Do you make your living in the finance industry? Is your current job dependent on the finance industry being robust? Is your job fairly secure? Or are you dependent dividends from your portfolio? Are you financially stable and do you have six months of expenses in the bank?

If you are reasonably financially secure with a job that is not in imminent danger of being lost, why wait? Prices are not going down everywhere. All areas are not buyer markets (my area of NYS is still a seller's market). Can you obtain financing? The biggest question might be are rates going to go down? Since rates have been more closely tied to the swaps, a fed cut does not automatically mean an interest rate reduction (we've gotten caught a few times in the past year where the 10 year going down resulted in rising interest rates due to the increase in spreads).

IMO if the house works for you, the interest rates are low, the price is reasonable, and you feel good about the transaction (sounds goofy, but important), go for it. If you are hesitant, don't.

If you big 10% below and they say no, you can come back and bid 5%. If they still say no, you can come back and offer asking price, if you really want to.

If sold comps in the area support the asking price, or reasonably close to the asking price and you plan on staying in the home for more then a few years, go for it. Interest rates are low and with as many bargains as there are on the market, it's really not a bad time to buy a house if you plan on staying in it for the long term. No body knows what's going to happen to the housing market in the next few years so if you're only planning on staying for the short term, I wouldn't make an offer.

Make an offer that you feel is fair, if 90% of asking is a fair price, then make that offer. But never offer more then you're comfortable paying or more than the market itself supports.

We are in the northeast of NY; unfortunately an expensive area and (for me as a buyer) unfortunately so far house prices have not come down (they are stagnant). We have been looking at houses for 2 years now and just came upon one that we like.

I looked for over 6 months and was about to give up.
You have 2 years into it with nothing to show for it. Do you want someone else to buy this house and have to look for another year or more? I say year or more because some people took the houses off of the market and will not relist until the market improves; you could have a long wait.

Start with your low, then work up. As was said, don't pay over what you are willing to or can afford. If they get insulted with your offer and refuse to deal with you, you may have to wait it out. Talk to your agent. They should be able to get documentation to support your offer.

It last sold 2.5 years ago, the current owners have not upgraded anything, just lived there for 2 years and then got transferred. The house is on the market for 6 ms now; 2 of them empty. The asking price is still more than what they have paid for 2.5 years ago and I think they will not lower the price

Do you know for a fact that they paid what you think? What are sold comps saying?

Thanks for your opinions so far - that sounds reassuring. We have been renting for a long time and seen the prices soar - never have been able to buy a house we like for a price we can afford. Now that the prices have come to a halt we see more possibilities around us. And fear that it is too early to buy, that the real deals will follow once we buy. Last year around this time we made a 10% below offer and the sellers were absolutely offended and in the hindsight were right - they got 99% of their asking. But I guess we will do what you suggested - again start with an offer on the lower side. We have a feeling that the current owners 2 years paid too much for it (it sold after 3 days) and I hope that it speaks for itself that it is now on the market for 6 ms.

If someone looked at the county tax records for what we paid for our place 16 months ago, they would have no way of knowing that we put in over $20,000 in upgrades since that time. Do you know if your sellers have put any money into the house other than the price they paid when they bought? Just a thought....the price they paid really has no bearing on today's selling price - either up OR down.

I agree with Redcurls. I don't like it when potential buyers believe they have to be the profit police and regulate how much profit a seller can make on a home in only 2.5 years. The fair market value of the home at this place in time is the important thing, not what anyone paid for it, whether they're losing on it or profiting on the home isn't relevant to it's fair market value.

The fair market value of the home at this place in time is the important thing, not what anyone paid for it, whether they're losing on it or profiting on the home isn't relevant to it's fair market value.

The only time that losing money matters to me is if I don't feel the price is correct and feel it should be lower like the one house I looked at in the spring. They were over $10,000 lower then what they paid for it and there was no way they were accepting much more less. They took it off the market the next week.

And fear that it is too early to buy, that the real deals will follow once we buy.

Sure, that could happen, but will a house that you like be in your price range? Do you really want to look for another 2 years?

Last year around this time we made a 10% below offer and the sellers were absolutely offended and in the hindsight were right - they got 99% of their asking.

They lucked out.

But I guess we will do what you suggested - again start with an offer on the lower side. We have a feeling that the current owners 2 years paid too much for it (it sold after 3 days) and I hope that it speaks for itself that it is now on the market for 6 ms.

When you make the offer, have your agent pull comps to support it, then maybe they won't be offended. We'd love for someone to come by and "offend" us.

"they would have no way of knowing that we put in over $20,000 in upgrades since that time."

Actually, that depends on what kind of building permits your county requires, whether you obtained them, and whether or not they are publicly accessible.

"I don't like it when potential buyers believe they have to be the profit police and regulate how much profit a seller can make on a home in only 2.5 years."

Fair enough, but as a buyer I'm going to need a good reason, clearly explained to me, that a house would go up in value by more than 7% in that time span. Yes, I know there are good reasons out there, but any increase substantially above the inflation rate means its time to start asking questions.

mfbenson -- do you also need it clearly explained to you when a home's value drops in value in 2.5 years? Do you offer fair market value which may be significantly less then the buyer paid or do you figure they paid x amount and with inflation you offer x amount plus 7% even though it may now be worth x amount minus 7%? Buyers don't pay more then fair market value for a home, even if the sellers owe more then the home is worth. If the home happens to have gone up in value more then inflation then that's the home's fair market value, regardless of how much profit. Likewise if the home goes down in value, that's the home's fair market value regardless of how much of a loss the seller is taking.

"do you also need it clearly explained to you when a home's value drops in value in 2.5 years?"

No, I've got a pretty good handle on that one. Its this whole making money thing that is eluding me.

"If the home happens to have gone up in value more then inflation then that's the home's fair market value"

That is merely begging the question. For what valid reason would fair market value go up faster than the inflation rate?

demand?

"demand?" - yes, but what's driving the demand? Did a big employer move to the area recently, and is it an employer in a shaky industry that will layoff everyone in a few years, or is it because its in a desireable retirement area and the baby boomers will provide a high demand for decades to come? See this is my point, its time to start asking questions when fair market value rises that quickly. If it makes an oversensitive seller feel defensive, tough. Get a thicker skin.

There are many many reasons why a home will go up in value more then inflation. Housing prices are not tied to inflation. The market determines the fair market value of a home. You can try to make 10% on a home but if the market is telling you that it won't bear that price,then you're not going to make your 10%. Likewise if the demand is so high in an area, or you've made a great investment etc. etc. the market may bear a home selling for 25% more than you paid for it two years ago. I've bought 7 homes over the last 30 years, never even bothered to ask what the seller paid for the home because it really didn't matter. What mattered was current sold comps and whether or not they supported the asking price. I'm sure some of the sellers I've bought from made money, some not so much.

"Housing prices are not tied to inflation."

They are over 90% correlated, if you look at any 20-year and longer period of time, going all the way back to the 19th century.

"What mattered was current sold comps and whether or not they supported the asking price."

And it doesn't occur to you to find out why comps are going up faster than inflation? I guess it takes all kinds...

Yes it takes all kinds...I'm a consumer, not an economist. Perhaps an economist may want to know all the nuances of the housing market. As a consumer I want to know I'm getting a good home for a fair price. When I need a new car, I do the research, find out the best car for my needs and budget and I try to swing the best deal. When I buy a computer or television as a consumer I do my research and get the best deal for my needs. I don't ask Best Buy how much they paid for it. I don't ask the car manufacturer how much it cost them to build it. Likewise when I buy a home,I want to pay fair market value, based upon the current market conditions. Irregardless of inflation.

"It takes all kinds"
Sorry I was having a little joke - I know perfectly well I'm pretty unusual for wanting to actually understand markets. Its just a kind of curiousity I have.

"I want to pay fair market value, based upon the current market conditions."

I don't know if you realize it, but you are agreeing with me in these words. We differ in that you seem to feel that comps will always provide a fair market value, whereas I think that when comps themselves have deviated from normal long term trends (like the trend where house prices just barely outperform inflation) that comps might not be providing as "fair" of a market value as it seems.

Earlier I missed a good opportunity when you asked if I needed a price drop explained to me too by giving a flippant answer, but in reality I would want to understand that one too - I would assume the prior value was a bubble price, but when houses appreciate at less than the inflation rate its just as much of a puzzle as it is when they grow at more than the inflation rate.

The inflation rate isn't necessarily the right rule of thumb - possibly an area has a perfectly rational rate of price growth of about 5%. But if prices start to go up at 10% for a couple years from nothing but excitement and easy lending standards, will comps really justify the high prices? My theory is that they do not, and that it is wiser to try to predict fair values by studying long term trends - which, depending on your set of definitions, is part of "current market conditions". When long term trends and comps are in agreement with each other, there's no harm done. When comps are way above (or below) long term trends, there's got to be a reason, and if I'm going to plunk down a lot of money I want to be satisfied that its a good reason that isn't going to adversely affect me.

"Irregardless of inflation."

Someone please tell me that the, ahem, word and sentence structure used here is a joke that I'm just not getting.

Inflation and housing prices are linked together, but only when you use the whole housing market,not any particular area.When it comes to local markets, it is supply and demand, and a host of other issues...This would explain why the same house in my town would go for about 400k less in Iowa..

"they would have no way of knowing that we put in over $20,000 in upgrades since that time."
Actually, that depends on what kind of building permits your county requires, whether you obtained them, and whether or not they are publicly accessible."

I agree with Redcurls and Cordovamom. Building permits wouldn't come into play with many home improvements. What I paid for my 1957 home was based on its almost 100% original condition. It was a '50s time capsule. Everything everywhere needed to be updated. We have made improvements in just about every room, but they didn't require permits. Granite, hardwood, new appliances, redoing driveway, stripping wallpaper, new lighting & plumbing fixtures, etc, etc. You might say my home isn't worth more because this was just maintenance, and I don't really expect to get more than I put into it. But anyone would ask more for an updated home than one without any updates.

If you wait until every single factor within the housing industry works in your favor 100% before you buy a house you will be renting all your life. There are always questions and "what if we wait" dilemmas, and nobody has a crystal ball divulging the answers.

Sometimes you just have to jump.

Paralysis by analysis.

You are throwing away money on rent paying the owners mortgage

I am a landlord.
Having someone else pay for your investments is a great way to make money.

Personally, and in my market (don't know the OP's), I would not buy now, based solely on financials. Housing is in decline -- predictions all over the map as to how far RE will fall and over how long, but nobody's saying things are looking up. Inflation is eating dollar value, but I'm not sure equity in a house will fare any better IN THE SHORT RUN.

Try this on: How would you feel if you bought this house and had to sell in a year or two? Life is full of surprises. IMO, you'd lose money -- more than brickeye says you are 'throwing away' on a rental. (In other times and markets, I might be agreeing with him.)