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I'm in contract for my house in NJ and I ended up in a bidding war and had to pay $9K over asking. It was indeed priced very very right to begin with so I didn't feel bad going a bit higher. I had looked at over 20 homes and every one had some issue or other. This one had ever thing I wanted, including good schools, different floors (not a ranch), a basement I could finish (has 3 windows), not an attic/cape type upstairs, not in older than 1950's, a bathroom in the master bedroom, a large private yard, not near train tracks (I actually saw some where the train goes through the backyard!), but in a town that has a train station (that one limited me a lot), a quiet street and under 20 miles to upper west side of NYC (also very limiting). I ended up getting all of this for well under $500K! I'm really psyched..
There is one other factor concerning home prices that is rarely mentioned here. That is the cost to construct or replace existing homes. We all know NJ prices are high compared to many states and that is due in fact that there is just not much available land to build new homes. Prices are so high for land that modest 25-3000 SF homes are not being built except for maybe South Jersey where land is still relatively cheap. The cost to construct a home is almost the same in NJ as it is in the Southern states with the exception of land costs. When folks say they can get much more home in PA, VA, NC for the same as NJ it is because of land costs and in some cases less restrictive building codes.
So if you believe there is no bottom or we have not reached bottom to the housing market you are sadly mistaken. When a house is priced at it's replacement cost it can't get any cheaper unless of course it is a forclosure sale and I don't see too many of them on the market lately.
You have this back to front. Replacement cost is an upper bound, not lower bound on prices. If houses cost more than their replacement cost, builders will build new homes until prices come down to replacement cost.
On the other hand, replacement cost can be higher than cost of a house (if it wasn't, new houses would be built more often). One reason for this is that the building depreciates. A newly constructed house is not comparable to a house that was built 50 years ago.
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Why do you think there are no new developments on the market today? A builder is not going build any new homes so he can sell them at cost.The
Of course he sells them at cost -- by definition, "cost" is what he sells them for. That cost includes the cost of the builders labor, the cost of capital for the corporation who take on the project, etc.
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So if your looking for a home and the buyers won't come down to your offer go look somewhere else, you may not get the neighborhood or house you want but you will get the price you want to pay.
Do you mean "sellers" above ? There are always short sales, even in "good" neighborhoods. Despite the best efforts of everyone involved to try to fix prices, there is still a way for buyers to move into a neighborhood with people who have comparable levels of income, education, etc.
You have this back to front. Replacement cost is an upper bound, not lower bound on prices. If houses cost more than their replacement cost, builders will build new homes until prices come down to replacement cost.
On the other hand, replacement cost can be higher than cost of a house (if it wasn't, new houses would be built more often). One reason for this is that the building depreciates. A newly constructed house is not comparable to a house that was built 50 years ago.
Of course he sells them at cost -- by definition, "cost" is what he sells them for. That cost includes the cost of the builders labor, the cost of capital for the corporation who take on the project, etc.
Do you mean "sellers" above ? There are always short sales, even in "good" neighborhoods. Despite the best efforts of everyone involved to try to fix prices, there is still a way for buyers to move into a neighborhood with people who have comparable levels of income, education, etc.
Land does not depreciate and in many cases the value of the land exceeds the cost of the structure.If you tear down a perfectly good old house on a prime lot you cannot rebuild that same house for anything close to the initial purchase price.
But the bottom line is location if you want cheap housing in NJ move as far away from NYC as possible and deal with the commuting.
Land does not depreciate and in many cases the value of the land exceeds the cost of the structure.If you tear down a perfectly good old house on a prime lot you cannot rebuild that same house for anything close to the initial purchase price.
Exactly -- and this means that the replacement cost has to be higher than the sale price, right ?
Exactly -- and this means that the replacement cost has to be higher than the sale price, right ?
No what it means is that older houses in great locations are usually worth more than new houses in lesser locations.
The best example are the older homes in Summit or Westfield vs the new homes in Hunterdon County.
It's all about location any old home can be updated and command top price if it's in a good location.
But a McMansion in a terrible location will someday turn into an old house that nobody wants.
Land can of course depreciate if the demand for an area or type of lot goes down. Or when buying power drops.
Supply and demand.
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