"Best time in our generation to buy" ... ???

It may be the best time to refinance if you are not planning on selling. These low rates reflect fear of, or a bet on an economic decline.

yes, particularly if you're in an ARM (wrote about that too: http://theapplepeeled.com/buyers/fixing-an-arm-should-you-refinance-to-a-fixed-rate-mortgage/)

not everyone CAN refinance, of course, in this market -- but it's sure as hell worth trying for many

Generally speaking in an efficient market,
low interest rates => pushes prices higher
higher interest rates => pushes prices lower

This ignores inflation though. So if prices stay the same but inflation is rampant, did you lose money?
How about compared to cash?

If you only buy things you love and can afford, then you won't have to worry so much about timing, other people's thoughts and these other head spinning debates/arguments/paralysis of analysis.

aifamm: agreed. I would add another little possibility though - deflation. Many are now believing that a longer-term deflationary trend is the real culprit, versus inflation. That doesn't make an analysis any easier ...

Ah but can you have both price deflation and inflation of money supply. Makes my head spin... but yeah generally most of the bears on this site are deflationists. Place your bets!

... let's get ready to rumbleeeeeeeeeeeeeee ....

Herez some clarification. NYC re is toast, deflationary bc there where the credit bubble started and will end. Wage deflation, 30mm ppl underemployed.

The rest of the crap, I don't give a shitz about. The last time I chked food, transport, nannies, vaca, clothes all took up less than 10% of our income. So if you pay 40% of your take home on a leveraged deflating asset I can see how the price of gas can really out a crimp on your vaca. Congrats on being a lemming.

It's not clear to me if this is a great time to buy, or merely a better time to buy than two years ago but still pretty bad.

I really wish I knew.

Are we talking specifically NYC, or US generally?

Bad time.

alanhart,

I would add to your very APT question by asking what part of NYC.

Given that the bulk of the Manhattan RE market is ABOVE the "conforming loan" limit, and it's damn near impossible to get a non-conforming loan, when it comes to Manhattan RE this is a discussion about the interest rates on loans that no one can get for the purchase of Manhattan RE. From my purview, not so apt!

In another thread Honeycrisp was part of a crowd arguing that Case Shiller data for the NY Metro, which shows home price valuations declining to the lowest levels in six years, was wrong because Case Shiller doesn't include coops - the bulk of the property in Manhattan.

In defending Case Shiller I had asked what the MAGICAL quality about Manhattan coops was that enabled them to rise in value when all the detached single-family dwellings in the NY Metro (many of which can get conforming loans) were declining. Apparently, Honeycrisp believes the magical quality for Manhattan coops is the continued low mortgage rates on conforming loans that don't apply to most Manhattan coops.

I'm not so sure I understand this logic being a mere mortal who has wasted my time reading up on economics and statistics. I will anxiously await enlightenment in the Magical Arts from the wizards who seem to have devoted a good deal more time to studying Harry Potter.

Correction:

Please forgive my slip into the vernacular, and substitute "what part of NYC" with "which part of NYC."

*blush* I'm flattered you remember me, sisyphean ... to add to the memory lane trip, it's not just b/c it the CSI does not include coops, it excludes condos too .. oh, and multi-family homes as well - no magical quality, just the combo of 99% of Manhattan inventory (I'm sensing the Case Shiller thread is making its way into this one)

as for non-conforming loan rates, they've also declined - plus, I'm seeing properties up to $1.5mm where buyers are doing all they can to make sure their downpayment is sufficient to bring their loan withing conforming limits -- not a negligible trend. All of this is to say that a majority of transactions over the last 12 months have fallen within conforming loans - not just because of the credit market realities of today, but because of the "natural buyers" out there.

How the heck do you get "now is the best time to buy" out of "best chance to lock in a low rate"?

Buying in times of high rates allows for the opportunity to re-finance to lower rates in the future. Once you've locked in a low rate, you are pretty well stuck with what you've got.

I'm amazed at the lack of intelligence in the original post. Don't you understand fixed asset pricing and the effects of changes in balance sheets (capital structure). No wonder we keep electing pollyanna politicians into office. They tell folks like you just what you want to hear. Ugh!

"Best time in our generation to buy" ... ??? " - not so much:

"25 Questions To Ask Anyone Who Is Delusional Enough To Believe This Economic Recovery Is Real"

"If you listen to the mainstream media long enough, you just might be tempted to believe that the United States has emerged from the recession and is now in the middle of a full-fledged economic recovery. In fact, according to Obama administration officials, the great American economic machine has roared back to life, stronger and more vibrant than ever before. But is that really the case?

Of course not. You would have to be delusional to believe that."

http://www.businessinsider.com/questions-to-ask-anyone-who-is-delusional-enough-to-believe-that-this-economic-recovery-is-real-2010-5

walterh7 and pulaski ... if you will notice, both the SE title and the one on The Apple, Peeled are in quotation marks, followed by a very skeptical "???". If you further read the first line of the original post, you will see that the quotation is attributed to Moody's chief economist.

Lastly, far from agreeing with that statment, the post ends with: "what seems clear is that the mortgage market has had a bit more life injected into it by the European situation. How this will impact US, let alone Manhattan real estate, is another story altogether." ... far from an endorsement of the "buy now" point of view.

First a shout out to aboutready and any other Monty Python fans on the site!

Now for something completely different...

"as for non-conforming loan rates, they've also declined."

Honeycrisp, it ain't the non-conforming loan rates that have declined, it is the non-conforming loans themselves. Go to the following web site.

http://mortgagedataweb.blogspot.com/

Click on the chart in the "Down Goes Conventional Purchase Mortgages!" section. Once there, select "Amounts (Jumbo)." This will provide you with a very striking visual of the number and amount of Jumbo purchase loans issued from 2005 through the end of 2009. The numbers drop from 50K+ to ZERO!

Sisyphean: I wish to complain about this parrot
(Jumbo mortgage required to buy most Manhattan condos and coops)
what I purchased not half an hour ago from this very boutique.

Honeycrisp: Oh yes, the, uh, the Norwegian Blue...What's,uh...What's wrong with it?

S: I'll tell you what's wrong with it, my lad. 'E's dead, that's what's wrong with it!

HC: No, no, 'e's uh,...he's resting.

S: Look, matey, I know a dead parrot when I see one, and I'm looking at one right now.

HC: No no he's not dead, he's, he's restin'! Remarkable bird, the Norwegian Blue, idn'it, ay? Beautiful plumage!

excellent, sisyphean. if you wanted to go all holy grail and what not you could have compared the mortgage market to the bring out your dead scene. I'M NOT DEAD YET.

fha and the gse's are like the scourge of normal markets.

honeycrisp, i like your stuff, but by "natural buyers" do you perchance mean first time purchasers who lack historical perspective?

RE depends too much on stability. I can't see any stability in NYC RE for 2 to 4 years. "Best time" is hardly apropos, it is strictly gambling at this juncture.
I will throw a bull bone though. Where I see buying now a possilbe safe hedged bet is for someone financially secure who owns now and wants to double their space and keep it at least 7 years.
Example
Has a 1 bed 1 bath that was valued at $1,200,000 2 years ago now worth $950,000. Sell it for $950,000 and get that 2 or 3 bed and bath that was worth $2,400,000 2 years ago and pay $1,900,000.
I myself would still wait but I couldn't fault someone else with this mindset.
In real money, your saving 250K. leaving you room for the market to drop another 13% and come out somewhat even.

aboutready - "natural buyers", in the first phase of this correction, i believe were value players / baby vultures, looking for big discounts and distressed situations (some found what they were looking for, many didn't); in the second phase (i think we're in it now), those "natural buyers" are first time home buyers looking to stay put for 7+ years OR those looking to downgrade to smaller units and then stay put. yes, perhaps they have less perspective, though by that argument, anyone who purchased in the last 3 years has less perspective.

truthskr10 - the gambling comparison i think is dead on - on all accounts ... as is predicting rates ... as is the stock market ... etc etc. that's the issue when we look at real estate as an "investment". I once asked Shiller, himself, about this very notion, and he found it silly, saying "It’s truly a sign of our times to buy a house, and it’s a funny idea that doing so will make us money. The idea seems off. If you think about it, inflation adjusted housing prices were the same in 1990 as they were in 1890." (link to it if you want to check it out: http://theapplepeeled.com/buyers/up-close-with-robert-shiller-part-2/)

I think the best that people can do in today's environment if they're considering purchasing is focus on their personal wants and needs, and maintain a long-term perspective (frankly, timeless advice). One could also note that it's a better time to purchase today than it was 2 years ago (not rocket science). Aside from that, everything's a gamble, no? inflation vs deflation, higher rates vs lower rates, market stabilization vs double dip, etc etc. Noone has a crystal ball.

w67th has a crystal ball. i gave it to him.

i agree everything's a gamble. but it doesn't hurt to look at the odds.

i read on monday that larry summers reportedly sent out a request to congress for another stimulus package, of at least $200 billion. on top of the "jobs" bill, i believe around $130 billion, which at least the way i read it mostly provides a continuation of payments to the states for unemployment, health and cobra safety net benefits.

i haven't been able to find the article i read. i've found many articles in which that speech was mentioned, but not another one that mentions the number, nor the quote that i recall, which was something along the lines that the stimulus package is about to run out of steam. nothing when you pull up reuters, bloomberg, etc. odd.

aboutready - you're too kind, but thank you for the support!

As for the "odds", I'd be curious to hear your opinion on my proposition on the following thread, that on much of the high end RE in Manhattan, the "odds" are better in Vegas...

http://streeteasy.com/nyc/talk/discussion/20790-case-shiller-home-price-index

Honeycrisp, ya gotta be in it to win it, mentard.

Yes all historical data point to buying 2 yrs post a bubble popping, cause tulips smell the freshest 2 yrs out.

$950k to $1.8mm to $950k again in 4 yrs!!!!!! Way to husband your resources, especially when you'll be able to buy an entire French castle and all the cheese in it for $400k ( euro terms) in 5 years. Plz tell me honeycrisp you don't work as a financial advisor.

What we are talking about is all the graying ppl wanting to ensure their $ stays a $. The dollar + 10% a year mentality is gone. That plus all the credit that is being sucked from the market means, itz complete azz to be in a leveraged re asset.

So so clear, but you gotta not be a mentard.

honeycrisp, i think you're being generous to the first-time buyers assuming they want to stay for 7+ years. i'd doubt it.

w 67th street ... i'm sorry, am i missing something? have i recommended "buy now or be priced out"? have i said that we're out of the woods? i really don't think i've noted anything in the least bit controversial here - i'm not making an argument for buying - i started this thread to others' views ... so i will reiterate:

Questions:
- how long with this downward rate pressure last in your view?
- what impact do you foresee this having on buy-side mentality?

aboutready - perhaps, yes. most of the buyers with whom i'm speaking are in it for a minimum of 5 years.

i have to say, i don't think i've ever heard a resounding "now is the time to buy in Manhattan" argument ... ever (well, aside from brokers, but that's almost always their take). from the bears' standpoint, it's always a "you're uninformed if you're looking to buy now" (and that's putting it kindly) ... and yet, decade upon decade, all of those "mentards" keep buying and selling and buying and selling ... while all those on the sidelines keep to their commentary. It would be oh so nice for the conversation to be stripped of the emotion, dogma and insults ... and have a real discussion and analysis of the market today.

Honeycrisp: by almost every measure, it is a bad time to buy.

By one measure - i.e. real estate as pure consumable, it's never a bad time to buy. There are many on the board who seem to have enough $ saved, $ incoming - I don't know why they feel the need to legitimize the purchase. There isn't any. A low interest rate is helpful if you NEVER intend to leave in 30 years. Otherwise, you might have to pay to leave if prices are low, interest rates are high.

1) It's going to last until there's a massive deflation/inflation/something. We're kinda in holding pattern waiting for the next shoe and the next shoe to drop until there's nothing left.
2) Who knows? W-shaped, L-shaped. It took 50 years for RE prices to come back in prime Manhattan from the Great Depression.

honeycrisp, as someone who has owned and who does own and who is renting, there is a major flaw with your desire to have a conversation stripped of the emotion, etc. real estate is full of emotion. in our society, as in many others, way too MUCH emotion. we all too frequently value ourselves via certain accomplishments involving acquisition, and there is really no more visceral one than real estate.

i'm all in favor of owning, generally. i may be a bit too doomsday at the moment, i think we are at a pivotal time and there is a not small likelihood that we will see a fair amount of upheaval, as such i wouldn't willingly tie myself to an illiquid asset, particularly when the rental situation is so favorable.

what i hate to see is year after year people stretching to buy something because they feel some NEED to because our society has promoted such desires as a way to generate growth for those who are wealthy. if you don't think there is a media machine in this country supporting the interests of the wealthy, well, i don't know what to say. and that hype is what pisses me off beyond belief. it's one of the factors that creates the emotion, and leads to young people buying a small one bedroom when they think they might have a kid in 3-4 years.

so i'd say you're doomed in your efforts to find rational non-emotional discourse on real estate. people take their caves VERY seriously these days.

and further to 2) this was in an era when the American star was in ascendancy.

"it's always a "you're uninformed if you're looking to buy now" (and that's putting it kindly)"

I wouldn't take any of that talk seriously. "Looking to buy" is very different from the impulse buying that's often implied around here. Despite some of the permabear ranting, I think most of them will concede there have been some pretty good deals getting done out there in the past year. And if anyone wants to harp on "looking to buy" as "uninformed", then you really have to question how these people ever get to be "informed." There's no other way to fully learn about the market than getting out there and window shopping. I presume most people are on here because they're doing just that (though I know some are here for more underhanded purposes, of course).

Bj: I own, and it is a better time to buy than 2007, 2008. But all the macro-economic factors point to it being worse (i.e. lower prices) down the road. There were some excellent deals if you are a bottom-fisher, lots of cash, buying whole bldgs or maybe one of those stiff-necked Park Avenue co-ops. But for the "regular" apt, I don't think so.

So according to Honeycrisp's article, Moody's thinks that low mortgage rates makes this the best time in a generation to buy. Well I've got a newsflash for you!

Newsflash: Mortgage Bankers Announce that mortgage purchase applications fell to a 13-year low last week!

http://www.mbaa.org/NewsandMedia/PressCenter/72973.htm

So apparently the market doesn't seem to agree with Moodys.

Maybe Moodys should go back to what they do best - rating securities. Oh yeah, I forgot,that didn't work out so well...

10023: I'm in no way advocating "now is the time to buy!" I avoid grand sweeping proclamations about the housing market because they completely ignore individual factors and just generally tend to be wrong. But color me uncertain about how pronounced a next leg down would be, or when it would happen exactly. My point was, if you ever intend to buy, it's a good idea to be somewhat actively looking, even if you don't expect to buy for several years. I take pretty strong exception to the idea that "looking to buy" is "lemming" behavior.

Isn't that the problem, with Moodys....or Goldman....or Miller....or the banks....or the insurance companies....or now our government, everyone has a vested interest somewhere because everyone has a piece somewhere.

That's why it's on individuals to confirm the raw data and formulate your own opinions. Bulls or bears, and everyone inbetween.

honeycrisp.. I think MOST ppl don't have answers, but even worse they don't even know which question to ask... like yourself.

You think that low interest rates determine asset prices. Well I would posit that asset prices, more specifically where those asset prices are headed, that determine the cost of money, i.e. interest rates.

Now there is a certain pissing match going on betwn the holders of "assets", whether it be gold, cars, Real estate, 2nd homes, yachts. rolexes, vacations, iphones, U2 Concerts and people holding cash. In essence the people holding cash are saying "we expect asset prices to deflate" regardless of the 0% Geitner/Obama/Exchequer/Euro/Greek gov't policies.

What is the cost of the pissing match to cash holders? Well actually nothing, and in fact if you plan to buy the asset at current price -10%, you are being paid 10%/yr risklessly. Now the holders of most assets are on the flip side of this equation.... they are in fact losing 10% thru deflation and to top it all off some assets have carry costs, you know wear and tear, maintenance, RE taxes, mortgages.....

So the "correct" question to ask is not what will asset prices do given low interest rates, but why are interest rates so so low.

"So the "correct" question to ask is not what will asset prices do given low interest rates, but why are interest rates so so low." ...... and how much longer can they be artificially held down.

Bingo

What is the cost of the pissing match to cash holders? Well actually nothing, and in fact if you plan to buy the asset at current price -10%, you are being paid 10%/yr risklessly.

wrong. w67, I thought you were relatively sophisticated. even cash has a risk. how do you hold yours? demand deposit at an institution levered up 30x with mortgage back paper you would acknowledge is way overvalued? money market funds comprised of credits with derivatives exposures or structures only Goldman Sachs can create? tax free money market funds representing the credit of virtually bankrupt cities and states? Don't tell me holding cash is zero cost. Everyone bears risk.

and I might add at an interest rate of 0.25% you're not getting paid much for the risk.

-me quietly walking on stage and taking the mike-

uggggghhhhh... the answer is never have more than $500K at any one FDIC acct.....

-the crowd erupts into massive applause-

I unzip my trousers

-the crowd is now in a frenzy-

PMG ... as opposed to a 15% drop in equities, 15% drop in euros...

MOST ppl don't understand risk adjusted returns, ask ericho

MOST ppl bought into the bubble

MOST ppl can't think past one payment

MOST ppl thought the recession ended a year ago

MOST ppl can't sell their biggest leveraged asset

MOST ppl lose money gambling yet continue to do it

MOST ppl are crazy and the ones with IBS are just plain nutz and should be avoided at all cost (irritiable bowel syndrome)....

Would be a pity then if we had an Argentina like crisis where inflation kicks in, and you were stuck with your pants down and your bank deposits frozen. It only happened in the last decade.

I have well into 7 figures and it's paltry interest but I sleep well at night....and its .45%(chase), .80%(HSBC) and everyone else inbetween.

You couldn't get me into the bond market for 20%.

Though I'm slightly over the FDIC limit on 2 accounts, thanks for the reminder...

pmg-WTF? yes that would be a pity. wow you're sounding awfully desperate to see those who don't buy feel pain.

are you retiring soon and need to sell at the top to avoid an old age of eating dog food?

ar, I'm not trying to convince anyone to buy a primary residence. but in times of a global economic crisis, my point is holding a barrel of "cash" is not risk free like w67 said. If we have the deflation you predict, we will also have a lot of credit destruction. Most "cash" is one form of credit or another.

PMG ... i think you are confusing the images of the german ppl wheeling around barrels of for a loaf of bread and deflation.... which is the opposite of "barrels" of cash... you know buy a 3bdrm cpw co-op for $100K.... thereby making it more "valuable" to have cash..

FWIW, the north korean nuclear tit for tat will make the US$ the MOST desired currency in the world.... not bc I am American.. but we can kick azz militarily.

One other thing... credit is credit... cash is cash... who was your econ II prof... you'd have a good case for getting a refund

Low interest rates can be deceptive, because banks are not giving away money to just anyone these days the way they were during the bubble, so the low rates don't necessarily mean that there is a lot of money chasing up prices.

A continuing crappy economy could cause housing prices as well as interest rates to increase if the Fed attempts to stimulate the economy through an inflationary increase in the money supply.

On the other hand, prices could go lower simply because the bubble hasn't entirely finished popping.

pmg I don't really agree with the economics of your argument. but assuming a crisis of those proportions the last thing you want is being tied to one location. in your scenario, given that you're talking about the US and not a much smaller country, at that point we'd all be pretty much well and truly f'd. ammo, water, land, seeds and antibiotics.

w67 okay on this one, you are officially a moron. your bank account? It's on the bank's liability ledger. That's right--it's cash to you and credit to the bank. The bank owes you the account balance. Believe me, I hope you never have any problem collecting your "cash" from the bank.

Perhaps we can agree that a lot of bad things can happen before the FDIC goes belly up? Time for someone to begin the boring rant about runaway inflation?

So is this the best time in our generation to buy in Nevada or Florida?

Pmg I used to audit fig for a living. I understand credits/debits. Just used my rtrade ATM, cAuse you scared me so. I bought a coke with it. Nope, my cash still works.

Maybe it's the best time ever to buy in Az.

Anyway, you are big boys and girls. You shouldn't need someone like W67 to justify your purchase. If you can afford the loss, fine, go ahead. If you can't, then think a billion times.

Or I'll put it another way. I don't think the initial owners at 740 Park ever made their $ back - would have been much better off renting (RC, remember) and sticking the cash in equities. But I don't think most of them cared. The situation right now is volatile. Better to be safe and sleep tight at night.

You know what? One of the favorite American-bashing topics of all time among other English-speaking countries is how piss-poor the education system is for the average person.

'Scuse me, wrong topic, bad grammar. Off to eat now.

Uhh, FYI the FDIC is already bankrupt. It's just "too big to fail".
http://www.fdic.gov/about/strategic/corporate/cfo_report_3rdqtr_09/balance.html

Cash is not as safe as it used to be. We're in a new world where the rules can change at any moment.

FDIC and Fed were put into place to fight bank runs... but if hyperinflation hits us, our dollars will be worth less by the hour, people will run to pull their cash out to buy ANYTHING with it. That could cause a bank run. It has happened many many times throughout history and to many countries. We are in uncharted waters now... it could happen here, especially if we lost our world reserve currency status.

But basically again, inflationist vs. deflationist.