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Great Resource For First Time Home Buyers
i found this linked on a citi-data forum and thought it was a great resource for first time home buyers.
although he (the writer) is a little down on LI, it's great & practical information.
http://www.********************/sheeplesguide.html
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Re: Great Resource For First Time Home Buyers
taken directly from the site:
I took a random sampling of a bunch of houses that are now for sale in all different areas on Long Island with no specific preferences in mind. I then looked up the houses on www.domania.com to see what they sold for previously. Out of the bunch, I put all the data together so you can see and compare from one house to another just to see how these houses are priced as compared to what they were purchased for previously.
While some may have put some money into their house, many have not. The point I am trying to make here is that houses over the last decade have gone up in price by over 30% year over year which is much more than the historical norm; it may not seem that they have since back in the mid to late 90's, there was a period of approximately 8 years where the prices here did not move at all; if you were to isolate only houses that were purchased at the start of the bubble or later, you would see that the increases were much bigger.
Prices have risen as much as they did due to Subprime lending and exotic financing which allowed anyone to be able to get a mortgage even though they still couldn't afford it in the long run; now that so many people are defaulting and we are heading for a recession, the money that supported these unusually high prices will no longer be available so prices will fall like a brick; even those with good credit who put nothing down aren't safe. Sellers are trying to get these prices while they think they can, but they are slowly realizing that they have to lower their prices to attract a serious buyer.
So what does all this mean?
Since normal appreciation is from 3% - 5% a year historically, I calculated what the price of these houses would be if the market wasn't distorted by the bubble. The calculations are compounded yearly like they should be to make accurate predictions; I am not factoring in any add-ons or upgrades because I don't have this data, but you can get some kind of an idea what the price should be. This data I calculated for each of the chosen properties and listed them in white so you can see what it would have been throughout the years. It really does show how far out of wack the asking prices are.
Why should you care?
Because when the prices fall, they will return very close to these figures unless of course if the dollar crashes and we are hit with severe hyper-inflation, in which case we all will be in big trouble!
Now I have recommended that buying this year will be dangerous to your financial health, but I do realize that some people (the now generation) will buy regardless of the good advice I am giving them; so all I will say to these people is that if you are going to buy anyway, do not be afraid to lowball. You can see by the significant increases in prices that the sellers can afford to lower their prices alot. Don't feel that it is insulting or inappropriate to the seller because their prices actually are just that. Don't be afraid of losing the house to another buyer because there will be a dozen houses for every buyer and if you don't get the house, the next one you find will be much better.
If you really want to buy in this market, I suggest you look up the house you are interested in using www.domania.com (if the data is there) to find out what it sold for last and do an analysis for yourself using the 3% - 5% formula; then offer no more than the 5% per year appreciation. Maybe start somewhere at the 3% level and work up to no more than 5% [See Estimator below].
Another thing, these calculations are also affected by when they were purchased; if they were purchased during the bubble (after 2001), the price it sold for really isn't good for the starting point; in other words, for these houses, the calculations will actually show a higher price than what would be the norm. If there is sales data for an earlier year, use that year instead.
House Appreciation Estimator
1) Find out when it was last sold
Number Street Name City, State or Zip
2) Enter House Information:
What it sold for previously (in thousands):
The year in which it was sold:
The top half of this estimator is an interface into domania's site to get previous housing prices. I felt the interface on domania's site is a pain to use, especially when you look up many houses or you make a mistake typing (you'd have to start all over again).
The second half does a calculation of what prices shoud be based on appreciation between 3% and 5% per year compounded. This will give you a list up to 2007 of the range of prices that the house should cost. Again, this does not account for major upgrades such as adding an extension onto the house or completely knocking down and rebuilding; thus increasing square footage.
"Some Sellers Just Don't Get It (Yet!)"
Some of these sellers realize they are in trouble already because they now know they bought at the very top of the market; these are the ones who bought within a year or two. These people are just trying to get out, trying to get what they paid for it with the realtor commissions priced in (sometimes even less). They may not have the funds to cut the price low enough to generate a sale. Others just see dollar signs in their eyes and are just trying to cash out; they can afford to cut their prices significantly and will to compete with each other eventually. The bottom line is that the crash is just starting, you can tell by the way the officials such as Schumer are finally coming out and admitting what is happening. Here are some properties that you may want to check out to see just how far out of wack prices are, I will also add Nassau when I get the chance.
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