Wednesday, October 04, 2006

Today's housing market news

I was trying to figure out what to make of all the housing market stats for Manhattan that were released today. The way the data is being interpreted in the media varies widely-- I won't go into great detail, but see this post at Matrix for some analysis of the coverage-- headlines include the words "down," "up," "stable," "steady," "slump," and "leap," so you can see there's a real definitive consensus going on!

Meanwhile, a commenter referenced one report in relation to Monday's post and comments about my net worth:

I don't recall the details of your home purchase (if you've mentioned it). However, I'd suggest that you game the possibility that you will have negative equity despite the 20% down payment. Prices are coming down pretty quickly. For example, in just the last quarter, coops lost 16% of their value. See:
[NY Post link]
Prices are indeed coming down, at least by some measures. But quarter-to-quarter changes never seem to be the best indicator of how much things are changing-- yearly changes are more telling. Some of the stats do show some year on year decreases, but others still show increases. And today's news is focused on Manhattan numbers, not Brooklyn. I think we're still on the cusp of whatever changes are happening and it's too soon to tell exactly how it will all shake out.

I still don't think I'm in danger of being upside down on my condo just yet. First of all, my condo went on the market almost a year ago and I bought at that price. A similar condo seems to have sold just recently for 15% more than I am paying. As I've said, I'm not really counting on any instant equity, but I think the value of my condo should at least be holding steady to what I paid right now. Even if prices continue to slide, I'll have put 20% down and I'll be paying off a chunk of the principal each month. Yes, the principal payments are small at first, but hopefully I can win the race and keep my head above water until whatever kind of soft landing/ crash/ slump/ pause we're heading into settles out into a normal pattern of moderate growth.


Anonymous said...

Hi Madame X,

I hope you don't find yourself "upside-down" in your condo - but frankly if it happens I would not fret too much. You made a deliberate and well researched purchase. This was not a risky investment gamble - it was a purchase you plan to live in. As you mention you will be paying down principal when you make those monthly mortgage payments.

You can't time the real estate market, just like you can't time the stock market. You purchased what you could afford when you could afford it.

I have been getting similar comments on my blog asking me to devalue my real estate holdings. So far I have not done so - but then when I set the value I was conservative - so even with the market softening I am happy with the values I set given the sales figures in my neighborhood.

I can't wait until you move into that new condo! I hope pictures will be forth coming...

Anonymous said...

I'm the poster you quoted. I don't doubt that you'll survive financially. I just suggested you account for the negative equity possibility. It may help you plan better.

I moved to a location, purchased a condo (with half the cost paid as a down payment) expecting to be there for several years and expecting to pay the remaining off in a couple of years. A year in, my position vanished and I moved from one end of the country to the other. Now, I won't have negative equity either but I'll definitely take a hit due to months/years of maintenance while it remains unsold and realtor fees.

If I'd gamed this scenario, I'd have stopped aggressively paying down the mortgage and kept the cash liquid to cover the ongoing costs of this situation. As things stand, I have an ARM at a low enough rate (and no prepay penalties) that I'm fine paying for housing in two locations. However, given the low rate, it would have made more sense *not* to pay the balance off since the cash would have come in handy at my new location.

I realize your job and location aren't as tenuous as mine (I'm a research scientist), but you may have your own wildcards to consider.

Anonymous said...

Didn't you say before that you could have positive or at least close to break-even cash flow if you were to rent out your new condo?

I expect prices to continue to decline over the next five or so years, and even to over-correct for awhile. But I imagine you will probably be in a great position at that time to dollar-cost-average in by vulture buying an additional condo or two at a much cheaper price, with decent cashflow immediately upon purchase.

makingourway said...

The best solution to home equity anxiety would be to comp 4-6 similar properties.

You can easily do it at or similar public MLS.

Another way is to ask a realtor or 3 other than whom you bought the property.

Alternatively, you might want to check out My Zillow at I believe they have home tracking data. When I looked up houses I sold in the past with Zillow I was fairly impressed. NY and other metro areas should have strong comparable data.

I haven't tried My Zillow, but I think you might be able to use it to set price change alerts.

They claim it will let you "...manage a Home Report e-mail that tracks changes to homes you're watching"