The More Expensive Ridgewood Homes Are Beginning to Look More Attractive to Home Buyers
Much has been said about the impact of the Home Buyer’s Tax Credit on lower priced homes. However, I believe we are also starting to see its impact on the higher end. We are seeing lots homeowners from Ridgewood, and other nearby towns, trading up from homes in the $300,000 – $500,000 range to more expensive Ridgewood homes. Buyers are snapping up the moderately priced homes because they want to lock in the tax credit and many of these homeowners are deciding to roll the proceeds from their sale into a larger/more expensive Ridgewood Home.
Ridgewood Home Sales by Price Range: 1/1/2010 - 3/9/2010
The chart above shows the price breakdown of Ridgewood Home Sales from 1/1/2010 through 3/9/2010 (today). The chart below depicts the same time period in 2009. A few items to note:
- At this point in 2009 no homes over $1,750,000 had sold in Ridgewood. This year two have sold.
- Five homes over $1 million have sold thus far this year – at this point in 2009 only two had sold.
- Seventeen homes over $600,000 have sold this year. In 2009 only ten had sold by the same time.
Ridgewood Home Sales by Price Range: 1/1/2009 - 3/9/2009
Multiple Offers and Re-Listed Homes
I also have a bit more personal anecdotal evidence that the market is improving. In 2009 I had listed two beautiful Glen Rock homes that eventually wound up being taken off the market because of lack of interest. I re-listed these same two homes in 2010. Both homes enjoyed many more showings, and significantly more interest this year, and both have now had offers accepted. Additionally, I recently listed a wonderful Ridgewood home that was fairly priced – but certainly not under priced. It received 7 offers within the course of a few days and is now under contract for a number significantly higher than what the homeowners were asking.
I am bracing for a backlash from two of my most active and intelligent, but sometimes equally harsh, commenters (LaLaLand and Barney). They both feel I see the real estate market through rose colored, or perhaps dollar-bill-tinted, glasses. Oddly enough, I disagree.
Related Ridgewood Articles
Ridgewood Real Estate Market Looks Strong
Ridgewood Real Estate Report – Average Sale Price Up 5.4% in October
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Why Choose Aloysius Donohue?
It’s hard to answer this question myself without sounding like a complete blowhard so please click below to see what clients and local newspapers had to say.
Big Al,
This is all in good fun…but there you go again. You remind me of the gentleman who asked, ‘other than that Mrs. Lincoln, how was the play?’
You do recall we were the middle of the deepest economic decline since the Great Depression during the 3-month period you are comparing to last year, correct? This is amateur if not misleading but typical of someone in your role.
As for the market, I have a search setup for homes on the market in ridgewood between 600k-$1.5M, two weeks ago this search showed 24 homes, today? …38…the bull(sh*t) market definitely seems to be upon us. Aren’t the spring flowers beautiful?
Keep ‘em coming, sooner or later you will be right.
Big Al,
One other request in the interest of fair disclosure—Please include in this post the same data already in your post for the periods in 2006 and 2007. Thanks!
Great Time to Buy (Famous Last Words)
Sunday’s NYTimes
By DAMON DARLIN
Published: March 12, 2010
“IT’S a great time to buy a home.”
Real estate agents were saying that in 2001, as home prices were rising. They also said it when home prices peaked in 2005 — in fact, David Lereah, former chief economist of the National Association of Realtors, published a book that year titled “Are You Missing the Real Estate Boom?”
And many real estate agents said it was time to buy as prices began to drop — and continued to say it over the past several years as prices fell by an average of 33 percent in America’s 20 largest cities.
Mr. Lereah would acknowledge that he had gotten it wrong. But from the perspective of many real estate agents, it is always a good time to buy.
“What they are really saying is that it is a good time to be involved in a transaction that generates a commission,” says Barry Ritholtz, C.E.O. and director of equity research at FusionIQ, a quantitative research firm. He’s also author of “The Big Picture,” an irreverent blog on markets.
If agents are always motivated to make a deal, buyers are often asking an impossible question: “Will the price of this house go up?”
Although the National Association of Realtors said for many years that home prices historically don’t fall, actually they do, and sometimes quite sharply. The housing market is complicated, and the future unknowable. Still, for clues to the overall direction of prices, Mr. Ritholtz advises buyers to look at three metrics: the ratio of median income to median home prices, which suggests whether people can afford a house; the cost of ownership versus renting; and the value of the national housing stock as a percentage of gross domestic product.
All those measures were aberrationally inflated during the housing bubble. And they still aren’t back to historical norms. We can get back to the norm in either of two ways, Mr. Ritholtz says: home prices can either drop an additional 15 percent or go sideways for seven years or so, while G.D.P. and income presumably grow.
To complicate matters, even if home prices rise or fall nationally, they may not follow that pattern in Las Vegas or South Florida or Maine, to say nothing of the neighborhood where you want to buy.
There may be a better way, however, for potential buyers to approach the problem. “Predicting interest rates is a whole lot easier than predicting home prices,” says Glenn Kelman, chief executive of Redfin, a multistate discount online real estate brokerage company based in Seattle. “Before you buy the house, you buy the money,” he says.
It’s a little like walking into a dealership to buy a car, and finding the saleswoman immediately jotting down what your monthly payments will be and starting the negotiations there. That’s absolutely the wrong way to buy a car. But for a prospective homeowner, it’s a good place to start the analysis to determine how much house you can buy.
Instead of betting on home prices, you make a bet on whether money will become cheaper or more expensive, allowing you to buy more or less house.
That’s where the regular Joe has a pretty good shot of being right. You won’t know day to day, or week to week, what’s happening to rates, and a jolt like a default in Greece or a change in Chinese monetary policy can throw everything off. But, generally, the Federal Reserve is telegraphing where things are headed over the next six months.
“I can’t prove to you that housing prices have definitely bottomed out,” Mr. Kelman says. “I can say with a fair degree of certainty that the cost of money will go higher.”
OF course, if rates go up, home prices tend to dampen. Borrowing $300,000 at 5 percent costs you $1,610 a month. If rates rise to 6 percent, that’s $188 a month more, or $67,680 over 30 years. Would the price of a $375,000 house fall because of a half-point rate hike? Now you are back to guessing about home prices. Don’t go there. Maintain your focus.
“People are frequently buying for the wrong reasons,” says Frank LLosa, a real estate agent working in northern Virginia. In most cases, he says, they think that they are getting an income tax break or that their home is an investment.
He points out that a buyer of a $300,000 home would have to see the house appreciate $18,000 just to cover the commission and closing costs. Then figure in the predictable costs of maintenance, the opportunity costs of the mortgage down payment and the amount one could have saved by renting a similar place more cheaply.
Then there are property taxes.
In California, taxes alone can be $5,000 a year on that $300,000 house. In New Jersey, where property taxes are the highest in the nation, the extra cost can be even more. (The Star-Ledger of Newark calculated that, on average, residents in the town of Lodi pay 10 percent of their income in property taxes.) But who would have guessed that property taxes in that state would keep climbing, doubling over the course of seven years in some cases, even as home values stopped appreciating?
Mr. LLosa thinks that many people — including him — would be better off renting. People ought to buy a house for what he calls “warm and fuzzy feelings,” but they shouldn’t try to predict home prices. Nor should real estate agents, who aren’t much wiser.
“I don’t think real estate professionals should be in the business of telling people when it is a great time to buy,” he said.
LaLaLand – You are a good man but articles are written like this every year. Don’t believe everything you read. There is no disputing that, on the whole, home ownership is good for individuals and good for the country – period. Obviously, it is not for everyone and some people do lose a lot of money in real estate and there are unscrupulous folks in all industries – but on the whole home ownership is a very good thing.
LaLaLand – “The perfect is the enemy of the good.” If you live your life afraid to get in the game you are going to miss out on a lot. This goes beyond real estate. I know you did not ask for my advice but my sense is that you are the type that holds back and watches from the sidelines. This may be the safer play but it is a lot less fun and you can’t be successful, at anything, without taking some risk.
Al,
I own a home. I am simply pointing out the bias and incentive in your view. You still haven’t shown how the above data looks when including 2006 and 2007. This is not personal, it is about educating people so they don’t make dumb decisions as they did over the past many years to push the world to the brink of bankruptcy. Also, you still need to address the recent significant increase in homes available for sale in Ridgewood.
Regards,
LLL
LLL,
You are 100% right in saying I have a bias toward real estate and an obvious incentive. I don’t take anything you say personally. I know you are just dealing in the facts as you see them. That said, the only way to really grow a real estate business is by referral and to earn referrals folks have to feel like you truly have their best interest at heart. It would be very hard to prosper in this business with a series of once-off deals where the clients were unhappy with the result or felt they were duped or pushed in some way. I actually did post charts that included 2006 and 2007 – a five year chart and a 10 year chart. I am sure if I posted a chart of only 2003 or 2004 you would feel it was not representative of the long term market . Taking a snapshot of the best, or worst years, does not really tell the story. I think the 5 and 10 year charts paint a much truer picture. I haven’t compared inventory levels from this year to last but the increase in homes for sale id a seasonal thing. There are nearly always more homes for sale in late winter and spring than at other times of the year. In fact, I would bet the inventory level is down this year from last but I don’t have the energy to run that research at the moment – but I will.
Have a good night and thanks for the insightful comments.
-Al
enron’s 1, 5, and 10 year chart looked great until it didn’t. History is worthless unless you know how to interpret it. Rates went from 17% to 3% in the last 25 years, where next? as a homeowner, do you think its better to start at 17% to 3% or 3% to 8%?