House Hunting: is the market turning?

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hidesert
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House Hunting: is the market turning?

Post by hidesert »

I sold my last house in 2005 and have been very happy to be a renter in the meantime. Now, however, with sub 4 percent interest rates and sellers (at least the realistic and motivated ones) steadily reducing their asking prices in the past year, we feel like making a move.

We're not after a huge bargain; We just want a house that meets our needs in a good location at a price we can afford. Specifically we're looking for something in the $185k to $225k range. We've been looking for about three weeks and have seen perhaps 20 houses. We liked the very first house we saw: high quality construction, great location and very well maintained. It had been on the market several months. That evening our agent called to tell us that someone else was making an offer on it. Even though we liked it we had only seen two other houses at that point and didn't feel like we should make a decision yet. Two days later that house was under contract to another buyer.

Disappointed, we continued looking at several other houses. None peaked our interest until we saw a property online that looked ideal. Then the snow and ice storm of the century happened. We couldn't get to see it for several days because of road conditions and power outages. By the time everything was settled down THAT house was under contract. It had also been on the market for several months and had just had a price reduction which put it into our range. Disappointed again!

Yesterday we looked at three more houses and found one that seemed ideal. It was a bank owned property but in pretty nice condition and in a great location. We pretty much agreed to submit an offer today but when we got home an looked at it online one more time to check on something it TOO had it's status changed from active to pending that very day!

What's going on? It appears in my area that the supply and demand price lines are finally crossing. Or maybe we are just unlucky.
Sulvar
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Re: House Hunting: is the market turning?

Post by Sulvar »

My experience from selling a house and buying a new one recently (and also from observing my friends buy and sell houses in the last year or so) is that good properties that are priced correctly sell very fast. They are often under contract the first weekend they are listed. Most properties, however, either aren't great, need some work, or are priced too high. These properties just sit on the market and never sell. So even though there may be tons and tons of houses listed for sale in your area, there aren't that many good houses on the market.
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Gray
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Re: House Hunting: is the market turning?

Post by Gray »

The banks have yet to accept the write-downs that they'll have to take on bad mortgage debts. As long as they don't mark to market, they don't realize the losses. Also, there are so many foreclosures, banks are not even foreclosing for an extended period of time because the foreclosure channel is full and they don't want to flood the market with supply.

Consumers who have been sitting in their house with the expectation that it would be their nest egg, and may have cashed out equity to pay off credit card debt, college, cars, etc, are in many cases underwater and unable to sell. They're weighing whether to walk away or continue to stick with it. Others have mortgages that are effectively "renting" (not building equity) from the bank until larger payments or a balloon payment comes along and forces them out the door.

Borrowing costs are at all time lows in large part due to the Fed's efforts to stimulate housing (to protect the banks) by suppressing interest rates. If rates rise, all it will do is push housing prices even lower than they already are.

So, there is no rush. I don't think we'll hit bottom until 2017-2018. We're only starting the third act in this four act play. Japan is probably a useful case study to the extent it's worth.

Yes, houses priced correctly sell quickly. The problem is there are few houses priced correctly, so buyers have to wait for sellers or banks to individually capitulate to reality on a case-by-case basis.
Last edited by Gray on Fri Jan 27, 2012 12:14 pm, edited 6 times in total.
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bottlecap
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Re: House Hunting: is the market turning?

Post by bottlecap »

I doubt it, but as others have indicated, there are buyers out there out of necessity. I was one 6 months ago. If you have a good house and a reasonable price, you can sell your home.

JT
sjb19
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Re: House Hunting: is the market turning?

Post by sjb19 »

Keep looking, but keep an eye on the ones you liked. Financing is still difficult for many people and you may notice the houses you like reappear on the market in a few weeks. That was certainly the case when we were house hunting a few years ago. It also makes sense to at least have your agent contact the listing agent to alert them to your interest in the event the pending sale does fall thru.
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Midpack
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Re: House Hunting: is the market turning?

Post by Midpack »

It is a good time to buy, and nice homes at reasonable prices will often sell quickly. But real estate isn't going to take off any time soon, and interest rates aren't either, so there is no rush. In that you seem to have found suitable homes easily several times, it would appear you're going to find a great home without any trouble. Your timing is perfect and the window will be open for some time, good for you!
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Fallible
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Re: House Hunting: is the market turning?

Post by Fallible »

As for whether the housing market is turning, I thought this interview a few days ago with Robert Shiller probably said it all:

http://www.indexuniverse.com/hot-topics ... er-qa.html
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
calcium
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Re: House Hunting: is the market turning?

Post by calcium »

I don't have much to add here, except to say that as someone who's looking at housing with moderate interest, I'm happy to hear/see that the market will remain low for the next several years. It'll allow me to save up to eventually purchase my first house (hopefully!). Now if my investments were only doing better...
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Gray
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Re: House Hunting: is the market turning?

Post by Gray »

By the way, be wary whenever you hear the words "it's a great time to buy" or "prices are so low they can only go up" or "interest rates won't stay this low for long" and so forth.
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hidesert
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Re: House Hunting: is the market turning?

Post by hidesert »

Gray wrote:By the way, be wary whenever you hear the words "it's a great time to buy" or "prices are so low they can only go up" or "interest rates won't stay this low for long" and so forth.
Yes, I agree with you. I'm in the market because my current house no longer fits my needs and it seems I can buy a house that does with a payment that is considerably less than my rent.

I think the housing market will change radically in the next few years. I think prices will continue to face downwards pressure for some time. I think some of these very large houses will have to be converted to multi-family units to make them affordable to the younger generation.
rogermexico
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Re: House Hunting: is the market turning?

Post by rogermexico »

Your situation suggests to me that your agent is doing a good job finding and showing the appropriately-priced properties and not wasting your time with the other 95% of listings. So I'd suggest keep on hunting but no need to do anything rash.
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Watty
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Re: House Hunting: is the market turning?

Post by Watty »

Specifically we're looking for something in the $185k to $225k range.
It is likely that in your local area the housing market is very different in different price ranges and you could be looking in the hottest part of the market.

That price range may be getting additional activity from people who would have been looking in the lower $100s but can now buy a more expense house with the low interest rates. Many first time buyers can afford houses in that price range now since the monthly mortgage payment will likely be in the ballpark of $1,000 a month which may even be less than renting.

Likewise people who would have been looking more in the high $200K range in the past may be looking for less expensive houses now out of caution or because of difficulty in qualifying for a larger mortgage now.
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DiscoBunny1979
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Re: House Hunting: is the market turning?

Post by DiscoBunny1979 »

I don't know if anything is happening other than the fact that you've only been looking for what, 3 weeks? The problem with house hunting is that if you find a 'perfect' house for you, it probably is a 'perfect' house for someone else! This is true in any market, not just this one. It's like going into an antique store, finding that perfect piece of furniture, not too sure if you want to spend the asking price, and walk out the door. Later that day, someone else finds that piece of furniture, negotiates with the seller, and buys it. You return a day later to find it not in the store. The lesson - if you like something you should put it on hold, put a deposit, or place an offer when you see it. There is nothing wrong with writing up a contract on a house with the stipulation of passing an inspection. You can always get out of a contract by finding something wrong with a house with the inspection stipulation.

The other thing I would caution is not buy a house just because interest rates are at the 'lowest in years'. You should buy a house because you want or need one. The down payment is the best way to have low monthly payments regardless of interest rate.
natureexplorer
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Re: House Hunting: is the market turning?

Post by natureexplorer »

Fallible wrote:As for whether the housing market is turning, I thought this interview a few days ago with Robert Shiller probably said it all: http://www.indexuniverse.com/hot-topics ... er-qa.html
What is Mr. Shiller's track record in predicting housing prices? For example, what was his prediction in 2005? From the sound of it, he is saying that housing prices could go up, down or stay flat.

Here an example from the interview linked above:
Shiller wrote:I’ve just read that there are talks between Russia and the U.S. to plan a colony on the moon.
What does that have to do with anything?
wingnutty
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Re: House Hunting: is the market turning?

Post by wingnutty »

Sounds like you are looking for the right house at the right price and there are lots of other people who share your wisdom :D

My wife and I finally bought a house after relocating in April, we close on Monday. We were VERY patient and even had to move 4x during the past 9 months with our 2 daughters and dog as we bounced around between rentals.

I would reiterate that houses priced right sell. I have noticed an uptick in buyer interest in the past 4 months in my area and it is largely due to sellers realizing that they need to price houses realistically.

We thought we'd never find the right house and we were exhausted at looking at houses and not seeing anything worth putting money into. But, our patience paid off with a nice foreclosure on 4 acres with a 6-car garage :lol: I'll be a happy boy in my new man cave, or perhaps I should call it a man castle 8-) !

Seriously, be patient and keep looking. You are in no danger of prices running away from you and interest rates are dead and will be for a while. Patience and smarts win the house-buying race!
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Gray
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Re: House Hunting: is the market turning?

Post by Gray »

That's a bizarre thought that the average single family home can be converted to a multi-family residence. I hope that prices decline to a reasonable level, not that our housing is transformed into a third-world like quality. I don't think dorm-room like residences would go over very well in suburbia.

If we're talking about a 5 bedroom McMansion, maybe., but I doubt the people who are current on their mortgages living nearby would take kindly to their upper income housing being transformed into moderate income housing.
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hidesert
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Re: House Hunting: is the market turning?

Post by hidesert »

I don't know that you could say that form of housing is third world. I lived in worked in Germany in the 70's and we rented a townhome in a suburb. Ours was the only one that was occupied by a single family on our block. This was a solid middle class neighborhood with Mercedes or Audis in the driveways. I haven't been to Japan but I understand it is similar there.
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kenyan
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Re: House Hunting: is the market turning?

Post by kenyan »

natureexplorer wrote:What is Mr. Shiller's track record in predicting housing prices? For example, what was his prediction in 2005?
Not sure if serious.
Retirement investing is a marathon.
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Gray
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Re: House Hunting: is the market turning?

Post by Gray »

I was referring to non-city US suburbia with zoning laws, home owners associations, etc.

The US has more space generally for housing than Western Europe or Japan.
sport
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Re: House Hunting: is the market turning?

Post by sport »

When a seller reduces his/her price into your acceptable range, it also makes the house attractive to other buyers, as you have found. Instead of waiting for sellers to reduce their asking price, one thing you can do is look at houses that are somewhat over your acceptable range that have been on the market a longer time. Some have been on the market more than a year. When you find one you like, make an offer you feel is acceptable to you. Since the seller has been trying to sell for a long time, they may give up on ever getting their higher price and accept your offer.

Jeff
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Re: House Hunting: is the market turning?

Post by madbrain »

natureexplorer wrote: Here an example from the interview linked above:
Shiller wrote:I’ve just read that there are talks between Russia and the U.S. to plan a colony on the moon.
What does that have to do with anything?
Price of housing on the moon will go up ?
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BHCadet
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Re: House Hunting: is the market turning?

Post by BHCadet »

Location! Location! Location!
I would buy the worst house in the best street with good schools and neighborhood.
The house can always be remodeled later.
dyangu
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Re: House Hunting: is the market turning?

Post by dyangu »

Hidesert, what you describe is pretty common in my area. Prices are not rising, but desirable properties listed at (or price reduced to) below market value receive offers immediately, while other properties sit on the market for months. I think prices will stay fairly flat this year (unless the employment situation changes drastically in your area). Take your time, look at lots of houses, make low ball offers, try short sales, and don't get into bidding wars. The housing market will turn around eventually. If not, we'll have bigger problems to worry about. Japan didn't have to deal with 10% unemployment rate and shrinking middle class during their stagnant decade.
relentless
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Re: House Hunting: is the market turning?

Post by relentless »

madbrain wrote:Price of housing on the moon will go up ?
No would go DOWN with increased supply :D
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