Wednesday, September 27, 2006

To Buy or Not To Buy That is The Question

The housing market has changed dramatically in the bubble markets over the last year. Back in the summer of 2005 bidding wars were common and inventory was very low in the bubble markets across the USA. Those days are a sweet memory to the legions of stuck flippers.

Today, a new reality faces both buyers and sellers. Its the Inventory Stupid! Inventory has increased dramatically in most bubble markets in the past 12 months. In Phoenix, inventory rose from 10,748 on 7/20/05 to 54,441 on 9/23/06 according ZipRealty and Bubble Markets Tracking Inventory. The inventory of houses for sale in the San Fernando Valley (the Los Angeles area) has more than doubled since August 2005 (DataQuick).

At the same time the number of housing units sold has fallen dramatically in the bubble markets compare with a year ago. The California Association of Realtors reported that housing sales decreased 30.1 percent in August 2006 compared to August 2005.

Some real estate agents are claiming that is now a 'buyer's market' due to the increased inventory, lack of bidding wars and the small reductions in prices. Blanche Evans , Editor of Realty Times thinks it is a good time to buy. “You can get a better price on a better home that will pay off when the slump ends.”

So is it a good time to buy in the bubble markets?

In many bubble markets, the peak price was reached late summer 2005. Real prices will continue to decline in the bubble markets for many more years. Prices declines in the bubble markets are very likely to vary between 20% - 65 in real dollars (inflation adjusted) from peak to bottom (it may take up to 8 years). Most of the real dollar price decline will occur in the first 3 years of the housing bust. Indeed, the huge price appreciation that occurred in the bubble markets over the past 5 years or so was a speculative episode.

Just as importantly, monthly rents are generally cheap compared to buying in the bubble markets. Buying in the bubble markets generally costs 1.25 to 2.5 times the cost of renting ( for a similar property; assuming 30yr fixed, solid credit, property taxes, and typical interest rate tax deduction). Each month hundreds if not thousands of dollars can be saved and invested if one chooses to rent as opposed to owning.

Buying now in a bubble market does not make financial sense. As housing inventory continues to rise and prices decline there will be lots of buying opportunities in the future. Additionally, an economic recession in very likely to occur in the US within the next 9 months. If you earn a reasonable income it is an absolute fallacy that you need to "Buy now or be priced out forever." This is not a small temporary 3 months dip like Mr. Lereah suggested. In the bubble markets, this is a multiyear housing market bust. In the Bubble Markets, renting and waiting is fiscally prudent. Don't be fooled.

41 comments:

  1. A bit of humor from craigslist...

    "Resale value for this condo is better than most others, as its one of the few places that has marble in both bathrooms, granite, stainless steel & washer-dryer in the kitchen, and hardwood floors, crown moudings, plantation shutters, HUGE windows, and ceiling fans throughout..."

    If the so-called resale value is so high, why the hell doesn't the current owner sell it at that price???

    http://washingtondc.craigslist.org/doc/rfs/212104167.html

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  2. Use zillow to track the price hsitory.

    Dont use it for current estimates.

    In SOCAl, 2003 is the breaking point for the prices in many areas.

    The slope of the price curve was between5/8 degrees till then and it slopes upward dramatically at 25/45 degrees.

    Once see this curve you will be able to determin the ball park price very easily

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  3. I appreciate the boldness of your predictions but don't forget that economists have predicted 9 out of the last 5 recessions.

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  4. IMO, the prices have not really come down as yet. What some deem to be "reductions" are merely sellers and agents simply not getting their asking price which they have, up to now, always pegged at 5% above what the guy next door sold his place for. Instead of the 5% premium, sellers are adjusting their asking price to what the guy next door sold his place for (which was typically last year's high).

    That said, I'd be happily surprised if prices come down 20% but I don't think its likely with interest rates still hovering at 6%. I think a 5-10% reduction is more realistic. Money is still too cheap folks.

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  5. David,

    Great self-justification for being trigger-shy!

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  6. I own homes in the Phx metro area and rents have risen over 10% during the past year. What was once $850 for a 3 bedroom home is not $1025-$1050. My feeling is if rents rise above the $1100 level it will make little sense not to buy given that mortgage for a $240,000 would be all that much higher.

    Much of the excessive inventory in the Phx metro is located in the newer developments. This is not to suggest homes closer in aren’t seeing plenty of competition for buyer but to say home prices where I own have fallen 10%-15% from a high of last year.

    My advice for buyers in the Phx metro area would be to look around for serious deals while they are in the driver’s seat. The Phx metro aves. 100,000 new residents each year and I tend to doubt buyers looking in Phx, Chandler, East Mesa and Scottsdale will be in a much better position than they are now. On the other hand my guess is home prices for properties located on the outskirts will continue to suffer.

    Although it’s safe to say the housing bubble has popped it’s hard to actually predict how far prices will fall further. Given the change in housing psychology, increased inventory I was expecting prices to have fallen a lot further than the current 10-15% but that just hasn’t happened.

    And now with the increases in the Phx metro inventory slowing down and interest rate hikes on hold the buyers may not find themselves in a better postion than right now.

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  7. Another fantastic post. You have helped many not be fooled by the dirt like Lereah.

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  8. The slightest bit of common sense will tell you that now is a horrible time to buy a house. The last year was worse (no inspection contingencies, etc), but its still horrible now (paying twice as much as homes are really worth).

    Imagine being a week into the NASDAQ 5000 crash and some sell side analyst saying "the NASDAQ at 4,700 presents a wonderful opportunity to get into stocks - its a buyers market!"

    That's what we've got today. I remember watching CNBC as the NASDAQ started to crumble and analysts said "this is just a temporary blip." The same is being said by housing bulls today. It's either ignorant or dishonest or both.

    Sure prices have come down a tiny bit, but this is just the start of the massive price corrections that are coming over the next few years. The average joe still thinks everything is fine in housingland. Once the masses become aware of just how ugly the fundamentals are (for example, the three year supply of condos in DC as reported in today's Wash Post), then the market will crumble under its own bloated weight.

    This is NOT a buyers market. Sure there is a ton of supply, but a glut of supply absent great prices is not a buyers market. It will be a buyers market when you can buy for less than the cost to rent. Trust me, we'll see that before this crash is over.

    Price declines will average 50% over the next three to five years (from the peak). Outlying areas will be hit worse than close-in areas and condos and towns will be hit worse than SFH's.

    This is not a doomsday forecast - this is reality.

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  9. -


    Make your offer at 1997 prices + 3.5% annual appreciation and you won't get hurt. If they don't accept it, walk away and repeat cycle.

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  10. I own homes in the Phx metro area and rents have risen over 10% during the past year. What was once $850 for a 3 bedroom home is not $1025-$1050. My feeling is if rents rise above the $1100 level it will make little sense not to buy given that mortgage for a $240,000 would be all that much higher.

    That's a great argument to buy a house in Phoenix. I was not aware that in Phoenix, unlike the rest of the country, other expenses like property taxes, insurance, and maintenance expenses do not exist.

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  11. That 1997 price + 3.5%/year would require about a 38% discount to today's prices in NOVA.

    source: http://www.nvar.com/market/history.lasso

    My $0.02.

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  12. anon said:
    "Make your offer at 1997 prices + 3.5% annual appreciation and you won't get hurt. If they don't accept it, walk away and repeat cycle."

    But, aren't you going to get tired out from walking around in circles ... getting rejected ... over and over? Let's be realistic and if you really want to do a "bottom up" pricing analysis at a minimum add in for "real value." For example, perhaps this place you're looking at is in Shaw. In 1997 Shaw was still a war zone ... now it is a very desireable place to live. I hope you can agree that that is "real value" added? Prices would easily have doubled there in the period because the real value of the neighborhood has at a minimum doubled. Similarly, look at the population increase for the Metro area as a whole and understand that if the population went up 20%, then desireable places which may not have seen any construction (think North Arlington SFHs) are going to have 20% more people wanting to buy them and bidding up the prices accordingly ... not to mention the fact that in a metro area with 20% more people, a close in location has simply more "real value" in saved commute times vs. the alternatives currently available. I've said it before and I'll say it again. A "home" is not an investment, it is an expense. All the rules that come into play in determining the value of investments go out the window when applied to an expense. And if you're using investment rules to guide your decisions in incurring a housing expense, you are not going to be doing a very good job in minimizing your aggregate lifelong housing expenses. As an anology, you're too busy focusing on getting more ballast into your sinking ship and ignoring the hole below the hull that's letting the water in.

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  13. http://photos1.blogger.com/hello/101/3984/1024/JapanLandPrices-2006-Autumn1.0.jpg

    It's just too good not to post.

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  14. "And now with the increases in the Phx metro inventory slowing down and interest rate hikes on hold the buyers may not find themselves in a better postion than right now."

    Sure. A water-deprived hellhole in the desert, with more than twice the available for-sale inventory of New York City, with less than half the population. Crime statistics in every category higher than the national average. And according to Freddie Mac, a nice fat 30% of 2005 sales were made to investors.

    C'mon Larry, you can do better than that.

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  15. desi dude, you are right. here is some evidence that the sacramento prices on the low end are selling for much cheaper than the zillow prices:

    http://blog.myspace.com/index.cfm?fuseaction=blog.view&friendID=51443639&blogID=172859731&MyToken=f6287163-7d87-4707-9eaa-2c2296ece964

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  16. David,

    Great logic and use of data. Unfortunately, for the housingheads the buy now mantra is a matter of religion for them.

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  17. anonymous 4:36 said,

    "Although it’s safe to say the housing bubble has popped it’s hard to actually predict how far prices will fall further."

    Well, not really. There is some data on how much price deflation has occurred in previous housing busts.

    (Note appendix "C" of the following):

    http://www.globalinsight.com/gcpath/1Q2006report.pdf

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  18. Lance,

    Faith-based economics! How goes your work these days as a real estate agent? Tough times, I'm sure. Good luck finding people to pull the "trigger."

    By the way, where's your analysis and the numbers to support what's implicit in your last statement - that now is a good time to buy? (Hint: take a look at housing stocks and see if the smart Wall St. money supports this view. End hint.)

    I think our blog author's analysis is spot on. Though predicting a recession is tricky business - and one no one really wants to be right about.

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  19. hmmmm .... this one really should be being posted by a bubblehead ... but it was too good to not post it ...



    http://washingtondc.craigslist.org/doc/cas/213292441.html

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  20. Whether or not to buy depends upon what type of deal crosses your path. This market is much like 1991. Most will not buy until prices stablize for a couple of years. Fear that prices will continue to drop will keep many on the sidelines.

    The sky is not falling. This is a normal cycle. I have been expecting an end to the crazy market since 2002. I have not put "new money" in the market since then ( except for a couple of places that I bought at 50%+ discounts to FMV).

    That said, if a tremendous opportunity comes my way I will buy. These opportunities don't just fall into your lap. If bubbleheads were to put the effort into finding a bargain instead of endlessly debating a future that no one can forecast, their wish for an affordable home would be answered.

    I have much more at stake than my personal home and I am not panicking. Buying "right" is the best protection in any market.

    btw- there is personal recourse in Virginia. Good luck to those who choose to simply "walk away" from their mortgage obligation.

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  21. The "price" of a house does not exist in a vaccum, but fits within broader economic context.

    At the bottom of the last, early '90's bust, housing affordability reached all-time highs when prices were measured against incomes and rents.

    Even with the weenie 10% reductions we are now seeing, affordability, by these traditional measures, is still at an all-time LOW.

    Bankers are still chasing innocent civilians down the street and shoving mortgage money at them.

    I am still getting "spam" voice mail at home offering to "reduce my payment" with a low-rate mortgage. I am a renter.

    This whole thing has a long, long, way to go. It is not a "buyer's market." It is a sucker's market.

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  22. "All the rules that come into play in determining the value of investments go out the window when applied to an expense."

    That is utterly false. If the present-value of your savings on expenses is 0.5% of your up-front cost, then you've made a dumb decision. Paying money now to save on future expenses is an investment, and is evaluated like other investments.

    Now, if you want to discuss the value of reducing the variance of your future expenses, then there might be something, because now you're really talking about something like "insurance." But there are lots of ways to reduce the variance of your future housing expenses that don't involve buying a house.

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  23. to buy or not to buy,

    how do you spell BUBBLE???

    BY DAN DORFMAN
    September 27, 2006
    URL: http://www.nysun.com/article/40411



    Veteran real estate broker Deanne Esses, who plies her trade as a senior vice president at one of the city's biggest firms, Bellmarc Realty, said eight people in her Upper East Side office on Madison Avenue are leaving their jobs for alternative careers. Those eight represent 20% of the office's sales staff of 40.

    That's only the beginning. Ms. Esses said she thinks more New York City brokers will be leaving the scene. "Business here is just not quiet; it has dropped dead over the past few weeks," she said. "At the same time, there's a flood of inventory on the market. We run open houses, we run advertisements, but nothing works. There are no buyers, and without buyers, there are no sales."

    Given the housing slump, such departures — the latest wrinkle in a once-booming real estate market — could become a lot more conspicuous. In recent years it's estimated that the ranks of brokers expanded nationally by more than 200,000 at new and existing real estate firms. With the housing slowdown accelerating, many more career changes are likely.

    In effect, the end of the current real estate boom is also signaling the end of the seemingly nonstop national flight into the real estate brokerage business by those folks who figured such an entry was practically a guarantee of a lucrative six- or seven-figure annual income.

    In the 1960s, there was a popular Peter, Paul & Mary song: "Where Have All the Flowers Gone?" Don't be surprised, judging from the weakening housing picture, if New Yorkers aren't soon humming: "Where have all the brokers gone?"

    Indeed, the plethora of inventory on the market can be seen in the outburst of open houses. In a Sunday advertisement earlier this week, for example, one Bellmarc ad featured 87 open houses. In contrast, two years ago there were virtually none as brisk demand quickly snapped up any available inventory.

    Amid the city's rapidly faltering real estate business, a principal of Bellmarc, Neil Binder, visited an Upper East Side branch last Thursday and delivered a 40-minute pep talk to the staff. That was unusual, because the last time he did so was shortly after September 11, 2001, when the city's real estate business, accompanied by the economy and Wall Street, fell out of bed in response to the terrorist attacks.

    Ms. Esses made these noteworthy observations:

    • Everything now is negotiated downward from the initial asking price, by a minimum of 5% to 7%.

    • Prices are down at least 10% from a year ago on practically everything.

    • While American buyers are hesitant and reluctant, "the Chinese and Russians are coming into the market like crazy."

    • Three- and four-bedroom apartments on Fifth and Park avenues are still being quoted at $15 million and $16 million, but there are a lot more of them on the market.

    • Chelsea and the West Village are the hottest areas in the market, while the Upper West Side — where prices have risen out of sight — is moving very slowly. The Hamptons have turned especially soft.

    • Look for boards to become much more lenient and flexible. It's only a matter of time.

    "We're in a transition stage where sellers will have to come down in price, and right now it's a waiting game to see what the buyer will do," Ms. Esses said. "Since there's only one Manhattan, I don't see a crash. But who knows?"

    Real estate appraiser Jonathan Miller, president of Miller Samuel, also cites a sharply slowing trend, with actual sales activity flat. There's a big gap between buyers and the sellers, and more realism will be required by the sellers, he said. His reasoning: swelling inventories, especially condominiums, which he notes increased nearly 6% between the end of June and the end of August. He largely attributes this to new development, which he says is adding product to the market faster than it can be absorbed.

    Early in 2004, Mark Clemente left his uncle's dry-cleaning plant in Detroit to go east and, hopefully, make his fortune in real estate. Shortly thereafter, he became a broker at E&G Realty, a small firm in Newark, N.J., where he earned a respectable $195,000 in his first year.

    But it has been downhill ever since. The housing slump and fierce brokerage competition led to the demise of E&G. Mr. Clemente's income collapsed, and over the past six months he has held a number of part-time jobs, including one making sandwiches at a Queens delicatessen that paid him $100 a week. "I'm going home; my real estate career is over," he said the other day.

    Coldwell Banker broker Elayne Riemer contends the market is by no means tanking. The only slowdown she says she sees is in inflated new construction, where prices have fallen 10% to 15% from ridiculously overpriced levels.

    She noted that developers in many of these buildings are already offering brokers special perks, like trips and higher commissions.

    The market, she adds, is very unpredictable — slow one week and active the next — helped by a high rental market and hurt by the press's creation of a bubble that isn't there."Once people realize the bubble talk is a lot of nonsense," she said, "they come back and buy."

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  24. I thing that is not widely known is that most people aren't aware of the troubles in real estate. I had a friends parent tell me the other day, that they were going to sell their home in Frederick (that they bought feb 05) and move to pennsylvania because it is cheaper. Then he said that he was going to use his equity to buy his pen. home and give all of the money he makes off of the sale to his daughter, to help pay for the 240K 2 bedroom condo she bought in frederick, june 05. He was completely unaware that prices have gone down 2% yoy. He told me I was wrong and he was expecting to make at least 10% over his purchase price. This is your joe average guy. I have about ten other stories of work people (highly educated) that are planning to sell and move in the spring and have no clue that the housing market is tanking. I wonder how bad this is going to get when joe average becomes aware.

    and for lance, you said...
    "A "home" is not an investment, it is an expense"

    Exactly, but the problem is that during the last run up people didnt treat their homes this way. Look at the stats. People were buying homes for investment only, thus the runup. You keep shouting about a paradigm shift, and that was it. The result of the paradigm shift is what we are seeing. -9% in dc proper.

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  25. the real bob,

    It is somewhat OK to be naive if it is just your long term home that you are purchasing. It as long been said that you must plan to live in your home at least 5 years to break-even.

    Yes, the past few years have been an anomaly. It is hard to believe that anyone beyond their 20's doesn't realize this. History will repeat. We are on the downside of a normal real estate cycle.

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  26. this is not a normal real estate market. Toxic loans products, fradulent appraisals, unqualified buyers, easy credit, massive government injections of liquidity into the economy make this anything other than normal. this will be a blowout like no other.

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  27. va_investor said...
    “Yes, the past few years have been an anomaly. It is hard to believe that anyone beyond their 20's doesn't realize this. History will repeat. We are on the downside of a normal real estate cycle.”

    So which is it? An “anomaly” or “normal” cycle?

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  28. "We are on the downside of a normal real estate cycle."

    BWAHAHAHAHAHA!!!!

    I used to think the "Investor" was a real estate agent. Now I am convinced she is a comedienne.

    Good one, VA!

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  29. Both robert. Take a look at the late 80's and early 90's - same stuff, different decade.

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  30. http://www.lendingthegreen.com

    Buy now on interest only loan or be priced out forever.

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  31. Great San Diego Housing Flip site

    http://thisoldhouseflip.blogspot.com

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  32. same stuff different decade???? you have got to be kidding.

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  33. va_investor said...
    “Both robert. Take a look at the late 80's and early 90's - same stuff, different decade.”


    anom•a•ly
    Pronunciation: &-'nä-m&-lE
    Function: noun
    Inflected Form(s): plural -lies
    1 : the angular distance of a planet from its perihelion as seen from the sun
    2 : deviation from the common rule : IRREGULARITY
    3 : something anomalous : something different, abnormal, peculiar, or not easily classified

    nor•mal
    Pronunciation: 'nor-m&l
    Function: adjective
    Etymology: Latin normalis, from norma
    1 : PERPENDICULAR; especially : perpendicular to a tangent at a point of tangency
    2 a : according with, constituting, or not deviating from a norm, rule, or principle b : conforming to a type, standard, or regular pattern

    If this is a normal cycle as defined by “the late 80's and early 90's” are you suggesting prices will revert to the mean? Or, if this is an anomaly, are you suggesting that prices will fall below or stay above the historical average?

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  34. If this is like 1991, the home across the street from my folks lost 40% of its nominal value over 4 years (slightly more than 50% of real value).

    Do you buy like my last boss where he was so underwater that only in the *next* bubble could he upgrade? I one buys within 2 years of the peak, I hope you don't need to move for a decade. It will take that long to be in the black on the house.

    Homes in my area are poised to drop more than my annual salary during the next 12 months. :(

    Then again, so many of the loans in my areas are the high risk that this will make 1991-1995 look so gentle.

    Neil

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  35. Why get hysterical? It is a normal housing cycle. I am not going to argue semantics with robert. Neil, I've have consistantly stated my prediction for 25% declines for houses and up to 40% for condos. Wait to buy if you think that is your best option.

    creative mind - chill.

    btw neil, your boss must not have gotten too many raises to be stuck for over 10 years.

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  36. Exactly - given that a 'normal' correction can take up to a decade to get back to peak prices, and can mean that people are still selling for a loss 6, 7, 8 years after buying, what does Va-Investor mean???

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  37. Ok. Folks. NOVA Fence Sitter here has decided to get off the fence. I went apartment shopping in Arlington and anything worth living in is $2000 per month. I've figured out that with interest rates where they are I can get a nice town house for close to that using conventional fiancing. With inventory the way it is I think I can negotiate 10% off list which will get me in the $390K range - which at 6.13% is close to $2100 per month (with tax benefits). Although in purely fiancial terms renting still makes sense I think the "utility" that owning will bring to me is worth the extra $100 per month. In the end I think the bubble heads and the housing heads are both a little bit right. I still believe prices will come down but the cost of renting will provide a floor. Unless we go into full financial melt down mode then all bets are off -but then again at that point we will all be up the creek without a paddle.

    NOVA Fence Sitter

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  38. Good analysis Fencesitter! Let us know when you've found your home! Btw, that $100 differential is going to buy you a lot more than "utility" ... Among other things it buys you is a lifetime guarantee that what you pay for housing won't go up unless you want it to! (eg., you go out and buy a bigger house.)

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  39. va_investor said...
    “Why get hysterical? It is a normal housing cycle. I am not going to argue semantics with robert.”

    Sure va_, it’s a “normal anomaly”. No need to argue semantics huh?

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  40. Fence sitter, I think that is a valid analysis. I do it myself. The only question I have is whether you consider the apartment utility the same as townhome utility. I have been watching all aspects of the market pretty closely. What I have found out is that many people consider homes, townhomes, and condos similarly. You can see that in prices. A condo in downtown rockville will cost you from 400 - 800k. A SFH will cost you from 400 - 1 mil. I view these as dramtically different properties in this area. I think what caused this was the panic run up. People wanted in something no matter what. location, type of property, school distric, etc all became unimportant.

    My whole point is that with things falling as rapidly as they are, what your dollar can buy you increases dramatically. Do you want to settle for a townhome, or would you rather have a SFH? Another conern you need to have is the neighborhood. If home prices drop enough, will bad element infest your area, or be pushed in to that area. As an example, there is an area called aspen hill in maryland. It used to be an upscale area, but when inner city prices flew up, the trash that was inhabiting the city moved out there. Now, they have one of the highest crime rates in maryland, and big drug problems. I would just make sure a lot of homes arent for sale in the area you are looking at.

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  41. Before I dig in take this first fact, dont listen to "experts", "analysts", etc... They will say anything to keep the market bolstered (esp. NY TIMES) Find a good friend who is in the market flipping or investing or simply buying and holding. Its like talking(experts) a class from a teaBefore I dig in take this first fact, dont listen to "experts", "analysts", etc... They will say anything to keep the market bolstered (esp. NY TIMES) Find a good friend who is in the market flipping or investing or simply buying and holding. Its like talking(experts) a class from a teacher who has retired and isnt in the field. I look at the papers, talk to friends, read blogs and avoid "experts". I can give some insight that may be able to give New Yorkers( and high priced LA areas) a broader perspective. I have properties both in Manhattan and West Palm Beach. I can tell you what will happen in NYC/LA by telling you what's happening in FL. Yes they are two different markets but its like a ripple effect. West Palm Beach real Estate is devastated. You cant imagine how many flippers are stranded here. Im here and its worse than the hurricane (btw- not even one hurricane...so you cant blame mother nature) The prices cant go lower than whats owed on the property and many, like friends of mine, are simply returning the deeds to the mortgage companies. Its less severe than bankruptcy and it still saves some face according to some. As for rents they are dropping dramatically as flippers are trying to get their places rented out... this is West Palm.... NYC /Manhattan is different because of jobs. People need to live there to work. But its only a question of time before that ripple hits the Manhattan market. It will take time but it will make a severe dent. As for buying or waiting.... ooooh nooo... wait until mid 2007 to see the way things are shaping up. If you are desperate to sell, dont wait until 2007....do it NOW. 2007 is predicted to be very high and dry like Elephants walking miles on the Kalhari with no water!!! And with LOTS of hungry lions waiting at the watering holes!!! While there are no crystal balls... I as an investor would advise any friend to WAIT... there will always be deals. Dont plunk your hard earned money in a market that is going SOUTH. The only people that should buy are people that would literally save more money in renting than buying. But with prices falling so fast who knows how low they will go. I remember a woman in our co-op(NYC) building on 18th street who bought her 1 bedroom 14 years ago for 14,000. Yup, no joke and no lie. 14 years is not that long ago... Its long but not that long to see something go from 14,000 to 399,000 in a prewar tenement building. Prices in Manhattan just got disgustingly high. Its as if a bunch of magicians put a voodoo spell on the whole market to hypnotize us and we're all waking up...saying what fu**!cher who has retired and isnt in the field. I look at the papers, talk to friends, read blogs and avoid "experts". I can give some insight that may be able to give New Yorkers( and high priced LA areas) a broader perspective. I have properties both in Manhattan and West Palm Beach. I can tell you what will happen in NYC/LA by telling you what's happening in FL. Yes they are two different markets but its like a ripple effect. West Palm Beach real Estate is devastated. You cant imagine how many flippers are stranded here. Im here and its worse than the hurricane (btw- not even one hurricane...so you cant blame mother nature) The prices cant go lower than whats owed on the property and many, like friends of mine, are simply returning the deeds to the mortgage companies. Its less severe than bankruptcy and it still saves some face according to some. As for rents they are dropping dramatically as flippers are trying to get their places rented out... this is West Palm.... NYC /Manhattan is different because of jobs. People need to live there to work. But its only a question of time before that ripple hits the Manhattan market. It will take time but it will make a severe dent. As for buying or waiting.... ooooh nooo... wait until mid 2007 to see the way things are shaping up. If you are desperate to sell, dont wait until 2007....do it NOW. 2007 is predicted to be very high and dry like Elephants walking miles on the Kalhari with no water!!! And with LOTS of hungry lions waiting at the watering holes!!! While there are no crystal balls... I as an investor would advise any friend to WAIT... there will always be deals. Dont plunk your hard earned money in a market that is going SOUTH. The only people that should buy are people that would literally save more money in renting than buying. But with prices falling so fast who knows how low they will go. I remember a woman in our co-op(NYC) building on 18th street who bought her 1 bedroom 14 years ago for 14,000. Yup, no joke and no lie. 14 years is not that long ago... Its long but not that long to see something go from 14,000 to 399,000 in a prewar tenement building. Prices in Manhattan just got disgustingly high. Its as if a bunch of magicians put a voodoo spell on the whole buying market to hypnotize us and we're all waking up...saying what fu** did I buy!

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