The price of the house is only half of the equation. The other half is interest rates. It will do you no good to wait hoping that prices drop more if interest rates spike. Some of the projections that these fellas are giving you may be right, but you should take those anticipated price drops, and then figure out whether rates are going higher...then use a mortgage calculator to figure out your payment. Here's how I look at it. On a national level, prices are low, and may or may not go much lower. But interest rates are rising. I personally wouldn't wait if this was the "nationally average" house. But the real issue is what is your local economy like? Do you live in Texas near and oil field and housing prices are a function of the price or oil? Did a large factory just open up in your small town? Do you live in a section of California where for sale signs go up every day? Some markets go up when others go down, so you can't really get blanket advice on price trends anyway. SM
The only way to determine value in the real estate market is to look at the comps. Comps are properties in the immediate area that have SOLD in the last 6 months. You don't get your comps from Zillow. Drive around the area, get a couple of phone numbers of realtors from the real estate signs. Call them, tell them you're looking at properties in the area, you would like to get some comps. They will fax them to you. Make sure you call more than one Realtor because they may leave something out of the comps. Then compare the comps to the current listing prices in the area. You do this because sometimes in a falling market the listing prices are lower than the sold prices. It's really irrelevant what the price was in 2003, or what it appraised for back then, what the tax assessor says it's worth, etc etc. OldTrader
I disagree. Interest rates will fluctuate, but the price you pay is static. If rates go higher, prices will go lower and may not come back to where you purchased. However, if rates are high, you can use an adjustable rate mortgage and re-finance later. Bottom line is that you should not look at what you can afford, but what you'd be comfortable paying. I'm waiting for a while until at least the first interest rate hike to see the effect it has on prices. Also to note-- under this govt. bailout plan, people are locking in 3% 30-year FIXED mortgages. So banks are willing to deal.
If you pay cash then you may want to wait a little or lower the offer after a comparison of recently sold homes of similar value. It all depends on your needs (Kids, wife, work, schooling).
Best to buy stocks now, and hold until november (to see if Hussein (Obama) doesn't get elected). Meanwhile home prices may drop a little more.
Contact a Realtor and ask to have a CMA done for you. They should do it for free. This will tell you what people are willing to pay or have paid for similar properties in the past six months or so. Do not confuse this with an appraisal. They are not the same. An appraisal will tell you what it would cost to build that property stick for stick at todays costs. A CMA will tell you what people are willing to pay in the current market (demand). You could have a property that appraises for 250k, but that area or property is in high demand and find out that people are willing to pay 300K. You should have both the CMA and the appraisal done. You will be better informed. Owning a home in my opinion should be a long term buy and hold. Timing of the market... if you are doing a long term buy and hold couldn't be better right now.
I agree that prices go lower as rates go higher (and vice versa) over the long term, but that can take a couple years to play out for dramatic changes. For example, when rates were cut in 2001, it took a while for housing prices to rise. Also, from what I've seen, its my opinion that this phenomenon only takes effect when rates are outside of the typical range (7 to 8%) for a long period of time due to the inherent "stickiness" of the housing market. SM
The situations you are citing are anomalies. In most parts of the nation builders are just making less on each house. They aren't taking a 50% loss on the build. When prices started dropping, materials also started dropping. Houses just got very cheap to build. Anyway, I agree with your point that 6.6% savings is not a savings at all in this market. But he didn't do his math correctly. The median home price was about $160K in 2003. It peaked in 2006 at about $230K and is currently at about $195K. IOW, even matching the 2003 price results in a 18% price reduction, because if the area followed national averages it should be worth about $293K now. The seller is then adding an additional 6.6% below the 2003 price. He is effectively giving a 23% discount on the house. Of course the OP's situation needs to be considered individually to make an informed decision, but everyone should remember that even though prices have fallen a bit, doesn't mean that the house should be selling for less than it did before the housing bubble.
Wow I'm enjoying reading everybody's opinions on this and appreciate all the great information from everybody. Some more details on this are that I'd be using this house as a primary residence. I'm planning on living there for at least 7 to 10 years so this is not going to be a flip type of situation. I've tried looking for decent deals on foreclosures but haven't seen too much of that in the neighborhood I"m looking at. There's just not much for sale, so it seems like most of the people in the neighborhood are choosing to just sit on their low interest rate mortgages rather than trying to sell for a big loss. The current owner of this house bought it in Jan 2003 and it appraised for $241K, he got married a couple of months ago and is moving into his wife's home and is wanting to get rid of this house. I've tried looking at recent sales and its difficult because the prices vary so much. The recent sales from this year in the neighborhood are averaging around 250K to 260K.....but just a block down across the street there are similar size homes that are older selling for about 220K so I think it will appraise somewhere in the middle right around $235 - $240K. I guess my main draw for even considering it was the fact that they were taking 6.6% off the orignal 241K price in 2003 which is sort of the start of the bubble. I would not pay if they were taking 6% off the 2006 or 2007 prices thats for sure! So I've got until tomorrow at noon to respond to the counter offer........argh this is stressful!
Are you renting at the moment?If so,you need to take this into consideration.Someone said not to buy until 2012,by then you'll have paid a fortune in rent,($2000 per month would be nearly $100 grand in dead money)rates will likely be a lot higher and if property does actually stabilize you'll be well out of pocket.