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I have to agreed with the OP. I started looking for house in N. Edison 2 years ago, I was looking for house up to 550k, and all I found were just dump beside 1 house. But that house was sold when I wanted to go back to check it again the following week. I really don't understand why old house priced so much. I guess, because a lot of Asian wants to live in that area. I gave up after 6 months or so there, and then start looking for house in other better school towns and finally closed a house in Cranford. Of course, Cranford is on Raritan and it is not for you. It is also a 90 to 95% white, so if you want a more diverse area, then it is not for you either.
So you don't think houses are worth what someone is willing to pay for them?
Do you understand what a demand curve is ?
If you increased the prices of houses across the board by 20%, some people would still buy them, but you would have fewer buyers. It might be worth it to the people who are buying, but it isn't worth it to those who aren't buying.
When you have fewer and fewer sales, the number of people for whom the price is worth it gets smaller and smaller.
Right now, the state of the market is such that the number of people who think that the houses are worth what they are being sold for, is at a record low.
Your statistics do not apply to individual houses or neighborhoods. Sure demand is low nationwide and statewide for houses but that is a generalization. The bottom line is that a house is worth what someone is willing to pay for it. I watch Edison listings religiously and I have seen all summer that all of the 1 million dollar houses that are reasonably priced have been sold. Certain neighborhoods are desirable for various reasons and prices in those neighborhoods are going to remain stable. I won't argue that prices all around will continue to decline as the economy continues to suffer but ares that are desirable are not going to decline at the same rate.
That's almost a tautology though (definition of reasonable price is a price low enough to clear the market in a timely manner)
Some neighborhoods have less distressed real estate than others, so the owners don't need to sell, which results in high prices, but low scales, which is what I alluded to before -- the way you keep prices high when demand drops is to move left on the demand curve (e.g. lower sales numbers in return for higher prices)
I would be very surprised if the sales numbers (not prices, but the number of sales) in these neighborhoods to which you refer, are in the same ballpark as their boom time peaks.
If you increased the prices of houses across the board by 20%, some people would still buy them, but you would have fewer buyers. It might be worth it to the people who are buying, but it isn't worth it to those who aren't buying.
When you have fewer and fewer sales, the number of people for whom the price is worth it gets smaller and smaller.
Right now, the state of the market is such that the number of people who think that the houses are worth what they are being sold for, is at a record low.
Who cares what houses are worth to people not buying them? I don't see how that matters to the discussion.
The fact is there will ALWAYS be buyers. There may be more or less at any point in time, but they will be there. And that is what is going to set market value.
Who cares what houses are worth to people not buying them? I don't see how that matters to the discussion.
The fact is there will ALWAYS be buyers. There may be more or less at any point in time, but they will be there.
The number of buyers does matter for a whole bunch of reasons. It matters if you're selling a house today, because you will find fewer buyers, and those buyers are likely to be the kind of demanding, annoying buyers that you wouldn't wish upon your worst enemy -- after all, they are being overcharged and they know it, so in exchange for being milked on the sticker price, they will squeeze you hard on the intangibles. They will also be more likely to bail on the contract.
It also matters because it's a bearish signal.
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And that is what is going to set market value.
That's fine if you only care about today's "market value". If you're interested in forward estimates of market prices, however, an inventory overhang combined with a shortage of buyers suggests that prices are either going to stagnate or fall.
If you don't mind buying something for 600k that will appraise for 500k in a few years, then sure, why worry at all ?
Who cares what houses are worth to people not buying them? I don't see how that matters to the discussion.
The fact is there will ALWAYS be buyers. There may be more or less at any point in time, but they will be there. And that is what is going to set market value.
when you have less buyers, it is going to bring market value down. Right now you have 4-5x the amount of propertys on the market to actual buyers.
It is going to drive market value down steadily until we get to an equilibrium between buyers and sellers
The number of buyers does matter for a whole bunch of reasons. It matters if you're selling a house today, because you will find fewer buyers, and those buyers are likely to be the kind of demanding, annoying buyers that you wouldn't wish upon your worst enemy -- after all, they are being overcharged and they know it, so in exchange for being milked on the sticker price, they will squeeze you hard on the intangibles. They will also be more likely to bail on the contract.
It also matters because it's a bearish signal.
That's fine if you only care about today's "market value". If you're interested in forward estimates of market prices, however, an inventory overhang combined with a shortage of buyers suggests that prices are either going to stagnate or fall.
If you don't mind buying something for 600k that will appraise for 500k in a few years, then sure, why worry at all ?
When there are people buying mc mansions in edison today for 800k the fair market value of those houses is going to be 800k. If someone is having a 3rd child and needs more space they are going to buy a house now regardless of where the market will trend. According to your logic nobody should buy a house now under the assumption that home values may continue to decline. In the real world that is not the case as people are in situations where they do not want to wait and if they plan to stay in their house for 20-30 years to raise their families they are not going to care if their house may depreciate in near future. Again, every situation is different and you cannot assume things based on generalizations. What is that saying about what happens when we assume? You may think that certain houses are overpriced and economic data may suggest that certain houses are overpriced but if the houses are selling at those prices they are worth those prices. I do agree that prices in North Edison will probably continue to decline with prices nationwide but I also believe that the factors that make North Edison desirable are going to keep those prices from falling far. This is true for any towns with good school systems and easy access to NYC. Home values in these towns are not going to decline as much as the national average as there will always be a demand for these areas. You have to remember that these towns will attract professional families whose earnings may not be directly tied to the economy. That is what you are seeing in Edison, professional families are looking to purchase their mc mansions and these houses are selling while you have houses in the 500-600k range that just sit on the market for literally years.
In the real world that is not the case as people are in situations where they do not want to wait and if they plan to stay in their house for 20-30 years to raise their families they are not going to care if their house may depreciate in near future. Again, every situation is different and you cannot assume things based on generalizations.
That's consistent with what I'm writing though. I didn't write that nobody buys at the higher price. The demand curve says that gradually, you get fewer people willing to buy as the price increases. With prices where they are, there are still some who are willing to buy, but the number of willing buyers is at a record low and the reason is largely that the demand curve no longer has bubble-exuberence, but the supply curve has a stickiness that makes it difficult to adjust (e.g. fewer owners are willing or able to sell at market clearing prices)
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This is true for any towns with good school systems and easy access to NYC.
Sorry, even the towns with "good schools" have seen a lower number of sales and a drop in prices. For example, Short Hills, which has a "good school system" and as good a commute to Manhattan as you could hope for with that "school system" has taken price hits.
What comes up must come down -- so to the extent that prices overshot their historical norms during the bubble, they will revert to their historical equilibria. It may be true that the less desirable towns were more prone to see credit fueled price spikes, as those the buying power of people moving there took a larger hit. However, these weren't the only towns that saw a bubble, and therefore aren't the only towns that saw a burst.
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Home values in these towns are not going to decline as much as the national average as there will always be a demand for these areas. You
Sure, but there was "demand for those area"s in 2000, those areas still had "good schools" in 2000, and yet the prices were somewhat lower. They might not decline as much as the national average (especially if they didn't increase as much as the national average) but unless they completely missed the housing bubble (I don't see how desirable towns would have missed the bubble), they won't miss the burst either.
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have to remember that these towns will attract professional families whose earnings may not be directly tied to the economy.
What are they tied to then ? Any desirable town that has a good commute to lower Manhattan is going to be popular with Wall St employees, and their compensation is very much dependent on economic conditions -- the higher up the ladder, the more variable their compensation. The same is true of CEOs, business people, etc. They aren't just paid a fixed salary any more, they have compensation packages that are heavily dependent on the performance of their business.
Last edited by elflord1973; 08-31-2010 at 06:21 AM..
If someone is having a 3rd child and needs more space they are going to buy a house now regardless of where the market will trend. According to your logic nobody should buy a house now under the assumption that home values may continue to decline. In the real world that is not the case as people are in situations where they do not want to wait and if they plan to stay in their house for 20-30 years to raise their families they are not going to care if their house may depreciate in near future.
I tend to think differently in regards of this aspect. I got married in 2000 and started looking for a house back in 2003. From 2003 the bubble started and that killed our plans. In 2008 we had a baby and we were still waiting for prices to touch earth. Currently, we rent a two bedroom apartment and we need more space. However, we don't want to overpay for a house and then be underwater. Along the way I found out that there are a tremendous amount of people, just like us, waiting for prices to come down. What's even more interesting is that, most couples we have met along the way have plenty of money saved up for the right situation. Yes, there will always be buyers. But the amount of home buyers as of late have been dramatically reduced, thus inducing the demand curve to an all time low. By the way, if prices never come down to levels that agree with our income then I guess we will rent for the rest of our lives. Maybe in a very amuzing way a favor is being done to us.
I never said less buyers will not impact market value. In fact I said the exact opposite. But at the end of the day there is a market value for everything at any point in time. And whatever buyers there are are the ones that are going to set it. And I certainly wasn't talking about future market value. I was talking about market value today.
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