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We currently own a townhouse in Port Chester and are looking to upgrade into a house in a better school district (kids are 3 and 1). We're in a low range (450k-550k) but surpringly there are quite a number of homes in several of the towns we like in this range. I know this is solely due to the current market conditions. All of said towns were starting in the high 600's before, so we are super excited about the possibility of being able to raise our family in a nice community.
Our issue is that we still are carrying some credit card debt. A part of me knows that probably the best thing is to wait a year until we can pay if off. But another part of me is yearning to settle into our forever home and is scared that the low prices won't be around next year (and/or the interest rates will be substantially higher).
I grew up in the inner city and can now afford a home in Chappaqua. This is amazing to me! It's like I'm WINNING! How much longer will that be the case? If I don't act now, will I lose that opportunity forever? Or can I safely assume that the recovery will take a while and the climate will be similar next spring/summer?
Since you already own a place, the broad fluctuations of the economy and the real estate market aren't that important to you. If home prices go up next year, you'll sell your townhouse for more and therefore will have a bigger down payment for your dream house than you would if you sold this year--so you'll still be able to afford the same house. What you need to worry about are the specifics of the micro-markets you're in--prices of townhouses in Port Chester and prices of lower range homes in Chappaqua--and the liklihood that one might increase faster than the other. I would guess that prices for cheaper homes in Chappaqua will indeed increase at a quicker rate than those for townhouses in PC, but I don't know those markets well enough to say.
I sort of agree with dma1250 with the exception of not knowing how long you had the townhouse in Port Chester and how much you owe on it. Since you are trading up, and you may still owe a lot on the Townhouse and you won't have that great down payment that dma mentioned. If you bought in PC a while back and have gained some equity then I agree with dma, and in my Real Estate experience these days, it would make sense to buy now, as these are the lowest prices ever and Mortgage rates will definetly be going up soon. If you wait, you might miss the boat.....is my opinion. As a Realtor, I can help you sell your Townhouse and purchase your new dream home.
there's only one way for housing and it is DOWN.
This was the worst bubble in american history.
Prices will go down to what was in the 90s and perhaps less.
People cannot afford their houses because they cannot maintain them due to high property taxes, higher maintenance costs (oil, etc). People need to save more now for their uncertain retirement and health care spend more for food so less money for housing.
Real estate around NY is collapsing...
So if you are looking to upgrade then wait (the more the better--I would be surprised if housing turns around sooner than twenty years or so). If you are looking to downgrade then sell.
Sort of agree with fedus. The bubble created housing prices that grew faster than inflation (relative to the 90s). The crash did not drive those prices all the way back down to the level inflation would have predicted (prior to the bubble, the price of houses roughly correlated with inflation over the long haul).
It's possible that in a couple of years, completion of the deleveraging cycle could lead to some increase in prices; but I doubt there will be another bubble, simply because everyone in this generation went through the last one so recently.
There is the question of whether prices will go down further. The federal government and banks themselves do a lot more diligence in the process of loan approval/appraisal/commitment. Too much, really, as an overcorrection to the leniency of recent years. One could make the argument that it is a better idea to rent a home and invest in something else, like securities. There could be another recession if the fed govt tax bill standoff is not resolved and the govt shuts down.
Further, interest rates are really low right now...which should generate interest in buying real estate. It's not; I can't imagine demand for home ownership would improve any if interest rates started going up (and they can't really go down much further).
But if you really want to own a home, I'd recommend buying now, not waiting. Prices are low, and interest rates are low, which is a perfect storm. (This is a very rough generalization) but you can expect to pay about $300 more per month for every 1% increase in interest rate on a home of about $500,000. Provided you can move your current property without too much damage to your potential down payment, you can save a lot of money in the long run. But expect to pay more and deal with more headaches in the closing process.
If you wait, you might not get higher prices, but you might get higher interest rates.
Sort of agree with fedus. The bubble created housing prices that grew faster than inflation (relative to the 90s). The crash did not drive those prices all the way back down to the level inflation would have predicted (prior to the bubble, the price of houses roughly correlated with inflation over the long haul).
President Joe
you did not address factors that spell death for real estate
PROPERTY TAXES
Even if prices go down to what they were in the 90s housing will still be costly because taxes doubled and will grow more due to local and state debts making running expenses more than mortgage
LIVING EXPENSES/RETIREMENT AND HEALTH CARE
Building materials, oil, electricity, food etc increase while salaries remain stagnant. People will need savings for retirement and health as the gov seems increasingly unable to provide. This means less money for housing
DEMOGRAPHICS
Boomers have started to retire and there are fewer families to replace them so less demand.
Indeed rates are low and borrowing money is cheap but who needs that when your house costs less than what you bought it. Besides if mortage rates go up prices will need to go down to compensate so waiting is win-win. We just witnessed what happened when money was cheap and people borrowed to buy mcmansions.
I don't disagree that real estate is still tremendously overpriced, but you cannot generalize what is happening in the rest of the US to Westchester except for that as interest rates rise, prices will go down. As long as NYC is 30 minutes away by train, prices in NYC don't drop by 50% or more, and private school remains $30K per kid, there will always be a bit of a buffer.
As for wages being stagnant, that is for the average workers, not upper management and the rich. In case you hadn't noticed, most of Westchester is made up of that top 10% of people that the rest of the country is loathing right now. Boomers will have some effect here, too, but I don't think as much as everywhere else since, let's face it, most of us leave as soon as the last kid graduates HS anyway.
Trust me, I wanted the sky to fall over 6 years ago and have looked in disgust at how the Feds have tried in vain to prop up a market that should have been allowed to crash and recover quickly rather than slowly hissing for years. I have no faith that they will act any less irresponsibly over the next decade. They'll keep meddling until prices stabilize.
I don't disagree that real estate is still tremendously overpriced, but you cannot generalize what is happening in the rest of the US to Westchester except for that as interest rates rise, prices will go down. As long as NYC is 30 minutes away by train, prices in NYC don't drop by 50% or more, and private school remains $30K per kid, there will always be a bit of a buffer.
As for wages being stagnant, that is for the average workers, not upper management and the rich. In case you hadn't noticed, most of Westchester is made up of that top 10% of people that the rest of the country is loathing right now. Boomers will have some effect here, too, but I don't think as much as everywhere else since, let's face it, most of us leave as soon as the last kid graduates HS anyway.
Trust me, I wanted the sky to fall over 6 years ago and have looked in disgust at how the Feds have tried in vain to prop up a market that should have been allowed to crash and recover quickly rather than slowly hissing for years. I have no faith that they will act any less irresponsibly over the next decade. They'll keep meddling until prices stabilize.
I don't generalize I am talking about Westchester. Due to higher incomes, proximity in NYC, etc prices will be higher than elsewhere in the country. However this does not prevent that real estate here will take less of a hit. Everything is proportional. When prices everywhere go back what they were ten years ago westchester will still be higher than elsewhere!
Also the above factors I mentioned apply to westchester. Some even more so, eg taxes. Also it's a mistake to think that people here are rich Median household income if you exclude, say Bronxville etc, do not exceed 150K
I don't want the sky to fall over. Ten years ago prices were low but sky was ok. Unfortunately people and especially in Westchester have grown so dependent to real estate that a further discount of 20-30% might be detrimental to their income/retirement.
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Prices will go down to what was in the 90s and perhaps less.
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Prices are already at 90's levels in much of Westchester. Lots of houses are selling for prices that--when adjusted for inflation--are lower than what they sold for in the 90's. (You have to remember that $550,000 in 2011 bucks is the equivalent of $375,00 in 1995 bucks). Real estate in the NY suburbs seems to be generally more affordable than it has been in a really long time. Yes, taxes are up, but mortgage rates are down and prices are way down. I don't know what prices will do, but I doubt that they're going down much more if at all.
Prices are already at 90's levels in much of Westchester. Lots of houses are selling for prices that--when adjusted for inflation--are lower than what they sold for in the 90's.
I am not sure where you are getting this info. S&P case schiller for the NYC area is 166 for Jan 2011 up from 100 in 2000. 100 in 2000 is 130 in 2011 if you adjust for inflation. So prices in NYC have to come down 20% to reach the 2000 levels adjusted for inflation.
However, for the reasons I mentioned earlier, even a further 20% correction cannot account for neither higher property taxes nor the dismal finance prospects.
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