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Houses that were selling for 600K in 2001 are now asking around 725-750K, which is what they should be according to half-off's inflation calculator.
600K in 2001 is an inflated price so I would only consider a price in 1999 or earlier.
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Originally Posted by dma1250
Given the dramatic drop in mortgage rates
If mortgage rates increase then prices fall further to compensate.
Quote:
Originally Posted by dma1250
and the huge increase in the area's amenities and quality of life--I'd say things are arguably cheaper than they were back then.
Unfortunately this "huge increase in quality of life" was accompanied with a huge increase on property taxes. Those taxes are unaffordable to many current residents, given the median income, who will soon try to escape by selling. Needless to say the taxes should be priced in the house.
Quote:
Originally Posted by dma1250
Also, there is really no such thing as actual "worth" in real estate. A house is worth whatever one person will pay for it.
Viewing a house as unique makes one bid higher. There's always a more appropriate house coming up.
Last edited by halfoffpeak; 03-17-2009 at 10:40 PM..
According to Professor Robert Case, the creator of the Case Schiller index, housing prices have already fallen below predicted norms. He believes that if not for the severity of the recession, the real estate market would have already bottomed. While there is no unanimmous opnion, he and other economists who rely on the Case Schiller index, predict the market to hit bottom this year, with about another 10% in reductions. They are expecting a national average price drop of about 30-35% off peak. Of course, that average is inflated by 50%+ in some select markets. Most markets are predicted to drop less than 30%.
2001 prices were not "inflated." A price of 600K in 2001 represents a very modest increase of a few percentages from 1999.
On mortgages, yes. The fact that rates are so low now is one of the reasons that prices have not dropped any more than they already have.
On "quality of life" I am talking about the increase in restaurants, stores, coffee houses, galleries, theaters, etc. Taking Croton, in 2001 there was no where decent to shop. Now there is an excellent gourmet market and the local supermarket has been renovated and greatly improved. The number of good restaurants has more than doubled. Those things have nothing to do with taxes, but they have a major impact on real estate prices.
I don't understand your "Viewing a house as unique makes one bid higher" comment. It only takes one bid. A house's worth is totally subjective and depends on the individual.
Actually it is good that you brought up Croton as this is one town that I have been searching. Here are some places that I have seen so far:
Seren, just wondering if you are searching the Croton school district, or Cortlandt as well, because I can't find any of those examples?
Of examples I did see --- I saw one home that sold for 436K in September of 2004. It re-sold in December 2008, for 450k. (Asking price was 479k).
I saw another home that was purchased in September 2005 for 799K, then sold in May of 2007 for 820k (the height of the market), and then re-sold again at the end of 2008 for 740k. (Asking was 775K).
Those are the only homes in Croton, in the last 6 months, where I could find information on the prior sales price.
But in both examples, the sellers took significantly less than the peek price, and sold for 2004-level prices.
Among the examples I currently see for sale in Croton:
Asking price 455k. Prior sale in April 2005, for 475k. (Thus, asking 20k less than the 2005 sale price).
Asking price 439k. Prior sale in October 2004 for 415k. (Thus, asking only slightly more than 2004 price, would probably accept an offer close to 2004 price).
Asking price 419k. Prior sale in 2007, for 526k. (Thus, marking down about 20% from the prior sale and from market peak)
Asking price 479k. Prior sale in 2008 for 482k, and prior sale in 2004 for 427k. (Thus, current asking is only about 10% higher than 2004 sale price).
There are also homes that are certainly still overpriced. And nobody can know whether current prices represent the "bottom" or not. But it is fairly obvious that many sellers in Croton have dramatically reduced prices and expectations off high prices.
In terms of making lowball offers, it can't hurt. Worst thing that could happen is your offer gets rejected. On *average*, homes actually sell for 95% fo their asking price. Meaning on *average*, you can expect a 5% discount off the asking price. So almost as a rule of thumb, I would start any offer at 10% off the asking price, and seek to negotiate towards approximately 5% off the asking price.
This is a very generalized rule of thumb-- There are homes that are priced more correctly, where you can still expect to essentially pay the asking price. There are homes so overpriced, that a seller may eventually accept 10-20% off the asking price.
If a home you're interested in, has sat on the market for a very long time (since last fall), without a reduction in price, then it could give you some real leverage to make a lowball offer.
Seren, just wondering if you are searching the Croton school district, or Cortlandt as well, because I can't find any of those examples?
Of examples I did see --- I saw one home that sold for 436K in September of 2004. It re-sold in December 2008, for 450k. (Asking price was 479k).
I saw another home that was purchased in September 2005 for 799K, then sold in May of 2007 for 820k (the height of the market), and then re-sold again at the end of 2008 for 740k. (Asking was 775K).
Those are the only homes in Croton, in the last 6 months, where I could find information on the prior sales price.
But in both examples, the sellers took significantly less than the peek price, and sold for 2004-level prices.
Among the examples I currently see for sale in Croton:
Asking price 455k. Prior sale in April 2005, for 475k. (Thus, asking 20k less than the 2005 sale price).
Asking price 439k. Prior sale in October 2004 for 415k. (Thus, asking only slightly more than 2004 price, would probably accept an offer close to 2004 price).
Asking price 419k. Prior sale in 2007, for 526k. (Thus, marking down about 20% from the prior sale and from market peak)
Asking price 479k. Prior sale in 2008 for 482k, and prior sale in 2004 for 427k. (Thus, current asking is only about 10% higher than 2004 sale price).
There are also homes that are certainly still overpriced. And nobody can know whether current prices represent the "bottom" or not. But it is fairly obvious that many sellers in Croton have dramatically reduced prices and expectations off high prices.
In terms of making lowball offers, it can't hurt. Worst thing that could happen is your offer gets rejected. On *average*, homes actually sell for 95% fo their asking price. Meaning on *average*, you can expect a 5% discount off the asking price. So almost as a rule of thumb, I would start any offer at 10% off the asking price, and seek to negotiate towards approximately 5% off the asking price.
This is a very generalized rule of thumb-- There are homes that are priced more correctly, where you can still expect to essentially pay the asking price. There are homes so overpriced, that a seller may eventually accept 10-20% off the asking price.
If a home you're interested in, has sat on the market for a very long time (since last fall), without a reduction in price, then it could give you some real leverage to make a lowball offer.
Thanks. This is quite helpful. I am searching in Croton on Hudson. Zip code is 10520. I need to be really close to Croton station as I need access to Amtrak.
Prior sale prices are all from Zillow. In terms of 2004 prices, I thought that is almost the mid-point of the bubble, no?
I am really frustrated. Maybe I am just priced out of this market and should look somewhere else. My wife and I are making a 160K total with pretty stable jobs. Got pre-approved for 480K. And 480K doesn't get us much in Croton it seems.
I check the NY times website and it states the median household income is 120K in Croton, way below what we are making. So I thought maybe people have a lot of equity in their homes, but not really. I check NY times webpage and average homeowner has been there for only 4.2 years with 230K in equity and 640K in mortgage debt. Add the fact that they pay 1K+ in taxes every month and I really don't know how these guys make ends meet.
Maybe 120K median household income is not correct. Maybe people are making much more than that. I don't know. Do you know any river town we can afford on 160K salary?
I check the NY times website and it states the median household income is 120K in Croton, way below what we are making. So I thought maybe people have a lot of equity in their homes, but not really. I check NY times webpage and average homeowner has been there for only 4.2 years with 230K in equity and 640K in mortgage debt. Add the fact that they pay 1K+ in taxes every month and I really don't know how these guys make ends meet.
Maybe 120K median household income is not correct. Maybe people are making much more than that. I don't know. Do you know any river town we can afford on 160K salary?
Your calculations are quite right. This is EXACTLY why the market is due for a great correction. Unfortunately, we are still in the stage of realtors and sellers trying to create an artificial bottom by listing high. However, this will not work in a free market.
I understand your frustration. Unfortunately, real estate moves slowly and one cannot ask today tomorrow's price. Even if you lowball 10% you will still end up paying an inflated price. If you don't need to buy now I suggest renting. This way you can explore the river towns and see which one is right for you. By the way, rents are decreasing too.
Last edited by halfoffpeak; 03-18-2009 at 10:18 AM..
Not sure you can easily define the exact shape of the "bubble." I see some people saying that 1999 reflected "natural" prices-- But who is to say that 1999 wasn't actually a valley, with 2001 or 2003 representing the "natural" prices. It does seem that prices through most of Westchester, are returning to 2004/2005 levels, which is still significantly less than the peak level of 2007.
You need to take things like median income into context. That's not the median income of recent purchasers. It includes the income of renters in 1-bedroom apartments. It includes the income of retirees, living in mortgage-free homes, with social security as their main source of income.
In other words, don't confuse "median" with "typical."
Also, when looking at past sale prices of homes, remember to give a seller some credit if they have renovated the home, thus increasing its value somewhat.
480k in Croton --- I think there are homes that could fit your bill. Personally, I looked at the raised ranch in Croton priced at 550k. Really, a pretty decent home with a nicely renovated main floor. Good for a first time buyer, and could sell for low 500's. I know there is new construction listed at 529k. It's been on the market for a long time-- The location and property isn't great. But it's a perfectly good house, and the house could quite possibly sell for 480k. And I saw a perfectly decent-sized ranch, in good condition, with river views, listed right at 480k. It would likely easily fit within your budget.
You will also see a smallish house in Croton, listed at 460k -- Well within your budget. The house is small, but in very good shape, and it is in perhaps the very best location in all of Croton. (My family has been looking in Croton for the last 6 months, and we almost bought a house a block away. It is our favorite location in the entire town).
If you don't need 3 bedrooms, there are some gorgeous 2-bedroom townhouses that are very very safely within your budget. (under 400k)
So if I was a first-time buyer with a 160k income, to answer your question, I likely would purchase in Croton.
Seren77,
Sorry I hadn't seen your response to my post--I went directly to the next page and saw Half-Off's. Most of your examples seem to be about 10% above 2001 prices (adjusted), and 10% seems like a totally normal increase given 8 years and the general improvements in the area. As I said before, I think that the prices have deflated and are back to where they pretty much would have been now without a bubble. But no ones and only time will tell.
But I do feel your frustration--I felt the same way back when we were looking and everything I wanted was out of reach. We looked for over a year and saw a thousand houses (really). In the end we bid 12% under asking for a house we adored and we got it.
dma.... I think you make a good point about every buyer. I think every buyer, virtually no matter their price range, wishes that they could afford that house that is just barely out of their reach. It always seems that the "perfect" house is just out of reach. I think that's even true of people buying million dollar homes--- But their "dream home" is just barely out of reach.
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