House Prices
For past few months, law clients have asked my opinion about house prices on Long Island.
The typical law client is either buying a house or selling a house or re-financing an existing house and trying to figure out whether it is a smart move or not. If Mr. Smith buys a house for $200K this year and its worth $225k next year - that's a smart move. If its worth $175K next year, that's not a smart move.
Factually, house prices on national level lost 8.9% in value in 2007. So a $400K house lost $35,600 in value in 2007. Homeowner's equity fell below 50% for the first time since 1945. Clients ask me 'is this a good time to buy?' Will prices continue to go down? Is this the bottom of the market?
If I knew the answers to these questions with absolute certainty, I'd probably be doing something else besides practicing law in New York. I have my opinions, however, and with grateful acknowledgement to persistent clients, I'll put them in writing for their review.
I believe home prices on Long Island will continue to move downward for next several years. The continued tragic devalution of the dollar may mitigate this to some extent so that prices may not move down as quickly in terms of dollar prices but real value of residential real estate will continue its downward move.
"But my real estate agent said now's the time to move up to a bigger house!" As conventional wisdom says, 'never ask a barber whether you need a haircut'....and similarly 'never ask a realtor if you should buy a house."
So for law clients who are renting their homes.....there are many reasons why purchasing in this market makes sense....if you intend to hold long term. If, however, you are thinking about moving up and do not have compelling reasons to do so at this time, my advice is to wait. If your 300K house loses 10% of value in next two years - that's a 30K loss. If you trade up that house at this time and buy a $600K house, that same 10% loss is a $60K loss.
If you are thinking about retirement but don't want to sell at this time because you want to let the market 'come back', you should consider how many years you are willing to wait. The tremendous liquidity of past several years took the form of ridiculous lapses of lender underwriting standards...in other words, if you had a pulse, you could get a loan. The loan programs were such that anyone could buy a home....including people who perhaps should not have been homeowners. More buyers in the market is more demand for houses is higher prices for those houses. This is one reason house prices went up so high and so fast. Now these same people cannot service their mortgages and despite the promises of politicians scrambling to keep (or get) high prestige government jobs, little can be done to cure the prior year's excesses except to let the markets take their natural course and for real prices to come down....perhaps significantly. Look for more foreclosures and prices coming down for the next several years.
The typical law client is either buying a house or selling a house or re-financing an existing house and trying to figure out whether it is a smart move or not. If Mr. Smith buys a house for $200K this year and its worth $225k next year - that's a smart move. If its worth $175K next year, that's not a smart move.
Factually, house prices on national level lost 8.9% in value in 2007. So a $400K house lost $35,600 in value in 2007. Homeowner's equity fell below 50% for the first time since 1945. Clients ask me 'is this a good time to buy?' Will prices continue to go down? Is this the bottom of the market?
If I knew the answers to these questions with absolute certainty, I'd probably be doing something else besides practicing law in New York. I have my opinions, however, and with grateful acknowledgement to persistent clients, I'll put them in writing for their review.
I believe home prices on Long Island will continue to move downward for next several years. The continued tragic devalution of the dollar may mitigate this to some extent so that prices may not move down as quickly in terms of dollar prices but real value of residential real estate will continue its downward move.
"But my real estate agent said now's the time to move up to a bigger house!" As conventional wisdom says, 'never ask a barber whether you need a haircut'....and similarly 'never ask a realtor if you should buy a house."
So for law clients who are renting their homes.....there are many reasons why purchasing in this market makes sense....if you intend to hold long term. If, however, you are thinking about moving up and do not have compelling reasons to do so at this time, my advice is to wait. If your 300K house loses 10% of value in next two years - that's a 30K loss. If you trade up that house at this time and buy a $600K house, that same 10% loss is a $60K loss.
If you are thinking about retirement but don't want to sell at this time because you want to let the market 'come back', you should consider how many years you are willing to wait. The tremendous liquidity of past several years took the form of ridiculous lapses of lender underwriting standards...in other words, if you had a pulse, you could get a loan. The loan programs were such that anyone could buy a home....including people who perhaps should not have been homeowners. More buyers in the market is more demand for houses is higher prices for those houses. This is one reason house prices went up so high and so fast. Now these same people cannot service their mortgages and despite the promises of politicians scrambling to keep (or get) high prestige government jobs, little can be done to cure the prior year's excesses except to let the markets take their natural course and for real prices to come down....perhaps significantly. Look for more foreclosures and prices coming down for the next several years.
very well written and on point
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