Home Prices To Bottom Out By Late 2009 But Some Can’t Wait
Not surprisingly, many homes that go up for sale in Berkeley are taking longer to find buyers and selling for under original asking prices. My guess is that only homeowners with little choice in the matter are choosing to put their houses on the market now.
For all of those out there, whether seller or prospective buyer, reader David flags up this recent prediction: “Credit Suisse agrees that we’re about 2/3 to 3/4 of the way through the price declines nationwide, and the bottom will be here around late 2009-early 2011.”
His advice to buyers: “Rent for a year or two, decide on [the] ‘hood, and buy at the bottom.”
The lists below show home sales in Berkeley for September 7 and August 31.
1708 Oregon Street (pictured right), a 3/2, 1,841 sq ft home, was on the market for $559,000 in February. At the time I described is as being one the best value homes for sale given that its price per square foot was a minimalist $304. Nevertheless, it took more than six months to sell and then went for 8% under asking at $515,000.
2436 Stuart Street, a 3/2 brown-shingle between Telegraph and College, appeared on the MLS in April last year, priced $859,999. It was back on in December, a short sale, priced $667,000 — a 22% price plunge in 8 months. At that point reader Tunguska, who had visited the house both times it hit the market, reported that “There is a horrible slope towards the NE corner, no driveway, and it was a rental property at the time so the condition was poor. I saw it again after “renovation”, not much improvement, just some new tile.” It sold this week for $555,000, a whopping 35% drop in 15 months.
sw said:
My guess is that a lot of the people selling right now are smart people that understand the market. They are selling now before prices decline further.
Prices adjust slowly and we are still a long way off from the historical norm.
September 5, 2008 1:17 PM
First-timer said:
I keep hearing about prices still dropping but what about rates. Yes I may be able to get a lower purchase price on house if I wait another year, but what about this great first time home buyer rate I’m able to get now, will that still be around in a year or do you think the rates will be higher or even lower? Will rates drop as well? Thanks in advance for your replies, I love all the market savvy readers Redfin has.
September 5, 2008 1:43 PM
Tracey Taylor said:
SW: Interesting perspective. You could be right, but I bet those people who are selling now in order to limit losses wish they had bitten the bullet a year ago, or even six months ago. That’s the sometimes brutal nature of the real-estate guessing game.
First-timer: Very good question. And I don’t know the answer. Any financial forecasters/savvy real-estate observers out there care to respond?
September 5, 2008 2:00 PM
David said:
I used to assume that rates would be higher next year, now I’m not so sure. Inflation will likely subside as the comparison in 2009 will have (hopefully) $100 oil versus $140 oil in the first half of this year. If banks can steady themselves, and the Fed rates stay where they are, mortgage rates might be flat or even drop from here. As was posted earlier, it’s better though to buy a lower-price with a higher mortgage rate and refi later than buy a high-price with a low rate and be stuck if home values fall.
September 5, 2008 2:36 PM
Mark said:
There was a great post on one of these blogs where Jenny P calculated the ‘break-even’ point.
http://sfbay.redfin.com/blog/2008/08/mortgage_rates_up_home_prices_down_is_what_youre_paying_really_lower.html
She found that the total paid for the house remains about the same if the increase in rates is about 1/10 of the decrease in in the price. (E.g., a 9% price drops and a rate increase of 0.9%)
The other thing to think about, however, is that even if the a rise in rates causes the monthly payments and/or total paid to be the same: a lower purchase price means (a) Lower property taxes and (b) The opportunity to refinance to a lower rate in the future, should rates eventually return to the lower level.
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