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Posts Tagged ‘buyer’s market’

Low Mortgage Rates, Low Prices – So Where Are The Buyers?

There’s very little debate over the fact that this is a “Buyer’s” Market” right now.  The thing is that this time around it’s a little different than in past market cycles.  There are plenty of homes to choose from, prices are low (still declining in many areas) and interest are as ever.

By all rights, there should be lots and lots of people buying houses right now.  There aren’t!  There are buyers and they are buying houses but not at the pace that the market conditions should justify.

Why not?

Here’s a short video that may be helpful in understanding part of the reason.

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It is NOT a Good Time To Buy A House!

IT’S A GREAT TIME TO BUY —  OHHHHMMMMM

IT’S A GREAT TIME TO BUY— OHHHHMMMMM

To quote one my heroes, Simon Cowell,  “I don’t mean to be rude but….” SHUT UP ALREADY!

Yes prices are low!  Yes Interesting Rates are historically low!  Yes there’s a ton of housing inventory!

So let me qualify my opening about why everyone should not be jumping on the bandwagon and grabbing up some of the low-priced inventory with the low-interest rates.

It goes back to something that has been mercilessly pounded into our collective consciousness over the last 50 years.

REAL ESTATE IS A GREAT INVESTMENT!!!!

For many years, this was true.  In fact if you search through my blog archives you’ll find that I have taken my turn at chanting the mantra. If I were a politician, I might be called a flip flopper.

Right now – it’s NOT a great investment.  Sure we’d all love to silently hope that the RE Market is going to “cycle back to normalcy” tomorrow – or next month, or next year.  Another Cowelism – “If I’m being honest..”  there really aren’t any indicators that home prices are going to “bounce back” anytime soon.

Of course no one really knows exactly what the future brings and I’m by no means an economist but I continually read just about everything that’s out there on this subject and nothing has convinced me that you can buy a house now and watch your investment grow.

One of the things that makes me believe this has to do with the next “wave of foreclosures” that is coming in the next 9 – 18 months.

So, if that’s the case, you might ask, why did I just spend several hundred dollars and renew my Realtor’s License?

Fact is, there are people who should and will be buying homes and with the market as complex and dynamic as it is right now, those people need a guide like me who knows the ins and the outs so they can make it all the way from their current home to the next as gracefully and smoothly as possible.

So who is it that should be buying?

Glad you asked.

There is only one valid reason to be buying a home right now – if you are looking for a new place to live and plan on staying there for some time. For those people it’s a great time to buy for all the reasons above (low price, low interest tons of inventory).

So what I’m suggesting is this: Be honest with yourself. If you need a new place to live in Connecticut – give me shout and I WILL  help you find it.   If you are thinking that you should buy a house because conventional wisdom has been drilled and drilled that it’s a good investment, you may want consider buying gold.

It IS a Buyer’s Market.  That merely means that there are more sellers than there are buyer’s – it’s just supply and demand. It doesn’t mean that everyone should be buying just to buy.  If you need a house, you can get a great value – a REALLY great value – but think about the house as place to live, not as a way to make money.

Right now in Northern Fairfield County, CT there are more than 2000 Single Family Homes and Condominiums listed for sale.  They range in price from the low $100,000’s to more than $8,000,000.   So there are a lot of options.  If you have a valid reason to purchase one, I’d be excited and delighted to help you sort it all out.

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Rick Schwartz,   REALTOR

Homes for sale in Danbury, Bethel, Brookfield, Newtown, New Fairfield, New Milford, Ridgefield and Redding CT.

A Real Estate Carol: Ghosts of Prices Past, Present and Yet May Be!

January 1, 2010 1 comment

THE FOLLOWING IS BASICALLY TRUE, EXCEPT FOR THE PART THAT DIDN’T HAPPEN YET

THE NAMES HAVE BEEN CHANGED

THE NUMBERS ARE ALL ACCURATE

REALITY

John and Mary decided in the fall of 2006 to move.  The house they were in was old, and had too many steps for John’s aging knees.  They did some fixin’ up and put the place on the market in early 2007.

One of their neighbors who had a similar house two doors down had sold in the summer of 2006 and received $430K.

Their Realtor told them that prices had dropped a little in their market and they should list it at $425 and be prepared to come down a bit.  Mary and John were concerned by this.  They felt that their house was at least as nice as the neighbor’s and that they did not think they should take “a loss”.

The Realtor, who knew that they had bought the house about 10 years earlier for $325, didn’t seem to agree that if they sold for $420 it should be counted as a loss.  In fact, she said, if you sold for $420, you’d be making a considerable profit.

Mary said “But if we had sold last summer we would have gotten more!”

The Realtor said “But you didn’t sell last summer?”

Mary: “Well, should we wait until prices come back up?”

Realtor: “I can only answer that if you can tell me when they will go up?”

Mary and John:  “HMMMmmmmmm

So Mary and John listed the house for $425 and in about 45 days sold it for $415.

They bought a new house in a different town about 20 miles away.  It was actually a bigger place but because it was a little farther out from the big city, the market was priced lower.  They bought it for $375.

With only a very small mortgage left on their original house, they were able to put $300 down on the new house and mortgage $75

As we move into 2010, home prices have NOT rebounded, in fact, they’ve continued to drop.  The home they bought in 2007 is now valued at $300 based on recent sales in their new neighborhood.

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ALTERNATE REALITY

Mary said “But if we had sold last summer we would have gotten more!”

The Realtor said “But you didn’t sell last summer?”

Mary: “Well, should we wait until prices come back up?”

Realtor: “I can only answer that if you can tell me when they will go up?”

Mary and John: “HMMMmmmmmm”

So Mary and John held on to their house, waiting until the market came back.  As of the beginning of 2010 it had not, in fact, prices continued to drop.

In January of 2010 John had had it with the stairs.  He told Mary they needed to sell now – even if they had to give the place away.

So they called their Realtor who, after doing a Market Analysis, told them that their home should bring between $330 and $340.

They listed it at $349 and after 45 days sold it for $340

After looking around they found a new home in another town (the same home in the first part of the story).  They purchased it for $305.

Since they had a very small mortgage on the house they sold, they were able to put $235 down and had a mortgage of $70.

——————————

So – if you put aside unimportant things like sale price and market value – at the end of the day,  in both scenarios John and Mary leveraged the equity in their home to buy another home that they liked better – and they ended up with virtually the same situation – with one exception. In the second scenario, they stayed in the house they didn’t like for three additional years.

WHAT IF…….

The whole thing was just starting now.

  • What if you have a home that no longer fits your needs?
  • What if you decide not to sell it because you are waiting for prices to come back up?
  • What if prices don’t rise, and you stay where you are for years?
  • What if, after that time, you make a move and end up with essentially the same financial situation?

Of course, as in any good space-time continuum story, the future is unwritten. Just ask good old Ebeneezer and he’ll tell you  The Ghost of What Will Be, is actually The Ghost of What MAY Be. Prices could go up or down dramatically in the next three years.

The point, I guess, of my little fable is that if prices go up or down on the house you want to sell, they will likely go up or down proportionately on the house you want to buy – so if you want to make a move, what is it you gain by waiting?

Just some food for thought.

God Bless Us Everyone!

Realtor Expectations – Part Two: THE BUYER’S AGENT

Again, this article is built on the premise that the number of Realtors to choose from is staggering.  Most people have one or more acquaintances that are “in the business” – or they know someone who has a sibling, spouse or parent who sells Real Estate.  It’s great to know the Realtor’s name, but what else does your friend or relative know about them?  A name and a business card don’t tell you all that you need to know.

No matter how you come across the name of a Realtor, you owe it to yourself to do your due diligence and learn about their business practices before choosing one.  Here are some of the things that you should expect from a Realtor when they are acting as your Buyer’s agent.

A Buyer’s agent is a Realtor who you choose to represent you in your search for a new home.  In most states you will likely have to sign an agreement with that agent in order for him to represent you.   This is known as “Buyer Agency”.  While it is an overstatement to say that you’ll be “stuck” with the agent once your engage them (there are always ways to get out of most agreements), remember that you are making a commitment to work with that Realtor throughout the entire process of your home search – so choose carefully.

So – what are the things that a Buyer’s agent should be doing to make your search and transaction a great experience?

BUYER COUNSELING:   Your first meeting with your Realtor should include more than just looking at houses. This first meeting, must include you getting a clear understanding of the entire home buying process and your Realtor should be learning as much as he can about your specific needs and plans.

SEARCHING FOR LISTINGS:  There are dozens, maybe hundreds of sources to search for listings. Every day these resources are becoming more and more elegant ant sophisticated.  On my own website I offer three separate options.  The fact that there are so many resources available can make it difficult to decide which one to use.  After getting to know you, your Realtor should be able to recommend certain avenues for listing searches that will fit your needs and your style.

  • Search on your own: Some home shoppers prefer to spend a great deal of time on the internet and seek out matching listings themselves.  I have one client who has logged into a particular search site 2015 times since I set up his account last fall.  He communicates with me about things that pique his interest and I dig for further data to help him make a decision about whether to look at the home.
  • Realtor searches for you:  Some home shoppers don’t even own computers – or they have neither the time nor the inclination to use their computer to search for home. If this is you, then you need a Realtor who will spend time and get a very clear profile of what you want, pull listings and provide you with the details in whatever format you want.

Most folks fall somewhere in between those two extremes.  Make sure that you choose a Realtor who is comfortable and competent working the way you want to work.

QUALIFYING LISTINGS:  This is the next step after you have found prospective homes that fall within your stated search parameters. The information in a Real Estate listing can only tell you so much.

One example:

A listing, for example might say “Great access to highway”.

That might be a  plus to some buyers but it might not matter to you – however – you might be very concerned with the noise level in the neighborhood.  If noise is a very important factor for you then you probably want to know if having great highway access also means that you are going to hear traffic noise.  It might not – but you aren’t going to find out from the listing. So, your agent can research it for you.  Perhaps he knows the street already and can tell you off the bat – or perhaps he needs to call the other Realtor or take a drive by the house and check it out.

There are lots of other examples. The point here is that simply finding the listing may or may not tell you about all the things that are crucial to you.  Once your Realtor knows your likes and dislikes he can dig deeper and give you the additional information before you waste your time looking at places that aren’t going to work for you.

NEGOTIATING: I covered a lot about this in a previous post – the key here is to make sure that you are in sync with the Realtor – there should be no surprises.

Once you find a house, the Realtor should pull “comps” and go over them with you so you can have an idea if the listing price is somewhat in range of market value or if it is overpriced.

Well before you reach this point, your Realtor should sit with you and map out various scenarios and explain the options.  A few examples:

  • What if a house is significantly overpriced?  Do you make a single bid that is at market value and stand with it, or are you going to make an offer well below, which may be perceived as a “lowball” by the seller?
  • What if your opening bid is very reasonable and the seller refuses to make a counter offer?  Are you going to make a second offer?
  • What if you go through several rounds of bidding then find that you and the seller are deadlocked a few thousand dollars apart?

It isn’t necessary that you make firm decisions on these and other scenarios in advance – but your Realtor should have laid the possibilities out for you early in the game so you can consider your options. In the heat of a negotiation you should be executing your well thought out strategy – not developing one.

POST SALE: Once you make a successful bid on a house, you will be dealing with lots of other people:  Home Inspector, Septic Inspector, Attorney, Loan Originator, and Loan Processor – to name some of them.  Your Realtor’s “official” role is ending.  Having said that, however he can and should assume the role of “expeditor”, staying in touch with everyone and keeping track of who is where in the process so that you have an advocate should there be an unexpected wrinkle.

SUMMARY: Generally speaking, you should choose someone you feel comfortable with but that comfort should come from you knowing that your Realtor has a plan to work with you from beginning to end at your pace; following your style and helping you make the most of your home shopping experience.

Mortgage Rates Creeping Up

June 6, 2009 1 comment

Well -they’ve been going down and down and down – and while no one can predict for sure what is coming tomorrow – Mortgage Interest Rates have been slowly and steadily climbing for the last couple of weeks.

If you are one the “double jugglers” the time to move may be right now.  A double juggler is someone who is waiting for housing prices and mortgage rates to simultaneously be at the lowest possible combination.

Sometimes jugglers can juggle themselves right past the optimum point.   If, for example, you had bought a home 4 or 5 weeks ago ago for 300K, and got a mortgage of $250K at 4.5% for 30 years, your principal and interest payment would be roughly $1266 per month.

Assuming you wait for another 90 days and hope that the price of the house drops to $285K (which it may or may not) and you are able to purchase it and get a mortgage for $235K at 6% for 30 years, your prinicpal and interest payment would be roughly $1408 per month.

If you add up the increased monthly payments over the life of the loan, you will end up paying about $50K more for the house which, obviously more than wipes out the $15K you saved by waiting out the price.

Also keep in mind, that there are some  indications that housing prices have hit bottom or will very soon.  So, you could, not only pay more on the mortgage, there is no telling what the price of the house is going to be in 90 days.

Again – I can’t predict what is going to happen.  If I could, I’d probably would have competed with Penske for the purchase of Saturn from General Motors

Everyone has to make their move when they feel it’s right to do so.  Just make sure you don’t wait right past the bottom.  It could cost you.

When is a Seagull like buying a house?

1/31/10

Updating an old post from about a year ago.  This is actually more timely than ever due the April 30th deadline for finding a house under the Expanded Home Buyer Tax Credit.

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I heard an interesting parabolic riddle (I always wanted to say that) by an author on one of the morning television shows today. I was also on the phone, tripping over the dog’s water bowl and trying to make breakfast at the same time so I didn’t catch the name of the man who was talking. When my brain processed it a little later on it really struck me though.

If there are four seagulls sitting on piece of driftwood and one of them decides to fly away, how many are left on the driftwood?

The answer is four. DECIDING to fly away is not the same as actually making the flight.

It’s really the same with a lot of folks today who are looking at houses. We all know this is a buyer’s market and a lot of people are taking advantage of it to get some of the great bargains that are out there. There are lot of folks I talk to though, who have made the decision to buy but they are waiting: for prices to bottom out, mortgage rates to drop below the historic lows that we have right now, or they keep hoping that the next new listing that comes on the market will be the perfect home.

The fact is that it is only a buyer’s market for those folks who actually buy a house. At some point, prices will go flat and then rise, mortgage rates will go up, and there will be fewer houses on the market to choose from. Nobody knows when these things will happen.

The simple truth is that the stars are aligned pretty nicely – right now – for qualified home buyers. So if you’ve made a decision to partake in the buyer’s market, there’s no time like the present.

Waiting for the bottom?

May 2, 2009 1 comment

A lot of people shopping for houses today are moving very cautiously towards making a purchase as they keep their eye on the depreciating prices of houses.  Everyone wants to buy at the “bottom” of the market – which is a natural feeling – who wants to buy something today and have it be worth less in 6 months.

One of the challenge with this is that we are not going to know when the bottom hits until we can look back and point at it in our rear-view mirrors.  Once prices start to rise at some point, we will know, for sure, when the bottom was. Until then, we’re all just guessing – and gambling.

The second thing to consider is really a math exercise.  If, for example, there is a home that you like that you can currently buy for, let’s say,  $250,000.  If you wait 3 more months, the price might drop to, let’s say $230,000 giving you a “savings” of $20,000.

Let’s look closer at that $20,000. You have to consider what it is costing you NOT to buy for another 3 months.  If you are a first time buyer and you are currently renting, that means that you’ll be paying rent for 3 more months and not enjoying a tax deduction on the interest you’ll be paying in your new mortgage. The earlier in the year you make a purchase, the bigger your deduction will be on April 15, 2010.

If you currently own a home, compare your current interest rate to what you would be paying if you made a move sooner than later.  If you’re current rate is, let’s say,  7% and you can get a mortgage on your new home for 5%, how much will you be saving on your monthly payment.

Everyone’s situation is going to be a unique but you should take the time and do the math to figure out how much it will cost you to wait for “the bottom.”  You might be surprised.