The below blog that I am re-tweeting provides some solid insight into the current Real Estate Market. However, I am always frustrated as a Realtor in Northern NJ, where many towns are bedroom communities that either serve NYC or at least provide quick access to Manhattan.
So, while the below article is supposed to make us feel that investing in homes now will pay off in the next 4-6 years or so, I am happy to pass along some additional insight provided by Jeffrey Otteau of The Otteau Valuation Group. Mr Otteau says that NYC is on a major upswing in property values and that this will definitely spillover into the bedroom communities like Maplewood, Montclair, Millburn, South Orange and Summit, NJ. Furthermore he projects that NJ residents from farther out are in the process of re-evaluating just how much time they want to spend commuting and will likely look to move easterly to Essex and Hudson Counties.
The most important statistic he shared with us was that he projects interest rates to rise this year and that he fully expects them to pass the 6.0% level in one year’s time. This is a bit more than most recent reports and projections I have been reading, but the concern is that Buyers who might be “banking” on even lower property prices will find themselves one step forward on price (although i wouldn’t expect this to apply to homes that fit the “sweet spots” in these towns) but 2 steps backward on what they will ultimately be able to afford as for every 1% of mortgage changes there is a corresponding 9% change in home price affordability. What does this mean: if mortgages rise from their current 4.85% to 5.85%, the $500,000 home you were previously pre-qualified/pre-approved to purchase will no longer fit into the equation and you will find yourself having to reduce the range to $455,000. Such a drop in price will most certainly come with less amenities or a less desireable location within a town.
If you have any questions on how this might affect you, please don’t hesitate to contact me, Mark Slade at 917.797.5059
Posted: 28 Mar 2011 04:00 AM PDT
Last week, MacroMarkets LLC announced the results of the March 2011 Home Price Expectations Survey, compiled from 111 responses of a diverse group of economists, real estate experts and investment and market strategists. Many media sources reported on the survey’s comment about a projected ‘double dip’ in prices. What the media didn’t aggressively cover was the other projection in this same report. Today we want to shed light on both portions.
There is no doubt the survey looked negatively on house prices through the rest of 2011. Robert Shiller, MacroMarkets co-founder and chief economist said:
“Overall, the sentiment among our expert panel regarding the U.S. housing market outlook continues to deteriorate. Now they are expecting only a weak recovery, and even that is not until 2013. This uninspiring view must be influenced by the persistently weak market fundamentals – high unemployment, supply overhang, an unabated foreclosure crisis, and constrained mortgage credit.”
Terry Loebs, MacroMarkets managing director commented on the dreaded ‘double dip’.
“Many more experts are now projecting a double-dip after witnessing the double-dead cat bounce that came in the wake of expired government stimulus programs. In December, only 15% of our panelists were projecting that a new post-crash low would materialize for national home prices. Now, just three months later, almost 50% foresee a double-dip happening this year, and not a single panelist expects national home prices to recover to the pre-bubble trend in the coming 5 years.”
However, the longer term view of home prices was much more optimistic.
Double Your Money
The experts projected that by the end of 2015 home prices would attain a cumulative level of appreciation of almost 10% (see chart below from the report).
This means, if you purchased a house today with a 10% cash down payment, you could double your cash in five years; even taking the projected double dip into consideration.
Shiller also noted that there continues to be significant dispersion among the panelists regarding their individual home price forecasts:
“A few respondents do see a real recovery, predicting prices up 20% or so by 2015.”
If that happens, you would have TRIPLED your cash.
If you are thinking of selling in the next 12 months, you should do it before the projected ‘double dip’. If you are thinking of buying and you plan to live in the home for at least five years, your financial investment will be fine.