Mon 13 Nov 2006
From Time Magazine:
If you’re an empty nester looking to downsize, don’t let the weak housing market stop you. You may be working with less equity today than you had a year ago–but it could be more than you will have a year from now. And swapping your McMansion for something smaller today leaves you less exposed in a falling market.
Say you sell your big home for $600,000 and immediately buy a condo for $300,000, and housing prices drop 10% over the next 12 months, as some economists forecast. In the condo, you would lose just $30,000 on paper; in the house, you would lose $60,000. The condo savings, however, don’t include expenses, which you incur whenever you move.
Even so, things are rarely this simple. If you need to take on debt to complete the swap, you may be better off sitting tight because mortgage rates have risen. Moreover, home prices move unevenly. In many markets, big homes are holding up better than small ones–another reason to consider delaying. But not too long. Ultimately, the high and low ends track. By downsizing now, you could sell your McMansion before the decline hits that end of the market.
…
Pulling the trigger on a real estate deal hasn’t felt this dicey in a decade. The inventory of unsold homes on the market is at its highest level since the last bust. New homes are selling at a slower pace, and prices have fallen. Buyers are walking away from signed deals (and their deposits) at twice last year’s rate.
…
Independent economists take a dimmer view, but even if housing prices edge lower over the next few years, the most important question you need to answer is this: Are you truly ready to downsize? It’s not easy giving up the place where your kids grew up. “But it’s always a profitable decision in a strict financial sense,” says Phil Storm, a financial planner in Denver. He argues that living in a house that’s too big ties up capital and imposes unnecessary taxes and upkeep costs. “I advise making the move as soon as those bedrooms are empty,” Storm says.
LOL… mass media struggling to understand financial reality.
where was Time last summer? now I remember. reporting on the glorious housing boom…
Report: Corporate Bankruptcies Set to Rise
New York Lawyer
November 13, 2006
“Corporate bankruptcy filings, subdued by the high availability of credit in recent years, should hit courts in a wave within the next six to 18 months, according to a report released Wednesday.
“The survey said 70.7 percent of 90 respondents expect ‘the next big wave of restructurings’ is on its way, according to an analysis by the American Bankruptcy Institute and Dow Jones’ Daily Bankruptcy Review.
“The industry seen as most vulnerable was real estate and construction, with weakness also in sectors such as airlines, manufacturing, transportation and consumer products. Eighty percent of respondents said the real estate industry was ‘very’ or ‘extremely’ vulnerable. Two-thirds of respondents named retail as also being in danger.”
Whoa, that is the wishy-washiest MSM piece I recall reading, relative to the bubble and bust.
http://www.washingtonpost.com/wp-dyn/content/article/2006/11/11/AR2006111100857.html
“Thousands Fear Loss of Rent Controls in Historic Apartments..
…has ignited a citywide debate on the loss of middle-income housing — and people.”
“New York is a cosmopolitan place where many people want to live, but not many people can afford to live,” said William H. Frey, a demographer at the Brookings Institution. “We’re seeing the professionalization of Manhattan, and, increasingly, the Manhattanization of Brooklyn and Queens, and even a little bit of the Bronx.”
As soon as a recession hits this area, especially in the financial sector. Say goodbye to NY & NJ. Think this area is bubble proof….think again….
SAS
Kill GSE programs such as Fannie Mae and Freddie Mac.
SAS
Empty nests….bankruptcy….bubble….manhattanization….professionalization…goodbye to NY &NJ
Can I have another glass of Kool Aid with my tamiflu please?
“Can I have another glass of Kool Aid with my tamiflu please?”
Hey….Roche hung in there while all the U.S. based pharma companies got slammed when the Dems took over last week.
where was Time last summer? now I remember. reporting on the glorious housing boom…
Skep-tic
Here is where Time was last summer (June 13, 2005 to be exact)
http://www.time.com/time/covers/0,16641,20050613,00.html
rent controlled apartments is price fixing and should be illegal. if you can’t afford to live in the city you shouldn’t live there so i’m not buying these sob stories. every one you hear there are 1000 others who don’t have it. go where you can afford.
The president of the Shore Builder’s Association has an op ed in the The Tri-Town News (http://tritown.gmnews.com/news/2006/1109/Editorials/071.html) about what a fine time to buy a home this is. Under the current circumstances I am not in a position to respond, but if someone wanted to craft a response (I’m talking to you Mr. Bednar, Chicago, BC Bob, SAS, or if you’re feeling thoughtful at the moment, Booyaa Bob) I think it would be worthwhile.
A good starting point might be that he makes absolutely no effort to account for inflation. He’s also cherry picked his starting years, although accounting for inflation, I would imagine his condo hasn’t gone up all that much anyway.
Off topic here, but I am really expecting to see house prices at around 2002 levels by summer in the so called better towns in Bergen county. i am already seeing asking prices in quite a few instances back to early 04, late 03 levels, and inventory continues to grow, plus all the additional inventory that will come on the market in Spring.
Any how this is what i think we will see, any body else have any thoughts?
The standard rent leveling ordinences are fair! If you live someplace and are a tenant, your costs should remain fixed to inflation. If improvements need to be made or energy prices rise or something, file a financial greivence with the rent leveling board and get the rent raised to offset the incresed cost of operation. As long as the rent control laws are sweeping and inclusive it makes perfect sense.
“rent controlled apartments is price fixing and should be illegal. if you can’t afford to live in the city you shouldn’t live there so i’m not buying these sob stories. every one you hear there are 1000 others who don’t have it. go where you can afford.”
Some of us might not like it. But we should consider the origin of these regulations to understand why we have it. Apparently, retaining the middle class was considered important.
The problem is that in a free market, building owners will only provide high priced housing: McMansions in the suburbs and luxury apartments in the city.
So the middle class moves away, causing basic services to get more expensive (local inflation). This puts pressure on wages to attractand retain the higher paid people. Eventually, companies downsize or move their jobs out of state (or overseas). This leads to an oversupply of luxury housing, and those who remain (now paid less) still can’t find cheaper housing, so the process accelerates.
Eventually, this luxury housing becomes affordable housing, or in extreme cases, low income housing, but only after much volatility in the economy.
I think the point of rent stabilization is to have economic stability. Someone once said that an economy is basically a man-made concept that must serve the people. Unfortunately, we’ve been trained to feel like we need to serve the economy.
Richard, I don’t agree with the current rent controls, but you have to understand that you won’t find any low-wage workers that are necessary to run a city like NY unless you can provide them them with rent controls or another sort of subsidy.