REAL ESTATE IS ON SALE! WHY ARE SOME FOLKS RELUCTANT TO BUY?

Real estate is on sale!  Why are some folks reluctant to buy? 

Real Estate prices have dropped significantly.  Interest rates are the lowest they've been in 50 years!  This is the most affordable time to buy, yet some folks are holding back from buying their dream home.  Why?
  • November 17 2010 - Southampton
  • 0
    0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Be a Good Neighbor. Be respectful and on-topic. No spam or self-promotion! See our Good Neighbor Policy.

Answers (8)

Profile picture for the_country_hick
"Interest rates are the lowest they've been in 50 years!"

Shall we look at the real effect that low interest rates have on housing prices?  Starting with a 30 year fixed rate mortgage with no pmi, insurance, taxes, or anything added look at what happens to the ability to borrow as interest rates change.

At 4.25% interest a $100,000 mortgage costs $491.94
At 6.00% interest a $100,000 mortgage costs $599.55
At 8.00% interest a $100,000 mortgage costs $733.76
At 10.0% interest a $100,000 mortgage costs $877.57

It seems like the higher interest rates rise the more it costs to borrow money. Would this affect anything? Could it hurt a buyer somehow if interest rates rise?

Let us look at this from a different angle. If my income stays relatively stable and interest rates rise how will it affect my ability to buy a house? Will it change what I can afford to buy?

A $100,000 mortgage at 4.25% costs $491.94
A   $82,000 mortgage at 6.00% costs $491.63
A   $67,000 mortgage at 8.00% costs $491.62
A   $56,000 mortgage at 10.0% costs $491.44

This seems to show that low interest rates are only going to hurt me if I buy now. Most people buy at the top part of what they are approved to buy. If rising interest rates cause lower buying power (IT WILL!) how can I buy that same $100,000 house when my income did not go up much if at all?

It will not be possible. If I can not still buy a $100,000 house because rates went to 6% and I can only afford to buy a $82,000 house (at the SAME payment) what can house prices do except for go lower?

I hope you can see (with the evidence above found at any mortgage calculator) that buying with low rates is a sure way to lose equity very quickly as interest rates rise. I would rather make the same monthly payment at a lower purchase price and a higher interest rate. That way any extra I pay off each month really drops the amount I owe on the house.
  • November 18 2010
  • 1Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for Dunes....
"There is no perfect situation in which to buy, only you can to decide if you are ready to buy."

Which is exactly what many  Potential Buyers have done..
Decided they are not believing the "It's a good time to buy" & they are not ready to buy
  • November 18 2010
  • 1Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Homes are very much 'on sale' in Northern California.  In fact, move up buyers (the biggest fence sitters) have the best deals sitting right in their laps.  Houses in the 3000sq/ft range and above are selling for $100.00sq/ft less now than 5 years ago, hovering right around the 2001 price.  Buyers aren't sitting on the fence because of job insecurity (most potential buyers are in stable jobs even with CA unemployment at 12.4%) or the tougher standards of securing a loan (around 30% of your income towards housing, good credit, solid down).  Buyers are fence sitting because they have poor institutional memory; they think that the market will keep tumbling indefinitely and that interest rates have always been below 5%.  

My rule of thumb for buyers; save 20% down (or better all cash), write in terms you can handle (roof contingency or 'as is') and buy only the amount of property you can handle (low maintenance condo. or 1 acre fixer).

The reality of the situation is that interest rates will fluctuate, housing prices will fluctuate. There is no perfect situation in which to buy, only you can to decide if you are ready to buy.   
  • November 18 2010
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for Blue in d Nile
Zillow indicates over 58 thousand homes sold within the past month.  That is hardly saying that people aren't buying.

But as for "dream homes"?  I haven't seen any dream homes for sale yet, especially at any normal prices.  It doesn't stop me from looking though.

If a Realtor® isn't finding buyers, perhaps the problem is the Realtor®?

(It is certainly not the market nor the economy, nor the 16% that are unemployed or the 18% that are under-employed, nor the bad credit ratings of 40% of U.S. citizens).
  • November 18 2010
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for wetdawgs

@ Joan & Paul: Have you been snatching up properties for your personal portfolio recently?  If not, why not?


Why are some folks reluctant to buy?    Because there are almost no houses that are back to the baseline of inflation adjusted prices.   Prices will drop farther in most areas, despite the NAR propaganda that is apparently so tantalizing to a number of agents.   Yes, I know your income depends on selling, but do some thinking!!! Please!!
  • November 18 2010
  • 1Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for SoCal Engr
Because of two reasons...

#1 - Those who use common sense and sound financial reasoning are looking at their pocketbooks, the current economy, and the job market and realize that this is not the best time for them to be making significant financial commitments.

#2 - Of those who don't use common sense and sound financial reasoning (i.e., those who REAs could, and did, easily sway with their "now is the time to buy" pitch) most are not able to qualify for loans (and rightfully so) and are being forced to sit on the sidelines. Or, more likely, they are up-to-their-eyeballs in efforts to avoid foreclose or short-sale because they already made their bad financial decision for the decade.
  • November 18 2010
  • 3Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for the_country_hick
I am confused. In 2000 I could have bought what I wanted for $100,000. In 1988 it probably would have been no more than $60,000 and likely less. Today that same place would cost a lot more than $100,000 even including inflation adjustments.

There is no sale going on. There is still a massive price increase compared to historic norms. The good news is prices are still falling and given time houses will be affordable again.

When house prices went out of line with historic norms and took more of a % of incomes they could not stay that high forever. Now they are going back to  affordable levels but are not there yet.

If you can offer me a house for what it would have cost in 1997 with inflation added I will buy it. Can you do that? I think not. Houses are still priced to high.
  • November 17 2010
  • 2Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for sunnyview
Prices dropping off unsustainable bubble values doesn't mean houses are "on sale". Houses are well priced when buyers ratios of PITI and rent are close. Buyers need to seek value in their market before they buy to protect themselves from further instability. High end buyers need to be even more aware that the underpinnings for their niche market are weak and that prices have not found a floor yet.

Comparing prices that will not come back anytime soon to prices today would be foolish. Maybe the public is finally wising up... Well, a girl can dream can't she?
  • November 17 2010
  • 3Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.