crazy real estate market

[dumpster56]

The New Jersey Market, Be careful. Taxes on that Bergen county house will be near 10K a year. Now it was listed at 750 then 680 now the come back is 580K.

I said this before I believe the housing market is in a big correction. Yes house built in 1980 split level in Bergen County NJ could be worth 680 again in 3 years but WHAT TOWN IS IT IN?? Some Bergen county towns and a weak market and you could be looking at 480 in three years. But then again if you NEED to move there well then buy it if it is nice.

Houses that were listed at 560K in my old neighborhood when I was listed at 519K last april are now in the 440K range and NOT SOLD!

Man were we LUCKY!

 

[Craig]

I won't post them here, but do a little research on the big homebuilders, and their recent public statements ... from what I'm seeing, the management of these public companies believes we are in the early stages of a correction. Early. This has a long way to go ... probably 18 months or so, would be my wager.

Best of luck.

 

[Nords]

I won't post them here, but do a little research on the big homebuilders, and their recent public statements ... from what I'm seeing, the management of these public companies believes we are in the early stages of a correction. Early. This has a long way to go ... probably 18 months or so, would be my wager.

I'm hearing big insider sales, far in excess of what's considered the normal asset allocation/diversification routine.

 

[semtex]

I have very bad memory of the early stage of dot com bubble burst. The bottom fishingers died ugly. That's why I kind of worry.

 

[wabmester]

I have very bad memory of the early stage of dot com bubble burst. The bottom fishingers died ugly. That's why I kind of worry.

Well, you can always try to value the house based on fundamentals. One traditional metric is about 3.5 X median income for the median house. I don't think we're there yet.

 

[Jay_Gatsby]

I have very bad memory of the early stage of dot com bubble burst. The bottom fishingers died ugly. That's why I kind of worry.

It's hard to peg the top or bottom of any market, but suffice it to say, your best indicator is to trust your gut. If you think something is overpriced, then it is overpriced, regardless of what the so-called "experts" say.

 

[Sparky]

Check these out:

http://thehousingbubbleblog.com/

http://housingpanic.blogspot.com/

 

[retire@40]

Well, you can always try to value the house based on fundamentals. One traditional metric is about 3.5 X median income for the median house. I don't think we're there yet.

What about using rental value to work your way up to a break-even cost?

If you can't buy a house and collect enough rent to at least break even, then you are probably paying too much for the house.

 

[macdaddy]

If you can't buy a house and collect enough rent to at least break even, then you are probably paying too much for the house.

I doubt this will ever be true for a nice SFH in NJ. People pay a premium to live in a house versus rent. I often hear renters say they won't buy until the PITI (mortgage Payment & Interest, Taxes, and Insurance) equals what they could rent it out for. In reality, if PITI = monthly rental income in a nice, appreciating area, then it translates into a 10%+ return for an investor. Investors flood in, prices rise, rents stay the same (or fall). If you can come within 10% of breaking even then you're probably getting a good deal.

At some point, the smart money will step in. You won't read in the newspaper month after month that the bottom has been reached. Prices will bounce back up. There is still too much money floating around and nobody knows where the stock market is heading. People are still rushing into commodities - well, real estate benefits from inflation as well...

 

[Brat]

Interesting report by mortgage insuance folks:

http://media.corporate-ir.net/media_files/irol/63/63356/Winter2007ERET.pdf

 

[JustCurious]

I live in central Florida, and I was talking to a contractor that was at my house this past week to do some work, and he told me that my job was the first job that he had in three weeks! He said that the bottom has fallen out of the new construction and remodel market, and a lot of contractors are hurting and looking for work.

 

[pedorrero]

I too live in Central FL. Good (at least for contractors) is there is suddenly a lot of work available...those 1800 (approx.) homes that were trashed by the tornado(es) on February 2.

Gov. Crist flew into the tiny airport I can see from my front yard. Makes me feel a bit more important.

-- Pedorrero, still in his untouched bricks & sticks by the grace of the weather God.

 

[retire@40]

...If you can come within 10% of breaking even then you're probably getting a good deal...

Even using the 10% metric, we are not even close to good deals in real estate yet in many markets.

 

[semtex]

Just got the call from my agent. The seller would like to accept the 560K offer. From 750 to 560, what a dive!

 

[Martha]

Well congratulations, talk about a motivated seller!

 

[tryan]

semtex - nice job!

(That was a predictable outcome)

 

[lswswein]

Hi Tryan
What do you think of the Boston market - Are you seing any good deals? I am still on the sidelines and waiting to buyfor the first time. I am looking in the Natick to Boston proper.

-h

 

[tryan]

Nothing in the Boston area works as an investment property ... took over a decade to run up it'll take a recession to bring prices back to reality. That's my 2 cents.

Of course if it's your primary residence then it's more a quality of life issue. But if you can't afford the mortgage with conventional financing ... better to just keep renting. You'll get more house for your rental dollar today than you will paying a mortgage - at todays crazy prices.

 

[retire@40]

Nothing in the Boston area works as an investment property ... took over a decade to run up it'll take a recession to bring prices back to reality. That's my 2 cents.

Of course if it's your primary residence then it's more a quality of life issue. But if you can't afford the mortgage with conventional financing ... better to just keep renting. You'll get more house for your rental dollar today than you will paying a mortgage - at todays crazy prices.

Nobody is buying multi-family as an investment. It would take a 50%+ drop in current prices for things to get somewhat sane.

The only people buying in the Boston area are homebuyers. Even then, there's lots of irrational buying with 2-family condos (buying half a house), interest-only mortgages, and other "creative" buying strategies.

It's going to take a long time for the rest of the economy to catch up to the real estate market.

 

[lswswein]

I am looking to buy a primary residence, but I am a single guy who is happy renting. I keep an eye on the market and though right now I am finding a few condos in my price range but nothing screams buy. I was wondering if anyone else is finding any good deals. If you guys see any deals give me a shout

-h
p.s: I do have 20%+ for my down payment and making monthly payments is not an issue on $350K loan at 6% interest rates.

 

[macdaddy]

I invest in the Boston market. Near the universities, rental demand is incredibly strong, population count is (slowly) growing, and there is nowhere to expand to. That covers Beacon Hill/Back Bay/Downtown, Allston/Brighton, and Cambridge. I am pursuing some deals right now - condos that will be cash flow positive with 10% down. They are out there, because sellers are panicked. I think inflation will pick up and incomes and rents will increase; if I'm wrong, I won't make much money and may lose some. If you look at condos in places like Worcester or Lowell - they are overpriced, and the rental market sucks. Those are the properties that will fall 20%-30% and even then not sell. If you look at houses in Lexington, Weston, Wellesley, etc, I think prices will remain relatively stable, maybe falling a little bit ( < 10% ).

Boston is a great town for landlords who don't mind renting to students and young professionals. I think less than 30% of housing in the metro area is owner-occupied. Many people associate Boston with overpriced housing but compared to other "bubble" areas it is quite reasonable, because of a higher ratio of investors to owners buying.

 

[lswswein]

hi macdaddy
I am one of those young professionals and cash flow positive with 10% down sounds very good. I was running the numbers for a few places around the brookline area and I haven't seen anything like that yet. I have lived in the Huntington ave area and brighton for about 4yrs and now live near natick. I am looking at condos right now close to boston.

-h

 

[retire@40]

...I am pursuing some deals right now - condos that will be cash flow positive with 10% down. They are out there, because sellers are panicked....

I'd be curious to see how successful you are with 10% down rental condos with positive cash flow in the Boston area.

If you ever close on a deal like this, maybe you can let us know the details behind your purchase.

I don't see any deals even close to that in this area right now.

 

[macdaddy]

I'll post the #s on a place I am working right now, if you two promise not to steal it from me.

FSBO - 210k - 3/1 800 sq ft in a hot area ( which means to me - no vacancies and some appreciation over the next decade ). Brookline is a hot area but also desirable for owner occupants (families), which means prices will be higher than in student-dominated pure rental areas.

20k down. 190k balance for 30 years @ 6.75% = ~ $1070/month interest. HOA $150/mo. Tax and insurance $200/mo. PITI = $1420. Rent is $1300-$1400 and it will always be rented. Maybe there is some benefit from depreciation write-off, tax benefits, etc. So lets call it a wash on a YOY cash basis, but it should appreciate a bit.

The market here has definitely fallen from the peak. The risk I take is that it could fall more (if there's a recession). But there are a lot of cash rich investors operating in this area which puts a limit on how far prices can fall. This one is in the top 5% of deals I see. I agree with retire@40 that most multi-families are ridiculously overpriced and won't cash flow even with 20% down. A lot of them were bought by local contractors who rehabbed them and are now trying to flip them.

Feel free to PM me with any specific kinds of properties you are looking for, I'll be happy to keep my eyes open and share info on what I'm seeing in the market.

 

[tryan]

macdaddy,

there's the difference .... you see a good deal; while I see a negative cash-flow nightmare.

You can "plan" for 100% occupacy but the reality is students leave every year or two. And the clean up from these kids is extensive, expensive and time consuming. Which calls out another piece you're not seeing - maintenance.

Sure they MIGHT appreciate .... but you can get much quicker results - and have more fun - betting on RED in Vegas.

I had 2 condos in Brighton for years ... I'ld rather rent parking spaces in todays market.