Is This Really Bad News?

Home prices have dropped for the nineteenth straight month. If you're a homeowner and trying to sell your home, this could be real bad news, but if you're in the market to buy a home, it's very good news because it means that homes are becoming more affordable (especially combined with the lower interest rates). It's that situation that enabled Mrs. Lawhawk and I to buy our house late last year, and my brother in law is in a similar position now.

Each real estate market is different, and conditions in one market don't necessarily translate to others. Some locations have seen steep drops, such as around Florida and Las Vegas. However, around the NYC metro area, prices haven't so much as dropped as leveled off after years of spectacular gains.

For example, we routinely saw listings for Cape Cod style homes, 3/4br, 1 to 1.5 baths, on a 50x100 lot could go for over $450,000 in places like Fair Lawn, Midland Park, or Ridgewood, NJ. When we started looking in 2003, those houses were going for 350,000. The 2003 figures, let alone the 2007/2008 prices, were insane enough under most circumstances, and yet those kinds of houses are at the low end of the market where new homeowners are looking to buy. Demand for those homes is pretty constant, especially in Bergen County because of its proximity to New York City and the good schools.

However, in places where speculators had a field day, like in Florida, there isn't a steady supply of buyers to sweep in and keep the prices level. So, the prices are dropping, and will continue to drop until buyers think that the prices are more reasonable and will begin buying again. Some of this stems from the spate of new construction that puts older homes at a disadvantage.

In Bergen County, there aren't that many places to buy new homes, so the supply of houses is relatively constant. However, if you keep building new condo complexes or single home developments, you increase the supply outstripping the demand. In a hot market, that's not a problem, but the current market means that those homes are going to put downward pressure on prices.