MUCH less. Start out offering something like $90k. Explain that you really like the place and it would be perfect for you, but that’s all you can afford. If they react with shock, apologise and say you wish you had more to spend but that’s it, and anyway there are a whole bunch of places you’ve been looking at offered for less, so you guess you’ll take your money there. Make it sound like you are definitely going to be buying locally in the next couple of months.
This probably won’t work the first few times you try it. But if the condo market is as soft there as elsewhere, at some point you may find a seller who says to himself “Gee - no offers for 12 weeks. I just can’t let $90k walk out the door - who knows when it will come along again.” As noted, one “motivated” seller is likely to be a local bank that has foreclosed on a bunch of condos and is getting desperate.
Get down to the Registry of Deeds and do some homework. With just a couple of hours of work you should be able to get an idea of what’s happening in the way of foreclosures and recent deals. Consider going directly to the owner (e.g. a bank) - that way, no agent sucks a commission out of the deal.
Disclaimer: Bear in mind that I don’t know what your local market is like.
Thanks again to everyone who has contributed info to this thread, it is really helping me decide what to do.
One suggestion that posters have made is to read up on the whole real estate/mortgage/home buying process, which is something I’d really like to do. Any specific suggestions of books or articles or websites I should check out?
This is the time to wait for stability. It’s sure to help you in the long run. Most of the cost of home ownership is not the cost of the house, but of the loan. Stable economics push down interest rates.
It depends. If you look historically, a fixed rate of 6.2% now is not too bad a deal at all. Forget stability, get the lowest price you can. Stability may be in the sellers favor anyway. For a buyer with good credit and cash, chaos is great.
You could easily wait and year and risk of prices being higher than they are now about zero.
the sub-prime mortgages went bust in march/april timeframe. It takes about 6 months for that to flow through to foreclosures. Expect to see a lot of bad news on foreclosures hitting the market over the next couple of months. If you look at any of the past cycles, it will be at least 2 more years before all the bad property news goes through the market. Of course, investment banks, economists and real estate agents will say NOW is the perfect time to buy. They repeat that ad nausem at any given moment, as these vested players have every incentive to get you to buy.
Expect to see a lot of bad news coming through on the underlying economy over the next few months. The Fed will probably aggressively start to cut rates on top of the recent crisis.
It’s real simple, the affordability index is way out of whack (what buyers can afford to pay for housing). The sub prime mortgages didn’t help affordability, merely a bandaged over solution for people to “buy” houses for a few years.
To the OP, suggest renting. Second thing is to make really lowball offers like the previous poster recommended 90k for the condo you’re looking at. If you are patient, you might find someone that desperate. Chances are you can wait two years and the market price will be significantly lower.
I’ve been following this thread with interest. We’re in a position now to finally take seriously the possibility of buying our first house. We took some steps to improve our credit in the past few months and are pleasantly surprised at the results since then. We’re going to take a few months to spiff it up a bit more, save a bit more money, and find the right buyer’s agent. Our lease is out next June so we’ll have a chance to get acquainted with the area we’re interested in (central Maine, Augusta or south) and keep an eye on the listings.
Home Buying For Dummies isn’t a bad place to start. I get anxiety about this sort of thing and this has been a good book for breaking it all into small, digestible bites.
Blunt, I bought a condo in May, this condo-specific book was my guide thru the process, as a real estate newbie I thought it was very helpful. The best guide, though, was a level-headed friend who recently bought a condo in my area, also as a first home for herself. If you know someone like that, take them out to lunch and pick their brain.
The next thing I would say is don’t forget to factor in the amount of money you would be spending on rent. Not the amount your future condo would rent for, but the minimum rent you would pay and still have an apartment that you could tolerate. For me, this was a high number relative to my income, at least $10K a year. I could find cheap apartments around here but I wouldn’t want to live in them, so this was a fixed expense for me. If I sell in 4 years I can take a small loss on my condo and still come out ahead. If I could have tolerated living for $300/month in a group house, though, I would have been better off doing that and investing my money elsewhere.
If your looking for good advice, articles, current rates, and mortage calculators you can’t beat the website bankrate.com. I’d suggest clicking the “mortgage” tab under the “news and advice” tab.
They explain a lot of the terms, current trends, etc. etc.
Even if the bottom doesn’t fall out of housing over the next year (and I think it will), the chances it going up more than inflation have to be seen as virtually nil right now.
Read Lightnin’'s post. Then read it again. There’s a million Lightnin’s out there in every market.
Not only is his story driving down the price of buying, it’s driving down the cost of renting as everyone tried to rent to offset their mortgage.
Traditionally, one measure of buying versus renting was whether you could recoup a 30-year fixed mortgage payment if you had to rent the same property out.
Check and see if you’re close. What are those condos renting for? How much would your payment be if you bought one. Buying is still out of whack with rental prices.
I agree with everything tremorviolet has written. Real estate “corrections” move in slow motion, as it takes quite some time for sellers to adjust their expectations to the new reality.
You’re half right. Waiting for the top of the equities market is risky, because values can drop fast. Waiting for the *bottom * of the real estate market is a different critter. The bottom comes slowly in real estate, and when prices begin to tick up again, there is time to get on board.
Compounding the real estate mess, in my view, is the pending retirement of that huge baby boom demographic. A lot of them are going to be putting their houses on the market in the coming years, in hopes of moving into a smaller space or retirement community.
So there will be more supply (in many areas), combined with tightened credit and a smaller demographic coming behind the boomers, which means lower demand in those same areas. (Not to mention the effect the housing slowdown will have on the larger economy, putting a lot of people in the housing industry out of work, with a ripple effect elsewhere, meaning fewer people might be able to afford to buy even if we had an easy-credit environment.)
I see this whole thing playing out over several years.
Actually, I’m rethinking my optimism. I heard a report, in the past day or so, that China may be having a similar, subprime loan, problem of several magnatudes larger than the U.S. If true and considering how much U.S. debt is held by China, this could be much worse than anticipated. I found this quite surprising, assuming that Chinese banks would be much more conservative and I’m a guy who frequently warns of the danger of assuming. Shame on me.
Time will tell.
I think trying to game the market in the current evironment is the path to tears.
I would look, if you find a dream condo, or a condo that is your A- ideal, where you could see yourself stuck for 3-5 years I’d think about it seriously, drive a hard bargain but not an unrealistic one, and go for it.
I would not jump at a condo you merely tolerate because you are afraid the market will price you out if you don’t jump. I don’t think this is likely to happen in the short term. I would not jump because a Realtor tells you we are at the bottom of the trough and it is a good investment. (I am not sure that isn’t true - but in this environment that will be true in places and untrue in others)
“3-5 years or more” is plenty of time in these conditions not to lock into something that is not 100% to your liking. Be smart about it, but buy a home and not an investment.
As a percentage of their assets, Chinese banks exposure to sub-prime loans is tiny. Sure it’s a $10 billion dollar number but it’s not really material.
Chinese banks have their own bad debt issues. But banks can grow out of bad debt when the overall economy is growing as fast as China does.
