Asking Price vs. Offer Price vs. Sale Price - how much? (foreclosure, renting)

[Bill Keegan]

Originally Posted by halfoffpeak

At the moment the market is an upheaval and declining in NJ.
Ignore asking price. Bid half off the price of a comparable house
in 2006. This way you get the historically average price although
it might get lower.

**********Bid half off peak******************************

Hmmm. Let's see if this will happen here.
In Bridgewater, the very center of my market area because it's where I live, the peak was apparently in 2006. The median home price was $432,000, according to the Star Ledger. Half of that would be $216,000, or $33,000 BELOW the median price in 2000. The median price for the 450 properties that sold in 2008 (according to the data in my MLS) was $406,000, which is a drop of .25% (yes, that's one quarter of one percent) from the median price of $407,000 from a year earlier. To get to your half of peak number of $216,000, the median price would have to fall an additional $190,000, or 47%, this year. There's no reason to believe that will happen here in Bridgewater.

Your formula may work in certain select markets. It's NOT going to work everywhere, and CERTAINLY not in my market area.

[NatasNJ]

Median price 2006 = $432k.
Median price 2008 = $406k (decrease of 6%)

Where are you getting the .25% drop?

[davenj08]

Originally Posted by Bill Keegan

Hmmm. Let's see if this will happen here.
In Bridgewater, the very center of my market area because it's where I live, the peak was apparently in 2006. The median home price was $432,000, according to the Star Ledger. Half of that would be $216,000, or $33,000 BELOW the median price in 2000. The median price for the 450 properties that sold in 2008 (according to the data in my MLS) was $406,000, which is a drop of .25% (yes, that's one quarter of one percent) from the median price of $407,000 from a year earlier. To get to your half of peak number of $216,000, the median price would have to fall an additional $190,000, or 47%, this year. There's no reason to believe that will happen here in Bridgewater.

Your formula may work in certain select markets. It's NOT going to work everywhere, and CERTAINLY not in my market area.

a drop of median price from $432k in 2006 to $406k in 2008 is a drop of almost 6%. even that looks understated to me. a few houses that were valued at around 650-670k in 2006 peak are selling for around 525k now, which would be a drop of more like 20-22%. if people are still buying houses at or near asking price, its their mistake.

i wouldn't agree with the OP that prices are going to drop by 50% neither with Bill that Bridgewater has only seen a 6% drop since 2006.

[halfoffpeak]

Originally Posted by davenj08

can you please share some more information on your research?

There's not much space to explain the Case-Shiller index. You can find all relevant information at the Standard&Poor's site including the variables built in. Check out the latest numbers (November 08).

S&P | Indices > Alternative Indices - S&P/Case-Shiller® Home Price Indices - Home Price Values

The current November 08 number for NY area is ~185 down from ~215 at peak. Average is 100. Bidding half off does not guarantee a good price merely average-won't loose in the long term.

**********Bid half off peak******************************

[halfoffpeak]

Originally Posted by davenj08

i doubt prices have decreased any more than 20-25% off the peak 2006 price range in most strong markets in NJ (e.g. bridgewater, princeton, morristown, etc).

You are right. This because there are buyers that need to buy now and can not wait or they are just fools and think that they get a good or bottom price.

The more fools the slower the decline. But the decline is unavoidable.

**********Bid half off peak******************************

[theoakman]

My forecast is a market bottom of about 30% off peak.

Incomes only rose 20% since the price increases started while prices increased 100%. At 30% off market, you are around a 40% increase in price in the end. I don't know how long this will take and the reason I say 30% rather than 40% (which would put it in line with incomes today) is that I believe at some point, we may see incomes start to rise before the market ever gets to 30% off peak. Keep in mind, things have a tendency to crash harder than they should so I consider my estimate highly optimistic. While I do believe that 30% off peak is probably the best value you can hope for, I think the chances of you getting it today are 0%. You would have to wait out the market at least 9 months before you start to see the real declines IMO.

NJ is suffering from some really bad unemployment, the financial sector took a huge hit, and our state government is chasing businesses out left and right. I don't know how bad the decline will be because I don't know how bad unemployment will get. I always tell everyone, wait 6 months to a year and revisit the market. We'll see how all those Wall St. layoffs affect the local market.

The market will bottom out when you see a combination of the following:

Decreasing foreclosures
Increasing employment
Increasing wages
Increasing sales (year over year)
Decreasing property taxes

Right now, we have the opposite.

Historically, real estate bottoms have lasted up to 10 years, so the immediate risk of housing prices rising are non-existent.

[halfoffpeak]

Originally Posted by davenj08

i wouldn't agree with the OP that prices are going to drop by 50% neither with Bill that Bridgewater has only seen a 6% drop since 2006.

And where do you base that? This is just your impression. Under this recession 50% decline is necessary and, dare to add, optimistic.

**********Bid half off peak******************************

[davenj08]

Originally Posted by halfoffpeak

The current November 08 number for NY area is ~185 down from ~215 at peak. Average is 100. Bidding half off does not guarantee a good price merely average-won't loose in the long term.

well, i am not trying to understand 'how' case schiller index derives thier values and their underlying algorithm. all i am trying to understand is how you derived the 50% off rule.

NY area is down from 215 to 185, that's a drop of about 14% from July 2006 to Nov 2008. even if we see a 10-14% further drop in 2009 as predicted by most economists, that will be a combined drop of 25% off the peak 2006 prices.

so, how did you conclude the 50% drop?

[halfoffpeak]

Originally Posted by theoakman

My forecast is a market bottom of about 30% off peak.

And where do you base that? 30% is imminent. Just check the comparables at
New Jersey Real Estate Report

You mention that this recession will take much longer which implies there will be much higher decline than 50%. Take into account that the NY area economy is collapsing, something that did not happen during the 90s when the house prices were below average.

**********Bid half off peak******************************

[halfoffpeak]

Originally Posted by davenj08

so, how did you conclude the 50% drop?

From ~215 to ~100 will take more than 50%. What part don't you understand?

**********Bid half off peak******************************