Open House Picks: Six Months Later

Joe, I respectfully disagree. I have friends who are selling and breaking down, cutting prices, and accepting much lower offers than planned (we're talking 20%+ less than last year) since they see it will only continue to get much worse. As inventory continues to rise, economy at best stagnates in NYC (if not continues to deteriorate), and interest rates creep up, downward pressure will grow with no quick end in sight.

Posted by: Miss Muffett at June 12, 2009 1:06 PM

Joe - for my specific friends, there are life issues that are an influence in their decision to sell (and cut price/accept lower offer), but not an imperative. They could stay but they are seeing they're better off getting out sooner rather than later. As my own experience attests, RE decisions can be part of a complex stew. We did not *need* to sell when we did, but given all the other factors at the time, plus the desire to be in a different school zone, it seemed wise to sell and cash out before prices went down (which I had thought for a long time was inevitable).

Posted by: Miss Muffett at June 12, 2009 1:55 PM

What I mean is, if you see you might want to sell eventually (for cash as a financial cushion, for downsizing, for school, for trading up and renting in meantime, for those considering a move, whatever), the current RE market is a tipping point in the decision-making. My friends, and my own situation, was like this so we sold, and now friends are selling, even for a lot less than they would have gotten a year ago (but likely a lot more than they'd get next year). OK, back to work - no more time to post for now!

Posted by: Miss Muffett at June 12, 2009 2:07 PM

The ongoing price drops in OH 6 months later thread aren't fictional either, and a better "true" snapshot of market.

Posted by: Miss Muffett at June 12, 2009 2:52 PM

Ew

Posted by: Miss Muffett at June 12, 2009 3:10 PM

So Benson, what's your prediction re: NY RE prices for the next 12 months, 2 years, and 5 years?

Posted by: Miss Muffett at June 12, 2009 3:49 PM

So, with rental supply going up, won't rental market continue to soften, thus providing incentive for buyers to hold out further til sellers cave? As someone currently renting, I have no incentive to buy now when even 2-5 years of rent is less than the savings I see in the drops that are happening (since we're in market for a house, where even a 15-20% drop is a lot of $)...

Posted by: Miss Muffett at June 12, 2009 3:59 PM

Oh, DIBS, please stop peddling fear. People always need to sell for various reasons.

Posted by: Miss Muffett at June 12, 2009 4:17 PM

Perhaps - congrats on your purchase. We are actively looking too, and contrary to what some people think, we are not really trying to time the market per se. If we got a good price on a place we loved, within a budget we're comfortable with - we probably would buy, even knowing that the bottom is not yet here. The change in our mentality is that we are a lot more patient now, and the budget range we are comfortable is lower - not because we have less cash/income, but exactly because of the unpredictability you point out.

It's certainly possible we will buy a place and see prices decline further (and no, I won't then suddenly start cheerleading the market since, like wasder, I will know that I've bought a place to keep for life). But it's also possible that we will stay in our nice/economical rental for a long time and just wait to buy again. Either way, we are certain that time is on our side. I agree that no one knows for sure what's going to happen, in terms of how low prices will go, but I have yet to hear even the most bullish of bulls predict prices rising again anytime soon. If the most optimistic scenario (for bulls) is stagnation for a (long) while, and the worst is much bigger declines, I will stay on the sidelines until a compelling property at a truly attractive price presents itself (oh, and I'm not a fussy prima donna seeking a mansion on a prime block - modest house, modest block is fine as long as the hood/school works for us). And I'm not looking to buy a house for nothing - I'm placing my bets on prices returning to at least 2004 levels, and possibly lower (2002?) so that's still a hefty price tag in historical terms.

Posted by: Miss Muffett at June 12, 2009 7:47 PM

Homey, I'm glad you love your home: more power to you. I've never denigrated anyone for buying at any time - it's a personal choice. Folks like Wasder may have a tinge of wishing they'd paid a bit less, but in the grand scheme of things, there is no point in having regrets for what's done, especially if you are (as you seem to be) in a house you love, can afford, and plan to be in for a long time.

But my situation, and that of many others that I know, is different. My husband and I chose rewarding, but not terribly well-paid professions. We work very hard, but don't make much money for a city like NYC. Plus, we have small kids. So for us, the choice of a home, and the price point, is inextricably bound up with pretty much every other choice in our lives - most importantly, how much time we have for our kids (smaller mortgage = less income pressure). Am I miserable now in my rental? Far from it. It's a lovely place, in a great hood, and we feel lucky frankly to be where we are. We also feel lucky to have NOT bought before the crash (we were considering it), but now that things are so clearly on the downside -- or as I said, stagnating at best (for sellers) -- it just seems foolish for us to plunk down tons of money since sellers IMHO are still often holding out for unreasonable asking prices. I might feel differently if I'd found the house of my dreams (and I assure you, they are not grand), but that has not happened. When it does, and if the price is something we're truly comfortable with, we may indeed bite.

What I find strange is how a candid discussion of prices leads me to be reviled by people like yourself. Precisely because the cost of housing can often impact SO many other aspects of your life, I think it's an important discussion to have. And that - the way cost does impact the rest of your life - is precisely why I am as obsessed as I am with real estate. It's easily going to be the biggest investment my husband and I ever make (already was in our previous purchases and sales, and now we're seeking the home to buy for the rest of our lives - the big kahuna, if you will). Not to mention the way in which real estate is so wrapped up in notions of home, family, identity, community etc. I share the view with some others on this blog that long-term, ownership beats renting, but that again is due to our particular circumstances - namely wanting to leave some financial security to our children (I might feel differently about renting if we didn't have kids, but maybe not). That said, I think there are times -- like now -- when renting makes sense on a temporary basis.

I welcome other points of view - for this reason, I'm genuinely curious to hear predictions by the more bullish on this list as to their predictions for the next 12 months, 2 years, and 5 years, and the reasons behind their predictions.

Posted by: Miss Muffett at June 13, 2009 4:19 PM

First, thanks for the kind words from those that offered them. Traditionalmod, I've actually gone out of my way NOT to gloat about my sale - in a way, it was dumb luck. The prime reason for us selling when we did was to get into our school zone of choice. That said, I, like lechacal, was also predicting for a while before our sale that the market would go down, and was ridiculed and called all kinds of nasty names by those who thought I was crazy. In fact, after our sale, I even felt a brief twinge of seller's remorse at one point, mostly because a home is an emotional place, but also because I did have the passing thought that perhaps, as so many people said, I was making a bad financial decision in a market that, at the time, was still defying gravity in prime NYC (despite falling elsewhere).

Benson, of course I realize that real estate is not a "magic bullet" that will somehow magically make my family's life perfect. Things are way too complex for that. But I think the reason that real estate arouses such passion is precisely because it does have a HUGE effect on your life, and when you have kids, on your family life. We really do want to buy a home, since we very much enjoyed home ownership, and look forward to being owners again. But for now, we are actually in a very nice rental where our family is very happy and going to a school we really like (our top priority right now). Renting is not the solution for us long-term (for all the benefits of home ownership much touted on this blog), but it's a great one for now. We love our neighborhood, like our apartment at least as much as our former one where we owned, and our rent is very reasonable. Ultimately, we want to buy a house where we can live the rest of our lives, ideally with some income so that the income pressure on us is eased, so we can have more family time, and perhaps the flexibility to take over more space for our growing family in the future, should our finances permit that. So, a modest 3 story with a rental is the kind of thing we're looking for - not a mansion on the park as some people like to caricature my tastes, and not for $1. Our budget is fortunately healthy due to the good luck we've had in the past, so we are blessed to have capital, but as modest earners, we have to be very careful in our choices.

The main point of my posts, and the reason I'm following the market so closely, is that there now seems to be universal consensus that the NYC market will go back in time to earlier levels (which year is up to debate - 2004 is one I hear a lot, but bears think it could go much lower). And yet, many sellers out there still seem to be in denial of this. Not all of them mind you, so yes, there are deals to be had, but not a lot due to an ongoing stand-off. When I was selling, I was actually prepared to sell for 20% below what we eventually got, since we were very serious about selling, and I guess what I find interesting is why sellers even bother to list at such high asks when their property just sits and sits and sits.

For those who say I'm running a risk in waiting, I think the risk is much greater in acting precipitously. I have yet to hear anyone provide a credible rationale for why prices will begin to move up in the next 12 months - so really, what is the risk in waiting? As for interest rates rising, that will exert more downward pressure on prices that will likely offset the increase in mortgage payments (plus in our case, we are trying to keep a relatively small mortgage so are less affected by interest rates).

Again, I am NOT trying to time the bottom - if we see a house we love, at a price we can afford, we may very well bite, but given unrealistic asking prices, and ongoing price cuts, we see no reason to rush.

Posted by: Miss Muffett at June 14, 2009 10:26 PM