For some time now, I have suspected that we will enter a rather serious depression (not great depression, but certainly not short recession).....and lately, there seem to be daily announcements from the experts that are leaning this way as well. With consumer sentiment at a record low, I got to thinking about how our expectations have changed.
Last year around this time, Mr. BT and I were prepared to spend a considerable amount of money on a home. At the time, we figured we could get a piggy back loan to make up the difference for what our down payment didn't cover.
Come July or so, as the credit markets started to melt down, and as local home prices began dropping, we lowered our price range cap to reflect only our 20% down payment (which has grown a bit over the year).
As home prices have dropped further, we are now seriously looking at homes priced 20-30% below our 20% down payment cap. I am very nervous about things to come, so purchasing a house well below our current means, is very appealing to me.
In essence, our price range has dropped just as much as the local real estate market. As homes drop in price, our expectations are not growing (same price range, but nicer home)......they are instead moving down with the market (lower price range, same type house).
Of course this won't help out the local economy. Less money to a realtor, less money to a mortgage broker, less taxes to local governments etc. On the other hand, a looming recession/depression coupled with inflation prospects, is also driving me to purchase sooner than I probably would like to. I have a feeling the Fed will be raising interest rates come Fall, once they see that inflation is not subsiding with the slow down in the U.S. economy.
In 6 months time, I think home prices will not be dropping as dramatically, so it be the point of maximum value, in terms of the home price interest rate trade off.
Yes, this is all speculation on my part, but after all, I am an average buyer....It's likely I am not alone in my thinking =)
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7 comments:
I'm the opposite, I keep my target price the same, so houses are getting better and better. And I am saving $$ so my down payment grows as well.
I think second half of next year may be the right time for me. This year... Too many resets coming, still too much specuvestor activity.
Once prices hit the 50% off (median prices) then I will get serious. We are almost there.
You are not alone. We have lowered our expectations tremendously.
We are looking but only at homes we can afford on one income and only half heartedly. Most of our energy is focused on finding jobs out of the area.
We can identify exactly. Over the past year, we've been lowering our housing budget and raising our expectations of what we'll be able to buy for the money.
Summer of 2009 is more or less a drop deadline for us....my oldest starts kindergarten then.....(of course I say that now...but its not like I haven't changed my mind about things a gazillion times over the last year).
All of the doom and gloom out there becomes self-fulfilling as individuals and businesses alike hunker down, thereby further depressing the economy. It's a vicious circle.
I have a friend who owns a landscape design/construction company. He was telling me about potential clients who won't pull the trigger on the project. The clients are a couple, one being a doctor and the other an attorney. Both have secure careers and plenty of money. We need people like that to kick-start the economy, not sit on their hands.
I fluctuate, one day we lower our price range and focus on fixers and another we look at homes that are relatively new with little need of updating. Each situation and home is a little different, we keep a finger on the pulse of the market (right now barely beating), both rental and purchase.
The biggest change in our attitude from a year ago is that we have relaxed and accept the macro changes impacting the market. We will act on a home that works out on the fundamentals, price vs. rent, and we are expecting nothing to really happen for us into Spring 2009. Even then we will be using calculations to determine our actions, even though we may have fallen for a home.
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