I'd say far enough for us to actually be able to buy a house this time around. We've been real close to getting a house before, and in one instance, it was the seller's financial position that thwarted the sale from going forward (the bank refused to let the seller sell at our agreed upon price).
In all seriousness, the country isn't one homogenous housing market, but thousands of little ones. The NYC metro area has literally dozens of markets, and each one is on a different trajectory. And each price range has its own market as well.
Some areas of the country will see major corrections, while others will be little affected. Still others will continue to see prices rise.
Now, I happen to want to live in Bergen County, New Jersey (scoff all you want, but it's in a good location to travel to NYC, and easy to get to destinations in upstate NY or PA in short order). Good schools and good restaurants and excellent shopping are other reasons. Those are also good reasons why the market here isn't going to collapse anytime soon.
The prices will simply stop rising as fast as everyone had come to expect.
Now, there are still people who think that their 3BR, 1BA capes are worth $500,000 because they are located in Ridgewood, NJ (home to one of the top school districts in the state). The market will come to bear on them in the form of increased inventories and buyers who are going to offer well below, or wait out the sellers and watch the price drops on MLS.
People who want to sell their houses will do well to be realistic. A good house will sell regardless of the market. The last few years saw so many dumps sold at a premium because the market was so hot and speculators were going hog wild. Those same speculators are now stuck with properties that they can't move, and if they took adjustable rate mortgages, the bills are coming due on their homes.
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