Buying Strategy in Northern NJ

[Fitim Mulosmanaj]

My fiancee and I are looking to buy our first property.   Mostly interested in Bergen County, but some cities in Essex county are also being considered.  

We are concerned about overpaying due to the recent run up in prices and the strategy to mitigate that risk is to dollar cost average into the market.   If we buy our first home then prices tank we are committed to buying another property at that point.  We are considering a couple of approaches:

1) Buy a 2- 4 unit and occupy one unit. They buy a SFH if the market crashes, or when our growing family requires it.

2) Buy a single unit for ourselves (condo or townhome) and plan to keep it as a rental when we buy a bigger home down the road

I have had a few conversations with realtors and gotten some wild variations in advice. Some say SFR is the hottest and prices there have gone up the most. Some say Multi is super hot. Some say the market is cooling, some say it's hotter than ever.

Any general advice is welcome, or referrals to good agents that can help.   My financing is solid.....can do up to 20% down if needed for a multi family, but obviously would like to hold onto capital for the next deal.  

Also, any advice on towns that are attractive would be welcome.   Im somewhat new to the area and just getting to know all the towns.   

[Joe Martella]

What you are asking is the same question that every single investor has today:  Will there be a housing market crash?  Depending on who you follow and listen to, we are in a depression, the housing market is here to stay for at least a couple of years, a crash is coming, recession is coming, etc...  

The reality is that everything is at an all time high.  Food, clothes, cars, houses, high unemployment, etc... and no one believes that it is sustainable.   For real estate investors we are thinking that there will be a housing crash.  For stock market investors, they think that there will be a market crash.

I don't think that the crash we saw in 2008 will happen that dramatically.  Remember the housing market crash happened because of bad loans.  Watch the big short, if you haven't already.

I do think that this tempo isn't sustainable and there will be a dip in the economy.  The dip in he economy will cause a natural dip in housing prices.  That said, it is a dip in values, not a housing crash.  That will leave some people underwater, but that only matters if they have to sell and need to get into a short sale discussion with the bank.

There is no clear direction of the economy.  My suggestion is to look at what the historical rents are.  If the lower rents support the current financing, you should be ok.