Wait a year or get the interest rate?

Buying is a very personal thing. It really depends on your personal circumtances. the 15-20% decline from current levels is a big assumption. If you are certain about this, then you can discount current levels by this percentage and buy now. Kinda like buying now at next year's low price. if you can find the apt you like then Bid targettng to settle at 20% of asking. this way, you get next year's price at the low levels of interest.

You have to take note that the Focus is on getting Real Estate prices to stabilize or "hit bottom". They'll get this right sooner that you think.

Also to remember, the Feds (and other Central Banks around the world) are printing all that money and this is weakening our cash. Inflation/devaluation is just around the corner. The way I see it, I want to be in big debt and and holding that real property rather that stuck with devaluing cash deposited in a bank that can shut its doors.

Bid low, watch your cash flow and you should be alright.

beancab - most everyone in a position to buy are going through the same dilemma. My wife and I kept an open mind about it and tried not to over analyze. We were OK waiting a year or more but if we found something we really liked at what we believed to be good price we were prepared to make an offer. Funny enough, before our decision to consider buying, every single property we saw and really liked sold within weeks. Then following our decision to move forward we bid on 3 properties and our offers were lower than others already being considered. Something was happening. Then we found another we liked, in rough condition, presented horribly but we knew it could be spectacular. Our offer was accepted and we're thrilled. Can't wait to get busy making it our own. It will be the home where we will raise our daughter. Our timeline is long and any further declines before a bottom will be on paper only. Our interest rate will be 4.1%. Some other posters have been offering massive doses of sympathy.. But I'm smiling. Good luck with your decision!

I meant to direct this to dsp1965

As a prospective RE buyer, for me, even low rates are not enough of an incentive to buy right now, as it seems that values are still coming down. I would rather wait until housing prices have bottomed, even if it means that financing costs are higher. If the monthly cost is roughly the same in either case (high value, low finance cost vs. low value high finance cost), I would prefer a lower house price and higher financing costs because a) I don’t want to be upside down in six months on the value of my home, and b) because the interest payment is tax deductible but not the principle- I’d rather pay more in interest than in principle.
I imagine may others feel the same way I do. Add in economic insecurity, high and going higher taxes and maintenance, high down payment requirements, scarce mortgages and the negative equity most owners are sitting on and you have a prescription for paralysis. The market freezes and it will be sellers who eventually blink and start dumping units at firesale prices. That includes developers sitting on bloat. Best to wait there is no rush here. Even if you don't catch the exact bottom the recovery is not going to be V-shaped. I fully expect that when I do buy my condo/co-op will be my poorest performing asset.
Despite all of the above I am going to Miami to buy a condo and rent it out. The price to rent ratios are the best I have ever seen there. I am only looking in older buildings with solid financials.

Wait a year...we are far from out of the woods in the current economic downturn. While I do believe we will have to pay with substantial inflation, I also do not believe inflation is right around the corner. I do not see interest rates rising significantly over the next year. And I also wonder if it is better to buy with higher interest rates...usually this will reflect in lower prices. But while you can refinance your mortgage over its life, you can never go back and reset the purchase price lower.

All bright, intelligent rationale but I have often pondered what happens when everyone shares the same idea. Wait a year, see what happens x 5000 = deals everywhere. OK, got it.

i too am an anxious buyer, but i am looking for newer developments or even newly completed construction. I am trying to be optimistic but i don't see the prices in the newly completed construction dropping. we made an offer on one unit and was rejected after a counter offer. I know this developer has about 15%-20% units available. the bldg is completed and occupied. I'm sitting tight and looking at other options, but i will be disappointed if the unit we bid on gets sold. My agent is saying the mkt is starting to pick up, and reading these boards you get conflicting answers on this issue. I'm not looking or waiting for bottom, in fact i want an apt yesterday! but on the other hand this is a second home for us so im not in a hurry and will not pay a lot for 1br apt. new or not. as far as what is a lot, well the builder has agreed to about $1000 per SF, but my problem is i still have to pay new developer closing fees (which are very expensive) i'm not convinced how accurate the square footage really is. The comps (recent) just aren't there because anything that went into contract over the past couple of mos., has not closed. I definitely have a dilemma

The only way we can get higher rates is if the economy stabilizes and there are signs of inflation.
Can we come to the conclusion that when this economy stabilizes that housing will too?

movinup,
Don't put too much on these boards. No one knows your finances better than you. I will guarantee you this, no one here will pay you the difference if housing recovers 5-10% by next year.

spinnaker...while there are alot of sideline buyers, they are dwarfed by the amount of sellers out there, which is only getting larger by the day. Add in the shadow inventory of new developments, and even if by some strange occurrence every sideline buyer decided it was time to buy at the same time, I still do not see prices suddenly jumping up

spinnaker, there are always people waiting to buy. and a number of the people who are waiting may find themselves without employment. congratulations on your purchase, but for those who do not feel an overwhelming desire/need to buy right now, to me there is almost no risk in waiting.

ericho, economic stabilization? at what level?

Watch the 10 year notes.

http://finance.yahoo.com/echarts?s=^TNX#symbol=^TNX;range=3m

Watch the junk bond market.

http://finance.yahoo.com/echarts?s=SHIAX#chart2:symbol=shiax;range=1y;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

Very little risk of prices jumping up. Agreed.

What's not so certain in my mind is whether or not the flood of listings resulting from financial or job stress has mostly played itself out. If I was impacted by the stock market crash, job loss, or otherwise having difficulty meeting my monthly payments, I would rush to list my apartment ASAP, not wait until prices are at their bottom. We have to give sellers some credit here. Their primary objective is to maximize their return, just as ours is to seek out the best deal. I think that down the road there is plenty of risk that your terrific, well priced property in the perfect location will be met with increased competition. And we all know what that means.

Also, the impact of the often talked about shadow inventory will be confined to a certain market segment in my opinion. UWS prewar buyers will not all of a sudden leave the parks and the schools to seek out a midtown bargain. But if you are in the market for a shiny new condo -absolutely wait and prepare to be rewarded.

spinnaker, there are other macro elements at work. people on the UWS may not want to leave the schools, but the schools may not have any room for them. i also strongly believe that going forward there will be employment issues that are not necessarily as apparent as layoffs. if you are employed but your salary declines 25% and you bought an apartment assuming an upward trajectory of income and you have two kids in preschool? hypothetical example, but I can see it playing out in relatively large numbers.

that's the larger apartments. and for the smaller ones, where will the new blood come in to buy to allow people to move up? the chain is broken.

Depression? Nuts
Recession? Yes

Gold (a measure of inflation) is 6% from the all time highs.
Dr. Copper has been up 100% since the lows in Nov/Dec.
Silver prices are also up 100% since the lows in Nov/Dec.

How the HECK does 'commerical/industry/manufacturing' metals be up 100% if we are still in the mist of a full blown deflationary collapse? Most of the knuckleheads here don't have a clue.

bubble=money chasing asset

House = Asset?

dsp, your statement that you think prices will come down 15-20% is meaningless. Prices have the same chance to go up 15-20%. You don't have a crystal ball. So I would go for the sure thing, rates.

commodities=asset
house=place to live

AR -I can't put my head around more than one or two "what ifs" at a time. It all could play out exactly as you say, but for me I am living for today, confident and hopeful for the future. The room for new blood will be created the same way it always has, by the old blood making way.

spinnaker, i am truly happy for you. my point is that there is no new blood, at least in the near term.

house=place to live

I agree...

And what is a house build out of? And if the same 'bubble' money is chasing other commodities, don't you think in an inflationary environment that housing will get some love too?

with one-third of americans reporting that they have friends or family that have moved in with them in the last year, no i don't.

Thanks AR! Its a long process and we're not there yet. It will be a relief when we are.

So back on the subject.... Young people entering the workforce have always been renters haven't they? It strikes me that the healthiest part of the market right now is the lower end, so the demographic may not be as much new blood as it is old blood downsizing or long term renters finally able to make the numbers work. Maybe we aren't giving enough credence to this large pool of potential buyers entering the market for the first time. I dunnnoo... I gotta get outside, take the dog to the park, get some sun, write a page or two.

ericho-the flight to gold is not a reflection of an improving economy. it is a flight to safety and a hedge against inflation. normally inflation would be good for housing but only if housing has been at historic lows. housing is still to expensive and rising interest rates will only make it more so. prices need more correction and the market is always right, though sometimes late.

Read this...article was written in July 2000.

http://www.businessweek.com/2000/00_28/b3689201.htm

Sound familiar?

Now fast forward. Even in the mist of the greatest deflationary collapse of debt in our time around the world, housing prices in Hong Kong are at all time high. Ask yourself, how's that possible?

have a great walk. i did a 50 minute one myself this morning to try and sweat the alcohol out. partial success.

i think there will be significant wage deflation for those who have been employed 3-7 or so years (actually everywhere, but that is the demographic component one would focus on for entry level purchases, broadly speaking). even as prices are falling, both rental and sales, wages are as well. no crystal ball here, but i am not optimistic (gee, as if that weren't blatantly apparent).

good luck on the purchase.

cfranch,

If so many believe that we are in the greatest 'deflationary' collapse, then why are SO many hedging against inflation? Follow the money and not the media/news.

Need i say more?

if so many thought that real estate was the best investment in the world, why are prices plummeting? if securitization was a slam dunk, why are we where we are today?

ericho
i do follow the money. i day trade for a living and largely ignore the media except as a contrarian indicator. the fact so many are calling for a deflationary collapse has me buying inflation hedges. and that is supported by the charts of these securities-GLD, TBT etc. if there is a divergence between sentiment indicators and the charts i don't take the trade. right now inflation is what the charts are indicating.

and nyc RE will be hurt by inflation as we have not had the price collapse that has occurred elsewhere in the country.

Because housing is an asset and prices of assets fluctuate. Entry points to all assets are key...plain and simple. This collapse was a direct result of people simply buying things they can't afford. It's the 'American Way'. Cool da la?

cfranch,
I disagree. Prices in some areas have been hurt by it.
I live in LIC and new developments back in 2004 sold for 650 per square foot. At the peak, prices got to 1,100 per square foot. The better developments (Powerhouse & Toll brothers) are all being sold in the 500s per square foot now.

If you're seeing what i'm seeing in regards to inflation, the economy should stabilize here over the next few months and we'll get a pickup by early 2010. The ONLY ways we can get inflation here is with a collapse of the dollar (folks with cash will be screwed) or with a healthy economy.

Doh!
Look what we got here...a collapsing dollaarrrrr.
http://stockcharts.com/h-sc/ui?s=%24usd

B I N G O!
B I N G O!
BINGO was his name-O.

The dollar was significantly weaker last summer (i travelled in both the UK and France), and those were hardly inflationary times. the recent flight to the dollar has bemused me.

The dollar started to rally in the fall of 2008 when the rest of the world was fleeing to safety (US Treasury). Take a guess when housing prices started to accelerate to the downside in NYC?

Fall of 2008.

yes, and i got fat when i had a child. the child didn't make me fat, the lack of excersize did.

This is the great debate in every buyer's head.
I am a buyer and at some point you just want to pull the trigger. Did you buy at the bottom? Is this RE really the best investment? Could that nut be better placed in some other investment? For me, I really want to own my own apartment and customize it to my specs. I could never bring myself to do this in a rental. I have to ask myself, "how much longer?". Life passes by, kids grow up, friends come and go. Your home is more than an investment...much more. At the same time it's impossible to divorce my brain from abject reality. The past few years were a sucker's market and I can be a lot of things...just not a sucker. So now we are in a new market and must consider the plan. Waiting is a hard game...some of us have been at too long.

"If you are certain about this, then you can discount current levels by this percentage and buy now. Kinda like buying now at next year's low price. if you can find the apt you like then Bid targettng to settle at 20% of asking. this way, you get next year's price at the low levels of interest."

That idea sounds great on paper, but it never works in real life:

Pricing in Downturn Risk May Lose A Dream Home

http://www.urbandigs.com/2009/05/pricing_in_downturn_risk_may_l.html

So much for low levels of interest...

http://www.bankrate.com/blogs/mortgages/mortgage-matters.aspx

Rates for a 30 year went up half a percentage yesterday. Hopefully that was just an anomaly, but this could be the nail in the real estate coffin the bears have been hoping for.