‘To Move Property, They Have To Lower Prices’: NH
The Nashua Telegraph has this update from New Hampshire. “Maggie Decker put her two-bedroom, garden-style condominium on the market in February for $149,900. She has lowered the price $8,400, has offered to pay closing costs and even threw in a warranty. Six months later, her Knightsbridge Arms condo still hasn’t sold.”
“‘Last year, you could have pretty much named your price,’ said Decker, of Nashua. ‘This year, the number of houses and condos on the market is ridiculous.’”
“In Greater Nashua, 923 homes were sold between Jan. 1 and May 31. This year’s numbers are down compared with the 1,045 Greater Nashua homes sold during the same time last year, according to the New Hampshire Association of Realtors.”
“What this means is that sellers have to aggressively market their homes, local real estate agents say. ‘The problem sellers face.. they still think their home is in a market where it’s going to sell in the first two or three weeks,’ said agent Ben Mercuri.”
“It’s good news for home buyers. These days, there’s more negotiating going on. ‘What’s moving is the more affordable properties,’ (realtor) MaryBeth Gustitus said. ‘What that tells us is our buyers are shopping on value, and they’re taking longer to do it.’”
“With higher rates, buyers can afford less, and it goes back to buying the value house, Gustitus said. So if sellers want to move their property, they have to lower prices.”
“Another reason is lower demand for new housing and an overabundance of supply. As a result, buyers feel a lot more confident with the purchases they do make, Mercuri said. ‘It doesn’t have to be spontaneous,’ he said.”
“(Broker) Brian Moses in Nashua, classified the market as normal. ‘It’s not a depression or a bubble,’ he said. ‘We’ve really been tremendously spoiled over the years and the real estate market has been robust with double-digit increases. I don’t’ think it’s any reason for anyone to hit the panic button.’”
“Gustitus’ advice for sellers is to understand where their house fits in with the market. On the whole, she said the reality of prices is starting to sink in with sellers. ‘They’ve had six years of them seeing their neighbors sell at full price. That became a normal market for them. The problem is, that’s not a normal market. That was the perfect storm.’”
“Meanwhile, Nashua’s Maggie Decker is hoping she finds a buyer, and soon. She and her husband are looking forward to moving into the house they’ve already purchased in Rindge. But first, they have to sell their Knightsbridge condo.”
“‘The agents said it showed beautifully, but there was just so much on the market and our timing was just a little bit off,’ Decker said, adding that the condo would have been sold already this time last year. ‘It’s emotionally wrenching.’”
‘She and her husband are looking forward to moving into the house they’ve already purchased in Rindge. But first, they have to sell their Knightsbridge condo.’
It shouldn’t be much longer for the press to openly state how foolish it is to take on two mortgages. They have yet to make that connection.
I think this problem of not being able to sell in the existing market is plagueing the new builders. People can’t sell existing homes because they won’t lower their prices enough thus they have to cancel the new home contract. New home builders have to keep the inventory moving so they slash prices to move it. Seems like a pretty simple concept but people are still hoping for the greater fool to show up at their house.
Actually what is worse is even if you do price aggressively, stuff is tending not to move right now in some parts of the market. It seems that the mind set and the momentum has shifted for most folks, though there are still some people who are buying because of relocation and other drivers. In some markets the whole thing has partially or completely siezed up.
they won’t lower the prices, or they can’t.
We need to put you in a suit and sit you down toe-to-toe with these dipstick realtors on TV. Waiting for the press to make connections takes a looonnnngggg time.
There were never two mortgages. Only one and the condo had sold not once but three times…the first backed out because of the inability of having a bbq on the third floor, the second buyer lost his mortgage funding, and then a third buyer bought it. It was a great condo and worth the money.
2 br condo for $149k? I’m always amazed as to how in much of the US you can purchase a home for a small percentage of what it takes to buy the equivalence in the Bay Area…
Yes, there still is sffordable housing in parts of the US. Bay area prices are outrageous but so is most of california in my mind.
Yes but that $149K condo probably cost half that a few years ago. And as far as affordability goes, it’s all relative. I’m posting without researching, but maybe New Hampshire incomes are fairly low. Meaning the $149K condo may not be affordable to those in the condo market.
All of my friends from New England call New Hampshire “The Alabama of the North East”. Incomes are much lower than many other areas nearby ($42k average).
Isn’t it much more pleasant to talk about the NE now, without The Lingus cropping up? Ahhh.
“Incomes are much lower than many other areas nearby ($42k average).”
Southern NH was a somewhat backward place when we moved here about 18 years ago but there was something about that that was attractive to us. It was a fairly quiet place with little crime, good quality of life and a low cost of living.
Digital Equipment Corp was doing fairly well and was a huge employer in the area. There was some other high-tech and defense work in the area. Then Southern New Hampshire grew and grew and grew. Part of it was an outgrowth of companies from Boston.
At any rate, you had a lot of folks with a fair amount of education move into the state for various reasons. One could be the lack of an income tax.
In the few cities and towns, you wound up with the old-timers that preferred things the way they were and the folks that moved in and wanted more services. The more services crowd resulted in higher cost of living for everyone else. And in some cases, have pushed out the long-timer residents unable to afford local property taxes.
So you do have a lower average income as there are many areas in the state that haven’t seen the inflow from other areas.
You also have a great deal of retail here as there is no sales tax as well. There are sales taxes in our three neighboring states so we have shopping centers on our borders which attract lots of shoppers from Maine, Massachusetts and Vermont. Needless to say, these retail jobs don’t pay well. But you don’t need a huge income to live here.
Southern NH on the Route 3 side is also nice for commuting in Nashua as traffic jams on the highway are exceedingly rare. And of course we still have an inflow of folks from Massachusetts looking to escape their high cost of living.
Nashua has a median family income of $68386 and 2000-2005 Job Growth percentage of 5.3%. The median home price is $258,767 and the average home price gain from 2004-2005 was 8%.
You can see more stats at
http://money.cnn.com/magazines/moneymag/bplive/2006/snapshots/PL3350260.html
Nashua is the only place in the US that has won the best place to live in
the country twice.
If you have a high-tech income or a high-finance income at nearby Fidelity
Investments in Merrimack, it’s a comfortable place to live.
I bet the family median income is from people working in MA or from MA companies that have moved some/all jobs to NH (e.g. Fidelity).
Fidelity expanded out from Boston a long time ago and Digital was downsizing so Fidelity bought one of the large Digital campuses in Merrimack. Fidelity just announced another expansion and North Carolina won. New Hampshire was the other top contender.
Clearly there are folks that live in NH and work in MA. I personally don’t understand this combination as you wind up still paying MA taxes. It must have something to do with the housing and overall cost of living factors (car insurance is a lot less in NH than in MA).
Hewlett-Packard bought out Compaq which bought out Digital Equipment and has a lot of employees up here.
And there appears to be a lot of old money tucked away in some of the communities a bit further north.
Simon Property Group is going to build
a huge Premium Outlets Mall in Merrimack NH which should improve retail wages somewhat and bring in even more out-of-state shoppers. They had to sue the town to bring it in as many didn’t want the disruption to small town life that the mall will bring.
Brookstone had their corporate headquarters in Nashua before moving it to Merrimack. And then they got out. The engineering work is still done in this area.
As far as companies opening facilities goes, it’s usually at the request of employees that feel priced out of other areas. That’s one major theme of the housing bubble.
“In the few cities and towns, you wound up with the old-timers that preferred things the way they were and the folks that moved in and wanted more services. The more services crowd resulted in higher cost of living for everyone else. And in some cases, have pushed out the long-timer residents unable to afford local property taxes.”
That is exactly why native Southerners absolutely hate it when Yankees move in.
This is total BS. New Hamphire has the fourth or fifth highest median income of any state in the union. It is an incredibly rich state. Your friends are ignorant on this matter. You hear a lot of this type of thing. NH has demonstrably the 49th lowest per capita tax burden in the nation, yet you alway “hear” how high NH property taxes are. Purely anecdotal. A lot of left-leaning people in the Northeast bash NH for political reasons and nearly always get NH wrong. I think they need to believe their sh*t because the rest of the Northeast has become such a hell hole.
That’s just about what I paid in 1997 for my townhouse in Los Angeles.
That 2 BR condo for $150K is a little deceiving, and I wouldn’t read too much into it. The median price of a single family home in NH is about $270,000
If you drive 15 miles east of Nashua, NH, you’re in Essex county MA, which was recently listed in Forbes as the most overpriced place in the entire country. Essex county has towns like Andover (median price about $530,000), Marblehead & Manchester by the Sea, as well as Lawrence (median $280,000) on the other end of the price spectrum. BTW, Andover & Lawrence abut each other.
Um, you can buy an upscale 4BR condo in Michiana for $125K!
““(Broker) Brian Moses in Nashua, classified the market as normal.”
It’s normal for houses and condos not to sell?
Actually… it is. A highly liquid real estate market is an anomoly.
It is normal for houses to be a terrible short term investment.
I can definitely sympathize a bit with the sellers. Even if you wanted to set your house price at a price where it is fairly priced, no one really knows what that number is. I think the market is a moving target right now and the sellers are trying to chase the buyers down.
I watch a lot of the housing where I used to live in Long Beach, CA and it cracks me up to see these people with a home on the market for $1.3m drop the price by $50k, like that’s going to really bring the buyers out of the woodwork. It will take someone to finally lop $300k off the price (or $500k!!) before they start to see a bit of equilibrium. Even a $500k drop will probably just take it back to 2003 prices.
I work in Manhattan beach and a coworker bought in San Pedro at the market top. His property is easily off 10 - 15% in value. There are so many homes down here over 1 million that are not selling. You are exactly correct in the ridiculous price reduction of 50k.
Eventually, it will be the equity-laden sellers that recognize reality that will set the market; i.e. those that bought pre-2000. Say they bought some POS in the BA in 2000 for 500K. The house is now “appraised” at 1 million. They need to get out because of death, divorce, relocation, or what have you. They eventually will capitulate and sell for 600K, the proverbial 40% off peak, and still walk away with $100K, feeling miserable that they didn’t sell at the top, but still solvent. IMO that will set the market. The FB’s and the banks won’t - they have too much skin in the game and won’t capitulate that easily.
I suspect that some equity laden sellers are also going to be taxed out of their house. I have heard some isolated incidents where people have had to sell, because the tax bill became just too much.
I always laugh at the “will pay for 1 year home warranty”. Oh wow, a $300 policy! Yeah, that should entice me. It is quite hilarious that sellers think miniscule price reductions draw buyers like bees to honey. If you were that close in price in the first place, the potential buyer would have made an offer at whatever that small reduction would have been. I’m going to try to find the article a read some time back where a study was conducted that found that in a declining market, don’t bother with anything less than a 10% reductions. Anything less is waste of time.
‘The problem sellers face.. they still think their home is in a market where it’s going to sell in the first two or three weeks,’ said agent Ben Mercuri.”
-When will sellers register the ‘real world’ conditions?
“Gustitus’ advice for sellers is to understand where their house fits in with the market. On the whole, she said the reality of prices is starting to sink in with sellers.
-the reality of prices ….start with a nice 20% reduction of price.
“-the reality of prices ….start with a nice 20% reduction of price.”
That is the right point. A 5.6% reduction over six months is the reason id didn’t sell. More than a year ago, we cut the price of our place that much in 30 days. One more cut, then acceptance of a lower offer than that, and it was sold. That is how to sell today and just about the only way. There’s a great sense of “entitlement” to profits out there, masked in the whines of bewildered sellers.
These folks are moving way out into the boonies where real estate will be a lot cheaper than Nashua. Nashua has won best place in the US to live in by Money Magazine twice. And was in the top category this year and best place to live in the state.
I was a bit shocked at the asking price of a two-bedroom garden-style condo though. I would think about $100K to $120K. You can see a picture at http://pix.idxre.com/pix/NNEREN/main/0/250794_0.jpg
A google search has it pretty close to Boire Airport and that’s a pretty noisy place. You have a lot of small planes, many of them noisy and you also have a flight school (Daniel Webster College) adjacent to the airport. I thought that this place was somewhere else (in a worse location) so maybe the realtor map is wrong.
There are 2-bedroom townhomes in the area
selling for $150K and up so selling a garden-style for $150K will be a tough sell.
When folks around here talk about the prices for Cali housing, it never fails to amaze me and looking at the prices in our area, you can see why.
“Another reason is lower demand for new housing and an overabundance of supply”
Oooo. A new word. Can I make some more?
Ultrabunance!
Suprabundance!
Hyperbundance!
LOL — like extra-superoverabundance.
Cornucrapia.
Through the mid 90’s NH houses sold for 60% of construction costs. As recently as 1998 one could find a good 2800 sq ft house for $90,000. I know, that’s what I sold one for. Took two years.
Just had a friend interested in buying a house in the 150s in las Vegas. Its almost impossible. All the developments say starting in the 250s. I guess when they change the signs, I’ll know
Simmsssays ….worst ways to stay cool
http://www.americaninventorspot.com/inventive_keep_cool
“advice for sellers is to understand where their house fits in with the market.”
The reality is that their house is probably just not that nice and that the price is way too high. They just don’t get it. Most people just can’t pay these prices, without using a suicide loan and I think those loans may be starting to get enough negative press to steer people away from them.
“suicide loan “……….Outstanding!
Not mine..heard it here or elsewhere..
Nashua, on the ground observations from a loooong time lurker.
(thanks, Mr. Jones, for all your work)
Top of the market here was late winter/early spring 2005.
Prices did not drop immediately but inventory started
climbing. At first it was funny, reading this blog and
watching the “for sale” signs multiply. Now it’s frightening.
I’ve never seen so many houses for sale. Prices are down
about 10 percent from top.
There was extreme pressure up here to “liberate” your equity
and take out variable loans to take advantage of the low rates.
I have a friend who refinanced during this time. She is smart
and well..thrifty. (I swear, she had the cost figured down
to the price of the stamps needed.) Her “loan officer” was
pushing her to cash out her equity and take an arm. She kept
refusing and insisting on a 15 yr fixed. He gave her the loan
she wanted but told her she was “stupid” and would regret not
taking his advice. Very bad experience. She is glad that she
stuck to her guns but doubted her decision for a long time.
Used to be you would walk into a bank and the first thing
you would see were their saving rates. Now all you see are
loan rates. You have to ask for the savings rates. Is it only up here??
Well, the banks are probably embarassed to display their savings rates. They still want to borrow your money at .5 to 4% and loan it out at market rates.
What about current owners ?
I have been a reader for quite some time but first post .
We bought a house in 2004 in Memphis , TN , 1750 Sq Ft @ 147K. After a 20 % downpayment our monthly mortage payment is ~$850 ( Includes interest , principal, taxes and insurance ). Currently rents for similar housing is running ~1200-1400 / mo in the surrounding area apt complexes.
I am seeing more and more For Sale signs and new construction delivering housing ( Both apt cplxs and SFH’s ) at an incredible rate. Houses on my street that have been on market for more than a year and still not sold.
I am debating if i should try to sell now and lease for a while and “move up” in a year or two if i find a good deal.The problem is finding similar sized rental place for the same amount as my current mortgage. ( $ 900 will get you a 2 bed 2 bath , no garage , no back yard apt ).
I am thinking that if housing goes down X% then that is X% for everyone ( and i would rather lose X% of 150K than X% of 300K ). So if i want to “move up” in a couple of years then i should be able to get a fair deal after this mania is over. Since my carrying costs on the current house are much less than comparable rents i can keep it as a rental if worst comes to worst and i can’t sell it.
What do you guys think ?
BTW : A lot of people looked at me like we were crazy for buying in a “working class” neighbor hood instead of the McMansion on the links and not be “up with the Joneses”. My sister steered us to buy something where our mortgage payments would be the same as the rent we were paying.In case anybody wonders ,our current mortgage is less than 10% of our take home pay and is the only debt we have.
Our housing costs us next to nothing (paid off in the 90s) and I’m not particularly worried about a drop in housing prices. We do not have a lot of for sale signs in our neighborhood and many of the people here went through the downturn in the late 1980s and early 1990s so they know that there are cycles in housing and the economy.
We have a lot going on right now so it wouldn’t be a good time to move.
People that live well below their finance-induced means are in somewhat of a different situation than those that are highly leveraged. When you make a major purchase or go on vacation, you know that you have cash in hand to pay for it and don’t have to worry about debt issues over it. You may have some envy over outward displays of wealth but self-denial is part of the game which garners greater rewards down the road.
Great last paragraph..
Sometimes less, truly is more…
Agreed. I think there is a fine line between display of wealth vs use of wealth. For eg i own a “SLOburban” which i only drive when warranted/needed. For everything else the Honda gets the job done nicely.
Me and my wife have this infomal rule of third’s. Don’t buy anything unless you need it more than 3 times ( and if you do buy, then buy the best ) .
It also helps to be able to differentiate between needs and wants ;-).
I’d keep your place as long as you can count on your jobs not going away. You are in an enviable position. The position you are in is not that different from some other places where the buy/rent thing is not so ridiculously out of whack (like Dallas for instance). If you find the right place in Dallas, in a lot of cases it’s cheaper to buy the place than rent it.
Anyway, congratulations for living below your means. That’s the way to real freedom later in your life.
Thanks for the kind words.
As much as anybody can predict the future we are fairly confident of having a job for quite some time ( tho never say never ).I am now looking at putting the money to work.Not tooting my horn here just asking for advice.
What would you do if you had extra 4K a month ?
This is after maxing out 401(k)’s , Kids educational accounts funded, Day care expenses deducted. Cash position to handle at 1.5 yrs of living expenses if we both lose our jobs .
I have made some stock plays and am a bit low than what i started with ( school of hard knocks ) but nothing catastrophic to keep me up at nights, but the choppiness in the Market is keeeping me away ( I have no aspirations to be a day trader ).
I looked at gold but i am ambivalent towards it.
Would it make sense to park it in a Money Market @ X% and see how it turns out.
If Cash becomes king then i have nothing to worry about.
If Cash becomes trash then i pay off the house with the inflated $’s.
Or hedge Cash / gold , X%/Y% ( 50/50 , 60/40 )?
If you can stomach some volatility, I’d be looking at holding cash until October, then buying some stocks. I’ve become quite interested in the Indian stocks (ones traded as ADRS - although I want in at much lower prices) and that’s what I’ll be buying into fall pukeage with the full understanding that they can be sickeningly volatile. That’s one thing. I’m not in the whiskey & gunpowder mode of a lot of hardcore bears so I would also be looking to buy US stocks after the second fed rate cut (which should come early to mid year next year). Historically that play has done very well. Perhaps using the ETFs to avoid company specific events.
Are you betting that the Indian outsourcers / IT providers / Economy ( Satyam , Infosys , TCIS etc ) will still be climbing even if the US based business starts hurting ? i.e. That their revenues/profits from Domestic / non US markets will keep them going ?
Or that the second rate cut ( if there is one , i am not as sure but you probably have more experience than me ) will reflate the marets ( both US and overseas )?
Yes. They don’t need the U.S. that much anymore.
I went to cash the second week of May. I have seen swing-traders and short-term traders get whipsawed, sometimes wildly in both directions. I have a friend that trades in very short-term intervals and he’s doing well. We’re talking 20 minutes for the whole trade.
It’s been very relaxing watching the interest payments roll in this summer.
I’m looking at getting back into stocks sometime between late August and late October. Work and family life are a drain on time and trading does take some amount of time.
I do plan on getting back into gold and some energy stocks but am taking my time. I got into energy in 2000 (fall) and into gold late 2001 (I used to write a precious metals newsletters and have a few articles published at gold-eagle).
The commodity-related stocks can expose you to really, really wild volatility. If you want metals, you might try just buying a few coins when the price dips. With coins, you don’t really worry about the price of gold that much. If you want to play the miners, this isn’t the place to have that kind of discussion.
BTW, on the Bob Brinker show today, there was a caller that said that he sold his house after two years for a double in Las Vegas in 2004. He has a long-term contract to rent a comparable place for $12K per year and is very happy with the arrangement but has this nagging feeling
that he should own a house. Bob Brinker said that what he was doing was the right thing because he was much better off financially renting than owning right now.
My advice, for what it’s worth, is don’t sell.
Because your monthly nut is way below what you could rent it for, hang on to it. Your nut is also very low as percentage of income, so save. When you want to move up, buy another house but don’t sell, rent your current home, and you will get passive income from it. The renter will pay off your mortgage for you, and at the end you will have the capital asset free and clear.
Caveat is you need to be willing to put up with landlording, but it’s a great way to build capital. You’re in an enviable position.
Living below your means always is a good idea. If the house is comfortable for you and the family, keep it, especially with a stable job and modest house payment. Trying to time the market is difficult, and expensive, with a r/e transaction costing 6-8% of the price. The stress of going through a r/e transaction is something to consider too (Suzzane can help I’m sure)
Housing is first a place to live and distant second, an investment. Being a landord is a pain and risky because you can get the tenents from hell that destroy the house.
My advice would be to just sit this one out.
Moving is a big pain, I think I would stay. 4K extra? well the stock market in general might go down the next few months. hard to say? Value stocks or mutual funds that invest in value I like. I also beleive that overseas new markets will do well long term, like india, asia, eastern europe. I use mutual funds to invest in these types of markets. T-Rowe Price international discovery is a long term holding of mine. PRIDX.
I think there are many more experienced investors than myself on this blog however.
By the way, Cape Cod is for sale or so it seems as for sale signs are more abundant than green head flies on certain beaches.
Cape Cod seems to go in and out of style….
“Meanwhile, Nashua’s Maggie Decker is hoping she finds a buyer, and soon. She and her husband are looking forward to moving into the house they’ve already purchased in Rindge. But first, they have to sell their Knightsbridge condo.”
Please tell me Maggie, with so much property on the market why I’d want to buy your condo instead of a SFH which you are now choosing to do? I’d also like to know how many houses where being sold in 1999 over the same time span so that current sales can be compared to a non-investor market.
“So if sellers want to move their property, they have to lower prices.”
Duh
This post sheds some light on the answer to a long-asked question on Ben’s blog: Will the housing crash be felt in non-bubble areas? If we can assume that Nashua, NH has been a non-bubble area, it seems to be feeling the pain along with most other areas. On one hand, prices there become less advantageous relative to collapsing prices in non-bubble areas. On the other, Greenspan’s cheap money probablty tempted people in Nashua to cash-out refi with ARMs and to take out HELOCs pretty much as in other areas of the country. I’d think that the re-setting of ARMS will bite them just as badly as anywhere else and will force a lot of NAshua folks either to sell before they planned to, or to forego the trade-up they had anticipated.
Chip -
Southern NH (the three southeastern counties) is a bubble area. It’s part of the Greater Boston metroplex.
Yep it is. I’ve never seen so many “For Sale” signs in Nashua. Big bubble area.
Agreed. Last weekend one of my sisters sold her house in Windham (not far from Nashua), and moved to a bigger place further north.
The young couple (NH locals) who bought her house (for 280K, lower end in Windham) brought 3k to the closing. My sister had her place on the market for around 4 weeks, but priced it to sell. Her realtor was pointing out all kinds of properties in that area which are headed for foreclosure.
So yeah, certainly Southern NH is bubble country. Further north less so, but not immune. Easy credit doesn’t care about location.
“Southern NH is bubble country. Further north less so, but not immune.”
You’re right. Second home buyers in the Lakes Region and the Mountains are also hosed.
‘Last year, you could have pretty much named your price,’
Soon, they’ll be saying, “Two years ago, you could have pretty much named your price.”
I’m no kind of a financial wizard, but one more aspect that people might need to consider in regard to the economics of any particular housing bubble is the rising cost of gasoline. We bought our house in an industrial town north of Boston ten years ago, because we both worked in the Boston area, we didn’t want to buy a second car, and this was the closest we could afford a house we could stand to live in. A number of acquaintances & co-workers called us “stupid” or worse because, as they understand the economics of an area just emerging from its latest housing crash, any Rational Economic Actor would have bought a bigger, more elaborate house right over the border in southern New Hampshire, where new construction was mushrooming and the lenders were only too happy to make an aggressive deal. The fact that neither of us wanted to add an extra 30 minutes each way (minimum, at off-peak hours, assuming neither construction work nor inclement weather) to our daily commutes, was greeted with general derision. The idea that we might choose public transportation for at least part of our regular schedule was considered even more suspicious. But with the cost of gasoline on a steep upward trend, some of the people who laughed at us then are starting to talk about moving closer to their jobs… even if that means “downgrading” to a smaller house, or even a condo, in a less upscale neighborhood. I realize that public transportation is not an option for the vast majority of Americans, and that even the best possible network of commuter trains, bus networks, and urban subway/trolley systems will never be as attractive or convenient as owning & driving one’s own vehicle. BUT, if gas prices keep going up faster than salaries, how much of the housing bubble will consist of people forced to give up their exurban “dream homes” because they can’t afford to drive 100 miles or more every day?