home I am interested in has been sitting on the market since last October at $475,000. Built in 2002 at $280,000 with no substantial upgrades. How do you justify a 70% increase in 6 years? The most recent sold comp puts it closer to $400,000. And since the home has no interested buyers, I'm not alone in thinking it is overpriced.
We are renting in the neighborhood where we will eventually buy, my kids can walk to school and the local park. I can walk to the train and farmers market. My landlord does love me because I take care of his home and pay my rent on time. He in turn fixes any problems quickly.
I can't afford to buy a home that could potentially lose $50,000. I lost more than that when I had to sell my last home. So I feel the pain of sellers, but why would I make that mistake again? Financially, I come out ahead renting at probably half of what my mortgage payment will be. Until I see signs of a stable market it doesn't make sense to buy. But if a home came on the market tomorrow that was reasonably priced and had the location I want, I am ready to buy.
I don't understand the concept of "ALL SELLERS ARE NOT IN A DISTRESSED SITUATION AND DO NOT NEED TO SELL!!!" By virtue of having your home on the market, you are trying to sell correct? Sure, someone who "needs" to sell might come down in price quicker until the home sells (as in my first example). But if you are trying to sell and you get no offers sitting at the same price for 10 months (my second example) makes no sense to me. (And the home is now vacant which only adds issues of upkeep.)
Wouldn't you be better to lower the price quickly and sell than to hold on to the depreciating asset? Or if you are not willing to sell for a lower price then don't sell and take your home off the market. But by virtue of the fact there are no buyers, the home is either overpriced or there is something wrong with the home.
Eventually a home will come on the market that is priced right for me and in the location I desire and I will be ready to buy when it does. But I'm willing to walk away from potential homes if the deal is not right. There are always more homes on the market tomorrow.
byoak - thank you for responding - I know you meant well but you made me laugh out loud - I guess it's your job to sell but your message is a bit over the top. Thanks to everyone who responded because your thoughts helped me to solidify my strategy which is to rent for another year...
This will mean renting for my 20th year - I was ready to buy in 2001 but that's when the bubble started in the city I once lived - I was just getting enough income to be able to afford but prices were going up like crazy by the month and I was new at buying a home and scared. It's sad...now my kids won't get a swing set (we go to the part which is fun too though - meet other kids), "if" we are lucky we can find a fenced in back yard - could not get one this year - we will live with old furniture - we won't be able to decorate how we want - we will live with landlord rules...
but we will have freedom to leave a neighborhood we may not like and save a ton of money - I am now convinced the housing market in Philly area is 50% over priced and there is no way it will rise because unemployment is getting really bad 10% nationally and some weird stuff is happening in the economy - the govt is constantly using bubble gum to seal leaks on our slowly sinking boat - I think things will get better someday but not any time soon.
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