At what % of today's prices are YOU most likely to actually make a purchase?
Why do this?
If we conducted a little survey here, then we'd have a real data point in predicting the behavior of future buyers. We are probably relatively conservative compared to most potential buyers, so the results of the survey would be at the low end of the various predictable price support points, but at least it would be one objective measure of possible future buyer behavior in a sea of opinion.
How can anyone predict what price they'll buy at?
I know most people don't want to commit now to buying in the future at a specific price. Almost everyone would prefer to buy at the bottom of the market, whatever that is. And almost everyone would like to have more information to help predict that market bottom. Nice, but at some point you have to just decide whether to buy or not, even though you aren't sure if the market has hit bottom. There's never enough information for a perfect decision. I am interested in your best estimate today, with the imperfect information you have now, of what your most likely buying price will be, expressed as a % of today's prices for the types of property you think you'll end up buying.
What goes into the survey?
Comments are very welcome, but getting one number per person, expressed as a %, is the purpose of the question.
At what price will I most likely buy?
65%. I could see myself pulling the trigger at 350K for places that today are going for mid-500's and that I could live in. It's still way more than I could have paid in 1996, and way less house (condo, actually) than I want, but I want to lock in my future housing costs, and I could probably (barely) afford 350K. If the price was much higher, I probably couldn't bring myself to fork it out, unless I knew for certain it was a market bottom, and I am never going to know that until it's too late.
I'll probably just let any results accumulate in the thread, but if there's a strong demand, I'll tabulate them.
patient renter in OC
I will buy when prices revert back to pre-bubble level.
That would be early 2003 prices at a minimum. In nominal terms that puts the price at about $300K in the average neighborhoods I'm watching (Clairemont, Linda Vista, Serra Mesa etc.).
And/Or
The other method - I will buy whenever I can purchase for 3 times my annual household income.
BuyerWEPB,
Thanks for that. What % of current prices does that translate to?
Patient renter in OC
25% decline from today for new, probably 30-35% for resale since the new construction has already been discounted more in my area, this would represent a 50% drop from peak overall for both. Specifically I am looking at a 2100 sq ft new detached alley home that is list priced at 341k today with granite,ss appliances, etc. Comparable style resales are about 370-400k with an occasional thrashed repo lower. If that gets between 250 and 300 then I will be inclined to pull the trigger. My reasons are not about timing the market but about fundamentals. Rent today would be 1700-2000 for the same property, the loan would be only 2x my income. With 50k down a 250k 30 yr fixed mortgage it is about $1550 P&I. Taxes, insurance and hoa are roughly cancelled out by the income tax deduction, so then it makes sense to me. Of course it would be nice to be closer to the 250 than the 300 but that is where it gets tempting.
75% 2 years from now (70% with inflation). I think there is some permanent change to the market due to new financing vehicles avaiable and the "super star city" phenomenon. Couple that together with the behavioral effects of the market dropping further, and I think that's as low as it will go without a country-wide depression.
That would put an 1,800 3-4BR house at around 400K, which I think is the sweet spot given the demographics of the area and this country's crazy infatuation with the "American Dream."
Stan
If I find the right property, 20% below today's prices would temp me (in Coronado). It would have to be a house that would work for us for at least 10 years.
I've got my eye on some new homes currently selling in the Mid 800s. They have a couple in the last phase that they have been trying to unload for several months at 75K off with no luck ( one since Jan). I'de be willing to pull the trigger in the mid 500s but any more than that I'll be looking elsewhere or staying put in my started shack that I only owe 70K on. Homes this size in this area were selling in the high 400s in early 2003, so I don't think mid 500s is out of the question. I'm patient and can certainly afford to wait.
eccen in esc
20% - 30% I am looking in North County east of the 15 and I want a minimum of 2 acres. My budget is $450 max.
200/sqft is my target point.
That is around 40-60% off todays prices. I have a budget of around $300-350k for a 1500-1600sqft in Mission Viejo/Aliso Viejo/Laguna Niguel.
Even for a $300k property the affordability metrics are quite steep, one would need $40,000 cash to bring to the table for down and closing costs, at least 3 months reserves of $10,000 and furnishing/moving in expenses are going to be there for a new home..let's not kid ourselves. $60,000 cash minimum is required. In addition a typical family with 2 kids, $120,000/yr income is needed. Not many have these attributes.
We'll buy when (1) NODs start moving down, (2) employment starts moving up, and (3) sales start increasing.
And, when household debt-to-income gets cut in half.
Only then will the factors causing falling volumes and prices be purged. Why buy beforehand, if you have a comfortable rental?
It may take 10 years for these things to happen.
Prices will be 15-20% of current levels, then. We'll buy then.
Thanks to the 8 other contributors to date.
Here are the summary results so far:
# | Contributor | Trigger%* | Comments
1 | patientrenter | 65% | Eastside Costa Mesa
2 | BuyerWillEPB | ?% | (300 / 2003 Price = ?)
3 | temeculaguy | 67% | Of current resale home prices
4 | stansd | 75% | Without inflation adjustment
5 | PD | 80% | Coronado
6 | golfproz | 65% | (550 / 850)
7 | eccen in esc | 75% | (450 / ?)
8 | jg | 18% | Can wait 10 years
9 | kev374 | 50% | So. OC
*Most likely trigger price as % of current price for most likely future purchase
eccen in esc, did I get you right at pulling the trigger at 75% of today's prices, or was that 75% off today's prices?
Patient renter in OC
I would not base my purchase on % of price decline. If I had the time, I would wait until the sales volume reached a consistent level. To me that would show that the market reached an equilibrium that would signal most of the price risk was unwound. I would also look at the rate of inventory coming on the market and things like foreclosure rates.
Once more, things like the price median are pretty useless to me.
SD Realtor
eccen in esc
20-30% off today's prices - thanks
SD Realtor,
Sorry, looks like my survey question was not very clear. I should have anticipated this from all the other surveys I've been involved in.
I don't know how many people will be basing their purchase decision primarily on the % price decline. For me, it will be only one of many factors, just as appears to be the case for you.
My question is, considering all the complicated economic and personal factors that go into your own decisions, at the end of the day, what's your best guess at what the price will be when you buy divided by the current price (based on what the most comparable properties are selling for today)?
Patient renter in OC
I don't know about anybody else, but I don't really care how much $$ you make, what you educationally level is, what your girlfriend's/wife's bra size is, ribbed or smooth, great taste/less filling, or any other damn thing about you and your insecurities.
Somebody got up on the wrong side of the rock this morning.
$300,000 or so. Which will happen, despite what the Myitos of the world would like us to believe.
Thanks JohnAlt (in La Mesa?).
What's your best estimate of the current price of the property you're thinking of buying for $300K in the future? (So I can get that % value I referred to in the survey question.)
Patient renter in OC
Thanks JohnAlt (in La Mesa?).
What's your best estimate of the current price of the property you're thinking of buying for $300K in the future? (So I can get that % value I referred to in the survey question.)
Patient renter in OC
About $500,000 but with little demand. The sellers think it's still 2005, but they will end up selling at the 2010 price with a 40% discount. Or they will get forclosed if they don't have the equity to spare.
BTW La Mesa is right.
It varies. when renting is as expensive as owning is my real trigger. At the moment, I'd like to say that's 50% with my target area being going back to Eastside Costa Mesa or into an older Irvine community like University Park, Woodbridge, The Ranch.
However, times change and as my living needs change pushing towards SFRs and more bedrooms, the percentage will become smaller.
Updated summary:
# | Contributor | Trigger%* | Comments
1 | patientrenter | 65% | (350 / 550) East Costa Mesa
2 | BuyerWillEPB | ?% | (300 / 2003 Price = ?)
3 | temeculaguy | 67% | Of current resale home prices
4 | stansd | 75% | Without inflation adjustment
5 | PD | 80% | Coronado
6 | golfproz | 65% | (550 / 850)
7 | eccen in esc | 75% | (450 / 600) N. SD County. E of I15. 2 ac+
8 | jg | 18% | Can wait 10 years
9 | kev374 | 50% | (325 / 650) So. OC
10 | JohnAlt91941 | 60% | (300 / 500) La Mesa
11 | no_such_reality | 50% | East Costa Mesa / Old Irvine
* Most likely trigger price as % of current price for most likely future purchase
Patient renter in OC
Patient renter gotcha... thanks for the explanation. Unfortunately I don't have a good answer for ya because I have already put a few offers down on places that have been rejected over the past year. To me it looks like they are about 15% lower then they were back in 05 if that helps ya put a number down. Also budget wise I am looking at buying something that will more or less match my current rent, (even though it means throwing down a big dp)
SD Realtor
I'm looking for inflation adjusted 2000 prices.
I guess that's about a 50 percent drop from todays prices.
I would like to wait for prices to bottom but other factors will probably lead me into purchasing before then. We will probably be buying in the fall 2009, wherever prices are then (unless they have miraculously gone up). I'm predicting that prices will be down about 20% from now (10% a year). It is possible that there will be other factors at play that will prevent me from buying at that time or convince me to wait longer.
If I buy too early in the down cycle, however, I will do so with the full knowledge of all of the financial implications of my decision. I will have run the numbers up, down and sideways, complete with tens (or hundreds) of calculations utilizing different potential housing market scenarios.
Whenever I buy, I will certainly not justify my position with nonsense about how baby boomers are going to swoop in and save me from depreciation, or "I'm saving money on income taxes" (while bleeding property taxes), or "It is different here!"
(Best Bill Murray voice) Jus' the facts, Jack!
30-40% decline from today's prices.
I am looking to see a 20-30% decline from today's prices. My budget is up to $800k but ideally I want to be into my home for $500k. Looking for a ~2000sf 3br/2-3ba on a 6000-9000sf lot. Areas I am looking include Bay Park, North Pacific Beach, Ocean Beach, Point Loma, Missions Hills, Hill Crest, La Jolla.
Doh! I got my quote wrong.
That's the fact, Jack!
I currently rent a house in PB for 1650, when I can buy something and have the same type of payments I'll pull the trigger
I'm not buying this time around, but if I were I'd approach pricing with an open mind. As SDR said, instead of looking for specific pricing I'd be looking for that point of equilibrium between inventory and sales activity. Like when the number of actives approaches 300% - 350% of the number of monthly sales.
Right after the market reaches that point I think the volumes will pick up and start creating shortages of inventory in the better areas. Once the buyers are competing with each other the pricing will start to increase.
Where that point will occur is anyone's guess, even if using the past trends as an indicator. I think anyone who uses an absolute as their point of reference has an 80% change of being wrong because the trend could wind up bottoming out higher or lower than that. It would be a real shame to miss an opportunity simply because you thought it *should* go lower. Market psychology is an economic fundamental in the residential RE business, and there is no way of knowing when that psychology is going to turn.
Depending on prevailing interest rates, I think a lot of people might take a more positive view of buying once the monthly rent multiplier for an average house drops to about 175 or so - meaning a sale price for that house would equal 175x that monthly rent. $2,000/month rent x 175 = $350,000.
The more pessimistic players will wait until that rent multiplier drops to 150. $2,000/month rent x 150 = $300,000.
The last time around the typical GRMs dropped to as low as 120 in some areas.
We are looking in NC inland (Poway, RB area) and will look for something with a bit of land. Probably looking for at least a 20% decrease from current. We'll see when that happens...so far not much inventory on the market for what we want.
What price point would I buy!
Currently, we are leasing a space across from Balboa Park in Bankers Hill the space is 1671sqft, gorgeous top floor, views to the park, close to everything and a nice bay breeze to keep temperatures perfect. We are in an interesting position because as many on this site we have decided to wait to buy. We took it one step further and in support of our decision we have for the last 24 months paid not only our lease payment of 2700.00, additionally we have made a payment to our savings account; equaling what our mortgage w/ taxes and insurance would be if we purchased this space. This has been an interesting experiment.
1. It has shown how easy it is to save money
2. It has shown how many other things our hard earned money can get us
3. It has proven that in the long run we have saved countless amounts of money and most importantly we have saved ourselves heart ache as the example below will show.
Let me share the results of our little experiment then I will offer the percentage drop necessary for me to enter the market again:
Traditional mortgage on this unit had we bought 24 month ago
Price; 850K
Down payment: 20%= 170K.
Balance due 680K
Payment $3400.00 I/O loan or $4080.00 monthly 6% fixed
Taxes $885.00
Insurance $100.00
HOA $300.00
Total $4685.00 Based on I/O
Lease $2700.00 flat monthly.
24 payments: $1985.00 monthly =$47.640 to savings account
When balance on savings reaches $5000.00 we convert it to a 4.5-5.0% CD
Yields an average of $2143.00 annually
Add all of it up
170K
$47.640.00
$4286.00
Total 221.926.00
Unit next door same location, view, sq footage currently listed $699K (listed is key word) not sold, may or may not move for 640K
Total drop to date 17.5% if we had bought that would equal -$148,750.00
Unit was 509sqft currently: 418sqft (if it sells for 699K). My prediction is 640K: 383sqft. The next round of sales will probably hover at 300-325sqft
I will buy after these three things happen:
1. September lenders will FULLY initiate the new lending standards
2. What is now a short sale and or pre-forclosure will revert back to lenders as REOs in the fall
3. Resets on ARMS will facilitate people literally walking away from their properties. One issue is peoples values have declined, the bigger issue is the new rates for most will be in the 10% range; try that payment on a balance of 500K= 5000th monthly. Sadly many with significant equity fell for this option by taking cash out and reifying in an ARM
5. Lastly, an ARM is not sub-prime in the traditional sense but that is exactly what it is and even the well to do participated some where in the range of 30-50%
4. Many of the properties you currently see on the MLS are falsely being promoted as non distressed properties. The reality is many of these sellers are in some sort of short sale and or pre-foreclosure situation and all including agents and banks are conspiring to make it appear their pricing is correct for the market, even if the market rate has changed. This tactic will not work because, houses, condos commercial properties, are not selling Period.
5. Oct. Nov will be the banks selling season on their REO properties preparing for the 2007 write off of bad loans
Hence 2008 will reset comps for all areas
After all of this happens coupled with the leg work I am currently doing by looking at and visiting every property of interest I will secure a property at 30-35% below today’s market. Over all I predict a 25-35% drop and it will happen quickly and abruptly…….Every one will say they never saw it coming!!!