Preliminary September sales data for Northern New Jersey is in..
The first graph plots the unadjusted sales data (closed sales) for the counties listed. Please note the lower bound of the graph, it is set to 1000, not to zero. I do this to emphasize the seasonal nature of the Northern NJ market.
(click to enlarge)
The second graph is another view at the sales data for the first nine months of the year. Please note that this graph does cross at zero.
(click to enlarge)
The third graph displays only August sales, 2000 to 2006 YOY.
(click to enlarge)
The last graph displays YOY August sales, broken down by county.
(click to enlarge)
The numbers:
January
Average Sales (2003-2005): 2000
2005 Sales: 2013
2006 Sales: 1705
(Down 15.3% Year Over Year)
February
Average Sales (2003-2005): 1583
2005 Sales: 1578
2006 Sales: 1395
(Down 11.6% Year Over Year)
March
Average Sales (2003-2005): 2193
2005 Sales: 2256
2006 Sales: 2033
(Down 9.9% Year Over Year)
April
Average Sales (2003-2005): 2322
2005 Sales: 2383
2006 Sales: 1817
(Down 23.8% Year Over Year)
May
Average Sales (2003-2005): 2615
2005 Sales: 2725
2006 Sales: 2298
(Down 15.7% Year Over Year)
June
Average Sales (2003-2005): 3486
2005 Sales: 3682
2006 Sales: 2911
(Down 20.9% Year Over Year)
July
Average Sales (2003-2005): 3495
2005 Sales: 3338
2006 Sales: 2428
(Down 27.3% Year Over Year)
August
Average Sales (2003-2005): 3661
2005 Sales: 3668
2006 Sales: 2599
(Down 29.1% Year Over Year)
September
Average Sales (2003-2005): 2854
2005 Sales: 2655
2006 Sales: 1968
(Down 25.9% Year Over Year)
Caveat Emptor!
James (aka Grim)
The North Jersey market contines to deteriorate. There has been no flattening of the market to date. It appears that the decline that began in September of last year is continuing. If the market is indeed “normalizing”, I can’t seem to find any indicator of that.
jb
January – Down 15.3% YoY
February – Down 11.6% YoY
March – Down 9.9% YoY
April – Down 23.8% YoY
May – Down 15.7% YoY
June – Down 20.9% YoY
July – Down 27.3% YoY
August – Down 29.1% YoY
September – Down 25.9% YoY
Booooya!
This thread will stay at the top of the main page tomorrow on Tuesday, October 10th.
I’ll be travelling tomorrow, so updates will likely be light. Please feel free to use this thread in an open, but on-topic, manner.
jb
From CNN/Money:
Tick. Tick. Beware the mortgage time-bomb
That ridiculously low-rate ARM seemed like such a good idea at the time. But now, payments will be coming due in a big, big way.
Mortgage rates have been trending down, but that won’t do much to benefit those who signed up for low-teaser-rate adjustable-rate mortgages in the past few years.
…
In the past two years, homeowners took out 1.3 million ARMs with teaser rates below 2 percent, according to Cagan’s research.
…
Of those, 21.5 percent have negative equity, where the market value of the home is less than the amount owed. The number of people in that spot could go up significantly if home prices fall as forecast or if homeowners with teaser-rate-ARMs experience job loss, illness, divorce or a death in the family, which are the main causes of mortgage default.
good job Grim, Thanks.
SAS
Anyone know the ‘top’ towns in North Carolina near Raleigh? May head down there and want to look at neighborhoods.
I believe most of the developments down there are new, but are there any towns with older, well-built colonial homes, with nice architecture? (Probably stuff built in the 1940s.)
I hear Cary is nice, but the entire town is about 10 years old, and I love older architecture.
Tick. Tick. Beware the mortgage time-bomb.
Again for the umpteenth time; you have a choice. Do you want to rent money or rent a place to live???? Kara offering homes at a 250k discount!! How do you feel if you bought the same property last year??? You think renting would have been the preferred choice??
Anyone need 10 acres in Montclair?
MLS 2308886
http://www.realtor.com/Prop/1066145196
26 rooms. This is one for Bill Gates.
Here is some info on Kips..
http://www.dupontcastle.com/castles/kips.htm
Wow, the concepts are so simple, yet people really don’t learn until they get really hurt.
Think about this, how long would it take you to save $100K net?
Now if you paid $500K and your house went down 20% so it is now worth $400K could you handle that?
The numbers don’t lie, it is simple math people.
My Gramps used to say: “You make your money when you buy, not when you sell.”
He meant that if you could sell whatever you bought for what you paid you were ok.
-Sapiens
UnRealtor,
I just returned from an exploratory trip to Raleigh this past weekend. We did the whole neighborhood tour thing.
are there any towns with older, well-built colonial homes, with nice architecture? (Probably stuff built in the 1940s.)
Not much. At least from what I saw, the Raleigh area has 2 kinds of housing: The new stuff (
(
much of which is really nice. My only complaint is that you typically don’t get much land in most cases. Most of the older stuff consists of smallish ranches or capes, but you get a bigger piece of land. Not a lot of “in between”
Cary is the premier town. It’s mostly build-out. It has the some of the best schools in the country and decent culture, but also commands the highest prices (although still a steal compared with NJ). You also have to be careful with the schools. Due to overcrowding and equity concerns, you kid could be bussed to another school. You can get something really nice starting in the upper $300’s
Wakefield is really nice as well. Also more “exclusive”, but to the same extent as Cary. You can get something really nice starting in the lower-mid $300’s
North Raleigh, Wake Forrest & Rollesville also very nice. Not quite as “premier”, but you get a lot more for your money. Still in Wake County, so schools are good.
I saw some nicer older places with a lot of character Wake Forest near the seminary. You can get something really nice starting in the upper $200’s to lower $300’s.
Stay away from South Raleigh or anything in Durham County (if you care about the school system).
As much as we rip on the home builders here, I have to admit that I was salivating over the new construction.
Thanks RentinginNJ. May head down there in the coming weeks.
Did you engage a realtor, or look on your own?
So, top towns down there are:
1. Wakefield
2. Cary
3. North Raleigh, Wake Forrest & Rollesville
Some nice older homes near Wake Forrest.
Grim, didn’t know that castle in Montclair had a name. Very unusual backstory!
Article from BW
Where Housing Prices Will Fall the Most
Observers with different methods of analyzing the housing market come to some similar—and some dissimilar—conclusions
http://www.businessweek.com/bwdaily/dnflash/content/oct2006/db20061010_091087.htm?chan=top+news_top+news+index_businessweek+exclusives
In the Central Bucks, Pa., school district they educate the same number of children as all 29 Hunterddon County districts combined for $129 million less a year. The Central Bucks system has one superintendent drawing a salary of 186K. Across Hunterdon, 27 supers collect a combined 3.7 mil in pay.
http://www.nj.com/news/ledger/index.ssf?/base/news-9/1160454915190710.xml&coll=1
From BW report,
Zandi expects New York to drop 3.5% through the fourth quarter of 2008, while the futures traders are betting that New York’s real estate will drop a sharper 6% by next year.
Who would you put your money on? Zandi is certainly a smart, resourceful economist. But “predictive markets” like those used at the CME have proven surprisingly accurate in forecasting everything from the weather to political races. They’re particularly accurate when money is on the line, as it is in Chicago.
We hooked up with a Realtor; a very nice lady that took lots of time to show us everything and explain the pros and cons of the different town, with no pressure at all. She is originally from NJ and her niche market is people relocating from NJ & NY to Raleigh.
There were 2 big benefits in going with her. First, she was knowledgeable of the area, so we didn’t waste our limited time fumbling around. If you have more time, doing some touring on your own is probably a good idea.
Second, and most importantly, she served as a buffer between us and the sales people in the different development communities. She was able to either bypass the sales offices or deal with sales sharks herself, while we looked at homes. If you go on your own without a buffer, the sales office people are going to talk your ear off and some can really get pushy. It will get very annoying.
If you would like, I can pass along her contact information.
Unrealtor,
I visited a few weeks ago so my significant other could check out the area. We are in talks to start a franchise in Chapel Hill or Raleigh. I went to UNC-CH and love Chapel Hill. There are many older homes with character, but they are more expensive than the cookie cutter suburbs of Raleigh. I highly recommend visiting the chamber of commerce in both Raleigh and Chapel Hill to get tons of information about the area.
It appears that the RE complex is banking on a recovery in the spring.
When we get a very brief bounce in the spring and then it turns lower again this will be depressing for the sellers and realtors. Panic will ensue at this pint as the greedy grubbers realize the price decline is going down more.
Inventory continues to pile up 32,500 GSMLS houses. Does not include 4 sale by owner or new houses or condos.
when you break down the arguments for a rebound next spring, they just don’t make sense.
the idea seems to be that because the economy is slowing, the fed will cut rates. the fact is that the bond market has already anticipated the cuts. mortgage rates have been dropping for 2 months and this hasn’t stopped the slide in sales. cuts by the fed won’t change anything– they are already baked into the cake.
the second argument is that the HB stock rally shows we have hit bottom. Sorry, but I don’t see how HB stocks are predictive of a rally in home sales. These stocks lost 50% in value over the course of a year. There has been no such correction in the pricing of homes. I am not saying I think HB stocks are a good buy, just that there is a fundamental difference in these asset classes.
From the Daily Reckoning:
http://www.dailyreckoning.co.uk/article/101020062.html
Alan Greenspan and the US house price bubble
Boo hoo!
We were missing that old fraudster, Alan Greenspan. What
had become of him, we were wondering. The wisest,
wiliest, most powerful human being on the planet seemed
to have gone dark after he left his post at the Fed. We
thought we’d never hear from him again.
But yesterday, the man surfaced like a beluga whale in
Canada. Speaking to a private audience he said that the
US house price bubble – and incipient bust – were not
his fault.
…
From Bloomberg:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aKOf1BBL_2D4&refer=home
Fisher Says He’s `Comfortable’ With Rate Stance, Not Inflation
Federal Reserve Bank of Dallas President Richard Fisher said he’s “comfortable” with the central bank’s current interest-rate stance though not with the level of inflation.
“I am comfortable with the policy as it is,” Fisher said today in response to an audience question after a speech in London. While the “current rate of inflation is too high,” previous interest-rate moves will probably reduce the rate of price increases, Fisher said.
…
Fisher said today that the effects of the slump in the U.S. housing market on the rest of the economy shouldn’t be exaggerated.
“I don’t think there is any question there has been a severe, sharp correction,” Fisher said. “The question is the duration.”
“It’s important not to over-fixate on housing,” he said. “The rest of the economy is running on all pistons.”
From Inman News:
http://www.inman.com/inmannews.aspx?ID=57710
Connecticut home sales fall 21%
Prices drop for first time in 8 years
The statewide median sale price of single-family homes in Connecticut fell 0.9 percent and single-family home sales dropped 21 percent in August compared to August 2005, according to The Warren Group, a real estate and financial data company.
It was the first time since 1998 that the statewide median single-family home price dropped. The 21 percent drop in sales was the largest since 2000.
The state’s single-family median sale price was $287,500 in August, down from $290,000 in August 2005. The median sale price had risen steadily since November 1998 to a high of $296,250 in July 2006.
A total of 3,875 single-family homes were sold in August 2006 in the state, which is the lowest sales figure in August since 1995. Statewide single-family home sales have dropped 11 straight months and 17 out of the last 19 months dating back to February 2005, The Warren Group reported.
August sales off 30% YoY in Fairfield County, CT. The Entire NYC-region is getting hammered. I don’t see how realtors can sit back and pretend the market is normalizing. 30% drop in sales in a one year period is a crisis for any business. Realtors should be screaming crash if they want sellers to wake up.
several builders reporting orders down 40% for the quarter. normal?
My fiancee and I found a home in move in condition in our price range in Bergen County (Fair Lawn). We are going to pass on this house (for obvious reasons), but it is very encouraging to see true starter homes (modest size, doesnt need much work) in our price range. :)
It seems like there is a one way exodus to the Tar Heel state.
In the early 1990′s interest rates dropped from 9% to 6% and homes prices dropped big time.
It’s all about negative pyschology and affordability at this point.
This thing is crumbling. Word from the front lines is things are TERRIBLE. Real Real Slow. And price declines are happening.
BID ALOT LESS AT LEAST 25% LESS AT A MINIMUM.
I AM BAAAAAAACK AND READY TO SLASH AND BURN.
BOOOOOOOOOOOOOYAAAAAAAAAAA
Bob!
Qualified buyers own and dictate the terms of the sale….Not some 2004-2005 dream seller.
Go for the throat. make sure you are compensated for your time patience and sacrifice.
BLEED’EM DRY!
Bob!
And when you go to the bargaining table and they whine about giving credits.
Leave the table….. tell’em if they come back you can’t guarantee the bid cuz prices are falling and you own this market.
Gett’en a little worried GRUBBERS!
Better be cuz it is going to be mighty depressing when the bounce every friiggen starving realtor and Money grubbing seller is counting on this spring does not materialized.
Then i am really going to go out and hammer a few grubbers into submission.
No mercy. Crush and Destroy misssion.
Bleed’em DRY!
Bob
Grubbers you will regret not taking that first offer even if it is 20% less. I am hearing there are still plenty of 2005 dreamers out there with their entitlement attitudes.
Keep it up cuz you are going to be steam rolled.
Babababa
Bleed’em Dry!
Bob
….well..well
Please tell me how much should I make an offer for this house? thanks
MLS# 2296426
http://new.gsmls.com/public/detailLst.do?mlsNum=2296426
O.K. Who stepped into the phone booth and/or ran out of prescriptions today?
—–
Way off topic, but I just read a tidbit that made my day, and could impact any of you with a 401(k). http://money.cnn.com/2006/10/10/news/international/ing.reut/index.htm?postversion=2006101013
I’m a firm believer in individual responsibility for retirement planning, and that taking away the pension teat might not be such a bad idea.
But there’s a limit and a balance involved in teaching and communication. Until our education system (ha ha ..trough!) brings people out of high school who can read and understand a prospectus, we need investment communication reform.
I loved this line:
“Beyond the restitution, Spitzer’s office said ING’s agreement to provide a cover page summary of plan costs and a chart showing how expenses can eat into returns over time, could have far reaching impact on the rest of the retirement savings industry.”
“We’re hoping this agreement will set a new standard and that other providers will start doing this,” Brown said.
Now, if only SOX-like legislation could require 401(k)plan funds be independent of a company’s other investment managers, we might see some good returns for “lowly” participants.
O.K. yes, this was a rant and completely off topic. Sorry.
“thatbigwindow Says:
October 10th, 2006 at 1:05 pm
My fiancee and I found a home in move in condition in our price range in Bergen County (Fair Lawn). We are going to pass on this house (for obvious reasons), but it is very encouraging to see true starter homes (modest size, doesnt need much work) in our price range. :)”
If you don’t mind me asking, what was the price? I ask because I’m also looking for a starter home, but I don’t consider anything over $250,000 a starter home price.
So if the price is below that, that would be very encouraging to me as well. Thanks
Can I be the first to say welcome back Bob, and a hearty BOOOOYYYYYAAAAA! to you.
Glen Says:
October 10th, 2006 at 3:44 pm
“If you don’t mind me asking, what was the price? I ask because I’m also looking for a starter home, but I don’t consider anything over $250,000 a starter home price.
So if the price is below that, that would be very encouraging to me as well. Thanks ”
Add about 100k to that 250k figure :(
First of all, Welcome back BOOOYYYAAAA. The nation was eagerly awaiting your return. I was afraid some realtor may have sucked you in. No, not really!!!!!!!!!!
There comes a time when the market becomes insensitive to a decrease in rates. This is one of those times. Look how Japan responded to lower rates. This current market action is not a function of interest rates but rather one of supply/demand and pricing. Rates are not an issue, don’t be fooled. You may get a blip if/when the fed drops rates. However, that will be all it is, a blip. Be careful of false bottoms. You will see some action in response to a particular event. You saw some buying when H-Builders came out with all those incentives. Be careful, today’s incentives can be tomorrow’s nightmare. We may get bounces along the way. This will only constitute lower highs and the previous lows will be taken out at a later time. Don’t be caught in a dead cat bounce. This market is unraveling faster than I thought. We are still in the beginning phases. Be patient, don’t succumb to last resort incentives. Buy only true value.
State Posts Salaries Of Top School Officials
http://www.wnbc.com/education/10045328/detail.html
TRENTON, N.J. — The schools superintendent in Newark had a salary last year of $250,700 — the highest for a district-level administrator in the state.
The information is included on a new state Education Department Web site that details the salaries of high-level school administrators across the state
Salaries of school officials have been a political hot button this year. In March, a State Commission of Investigation report found that some administrators were collecting tens of thousands of dollars in perks, from clothing allowances to reimbursements for pension contributions.
More recently, lawmakers looking into the state’s highest-in-the-nation property tax bills have focused on school costs.
The Web site, which offers sortable data for salaries of superintendents and other top administrators, also does not include the names of the people, just their titles and pay.
Newark’s superintendent is Marion A. Bolden. She was one of 10 superintendents who had a base salary last year of at least $200,000.
The average salary for the 586 full-time top chief administrators in the state was just over $140,000.
From the article above on salaries, here is the Excel file with the detailed town-by-town data
http://www.nj.gov/njded/data/salary/salary.xls
Total number of public school students, Newark: 50,160. Now, I suppose that’s a big population. Maybe $250k isn’t that high.
Philadelphia has 4 or 5 times that many students, and the CEO makes the same amount of money..well he’s getting a raise soon to $275.
http://www.phila.k12.pa.us/offices/communications/press_releases/2006/08/23/vallas.html
Was this covered here yet?
——————————————
The Last Stand of the 6-Percenters?
WHEN David and Annette Wolf decided that their family was outgrowing its Seattle area home, they also decided that they did not need much help finding a new one.
They combed Internet listings of homes for sale until they spotted a four-bedroom house on a cul-de-sac with a three-car garage and 2.5 acres.
But the seller’s agent refused to show it to them. Why would she turn away an eager buyer? Not because of the Wolfs’ race, creed or color. Instead, Mr. Wolf, a software engineering manager at the online directory InfoSpace, said he and his wife were shunned once the agent learned they used an online broker called Redfin.
…
BuySideInc.com, an online buyer’s broker in Chicago that offers a 75 percent commission rebate, said that at one point 12 percent of its customers reported that traditional agents had refused to show houses to them.
The rate is now down to about 6 percent, perhaps because of responses like this: One client who was denied a showing made an offer anyway that was contingent on getting a tour — a move intended to alert the seller to the refusing agent’s actions.
“I’d like to have been the fly on the wall for the conversation between that seller and his agent,” said Joseph J. Fox, chief executive of BuySide and a founder of one of the earliest online stock brokerage firms, WebStreet. “The amazing thing,” he added, “is that the selling agent still got paid and made $15,000 to $20,000.”
http://www.nytimes.com/2006/09/03/business/yourmoney/03real.html?ex=1314936000&en=0be493bd5738880e&ei=5088&partner=rssnyt&emc=rss
JUST AN FYI:
A quick, PRELIMINARY, side by side comparison of last years Bergen County, SFH median sales price for October 1 – 10 with this years median sales price shows about a 14% reduction in price.
October
2005 $560,000
2006 $480,000
Paying any part of a commission back to the buyer in NJ is illegal. Only licensed agents and brokers may receive commission on a sale.
However, there is no reason that a buyers agent can’t drop their commission to 1% and have the seller take the difference off the sales price. The net is the same. However, the agent would need to work for a broker that allows this sort of behavior. Many big-box brokers do not allow it.
jb
Rich,
Good work. 14% is a start!!!
I like the info on this site, homes are still somewhat moving in my area north bergen, nj. anything decent usally ggoes under contract within 60+ days. with gas prices falling and the stock market rising, mortgage interest rates falling do you think market could pick up next year? now i understand increased inventory and tighter regulation on mortages will push prices down but are there other factors that dictate market conditions?
we may be in buyers market but things are certainly still expensive. when is a good time to get off the fence?
Also doesnt it workk out to be the same; two years ago you could have gotton a ARM for 4.5% for 5 years. Now the same ARM will cost you 6.3%. Even if there is a drop of 14% in Bergen county it still works out to be the same payment.
Once ARMs and investors are out of the picture I belivev things will be better but prime areas like Bergen County will continue to be competitive.
Bubble blogger respond
Rich in NNJ – great data. I would love to be able to reference this data along with some lowball bids. Is there a data source I can quote? (Something tells me I will need more than “Rich in NNJ on the NJRE Report blog” says so).
Some ugly news from Dominion Homes from Marketwatch.
DOMINION HOMES Q3 BACKLOG 419 CONTRACTS VS 771
DOMINION HOMES Q3 HOMES SOLD 209 VS 433
DOMINION HOMES Q3 HOME SALES $39.4M VS $81.8M
DOMINION HOMES Q3 HOMES DELIVERED 338 VS 549
This is why 14% drop is ONLY a start.
Slash at least an additional 16% right off the top.
Sound Better?
Shaking yet Grubbers?
You will be.
Bababbabababa
Bob
Coulda shoulda but Naaahhh u got to greedy.
And what happened?
Chased prices to the bottom.
Cut and run Greedy Money Grubbers.
Starter homes priced at second home prices. NOT…..anymore Grubbers.
It’s time to pillage a few grubbers into submission.Quit yet? No. Okay. More capital evaporation coming your way.
Babbabaa
BOOOOOOOOOOYAAAAAAAA
Bob
Where does everybody come up with the 40%or more
price reductions?Sounds like wishful hoping.It also sounds like there are a lot of disgruntled people who are upset they did not buy a few years ago.
Optimistic,
Disgruntled?????? Owned properties for 20 years, not a few years ago. Sold last August.
Disgruntled??? Nah.
By the way, Kara was offering 250k discounts, what % does that represent. Rich showed that Bergen County is down 14%, median price compared to 2005. Sounds like 40% is reasonable to me. We are in the initial stages of a marathon. This may take 2-4 years to play out. Wishful hoping???? Nah. That’s the sellers you’re talking about.
when will njar release nj #s?
BC Bob
2-4 years to play out?I do not think so.This is just a correction which has been playing out and will end soon.Houses in north jersey will not go down as much as most people on this board hopes.
Remember the first rule of real estate location,location,location.
Disgruntled? Heh. Nope.
Listen up, the greed that detached the market from fundimentals and took it to insane highs can EASILY turn to fear. If that happens, a similar detachment from fundimentals can develope.
So if anyone is thinking “gee, this location is….special…prices can’t go down” ought to consider human nature and mass behavior.
Optimistic,
A simple adjustment,a much needed correction,a re-balancing, a slight drop. Wrong!!! A bust!!!
Location,Location,Location is out. It’s PRICE,PRICE,PRICE and Toxic Loans. End soon???? That is wishful thinking. We have only just begun.
Can you please explain to me, to all, how a 60-100% price increase can be supported by a 15-18%
increase in income over the same time frame??? Better than that, explain how negative income(real) growth supports this??? You better come up with something more meaningful than the standard proximity to NY.
optimisticseller,
A correction? Location to what? A $500,000 mortgage and $10,000 in propoerty taxes sounds reasonable to you? The realtors, appraisers and lenders banged so many people with so many scams it’s beyond blinding. It makes Mr. Ponzi seem like Abe Lincoln.
“Oh, don’t worry about the price of the house, look at your monthly payments.
Yeah, right, get the f**k out of here. Some hard-working soul with 2 kids can’t even buy some p*ss-smelling piece of sh*t because one couldn’t screw the other one fast enough.
I still see people trying to flip houses so one more sucker gets screwed. Painting walls over wall paper. Give me a break.
You think the people are stupid here? You think the builders are dying for no reason? Sell your sh*t somewhere else ’cause it ain’t happening here.
And by the way, I’m a homeowner.
Gary,
I hear you!!
BC Bob,
Man, that post fired me up. :)
Don’t mean to shift the direction of the conversation, but…
Can someone explain this ‘gsmls.com’ website? Is it a legit proxy of MLS listing or is it a front for a real estate broker? It’s pretty stripped down, so I’m a bit nervous using it for my rental search in Somerset Co.
Thanks fellas!
-PMZ
“Houses in north jersey will not go down as much as most people on this board hopes.
Remember the first rule of real estate location,location,location.”
I guess Bergen county must have moved closer to NYC somewhere around 2000 because prices have doubled since then.
Waters,
“I guess Bergen county must have moved closer to NYC somewhere around 2000 because prices have doubled since then.”
Very perceptive!!! Since then??? That’s not the argument. What now?? Rich, has there been some seismic shift away from NY, allowing for the 14% medain drop in the past year. If yes, the plates must be continuing to shift.
I enjoy the info on this blog but 40% reductions? Ok Im going to start looking for homes in chelsea and gramcy park in NYC. Properties are going to be so cheap trump is going to start giving his property away.
Reality:
We will see reductions but the monthly payment will be about the same. (roughly) If starter homes in Bergen go down to $250000 believe me interest rates will be at 10%.
I hate to say it some of you will still be blogging about this bubble 5-10years from now trying to time the bottom of the market. If you see a house now you can afford make an offer low ball or what have you. But dont try to time the bottom.
Bye
PMZ,
There is no single MLS system. MLS systems are largely regional. North Jersey has 3 systems (NJMLS, GSMLS, MLSGuide) that cover the area.
Sites like Realtor.com do aggregate data from multiple systems unlike the individual systems. Keep in mind that there is some overlap, so for some areas you might need to check more than one system. GSMLS.com is legit, it is the consumer front-end for their MLS.
jb
only a moron would believe that bergen county
will not be affected by the free fall in
housing.
Take a look at some of the haircuts.
Discussing the bubble and looking to buy a home aren’t always linked.
I guarantee that we’re still going to be blogging about the bubble in 5 years. Keep in mind that some of us are more interested in the economics and market dynamics. Still others are interested in the finance aspects, affordability and social issues, political, and so on.
Not everyone here is looking to buy.
jb
“only a moron would believe that bergen county
will not be affected by the free fall in
housing.
Take a look at some of the haircuts.”
Pesche22 I never call any one on this blog a moron, just state some facts. What where interest rates back in 1999? Like I said homes may have been cheap but interest rates where much higher than today.
Good luck in finding starter homes in nice parts of Bergen County for $250000. Homes under $400,000 are the bread and butter homes belive me before these homes hit $250000 some guy is going to buy it before it hits that low.
Also hold you breath on 40% reductions there is going to be pleanty of people happy with 20% reductions and you will be still sitting on the fence.
Bye
“Where does everybody come up with the 40%or more price reductions?”
Using the last two prior RE boom/bust cycles, prices prices will revert to the mean:
http://graphics10.nytimes.com/images/2006/08/26/weekinreview/27leon_graph2.large.gif
If you feel the need to buy close to the top of the greatest asset bubble in US history, go right ahead.
Guys:
I am looking for a home in Bergen. I rent now. I know and I am keeping track of the reductions. But can you imagine what will happen to the economy if prices go down 40%. You mean a 1 mil house will go for 600K. That sounds too optimistic. ( I am not talking about shit holes. I am referring to houses who are worth selling in a buyers’ market.)
Thanks RentininNJ, does that agent have a website?
(Even the big agencies ike Weichert, etc, list their agent profiles online.)
Bob! You make this site fun again (no offense Grim)!!!
Welcome home!
Jersey City Guy
Thanks Rachel, may swing by Chapel Hill as well.
“This is just a correction which has been playing out and will end soon.”
Hardly:
http://graphics10.nytimes.com/images/2006/08/26/weekinreview/27leon_graph2.large.gif
“Houses in north jersey will not go down as much as most people on this board hopes.
Remember the first rule of real estate location,location,location.”
Why, has North Jersey moved in the last 4 years, when prices were 50% less?
How’s this for location:
320 Lupine Way, Short Hills
1. Jun 2005 – Bought for $1,300,000
2. Oct 2005 – Put on market @ $1,295,000 (MLS 2204767)
3. Dec 2005 – Listing withdrawn
4. Mar 2006 – Put on market @ $1,198,500 (MLS 2261656)
5. May 2006 – Price dropped to $999,850
6. Jun 2006 – Under Contract (June 12)
7. Jun 2006 – Closed $999,999 (June 15)
I’ll let you calculate what percentage a $300K loss in 12 months equals.
Is the 40% real or nominal? If real, over what time period and inflation rate?
jb
“You mean a 1 mil house will go for 600K. That sounds too optimistic.”
Yet a $600K house in 2001 selling for $1M in 2005 is not “too optimistic”?
Prices will drop much further, look at the above chart.
http://graphics10.nytimes.com/images/2006/08/26/weekinreview/27leon_graph2.large.gif
I love this gragh but is all the eveidence you have? Some JO at yale makes a graph and now we are going to see 40% reduction?
If you really what to get clear picture you should over lap historical interest rates with home values. then you 40% reduction may be right but at 10% interest so it all equal out.
Bye
And as far as 1 mil dollar homes there is not as many buyer as $400,000 homes. So there will be larger reductions in these homes. Bread and butter homes will not see drop as drasttic
UnRealtor Says:
Yet a $600K house in 2001 selling for $1M in 2005 is not “too optimistic”?
Prices will drop much further, look at the above chart.
That’s 10.75% appreciation. If you count 4% inflation (mind you … you paid 6% for milk during this period in NJ).
for 40 % decline of a 1 mil house – do you consider it will deflate by 32% ?? Does it sound a little too optimistic ?
Apart from the houses – just think what will the economy do during this correction.
I am not saying buy at these prices … I am just saying dont hold your breath for houses in Bergen county to go down 40 %.
All said an done …. people who work in NY/NNJ need a house to stay in . These are not stocks that people can dump and take a flight to safety. People can live without stocks – they cannot live without houses while working in NY.
Do you think whole of NJ will commute from PA border … or Delaware ? People moving there have already rocketted the prices there.
Im watching Nip/Tuck
good nite
Nip/Tuck is over now.
Im not a RE cheerleader but you must go ask your mom and pop what interest rates used to be. Hey they bought their house (bergen county)in 1982 for $150,000 but ask them what the interest rate was, ask them what a loaf of bread cost back then. So it all just evens out.
If you think houses are going to fall 40% and a 30year fixed mortgage is going to be 6.5% (You kidding yourself) If you think all of a sudden Bergen county is going to have the same cost of living as West Virginia keep holding your breath.
I do agree when it is diff to get mortgage that when you know your at bottom.
Back to good old days when u needed 20% down and no ARMs or I/O loans. Just a good old 13% interest rate Mortgage.
dee
You make some excellent points.
On tuesday J.P.Morgan upgraded 3 of the largest homebuilders citing that inventory levels are stabilizing which will drive a market recovery.
There will be some more negative trends in the near future till the levels even out.All the major builders stocks soared.
grim – why do you think 2-2.5x gross income is the right number to approximate affordability. I think it could be less given that we now pay our own healthcare, pensions (401k’s) and higher SS taxes through rising thresholds each year. When I look at my pay stub, over 49% has been taken from me on a YTD basis. Any thoughts?
I’ve read the above messages and been amused by the “optimistic seller” and other RE bubble pessimists out there. I have a long family history involved in real estate. In fact, my father was a builder in many prominent regions of Northern NJ back in the late 80′s and early 90′s (Bergen and Essex counties). I’ve seen it happen before and now it’s happening again. Prices do in fact go down, especially in the higher end house market. Market attitude has changed so dramatically, ever so gradually but fundamentally. Some sellers continue to hold out but there are tons of sellers out there who’ve already committed on a new property, some who are already paying 2 mortgages and who will be “throwing in the towel” in the near future. Then there’s the “near retirees”, couples who are living in a large home after the kids have long since moved out, can’t sell the home and are simply tired of paying those huge property taxes. These people cannot hold on forever. It’s just the way real estate slow downs have happened in the past and will continue to adjust. You’ll start to see more obvious markdowns from builders to sell off existing inventory come this winter/early spring. Builders cannot hold onto land/free standing houses that are vacant. It is my opinion that the market will bottom out in late summer/fall/winter of 08. Major markdowns will be across the board in late 07 approximately 15-20% off ’05 peaks, but I believe things will continue to deflate through the end of ’08 as rational thinking of the RE market has already taken hold. The truth is, if you need to sell your home in Northern NJ in the 1 million-2million price range (price range I’m looking) you’ve already lost approximately 20% off peak prices of 2005. Buyers like myself have seen some of these “bargain” prices and won’t pay a penny more (because we remember how lowball offers are beginning to be accepted, just like those buyers remember those inflated ’05 prices). Other buyers can also sense when the market is adjusting and will take advantage of those desperate sellers hiding out there. Sorry all you optimistic sellers out there, it’s going to get tougher still. My own money has been redistributed back into the stock market, balanced funds that have begun to really perform. Remember in the early 90′s how the stock market remained strong all those years while real estate languished in the background. People like myself have already gotten out of the RE market because it’s on the way down. It’ll continue to deflate slowly the next 2 years. No reason to rush back into real estate, it’ll stay flat for at least a couple years after that, probably won’t start trailing back upwards ’til ’09 or ’10. That’s what fundamental economics tells us. I recommend that if you can wait a year or two to buy, your money will work better for you outside the RE market until things level out more. I expect approximately 25-30% across the board price drops from the peak summer ’05 prices. Some of these adjustments can already be seen. Other sellers continue to hold out, but not for long. True, it’s hard to time the market exactly, but it’s foolish to rush into a sour market that’s clearly headed downwards.
mkfinancial,
That isn’t what I said, I think you might have misread. What I did say was that I thought it was prudent for a buyer not to borrow more than 2 to 2.5 times their annual income (maximum mortgage amount). It really isn’t a statement about affordability as it is a way to ensure that you won’t be house poor.
jb
regarding interest rates–
they won’t necessarily move inversely to house prices. in fact, the two have already moved simultaneously downward over the last few months. and people are anticipating that both will move downward in tandem going forward. both moved downward during the 90s housing bust and during the bust in Japan. so the idea that affordability will remain constant because rates will rise as prices fall is not straightforward.
also, there is a big difference between lack of affordability due to high interest rates and high prices. you can always refinance, but price is forever.
also, I asked my “mom and pop” about the 80s, and they said that mortgage interest payments were tax-deductible then, just like they are now. so the gov’t susidy of owner-occupied housing through tax policy is particularly valuable in a high interest rate environment.
And high interest rates usually mean high inflation. Another good reason to own fixed assets like RE. So again the point is that the relationship between interest rates and affordability is not as simple as some present it to be
Take away the IO and ARMs and see how many houses sell
Optimistic seller/Dee: If I may address both of you, you need to stop with the rhetoric.
1. First of all bback in the early 80′s houses in nice BEregn towns were going for 60 to 75K, 150K was big big bucks, in some of the so called best towns.
2. i would not put too much stock in analysts at JP Morgan, as most analysts are generally wrong, and coomon sense would dicate that it will take a coupl of years to move all this invntory, as it continues to increase.
3. Housing is unaffordable, it is as simple as that, interestr ates have nothing to do with it any more, sure rates were high in the 80′s but they came down, people refinanced, people ended up ok. Fast forward to now, with a dumpy hosue for 500K and 10k or more a year in property taxes,a nd you are optimistic. Why?
4. Finally as a BErgen county boy, enough with this we are Beregn co, we are premier, we take that nonsense as gospel, and it is not.
First off, Bergen co is nowhere near what it used to be, and that is a fact, there are still some so called premier towns, but not like they used to be.
Many of the rest are decent, but the housing costs including property taxes are just insane. Many of the remaining towns are in steep decline, and have been for years. Nobody expects prices to go down to West Va levels, but prices need to correct dramatically, at least 25% or more, ans soem towwns and some individual houses will suffer even more, I am seeing that already.
You guys want to unload you tire old houses to the next generation, well it is not going to happen. Nj is not competitive any more, and housing costs are a bog part of that.
Oh and by the way the state has no money, but that is another topic.
“Location, location, location”.
I invite anyone who uses this to insist that an area is different to take a walk around Newark, Trenton, North Plainfield or any one of tens of New Jersey Towns. See those old multi family homes? They were the gracious mansions of yesterday.
And their owners bought for the location.
Dee Interest rates were around 7 to 7.75 back in 99, whcih was considered to be very attractive.
Houses in my BC town good schools etc were anywhere from 200 to 250K.
These houses up until lats fall were going for 500K and over, with intereste rates in the 5.75 to 6.25 camp. Gee which scenarion would you rather. The giy who bought in 1999, who then refinanced say form perhaps 30 year to 1 15 year without consuming his equity is sitting pretty, any one who bought int he lst 3 years or so is not.
What is really dosconcerting now, is in my town at least nothing is selling, lots of price reductions, lots of relistings, but nothing selling.
If you want to learn Dee this blog can be very helpful, bu this we are BEregn co yeah,yeah is not going to cut it,you kind of sound like a realtor.
dee: One final point I too am in Northe Bergen, and I do not know aht town you live in, but I driove around a lot and monitor the njmls, and nothing seems to eb selling.
One realoter told me Saddle River and Upper Saddle River have a years woth of inventory or more on the market.
Here is the latest form the njmls on some select Bergen Co towns and inventory available, these are all single family homes,and the numbers do not include coops and condos and FSBO’s
Allendale 42
Franklin Lakes 136
Glen Rock 70
Ridgewood 142
Tenafly 122
All so called premier BC towns all with tons of inventory with more added every day, and it is the middle of Oct. Over 500 homes to choose from I think you might be in denial Dee.
A very simple formula is this, you purchased your home in 1999 at whatever, can you purchase it today? At whatever interest rate.Have your wages gone in accord with you homes value? Who can purchase your home?
KL
Dee and MSD, I remember buying my co-op in Queens in 2000 for $120k, its now at $260k. The mortgage was 6.75%. Mortgages are lower now, so by logical conclusion based on your statements, shouldn’t that apartment only be about 150k based on 4% inflation rate? Or did I miss something?
Truth is, housing went up extremely high, and has to come back down. Considering a 60-80% increase in prices, a 30-40% decrease isn’t unrealistic, there will just have to be quite a few factors involved to bring it down that hard. Consider that there REALLY are a LOT of jobs tied to housing, and they will be disappearing. Don’t forget the amount of materials, appliances, furniture, electronics that won’t be purchased to go into that new home. Doesn’t that have any effect on the economy? Doesn’t a lagging economy indicate job loss, and job loss indicate reduction in expenditure, and reduction in expenditure indicate reduction in home purchases?
I’d like to see someone explain to me how almost every town has a median income of $55k-75k and yet a $450,000 house is supposed to be acceptable? What, does everyone eat Ramen noodles? How many people are getting half salary off the books?
Am I missing something?
Great point KL
You guys made some great points, thats what I like to see. Opinions based on facts.
Give me more
I love hearing Wall Street Analysts predictions. Remember Jack Grubman and his internet stocks anybody? Interesting that these investment banks are buying up these packaged mortgage loans so that they can report the payments as earnings while keeping the obligations off the books. This thing is going to tank and the economy is headed for a recession no matter all the “talking up” these clowns are trying. The dollar is going to get smacked too. As I wrote earlier a 2bedroom 2 bath new construction with parking in Hoboken had gone from about $280K in 2000 to $650k-700k in 2005 with no fundamental justification for the price increase other than perhaps people being priced out of NYC and its same crazy price increases. You are going to see at least a 20% price drop in these in the next two years.
“for 40 % decline of a 1 mil house – do you consider it will deflate by 32% ?? Does it sound a little too optimistic?”
I already posted a $1.3M house that the owner ate 20% on in only 12 months (sold for $999K 12 months after paying $1.3M).
Can’t wait to see what the next 12 months holds.
“People can live without stocks – they cannot live without houses while working in NY.”
Really? I don’t “own” a house, and work in NY.
And while my neighbor is saddled with $4K+ mortgage, I’m living rent free via interest income.
I can wait forever, greedy sellers can’t (divorce, old age, downsizing, etc).
Google up historic mortgage rates — they’re about 8% for the last 60 years, notwithstanding the Jimmy Carter years.
The old everybody in Bergen County works in NYC,and therefore prices cannto go down.
And to prove that everything from top to bottom gets affected, here’s a furniture store going out of business:
http://www.app.com/apps/pbcs.dll/article?AID=/20061007/BUSINESS/610070394/1003
And here is another furniture store going out of business:
http://www.storehouse.com
Nice stuff. Looks like a computer glitch killed them.
I believe most of these homes showing decreases are just shedding the extra fluff. Prices increased cause of sellers concessions and price fixing by adding 10% to simular homes sold recently. 40% decreases in bread and butter homes unlikely. Like I sad there will be plenty of buyers when prices drop 20%-30% it will not get as low as 40%.
Bloggers Respond
grim – fair enough. In all likelihood, I did misread. I also agree that the prudent level is 2-2.5x though lately I think it may be closer to 2 given the reasons I cited previously.
Great work on this blog. I love the datapoints.
when comparing houses sold to last year,remember that each of the last 2 years were record breaking years in total houses sold.if a player hits 100 home runs this year then hits a paltry 80 home runs next year(20% decline)do you get rid of him for such a “lousy year”. i think not.
optimisticseller: The baseball analogy is nice, but can you explain what it is you are saying?
1 You are optimistic because why?
2. Sellers will come back to the market because why?
3. people will buy 500k houses ith 10K property taxes because why?
4. NJ his in dire financial trouble, but property values willl stay high because why?
5. We are losing high paying jobs (see again Spet 06 unemployment report), but house prices will stay high becasue why?
6. ! trillion in ARM resets next year, record amount of hiome owners in ARMS, billions in cahsed out equity, but house prices will stay because why?
if you can answer these questions, can perhaps youy might have some crdibility. Its fine to be optimistice, but you need to have soem reasons as to just why you are.
if a player hits 100 home runs this year then hits a paltry 80 home runs next year(20% decline)do you get rid of him for such a ‘lousy year’.”
Consider your own example — when have housing sales declined 30% in 12 months, and then rose?
http://graphics10.nytimes.com/images/2006/08/26/weekinreview/27leon_graph2.large.gif
Never.
More declines coming — either prepare to ride out the next 4-5 years of declines, or cut your price now 10% below recent comps (last 2 months or less) and get out while you can.
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