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I'm not trying to attack you, believe me. But this is one of the classical fallacies in Economics.
Price decrease result in higher demand? Well it may sound right but the correct logic is lower demand decreases the price, which doesn't make the demand higher than before. Even 25% of my MBA students don't get it right.
I agree that 50% adjustment is unlikely. I also agree that it CAN be a good time to buy for SOME buyers. In fact, I just bought a house in S. Florida. I am paying 85% of what the owner paid 8 months ago.
I
Personally, I think it IS a good time to buy. But I am not an INVESTOR, nor am I a realtor. I am average Joanne Blow, who will soon be looking for another home for my family. I'm not a speculator. What you have to understand is this: if people need homes, they will buy. I don't have 12-18 months to wait out this market by renting,
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It's possible that you are right, but unlikely. The housing collapse is in the beginning stages, not the bottom. Buying a house to live in is the right reason, and if you miss the bottom it's still your home, not a poor investment. I don't understand why you "don't have time' to rent while the market levels, but that's your business. The problems selling houses are manifold, too many owe more than they can sell for, much tighter credit requirements for potential buyers (even if they "need"* to buy), rapidly increasing unemployment putting more existing homes up for sale and on and on. I believe if you wait until 2010/2011 you will find 20% lower house prices. That would justify a couple years rent.
*You don't really ever "need" to buy when there are so many affordable places to rent.
*You don't really ever "need" to buy when there are so many affordable places to rent.
If rent is cheaper and you're looking at a 2-3 year stop in a location then certainly that's something to consider. However, my market is pretty stable and rent is more expensive than mortgage in Columbia. For the price a decent 1 BR/ 1 BA apt someone can buy a decent 3 BR/ 2 BA house.
That's why you keep seeing the "real estate is local" everywhere. Your market is not my market and vice versa.
It was to combat koolaid drinking realtors who always think now is the best time to buy.
Hey are you bashing my koolaid...
I do my best market condition reports while drinking my koolaid...doused with a dash of rum, mind you. The market always looks better after I've had some Koolaid.
If rent is cheaper and you're looking at a 2-3 year stop in a location then certainly that's something to consider. However, my market is pretty stable and rent is more expensive than mortgage in Columbia. For the price a decent 1 BR/ 1 BA apt someone can buy a decent 3 BR/ 2 BA house.
That's why you keep seeing the "real estate is local" everywhere. Your market is not my market and vice versa.
I agree with you, and the following example is illustrative. Years ago I lived in Topanga Canyon, CA. While reviewing the real estate today, I noticed a 1 bed, 1 bath "cottage" for sale on my former street.The lot size is only 1/8 acre. It is listed for $875K! Not only is "your market not my market", but my former market is not my market. There are pockets of wierdness in local real estate that make generalizations inappropriate.
PS In all fairness to the discussion, I didn't ask if they would be willing to rent it for $10,000 month (utilities not included).
How much will prices drop? I really don't know but, this is what I'm doing to hedge my bets.
We're moving back to the California coast so, we're going to sell our desert house. We don't owe much on it so, if we have to slash the price ... no big deal. We should still make some money and get our costs back. We don't have much of a mortgage payment so, we can afford to carry it for awhile if we have to and, make it a rental if necessary.
But we're moving now so we can rent and watch the area we want to buy in more closely. These prices are dropping so fast we don't want to miss the bottom when it hits so, that's why we're moving now.
Prices have dropped from $550K to $380K on average but, there's a lot of short sales and houses on the verge of foreclosure so I think there's possibly another 20+ percent depreciation ... at least in the area I'm watching.
Since we'll only have to pay $1500 a month for rent, we'll just wait and watch but, I don't think the time to buy is now ... I think there's still a lot of downside to go. But, if I'm wrong and prices start inching up a bit ... I'm putting myself in a position to move fast if necessary.
I used to think 50 percent was a pipe dream but, it also depends on the market. In the area I'm interested in along the California Coast, prices have already dropped over 30 percent. Basically from $550K on average to $380K on average.
Now you'd think people would be coming in buying up properties at those prices but, there's actually very little activity. Less sales this month than the month before ... even with price reductions everywhere.
Then you pick up the fliers in the neighborhoods and a bunch of them are short sales ... soon to go into foreclosure. And these are not bad neighborhoods ... they're very nice, brand new subdivisions where most houses aren't even two years old ...
So ... from what I'm seeing ... a 50 percent price adjustment could very well be possible in some markets, especially in California.
50% from what? From some seller's nutball fantasy that his $450,000 home might have been worth $700,000 a few years ago? It's all perspective if you ask me.
50% from what? From some seller's nutball fantasy that his $450,000 home might have been worth $700,000 a few years ago? It's all perspective if you ask me.
Well ... that's what makes this whole thing so bizarre. Yeah ... the home wasn't really worth $700K but, that's what people paid for it. So, in a way it was worth that much but, of course, they really didn't pay for the home ... the bank did with all of this bizarre funny money ...
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