Well, I ended up buying a place, but in December 2009, because like everyone else I was obviously affected by everything. Still, I think I literally caught the low price as my price was negotiated in late summer. Plus, after I bought, the government extended and increased income limits for the tax credit and since I lived on base salary (no bonuses for 2008, paid out in 2009), I actually qualified. Typically my bonus is a multiple of my base and my wife does not work (besides spending money). How funny is that?
My motivation was simple: a 65% rally in the US equity markets, record low interest rates, trillions thrown at NYC, it was just a matter of time before this dog was going to turn around. And it is...people now feel more secure about their prospects. In a big city like NY, exclusive towns like the one I live in will see the inventories deplete quickly. I've seen some weird transactions over the past 12 months, where on a sq. foot basis, it's not so much more expensive to live in my town then the town next to me which has lesser schools, parks, etc. That "arbitrage" cannot last, people will figure it out soon enough.
My prediction of 25-30% off peak prices was spot on though, that is exactly what I ended up transacting at. Plus rates are 150-200bp lower than 2007, so cost of carry is upwards of 40% cheaper.
I'll take it, thanks!
I believe that housing will experience a "V'ish" shaped recovery...but here me out in what I mean by that. I think that we will now see a sharp increase in prices as prices currently reflect a 10% jobless economy, high credit standards, and tremendous distress in the market. All of those factors will be relaxed in the next few years. I'm not saying 2006 like standards, but it will normalize somewhat.
In areas that have seen 50% drops, we could easily see 50% increases over the next 5 years, but that would still mean 25% from the highs. One need only look at credit spreads to get an understanding of how cap rates will correlate.
In real terms, housing will NEVER see the levels we saw...and many will never "breakeven" on their investment...ever.
At the end of the day, these "bubbles" are a transfer of wealth to those who pay attention (us) to those who don't (the rest). |
