The Downward Slope of Housing Prices

20110531_HOUSING_graphic-popup In an article that I could have written myself (or maybe I already did in a blog post), the New York Times reports that housing prices continue to drop, and the percentage of home ownership falls to its lowest level since 1998. 

The Northeast, particularly the suburbs around NYC, did not experienced the same housing crisis as the rest of the country. Until this spring. Suddenly, we're seeing late 90's housing prices.

The inventory is weird, too. Some towns have too much; other towns have only problematic homes. People are putting off retiring to Florida for a year or two with the hopes that prices will bounce back. My guess is that they won't bounce back next year, and we're going to see a glut of houses on the market next year, which will bring down prices even more. 

According to the NYT, people are renting rather than getting into the real estate mess. I understand that everyone is scarred from the real estate bust — I know I am — but bargains are out there. I've got my eye on one Victorian that has already dropped $160,000 in a very fancy town. Too bad that we have to sell our place first. However, we might be able to afford a weekend place in upstate New York, even if we don't move. 

28 thoughts on “The Downward Slope of Housing Prices

  1. I still wish I knew what was happening with the local housing market. Pittsburgh keeps getting mentioned as the exception in housing decline stories. I see now that two of my neighbors are trying to sell for 10% more than they paid three years ago. I don’t know if that is based on fundmentals or they just took what they owed on their mortgage and added the broker’s commission plus the transfer tax.

  2. Do you really think you’re going to be able to use a weekend place with your kids being the age they are, and all the sports activities?
    We are primed to buy here (I want a bigger house, closer to the center of our oddly shaped town) but the inventory in our town sucks. No, I do not want a ranch or a raised ranch. I want my bedrooms on one floor and my daily living space on another. I’d rather stay here because of my son. He’s finally making friends and socializing well, and I’d like to continue that.

  3. Our kids do soccer, basketball, ultimate, ice hockey, and baseball, Destination Imagination, Girl Scouts, and Y-guides — all at pretty casual levels. That gives us 12 weekends without scheduled sports activities during the school year. Most of those are during school breaks (thanksgiving, winter break, february break, spring break).
    With judicious scheduling, and use of a property over breaks and the summer, we could make a weekend house work. Our barriers are that we’re terrible at taking care of houses and that we like to travel further afield for longer breaks (hawaii, london, DC, NY, CA, . . .). With that desire, we might only find 4 weeks. But, if one could use the summer place on vacations and over the summer, it could work.

  4. I want my bedrooms on one floor and my daily living space on another.
    You could get a ranch house with a full basement. Not that I’d recommend that, though.

  5. In my area of Minnesota, houses that are in decent shape and aggressively priced are selling quickly. I know two families that sold houses in the last month, each within one to two weeks of the list date. In both cases they were initially priced lower than what I expected but ended up going for more than the list price. Most people don’t seem to want to follow the strategy of pricing low though-I think because they’re afraid they’ll have no bargaining power if they do-and so a lot of houses just sit and sit and then have to deal with the taint of a house that’s been on the market for half a year or more. We plan to try and sell our house next spring and I’m now thinking it’s better to price low to begin with, based on the experience of these two families.
    There are also a lot of foreclosures of course but they’re usually in bad condition and a lot of home buyers, especially new ones, just don’t want to deal with the repair or with the increased difficulty negotiating the terms with the bank.

  6. You can still get a passable house in my area for under $160k. There aren’t many, but something with no parking and very dated fixtures might go for less. Those tend to sell quickly if there are no serious issues with structure.

  7. We saw a house last week that should have been in the 160s to 180s, but because the short sale fell through (bank wouldn’t take 140), the owners were evicted and now it’s on the market for 90. Lots of problems in it, that’s true, and they’re all on file with the city since St. Paul requires an inspection. But still, miserable to see this happening to a neighborhood.

  8. Count me as one of those “renting instead of buying,” at least for a few years. With our financial issues from the separation likely to result in me kicking into the mortgage on the old house for a while, and I can’t fathom anyone would give me a second mortgage on top of that.

  9. Another rent-not-buy here. We sold our house in Los Angeles in 2005 and have been renting since, first in NJ and now in Queens. We love our current house, and would probably buy it under the right circumstances, but we’re not ready, nor is the market.
    We too are sniffing around the Catskills. A vacation home would be a lovely thing.

  10. Matt, that’s what we have now. But I want kitchen/living room/offices on one level and bedrooms on the other. I have no need for a dining room or “playroom.” The kids just end up in the living room anyway since we have only 1 tv, and it’s in the living room.
    My aunt and uncle (with 13 year old twins) have a place in the Catskills on a small lake, but they’ve been renting it out because they don’t use it enough.

  11. “I see now that two of my neighbors are trying to sell for 10% more than they paid three years ago. I don’t know if that is based on fundmentals or they just took what they owed on their mortgage and added the broker’s commission plus the transfer tax.”
    That’s not unlikely.
    “The Northeast, particularly the suburbs around NYC, did not experienced the same housing crisis as the rest of the country. Until this spring. Suddenly, we’re seeing late 90’s housing prices.”
    Some people would say that the crisis was the decrease in affordability seen over the past 10 or 15 years, and that the decrease in home prices is not the crisis, but the cure.
    These markets turn so quickly. In the infamous bubble markets of Florida, Nevada, Arizona and inland California, prices went up, up, up, until one day, houses just stopped selling. It was like a very expensive game of hot potato.
    I’m hoping that a West Coast couple that I know will be able to successfully unload their house soon. Their local market is lately very dependent on mainland Chinese buyers and as the Chinese housing market starts to circle the drain, there are bound to be repercussions in the West Coast markets that have become dependent on the Chinese.
    “I’ve got my eye on one Victorian that has already dropped $160,000 in a very fancy town.”
    That sounds very nice.

  12. Here’s an anecdote on how people arrive at their prices.
    Three years ago (at pretty close to the top of the market here), the current homeowner bought the house. A couple years later, she started trying to sell the house herself (she’d been a realtor at some point). Eventually, she listed at $180k with a cut-rate realtor. One of my neighbors offered $150k-ish and was turned down. The homeowner owed $170k-ish and that’s what she needed to get. Some months later, my husband and I offered $130k-ish and were (naturally) turned down. The homeowner eventually re-listed with a swankier realtor at $192k (!!!) and there the house sits, not budging.

  13. Jim the Realtor in the San Diego has a new foreclosure tour video up:
    http://www.bubbleinfo.com/2011/05/30/foreclosure-cruise/
    From what JtR says, Chase is getting very aggressive about setting low opening bids for foreclosures and then briskly auctioning them off. (JtR says that Chase is primarily trying to quickly get rid of bad WaMu loans.) Flippers buy the foreclosed houses and resell them at retail. This is very nice to hear, because previously, we’d been hearing about banks being overwhelmed with huge quantities of foreclosures and allowing them to sit and deteriorate for years.
    Not to give anyone ideas, but the banks have been offering up to $20k for distressed homeowners to go away quietly, leaving a clean, unvandalized house. $20k may be unusual, but $3k-$5k is not unusual.

  14. I don’t think most of the foreclosures around here are worth $20k. So far, the price declines and foreclosures have hit the poor areas.

  15. The bad areas here experienced Detroit-style depopulation. Lots of houses went from as high as $50k or so to basically worthless.

  16. “I don’t think most of the foreclosures around here are worth $20k. So far, the price declines and foreclosures have hit the poor areas.”
    That’s a natural place for foreclosures to start, but they don’t stop there. I’m expecting some more in the fancy older neighborhood I watch, particularly 1) recently remodeled homes 2) houses that have been on and off the market for years with little price change 3) unkempt homes and yards. In both our areas, real estate is theoretically inexpensive, but “nicer” neighborhoods aren’t cheap and it’s the taxes that can be the straw that breaks the camel’s back. It will surprise me a lot if the $192k house I mentioned doesn’t go into foreclosure eventually–the lady is living about 90 minutes away from here now, and she doesn’t seem to have a lot of margin. It beats me how somebody who “has to” get $170+k can afford to keep the house standing empty, paying both mortgage and taxes. I expect she can’t afford it.

  17. and it’s the taxes that can be the straw that breaks the camel’s back
    Yep. The people with houses that dropped in value sued (successfully) to get their assessed values lowered. I have no idea how many foreclosures here will be working up the chain, but you can only get so many people in trouble if prices haven’t dropped.

  18. This thread made me look at Craigslist. I see somebody is selling a house they started renovating but couldn’t finish. There’s no kitchen, but the bathroom looks beautiful. There’s also no flooring, except in the bathroom.

  19. Actually at the credit union, they said there were mortgages that could be more than the cost of the (foreclosed) house in order to rebuild. I think they were talking about FHA at the time.

  20. “Actually at the credit union, they said there were mortgages that could be more than the cost of the (foreclosed) house in order to rebuild. I think they were talking about FHA at the time.”
    That sounds right. I think there are at least a couple of different categories of FHA loan. Under the usual FHA loan, I think the house has to be immediately usable, and then there’s the option kris mentions. I tried to google it, but my eyes started glazing over reading the explanations.

  21. There are some 4-bedroom houses selling south of Hyde Park for under $10,000 (some for as low as a dollar), which saves you plenty of money for bullet proof glass and barbed wire. (Maybe even an armored vehicle to get to and from your house).

  22. In the locker room at Penn the other day I overheard two guys talking about how your used to be able to buy a house in North Philly (or very deep west Philly, maybe) for $5K, but now you have to pay $20K-$25K, so I guess prices are going up somewhere. (They attributed it to competition among the “we buy ugly houses” type people.)

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