Tue 26 Jun 2007
From the Otteau Valuation Group:
SALES REBOUND IN MAY BUT STILL LAG LAST YEAR
Contract-sales in New Jersey increased by 1,090 homes in May, a 14% increase, above the April level as the housing market continues to struggle with low buyer confidence and an increasing inventory of unsold homes. Despite the increase in May sales however, that was 6% less than May 2006. So far in 2007, year-to-date contract sales are running 4% lower than the same period last year which equates to 1,800 fewer home sales.
Compounding the lagging sales pace is that unsold inventory now exceeds 71,000 homes, the highest on record for New Jersey. The prior record was 68,000 reached in September 2006. Based upon seasonal housing patterns it is likely that unsold inventory will continue to increase for several more before receding later in the year. The present supply of 71,000 represents an 8-month supply as compared to a 7-months one year ago.
The New Jersey housing market has been stalled for several months now following increasing sales earlier in the year. That this is occurring in the face of low mortgage interest rates, a reduction in home prices, increasing worker salary and fewer new home construction starts is evidence that the current slowdown is deeply embedded and not likely to reverse soon. Part of the reason is that concerns about sub-prime mortgage delinquency are sending shock waves through the housing market by causing mortgage lenders to tighten loan approval standards and at the same time creating uncertainty in the mind of potential home buyers. As a result, many buyers are either unable to obtain affordable financing or have put their home-buying plans on hold out of concern about this issue. The facts however suggest that the ‘bark is bigger than the bite’ on this topic as actual foreclosures in New Jersey are few in number and have been steadily declining over the past several months. 270 in March, 162 in April, 147 in May. Even more compelling is to consider these figures within the context of 71,000 homes for sale and you can see that any real impact on the housing market to date is insignificant. The problem comes from the counting of foreclosure activity which has been dramatically overstated, casting a dark shadow over the housing market. Some relief on this issue will come later this month, largely as a result of criticisms in this newsletter, as counting methods will be revised to reflect more accurate figures (read more about this story at the following link - RealtyTrac to revise formula).
Any benefits of the recounting however will likely come too late to avoid a further decline in home prices as the housing market now faces the additional challenges of rising mortgage interest rates and the likelihood of a further slowing of sales pace during the approaching fall and winter selling seasons. As a result, any significant recovery will likely be pushed off until 2008 at the earliest. Given the current situation, home sellers should understand that Right-Pricing! will take on even greater significance in coming months. From the buyer’s perspective, rising mortgage rates and increasing seller flexibility will present significant opportunities during the 2nd half of the year that will likely disappear in 2008.
The problem comes from the counting of foreclosure activity which has been dramatically overstated, casting a dark shadow over the housing market. Some relief on this issue will come later this month, largely as a result of criticisms in this newsletter, as counting methods will be revised to reflect more accurate figures (read more about this story at the following link - RealtyTrac to revise formula).
Any benefits of the recounting however will likely come too late to avoid a further decline in home prices
I think Otteau puts entirely too much blame on RealtyTrac for what is happening in the market. I do agree that the data is easy to misinterpret by a lay reader (or media), but I don’t feel that any single dataset has the power to sway the public in this manner.
jb
Four important datapoints here:
1) NJ May Sales down 6% YOY.
2) NJ YTD Contracts (a leading indicator of future sales) running 4% under 2006.
3) NJ Inventory, at 71,000, is at a record high.
4) Inventory absorption, at 8 months, is higher than last year.
I’d like to take just a second to plug Otteau. This comes from me, I wasn’t asked to do so.
Agents, if you aren’t attending the Otteau Spring and Fall Workshops, you really are missing out. Otteau is, without a doubt, one of the best sources for real estate market data in NJ. I’m looking forward to attending the upcoming seminar in the Fall. I’d suggest you take a day and do the same.
As far as builders and developers, I’m sure I don’t need to plug, you already know who they are. Anybody who is anybody is already a client.
jb
The Ledger piece by Sam Ali is worth reading, if you haven’t already.
RealtyTrac to revise formula
Tuesday, June 12, 2007
BY SAM ALI
Star-Ledger Staff
Anyone have specific stats on how Hoboken condos are selling?
“but I don’t feel that any single dataset has the power to sway the public in this manner.”
You will be surprised what a single data sheet can do if every major media organization reports on it…
From NPR:
Should You Buy in a Sliding Real Estate Market?
Let me sum up Mr. Otteau’s report for you:
-Inventory is at all time highs.
-Sales are down, more so than last year
-Who or what can Mr. Otteau blame for this other than his crumb bum cronies? gee wiz, lets try sub-prime mortgage delinquency, and counting of foreclosure activity (let me ask, anyone whom has bought or considered buying, was running to the reality tracks foreclose list the first thing you did?)
Prices will continue to decline rest of 07, and lets pray for all our livelihoods that 08 will be the bottom.
Sellers, please don’t make this market worse with your arrogance and stupidity, lower your prices.
Buyers, please buy…or else…or else….by golly…. 08…these “significant opportunities”…they will just….errr….they will just “will likely disappear in 2008″
and thats sum it up.
compliments of me,
SAS
That NPR story is worth a listen. Very well balanced, no shills, good commentary.
jb
I have to disagree with you on this one JB:
Mr. Otteau’s report here was something right out of some Edward Bernay’s writings.
I know Mr. Otteau is a smart man, who has to play the PC game as not to bite the hands that feeds his company.
But his name has become a product, rather than the works and reports being the product. Otteau uses his authority and Consensus to try to speak for itseld rather than the quality, or lack there of…
But in any case, I’m a lover of women, not a fighter of men (I had my fair share of that in the USMC), the scotch and sticks are always on me ;)
SAS
JB - You say NJ inventory is at an all-time high. Can you elaborate? When was the last time it was nearly this high?
And the old record was when? Would like to know when the old record was set, how quickly the market rebounded.
I really think anyone who hasn’t sold by the end of the summer is in trouble. just one guy’s opinion.
“You will be surprised what a single data sheet can do if every major media organization reports on it”
I’d have to agree with this Troll bloke on this one.
Don’t let this go to your head Troll ;p
SAS
Troll (6)-
Otteau’s point is a valid one. Counting a single foreclosure as 4-5 foreclosures (and duplicating that error over and over again) is erroneous and potentially misleading to the public.
However, MSM also parrots NAR’s party line and its ever-hopeful claims of better days immediately at hand.
In the final analysis, all the erroneous info floating around probably cancels itself out. There are plenty of undoctored numbers out there to give the careful reader a clear idea of where the market truly stands.
The Parasite Tour Guides called again today — “Just put in an offer.”
There are about 200 realtors in the vicinity, chasing the handful of transactions.
No enough checks to go around, lots of resumes submitted to the Macy’s perfume counter, no doubt.
#11, time is running out to close before school starts in September.
In 30 days, the squeeze will tighten further.
Then good luck finding a “move up” buyer who can successfully sell their old house.
JB: That NPR story is good. Finally some balanced reporting.
My main take so far is that majority folks have forgotten or have never lived the RE downturn. These are the folks who are buying right now, just looking at 10% discount. Patience is a virtue.
Otteau’s point is a valid one. Counting a single foreclosure as 4-5 foreclosures (and duplicating that error over and over again) is erroneous and potentially misleading to the public.
I think the real story though is the trend. The trend in foreclosures is up. I’m not so sure the raw number matters. Even as Otteau points out, with 71,000 homes for sale in NJ, what’s a few hundred homes?
I also see the Realtytrac numbers are more of a leading indicator. While most notices of default will not end in foreclosure, more NOD’s should logically mean more foreclosures down the road.
Renting,
I’d go a step in another direction, a higher level of NODs and LIS points to potentially higher inventory. I’m not sure why Otteau doesn’t acknowledge this fact. The numbers he cites, the REO properties, will undoubtedly reappear on the market as inventory, however, it is plausable that a homeowner facing foreclosure will attempt to sell as well, adding additional inventory.
jb
PLEASE…give me one decent mainstream reporter that will just come out and say….homes aren’t selling as well in 07 because people realize that prices went up too much between 01 and 05 and that they have to come down a bit and normalize…
AND…enough of the “rates at historic lows BS”…the ARMS and fixed rates are much higher than they were back in 04/05…
Realtytrac numbers for May:
NOD: 2,890
NTS: 891
REO: 147
Lennar’s Earnings: A Sign on Housing Sector’s Fate?
The home-building sector’s canary in the proverbial coal mine might be Lennar.
The Miami company reacted to the severity of the housing downturn earlier than many of its competitors. With incentives of up to 10% on unsold homes last year, it was one of the first large builders to aggressively discount to reduce its overhang of land and houses. When it reports earnings today, it could signal how effectively the industry is unwinding the excess.
Discounting eroded Lennar’s profit margins, but it has helped the company pull in cash to reduce debt. “You could argue this early mover strategy was the right thing to do especially the way this market has played out,” said Paul Puryear, an analyst at Raymond James & Associates.
Reducing land, especially lots that have been prepared for development, is critical to homebuilders and the broader housing market. For homebuilders, the land is a dead weight on the balance sheet unless it is put to use. For the industry, it looms as future supply in a market already swelling with both new and existing homes. At the current sales rate, it would take 8.9 months to sell off the supply of existing homes already on the market in May, the highest level of inventory since 1992, the National Association of Realtors said yesterday.
This puts downward pressure on prices for everybody. Many analysts believe home supplies will decrease, and prices will stabilize, only after builders shed their unwanted land.
i find myself more or less wrapped up in the mania currently surrounding the market I work in. and coincidentaly i find myself looking for my first home because the timing in my life is about right for it.
anyone have views on the housing market in the upscale towns sprinkled around essex county? more specifically, the towns within a 35-40 midtown direct train ride into penn station in nyc. there is something about those towns that reminds me of the sustainability of the market for apartments in NYC…but what do I know anyway! Thoughts?? Thank you.
50% OFF HOME PRICES needed to avoid Housing Crashes in New Jersey !!!
imho
Bear Stearns Rivals Reject Fund Bailout in LTCM Redux (Update3)
By Jody Shenn and Bradley Keoun
June 25 (Bloomberg) — Bear Stearns Cos. is getting a taste of its own medicine.
It was Bear Stearns, the biggest broker to hedge funds, that nine years ago declined to join 14 other investment banks in the bailout of Long-Term Capital Management LP. Then last week, as New York-based Bear Stearns pleaded for help to rescue two of its hedge funds teetering on the brink of collapse, many of the same firms refused to come to its aid.
Merrill Lynch & Co., which pumped $300 million into LTCM, said no and seized $850 million of bonds held as collateral for loans it had made to the funds. Lehman Brothers Holdings Inc., JPMorgan Chase & Co. and Cantor Fitzgerald LP also pulled out, leaving Bear Stearns to sort through the wreckage of bad bets on subprime mortgage bonds and collateralized debt obligations.
“There is a good analogy to Long-Term Capital,” said Anthony Sanders, a former director of mortgage-bond research at Deutsche Bank AG who starts next month as a professor of finance and real estate at Arizona State University’s W.P. Carey School of Business in Tempe, Arizona. “They were all friends with Bear Stearns when they thought the spreads were huge. Now that the market has turned, Bear’s standing there like the lone grizzly.”
Without assistance from his Wall Street peers, Bear Stearns Chief Executive Officer James E. “Jimmy” Cayne, 73, was forced to salvage the healthier of the two funds, offering to put $3.2 billion of capital at risk in the biggest bailout since LTCM. Bear Stearns may dissolve the second fund after more than $600 million of investors’ money dwindled to less than $200 million.
more: http://www.bloomberg.com/apps/news?pid=20601109&sid=a2mbR8rPyzto&refer=news
From Bloomberg:
New-Home Sales in U.S. Probably Fell in May After April Surge
Purchases of new homes in the U.S. probably dropped last month, ending speculation that a jump in April sales signaled a recovery in demand, economists said before a government report today.
Sales fell 6 percent to an annual pace of 922,000 in May from a 981,000 rate the previous month, according to the median of 71 economists’ forecasts in a Bloomberg News survey. Purchases unexpectedly surged 16 percent in April, the most in 14 years.
A jump in mortgage rates this month and a glut of unsold properties on the market will continue to discourage home buying and construction, economists said. The housing slump, already the worst since 1991, will restrain the economy for the rest of the year and potentially into next.
“Builders are continuing to be quite cautious and are taking actions to bring the supply of homes more in line with the demand,” said Drew Matus, a senior economist at Lehman Brothers Holdings Inc. in New York.
The Commerce Department is scheduled to issue the new-home sales report in Washington at 10 a.m. Estimates ranged from 850,000 to 990,000.
From the WSJ:
EASY MONEY
Behind Buyout Surge,
A Debt Market Booms
CLOs Spark Worries
Of Volatility and Risk;
Loan Standards Loosen
By SERENA NG and HENNY SENDER
June 26, 2007; Page A1
The corporate buyout boom of the 1980s was funded in large part by high-yield “junk” bonds. This time around, another financial product is supplying much of the fuel — collateralized loan obligations.
CLOs, as they’re called, are giant pools of bank loans bundled together by Wall Street and sold off to investors in slices. They aim to spread default risk an inch deep and a mile wide. Last year, more than half of the loans behind the record wave of buyouts were parceled out to investors as CLOs, bankers say.
As corporate borrowing soars, however, concerns are growing that CLOs have made it too easy for shaky or debt-laden companies to borrow money. If economic conditions deteriorate, those loans could sour and investors in the riskiest CLO slices could face large losses. That, in turn, could make it harder for buyout firms to borrow money.
“We are witnessing a loan market rife with liquidity and disproportionate power in the hands of borrowers, arrangers and financial sponsors,” said credit-rating firm Standard & Poor’s Corp. in a June 13 report. S&P expressed concern that loans without strong covenants to protect lenders are showing up in CLOs. The rating company urged investors to “drill down” while researching the investments and to “hold CLO managers accountable” for questionable loans.
The past decade has seen headlong growth in markets for various complex financial products, from derivatives to mortgage-backed securities to CLOs. These booming markets are mostly opaque: Investment offerings are private and largely unregulated, trading is sometimes thin, and the securities can be hard to value. That makes it especially difficult to predict what will happen if market conditions rapidly turn unfavorable. Among CLOs, for example, modest moves in loan-default rates can lead to big swings in value for investors in the riskiest slices.
At the moment, default rates on corporate loans are very low, and CLOs are producing juicy returns for investors. Nevertheless, there are signs that nervousness is creeping into the market. In April, investors began demanding higher returns to hold the riskier CLO pieces, a sign that they were growing more worried. An index tied to non-investment-grade corporate loans fell all last week, according to Markit Group, its administrator. The index, LCDX, was launched one month ago and reached its lowest point yesterday.
The market for mortgage-backed securities — which are similar to CLOs but are backed by home mortgages rather than corporate loans — is providing CLO investors with a case study in how quickly values can tumble. Troubles in the housing market have driven down the value of securities backed by risky “subprime” mortgages. Last week, two Bear Stearns Cos. hedge funds with substantial holdings of illiquid securities backed by subprime-mortgage bonds had to scramble to stave off collapse after their assets lost much of their value. Bear pledged up to $3.2 billion to bail out one of the funds.
In late April, a Bank of England report noted parallels between the markets for subprime mortgages and for poorly rated corporate credit, heightening concern about the CLO market. CLOs are a form of collateralized debt obligation, or CDO. Besides corporate loans, CDOs often hold mortgage bonds and junk bonds.
Over the next few months, the market for non-investment-grade corporate debt will be tested by the sale of roughly $200 billion of new loans and billions more in bonds. In several loan and bond sales in recent weeks, including one to fund the buyout of Thomson Corp.’s Thomson Learning unit, investors have demanded higher interest rates or more protections to compensate for the risk.
From Reuters:
Lennar posts quarterly loss
Lennar Corp., the second largest U.S. home builder, on Tuesday reported a quarterly loss, citing charges related to land values and declining demand related to the subprime-mortgage meltdown.
Lennar posted a net loss of $244.2 million, or $1.55 a share for the fiscal second quarter that ended April 30, compared with net earnings of $324.7 million, or $2 a share, a year earlier.
From CNN/Money:
Lennar reports unexpected loss
In another sign of trouble for the battered housing and home building market, No. 1 home builder Lennar reported an unexpected loss in its second quarter and warned of more losses and possibly tougher times ahead.
Lennar, the largest builder by revenue in 2006, reported a net loss of $244.2 million, or $1.55 a share, down from net income of $324.7 million, or $2.00.
Even excluding $1.33 a share charge related to valuation adjustments, write-offs of option deposits and pre-acquisition costs, the company would have lost money, and it’s not clear that analysts would exclude those charges when comparing results to their forecasts. Earnings tracker First Call had forecast a 5 cent a share profit for Lennar.
The company’s statement talked of worse than expected weakness in the housing market, which it said made it impossible to give specific guidance going forward. But it does now expect a loss in the third quarter, when analysts had been forecasting a 25 cent a share profit according to First Call.
“The housing market has continued to deteriorate throughout the second quarter,” said CEO Stuart Miller in the company’s statement. “The supply of new and existing homes has continued to increase resulting in declining home prices across our markets. As we look to our third quarter and the remainder of 2007, we continue to see weak, and perhaps deteriorating, market conditions.”
Emphasis added
jb
50% OFF HOME PRICES needed to avoid Housing Crashes in New Jersey !!!
I think 50% off would be a crash.
What happened to Otteau’s prediction of a “near bottom” in January??
http://njrereport.com/index.php/2007/01/27/1900/
Otteau talks about “right pricing”. Does “right pricing” mean 2005 prices? Otteau’s forecast is targeted towards his client base [Realtors?]. I hope he provides a more complete and honest analysis during his workshop and unlike last time doesn’t back away from what he said because of NAR pressure.
That’s just my opinion.
Otteu says:
“From the buyer’s perspective, rising mortgage rates and increasing seller flexibility will present significant opportunities during the 2nd half of the year that will likely disappear in 2008.”
Antitrump scared if he don’t run out and buy now, he may miss opportunity of lifetime. Antitrump must will no longer be able to buy the 2Br 1 Batch cape for 500K. He must pay 700K after 2008.
Mr Otteu.
That light you see in 2008 is the oncoming train. Save your comments until you see prices adjust to the new inventory levels & decreased buyer pool due to subprime and meltdown and lack of urgency on buyers part to run out and pay the fools asking prices.
Not to mention the avg 500 bps increase in mortgate rates.
Given the current pace, I can’t see this cycle playing out any faster than prior cycles have.
Thoughts that the RE downturn, and subsequent upturn would be accelerated by the immediacy and relevancy of information (media, blogs, internet, etc) are turning out to be incorrect.
If this cycle follows the pattern seen during the last bust, it could be 2010 or later before we see signs of a recovery.
jb
Thoughts that the RE downturn, and subsequent upturn would be accelerated by the immediacy and relevancy of information (media, blogs, internet, etc) are turning out to be incorrect.
JB,
Even with all that info at your fingertips, the problem is you still have to want to know. I am shocked but I guess not surprised at the fight against knowing.
KL
JB [33],
I stick with my very first post on this site, regarding declines. 30-40% decline, peak to trough, in a 5-7 year time frame. Throw the msm, internet, cheerleaders and gloom and doom out with the unions. They are of no consequence. It all comes down to price patterns and time cycles. It’s easy, just run a Monte Carlo simulation. However, make sure that blackbox includes pattern/trend recognition.
From the Boston Globe:
Housing market continues to slump
May brought no relief to the slumping Massachusetts housing market as the volume of single-family homes sold took its biggest hit so far this year and prices fell 4.6 percent from $330,000 to $315,000, a new report said.
The report, from the Warren Group of Boston, the publisher of Banker & Tradesman and a provider of real estate data, noted that the number of single family homes sold in May fell 9.1 percent to 4,765 from 5,242 in May 2006.
May 2007’s drop was the largest since November 2006, when sales dropped 13.5 percent on a year-to-year basis.
Home sales started off 2007 with a healthy increase of more than 5 percent in January but have fallen every month since, the Warren Group said.
In May, the median price of a single-family home in Massachusetts was $315,000, down 4.6 percent from a year ago, the Warren Group said.
On the condominium front, the number of units sold in May fell 2.1 percent to 2,981 from a year ago, the group said, and the median price for a condo fell 3.5 percent from $285,000 in May 2006 to $275,000 in May 2007.
For those tracking cancellation rates as a leading indicator, LEN’s cancellation rate has been at 29% for the last two quarters..
jb
#17
I have to disagree with Otteau. That is the real story here…the trend. No matter how you slice the data, double or triple counting the same property, the number of homes going into foreclosure process or REO has increased significantly since Nov.
I understand Mr. Otteau is part of the real estate establishment, but blaming this on realty trac numbers market psychology and peoples skittishness re sub-prime is a stretch IMHO.
As far as people knowing, I would say most do not. The sellers are in denial, reflected by for the most part still jokish asking prices.
The homeowners who are not selling are in denial, as witnessed by the recent surveys on what would my house sell for.
Then there are the those of us here and others small in number though we are, who could buy but will not at these prices.
The only time buyers are finding out its a problem is when they go to get financing, and they are turned down.
So lets return to lax lending standards, so that the market can becoem robust again. Yes thats the answer.
bear (30)-
I haven’t noticed Otteau backing away from anything. Last fall, he stood in front of a group of agents and repeatedly used the word “crash”.
I wouldn’t be surprised to find Otteau isn’t a NAR member. He’s an appraiser.
I agree with Otteau that “double” or “triple” counting the numbers is going to overstate the absolute number of “foreclosures” (we’re really talking about foreclosure related events), but does it necessarily change the trend (yoy percent changes)?
For example:
NJ Foreclosures (RealtyTrac data)
Notice of Default
Q1 06 - 7,821
Q1 07 - 11,159
Mortgage defaults up 43%
Notice to Sell
Q1 06 - 1,704
Q1 07 - 2,445
NTS (Auction notice filings) up 43%
REO
Q1 06 - 935
Q1 07 - 568
Possessions down 40%
jb
“Home values in 20 U.S. metropolitan areas fell the most in at least six years, weakened by a record supply of properties for sale.”
“No region is immune to the weakening price returns,” said Robert Shiller, chief economist at MacroMarkets LLC and a professor at Yale University in New Haven, Connecticut, said in a statement.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aDPbZ0uuxP6E&refer=home
Regarding #41.
REO isn’t a good indicator of foreclosure activity, simply because it only measures the number of homes that did not sell at auction, and were repossessed by the lender.
If a home sells at a foreclosure auction, it does not appear as a REO number.
Likewise, a NOD property that the lender allows to be sold “short” never makes it through to the REO data, but it is (or rather was) inventory.
jb
The most important bit of information today, the Case Shiller S&P Home Price Index.
S&P/Case-Shiller Home Prices Fell 2.1% in April, Index Shows
Home values in 20 U.S. metropolitan areas fell the most in at least six years, weakened by a record supply of properties for sale.
Home values declined 2.1 percent in April from the same month a year earlier, according to a report today by S&P/Case- Shiller. It was the fourth straight drop in the group’s index, which started in 2001.
The housing market continues to restrain the economy even as other areas, such as business spending and manufacturing, accelerate. Elevated inventories of unsold homes, reduced demand and stricter loan requirements will probably keep prices low the rest of this year, economists said.
“No region is immune to the weakening price returns,” said Robert Shiller, chief economist at MacroMarkets LLC and a professor at Yale University in New Haven, Connecticut, said in a statement.
Home prices fell 0.2 percent in April from a month earlier, following a 0.3 percent drop in March, according to the index. The figures aren’t adjusted for seasonal effects, so economists prefer to focus on year-over-year changes.
Fourteen cities showed a year-over-year decrease in prices for the month, led by a 9.3 percent drop in Detroit and a 6.7 percent decline in San Diego.
“As we look to our third quarter and the remainder of 2007, we continue to see weak, and perhaps deteriorating, market conditions.”
Lennar # 28,
This amid falling prices, their avg price fell 7.5% and incentives rose 77% to an an avg of approx 43K per home. This must make existing home owners squirm. If they have any clue whatsoever.
S&P Case Shiller puts NY Area home prices down 1.5% year over year in April.
jb
Talk about a market moving headline.. From MarketWatch:
Home prices fall at fastest rate in 16 years
Home prices in 10 major U.S. cities dropped at the fastest pace in 16 years in the 12 months ending in April, according to Standard & Poor’s Case-Shiller home price index released Tuesday.
Home prices in 10 cities fell 2.7% year-over-year, the largest decline since September 1991.
Meanwhile prices in 20 cities dropped a record 2.1% year-over-year. The 20 city index is more comprehensive, but its history only goes back to 2001.
Price appreciation has slowed for 17 consecutive months.
I wonder why we pay so much attention to this Otteau guy. Warren Buffet says Never ask a Barber if you need a haircut - translated as never listen to Otteau about the state of housing.
BTW - I am looking at a 2015 recover in the housing market, at the latest.
I am new to this blog but I thought I would share that we put our house in one of the “top” towns (sorry, but it gives you an idea that we are in one of those train towns) on the market for sale by owner and sold it in 3 weeks with a 5% price reduction in the negotiation phase. We were planning on buying if we saw a good deal or renting but we bought at a 5% price reduction. Before you all chop me with that falling knife theory let me say that have you ever tried to pick the bottom of the stock market? Yes, inventory is up but in this town the homes with any market value are selling and the only “inventory” are the problem properties and price issues. And don’t forget that people buy homes when they need them, not everyone can “be patient.” Okay, there it is.
JLB,
Welcome to the blog. One thing that hopefully will become clear to you is that the purpose of this blog is not to affect the market by conspiring to “not buy” until seller capitulate. If anything, the bears on this board are pretty sure this market was/is not for them and some of the data out there continue to point this out. If someone HAS to buy then let them buy. It is really not up to anyone of us to make your decisions for you.
IMHO, the bears on the board are probably some of the most patient folks out there. Personally for me, I am waiting to find the house where the owners have to sell. I can wait. I congratuate you on your sell and buy.
good luck,
afe
I’ve got to agree with Clot, I can’t imagine why you are labeling this guy a “shill”.
Here are some of the notes that I took from the workshop I attended last Fall. These are *his* words, not mine.
Keep in mind this was from last fall.
——
“18 month to 3 year cycle depending on how economic variables play out over the coming months
“Prices are now declining, the bottom has not been hit, prices will fall further”
“Worst part of the housing market is the luxury market…will see the deepest declines in this cycle…will be the last to recover…may never recover from the slump”
“most reports on home prices are either wrong or misleading”
This is in reference to the NAR data pointing that home prices were increasing during this time. Otteau was indicating price declines were already in the process of taking place. Also…
“Statistics being published are dead wrong”
“I can tell you that prices are falling and will continue to fall”
“Job creation in NJ out of balance, creating low paying jobs”
“First time buyers are most critical…priced out of the market”
“For every first time buyer that doesn’t purchase, 5 more sales don’t take place”
“Home prices down approximately 10%”
“Speculators will rush to the exits”
“High speculative demand at the Jersey Shore”
“In 2005, speculators accounted for 28% of all home sales in New Jersey”
“2010 prices were reached by 2005″
recomends that agents “Set initial asking prices lower”
“Entire market now in a complete stall”
“Deepest declines:
Luxury Market
Vertical urban condo
Vacation Homes”
“50% of demand on Gold Coast midrise condos was speculator demand”
———-
Make no mistake, Otteau is not a “shill”. Don’t label him as such because he isn’t rooting for total economic collapse.
jb
#49
I agree that most of the homes that are sitting are overpriced junk. People seem to be pricing more based on what their neighbor is asking than what will sell. Not everyone is so stupid, however, and you have proved it by selling FSBO in a tough market. I’m sure some might say you could’ve gotten more, blah, blah, blah, but the bottom line is you sold quickly with minimal hassle and found a new house at a price you can afford. nice work
“Make no mistake, Otteau is not a “shill”. Don’t label him as such because he isn’t rooting for total economic collapse”
JB, How much did you $pay$ to attend this workshop last Fall, or is it open to a Joe 6 pack like myself?
SAS
JLB,
How dare you sell on your own? Don’t you know a licensed “professional” could’ve gotten you more money on top of their 6% fleecing fee?
“Lennar reports unexpected loss”
What’s with the ‘unexpected’ insert in the headline? Wasn’t it pretty obvious from earlier that these guys are going to bleed red ink for many quarters?
btw–
I will be going to that bike shop in Ft. Lee, might buy me a Fuji.
I want to start riding my bike to work. My small part to reduce greenhouse gases & not give my money to these middle east OPEC fruitcakes.
No, I aint no burn out hippie either.
SAS
JB on #51 - Otteau might be saying the current facts about the housing the market, but where he falters in in his prediction on a recovery. Most of RE pundits are overly optimistic on their timing of recovery (ie end of 2007, or fall of 2007) and they create a sense of urgency among buyers by saying that they will miss the boat etc etc. He will obviously say this because its in his best interest. While I agree that nobody can predict the recovery of housing, historically, it has taken several years, even decades (source: Mania & Panics by Charles Kindleberger ISBN# 0471161713 ). So to simply come out and say that the housing will recover by the end of this year classifies Otteau as a Shill.
From MarketWatch:
New home sales fall in May to 915,000 units
U.S. new home sales fell 1.6% in May after surging in April to a seasonally adjusted annual rate of 915,000 units, the Commerce Department said Tuesday. Economists expected sales to fall to 930,000 units. At the same time, sales in February, March and April were revised down by 84,000 units. April’s sales pace was revised to 930,000 units from the 981,000 units initially reported, a 12.5% rise from March’s downwardly revised 827,000 annual pace. This is still the largest sales increase since September 1993. New home sales are down 15.8% in the past year. Inventories of unsold homes fell 1.1% to 536,000, representing a 7.1-month supply at the May sales pace. The supply of inventory peaked at 8.3 months in March. Inventories of unsold homes are down 5% in the past year. The median sales prices fell 0.9% in the past year to $236,100.
Bear is becoming a grizzly.
http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2007-06-26T125817Z_01_N26242189_RTRIDST_0_EVERQUEST-IPO-UPDATE-1.XML&pageNumber=0&imageid=&cap=&sz=13&WTModLoc=InvArt-C1-ArticlePage2
From MarketWatch:
Consumer confidence falls to 10-month low in June
U.S. consumers are “subdued” about the economy and the job market, the Conference Board said Tuesday. The consumer confidence index fell to 103.9 in June from 108.5 in May. It’s the lowest since August. Economists were expecting a pullback to 105. The present situation index fell to 127.9 from 136.1; it’s the lowest since November. The expectations index fell to 87.9 from 90.1, matching March’s low. “Looking ahead, consumers remain rather subdued about short-term economic prospects,” said Lynn Franco, director of the research group’s consumer research center. The number of Americans who say jobs are plentiful fell to 27% from 29.1%, while the number who said jobs are hard to get rose to 21.1% from 19.7%.
From Bloomberg:
U.S. New-Home Sales Decreased 1.6% to a 915,000 Pace
Purchases of new homes in the U.S. dropped in May, signaling demand is still faltering in the second year of the housing slowdown.
Sales fell 1.6 percent to an annual pace of 915,000 last month from a revised 930,000 rate the prior month that was lower than previously estimated, the Commerce Department said today in Washington. The supply of unsold homes at the current sales pace rose.
A jump in mortgage rates this month and a glut of unsold properties on the market will continue to discourage home construction, economists said. The housing slump, already the worst since 1991, will restrain the economy for the rest of the year and potentially into next.
…
Economists forecast new home sales would decline to a 924,000 annual pace from an originally reported 981,000 rate the prior month, according to the median estimate in a Bloomberg survey of 72 economists. Forecasts ranged from 850,000 to 990,000.
The increase in April sales was revised down to 13 percent, the biggest since September 1993, from 16 percent.
Purchases dropped in three of four regions. They fell 11 percent in the Northeast, 7.3 percent in the South and 1.9 percent in the West. Sales jumped 31 percent in the Midwest.
I’m interested more in hearing this ‘High Speculative Demand at the Jersey Shore’. As a resident of this area and a potential FHB who is sitting back and ‘waiting’, what are the specifics surrounding this speculative demand? Specific area, range, lot size, sq. ft, etc.
In my case, for ’starter homes’ (and condos), I just don’t see that demand. I see lots of inventory and lots of prices that are slowly coming down in the direction of becoming reasonable.
The quick buy, teardown, rebuild market is almost non-existant anymore; the flips are turning into flops more and more; the McMansions are going vacant and sitting; even the higher end property on the water is going for some considerably reduced prices.
grim: RE Otteau
1. What is your impression relative to his economic view?
I say that in the NYC-area we are more likely than not [greater than 50%, but close to that level] going to have a recession due to financial services related layoffs within the next 24 months. Will this impact his forecast?
I reviewed your commentary, as well as notes from his seminar. I just get the feeling he is focusing on RE dynamics, and leaving the more troublesome “economy” issue constant. I think it is understandable [in fact professionally responsible], because ultimately he needs to speak from his expertise, but additionally, it gives a huge positive spin that effectively trumps EVERYTHING else.
2. If you were a cynic, you could argue that he bled all the red ink last fall knowing full well what we are staring down. In this sense, he builds public credibility and reputation. To the extent he believes he can influence NNJ given his past forecast, he can now “talk up the market”. You have to be cynical of course ;)
jlb - Congratulations on your sale. Your house must be lovely. My town as a 12+ month absorption rate because most of the homes for sale have not been updated since the 50s and are insanely overpriced. However, one house recently sold at asking price in two days - the buyers didn’t even consider offering any less. It was a beautiful home, on a great street, wonderful landscaping, completely updated inside and price reasonably… under $600K. They would have gotten close to $700K two years ago.
#50 I didn’t mean to indicate there is a “not buy” conspiracy, but I did want to point out there are buyers out there that aren’t looking for the lowest price, just a lower price
#52 thanks for your words, believe it or not I don’t think we could have got more for our house in that I believe “the only price that matters is the one a buyer is willing to pay.” oh and of course I add that 40k of commission we didn’t pay to our ROI
#54 haha I do think there will be a change in the way real estate transactions happen. We had open houses and we had quite a bit of traffic and the majority were smart young couples not working with agents but they were serious qualified buyers(there are buyers out there!), these “starter” home people are shopping the internet and not waiting for a realtor to call them or drive them around looking at crap so they can be sold what the realtor wants at a higher price point.
JLB #66,
Exactly! Good for you!
Pimco’s Gross says subprime crisis not isolated
Gross said the subprime crisis “may be just what the Fed has been looking for: easy credit becoming less easy; excessive liquidity returning to more rational levels.” Nonetheless, Gross said he expects the Fed to issue an “insurance” policy in the form of lower short-term interest rates in fed funds over the next six months…Gross added the subprime crisis will reduce consumption and new home building in the next 12-18 months.
http://www.reuters.com/article/fundsFundsNews/idUSN2635126420070626
Yahoo Finance is running a poll on whether housing prices will continue to fall in June.
Current results: 89% say yes
everyone agrees that prices of houses are falling, they just don’t think it’s their own particular house
Zacks Analyst Interview Highlights: D. R. Horton
With so many difficulties facing the housing sector, do you really think a 2008 recovery will happen? Why or why not?
We do not see a housing recovery in 2008. There are a few factors behind our pessimism on the housing market. Overwhelmingly, the biggest problem continues to be the lack of home affordability, which was caused by several years’ of home price appreciation outpacing the general rise in the median (personal) income.
On top of the issues tied to affordability and tightening credit conditions, the housing market has lost a key buyer of real estate—that of the speculator…Among the publicly-traded builders, such as a D. R. Horton (NYSE: DHI), the cancellation rate has spiked above 30% compared to historical levels of 10%-15%. This has important implications for the housing market and most certainly delays a recovery until 2009.
http://home.businesswire.com/portal/site/google/index.jsp?ndmViewId=news_view&newsId=20070625005237&newsLang=en
New piece by Gross up at Pimco:
Looking for Contagion in All the Wrong Places
JLB (66)-
1. I have yet to sell somone a home they don’t want.
2. If you did so well selling in a non-competitive bidding environment…how well could you have done with the benefit of a competitive bidding environment?
Did you buy FSBO, too?
“everyone agrees that prices of houses are falling, they just don’t think it’s their own particular house”
BINGO!
SAS
#73 Yikes, I wasn’t prepared for a realtor to comment but I do understand the defensive stance in regards to you having “yet to sell someone a home they don’t want.” The problem with the way it used to work is the realtor worked much like a “censor,” in determining what a buyer knows about or sees and because of that had more power in influencing what choices they could choose from and the internet is changing that—oh and for every realtor that thinks people don’t know how to search on gsmls, oh please! And did I say it was a non-competitive bidding environment? We did cooperate with brokers but isn’t it odd our serious buyers came by themselves, hmmmm. As far as buying, the seller pays the listing realtor, right?
Grim (72)-
Wow. What an eye-opener.
I agree with Gross…this slop can be priced at par and peddled under any sunny day assumption these clowns care to generate. The bottom line is: those CDOs and MBS are backed by thousands of delinquent and soon-to-be-defaulted loans.
The margin call always sounds the same, whether your collateral has the veneer of quality or sports a thin coat of smelly sludge.
Interesting article….the below statement is probably as accurate a statement I have seen. The whole Bear Stearns saga needs to be watched closely because it wouldn’t just affect Bear but others as well.
Mortgage Meltdown!
“A sale would give banks, brokerages and investors the one thing they want to avoid: a real price on the bonds in the fund that could serve as a benchmark…
http://www.moneyandmarkets.com/issues/MaM633_4.html
From Reuters:
Benchmark ABX at lows as subprime woes mount
Benchmark ABX indexes fell to fresh lows on Tuesday, driving the cost of insuring subprime mortgage securities against default sharply higher, investors and analysts said.
The ABX 07-1 “BBB-” series, which are tied to subprime loans made in last year’s second half, sank to 55.70 on Tuesday from 56.18 at Monday’s close. The index has fallen 42 percent since it was launched in January.
The ABX 06-2 “BBB-” index, which references loans from the first half of 2006, also traded at a new low of 61.78 after closing at 62.16 on Monday. The index has fallen 38 percent this year.
“This is a continued selloff from last week coupled with the weak remittance reports from Monday,” said one investor.
JLB (75)-
I don’t feel defensive about anything. I’m simply stating the fact that I’m not persuasive or sharp enough to sell someone something they don’t really want.
As far as your lack of preparation for a Realtor response, it shows. The Realtor-as-”censor” model began dying in about 1996, and I’d say the corpse was stiff by about 2002. Remember back then how so many people were saying that the internet would be the death of the Realtor? So far, about the only thing I’ve seen is the death of fly-by-night internet schemes, such as YHD/Foxtons and some of the flat-fee scams.
The fact that none of your prospective buyers came with an agent shouldn’t be surprising to you. You offered cooperation to agents, but the essential fact was that your buyer pool- just like you- wasn’t interested in Realtor cooperation. The FSBO buyer sees an agent as wasted money just as much- if not more- than you do. They’re doing the legwork on their own in order to do that agent’s work and “save” the potential fee. Otherwise, there’s no real benefit to buying a FSBO. Technically, a seller pays the commission, but it’s with money that’s come out of the buyer’s pocket…that fee is baked into the price.
By dint of lack of marketing reach and exposure to the full pool of ready, able, qualified buyers, FSBOs are categorically offered in a non-competitive environment.
“Make no mistake, Otteau is not a “shill”. Don’t label him as such because he isn’t rooting for total economic collapse.”
To be fair, I read your seminar notes and changed my opinion of Otteau somewhat. But at the same time, it seems to me that everything he says that gets reported in the mainstream media (MSM) says that the time to buy is always NOW (including in the article quoted above.
From this here blog, referring to Otteau in January ‘07: “His report also puts the housing market at “near bottom,” but he predicts first-time buyers reentering the market this year and affordable homes leading a recovery.”
Quoting from the article above:
“From the buyer’s perspective, rising mortgage rates and increasing seller flexibility will present significant opportunities during the 2nd half of the year that will likely disappear in 2008.” [i.e., "you better buy in 2007 or you'll get left behind!!"]
Here’s the Toms River Times, in April, 2007:
“Otteau expects the market to continue to improve over the next two years. “Inventory is up, so there is a lot to choose from. Prices are softer and interest rates remain at a 40 year low. Housing is more affordable. Those who wait to buy will not see prices go down, but instead will see interest rates begin to creep up.” ”
From the NY Times on March 11, 2007:
“The analyst, Jeffrey G. Otteau, who heads the Otteau Appraisal Group and issues the monthly Otteau Report to subscribing brokers, offered this current reading on the overall market: “It is just beginning to recover.””
Further, I would note that my RE agent constantly quotes Otteau as advising at seminars at the beginning of this year that the right price for housing is the 2005 price (height of the bubble in 10/05).
It sure seems that Otteau ALWAYS believes that the right time to buy is RIGHT NOW, or that the recovery is about to begin. Perhaps the MSM are cherry picking his quotes, or perhaps, given your notes, it’s the case that he can’t really decide what he believes, or perhaps it’s that what comes out of his mouth depends on who he is talking to at the time.
[72],
Very Scary. I would imagine the best possible outcome is “only” a housing bust. Other scenarios seem to be much more frightening.
“If a home sells at a foreclosure auction, it does not appear as a REO number.”
JB, some properties I watch were bought at auction, and listed through the REO channel.
I believe original lenders “won” the auctions, though, and not other parties.
Clot #79
“Technically, a seller pays the commission, but it’s with money that’s come out of the buyer’s pocket…that fee is baked into the price.”
I agree that it’s baked in, but are you saying that the result of the baking is that the seller gets less money or that the buyer had to pay more?
[81]
Agreed, BC Bob.
Clot, #79
“are categorically offered in a non-competitive environment”
I have to disagree. You can make the argument that “lack of marketing reach and exposure to the full pool of ready, able, qualified buyers” means a FSBO is offered in a LESS competitive environment (I’d certainly agree), but it is most certainly not “non-competitive.” There can be more than one bidder (whether or not there actually is) - this is not the US gov’t and Halliburton.
The great thing about FSBO sales is that, if you find you aren’t getting enough feet through the door at a price that makes you ecstatic, you can always call an agent. The other way around, not so much.
JLB #49, the key isn’t to “time the bottom” but instead to avoid the top:
http://graphics.nytimes.com/images/2006/08/26/weekinreview/27leon_graph2.large.gif
But since you also sold at bubble peak prices, you won’t feel much of a hit.
But at the same time, it seems to me that everything he says that gets reported in the mainstream media (MSM) says that the time to buy is always NOW (including in the article quoted above.
Is that all he said or simply the quotes that the writer chose to use? We can’t know what he said during the conversation.
jb
Heck, I’ve had my own quotes used out of context by the press.
jb
SAS (re: #56) Definitely mention my name — Jamey, the guy with the green BikeFriday folder and the old-school SOMEC. Nelson’s a really good guy, who won’t oversell.
(He is, however, the leading US retailer of Orbea CF frames, and a top-ten retailer of Lightspeed Ti frames, so you might find yourself tempted to move into the “and up” category… Then there’s the FUJI SL-1 United that he rides — 14.75 lbs and $7000 worth of obscure componentry-festooned fury.)
The shop is always packed with racers and triathletes, who congregate there before and after pack rides up 9-W, so be prepared to wait a few moments to be served.
Good luck. Hope to see you on the road–I commute daily, from Leonia to Midtown. Thirteen hilly, sweaty miles (which are, by far, the best part of my day). Just be sure to get — and WEAR — a decent helmet.
Speaking of quotes out of context. This is one hell of a headline. From Bloomberg:
CDOs in `6-Inch Hooker Heels’ Fooled Moody’s, S&P, Gross Says
Bike into midtown? Got to respect that.
jb
Clotpoll Says:
June 26th, 2007 at 10:55 am
JLB (66)-
1. I have yet to sell somone a home they don’t want.
2. If you did so well selling in a non-competitive bidding environment…how well could you have done with the benefit of a competitive bidding environment?
Did you buy FSBO, too?
clot: I think people confuse a smooth real estate transaction and maximizing proceeds. While maximizing proceeds is always possible, a smooth FSBO in this environment implies that money was left on the table. JMHO
I say that in the NYC-area we are more likely than not [greater than 50%, but close to that level] going to have a recession due to financial services related layoffs within the next 24 months. Will this impact his forecast?
Just as I don’t believe that Wall Street played a major role in home price increases (outside of some very specific neighborhoods. i.e. Manhattan, some “Gold Coast” locations & some desirable homes on the Midtown Direct line), I don’t believe that a “crash” on Wall Street would cause housing prices to significantly drop.
The truth is that too few people in the big picture work on Wall Street to move the entire housing market. Also, looking at the post dot com bust, home prices increased swiftly, despite significant Wall Street layoffs and bonus reductions. There really is no correlation.
“There can be more than one bidder (whether or not there actually is) - this is not the US gov’t and Halliburton.”
Indeed, FSBO is definitely not like Halliburton, which has been on US Govt retainer since the mid-1990s (note the date) via LOGCAP (Logistics Civil Augmentation Program).
Jamey #89, after 13 miles by bike, aren’t you a little “ripe” when you arrive at work?
Clot #79 Interesting how you take my words and jump to conclusions, is that how you treat buyers and maybe the way you limit them in a “censor” like way? I do believe realtors have value but I do think the internet is creating more savvy buyers and sellers. Our ultimate buyer had been working with a realtor but was also doing the “leg work”, I think the take away from that is if today’s realtor does the work and provides the buyer with the property they want they will earn their commission but you don’t just get paid for showing up these days. It is retro thinking to believe that today’s buyer doesn’t understand the fee structure or that a FSBO can’t get exposure in a competitive environment. If as a realtor you want to sell against the FSBO option you might want to suggest you need to put your ego to the side in dealing with your neighbors, your potential buyers and the local realtors. Putting ego aside might be easier for a homeowner than a realtor.
JLB #96, you’re talking to a wall.
Un (# 95) I work in a sweatshop.
Actually, I’m in the book biz, which is like being in a sweatshop, only without the glamour. My employers are somewhat progressively-inclined: they have shower facilities on-site. This means, really, that I can hole up in my office, towel off after the ride, comb back my sweat-dampened hair, and LOOK like I’ve showered…
Key(s) to not being stinky: drink plenty of water at all times, and, more important, wear woolen cycling clothes, which, thanks to the magical properties of the fibre, do not reek.
JLB Says:
June 26th, 2007 at 12:10 pm
I do believe realtors have value but I do think the internet is creating more savvy buyers and sellers. Our ultimate buyer had been working with a realtor but was also doing the “leg work”, I think the take away from that is if today’s realtor does the work and provides the buyer with the property they want they will earn their commission but you don’t just get paid for showing up these days. It is retro thinking to believe that today’s buyer doesn’t understand the fee structure or that a FSBO can’t get exposure in a competitive environment.
JLB: the way to maximize proceeds is to deal with an “uninformed” buyer who “doesn’t do the legwork”. Transcend your circumstances and thinking. It’s heartless, cruel and ……capitalism….. :)
BTW - I’m not taking clot’s side here. What I am doing is using logic…..
Interesting move on the 10Y this afternoon, currently at 5.111%.
jb 87
“Is that all he said or simply the quotes that the writer chose to use? We can’t know what he said during the conversation.”
Is what I was getting at, but it got kind of lost in that long comment. It may be that the MSM are always zeroing in on his most optimistic comments. If so, they are doing it repeatedly (although the MSM capacity to fail in any basic understanding of what they’re covering never ceases to amaze - or perhaps it’s simply mendacity).
Troll #92 maximizing profits is like catching the bottom–good luck! Leaving money on the table with the full transparency of a FSBO is less likely than through an obscured realtor transaction. In our situation, we actually had our buyer in days and negotiated for weeks, if you call that smooth.
People sell their used cars to a private party. Trading in at a dealership usually involves your brains getting buffeted by the dealership. Either transaction does not guarantee less or more money; it is the perceived benefit of not involving a third party while doing a private party transaction.
SImilarly, some people will do FSBO. They may or may not leave money on the table. But if it means not bringing bungling buffoons into the transaction, I say why not?
#103
seems to me the allure of “maximizing profits” has doomed the majority of homes to sitting on the market with no end in sight.
a bird in the hand.
troll #99 we should all agree that doing leg work and being fully informed are two different things and maximizing profits, if it’s possible, can be done with an informed buyer too since it all comes down to motivation and negotiation, right?
Grim: (#91) “Respect?” Would you please pass that message along to the motorists I encounter en route?
Actually, it’s a lot of fun, and, thanks to the GWB bike paths, not all that dangerous. I wish more Jerseans would bike to NYC, and that NJ were, in general, more bike friendly, or at least less bike-hostile.
I wouldn’t call Ottau a shill. He does provide relevant data for the industry.
I just consider his call that buyers won’t get bargains after 2007 rather optimistic.
Here’s an interesting anecdote:
A two-family house in my neighborhood sold 1 yr. ago. Tenants were all moved out before the close. House has stood empty for the ensuing year. That’s no income.
Buyer had grand tear-down plans. Worked on permits for the year to subdivide the lot in two and shoehorn two new constructions onto the property.
This week I drive by and notice a FSBO posted on the front lawn, advertising two buildable lots. I’m wondering if the buyers are hitting a reset and the financing for their speculative, non-owner occupied deal is running dry. Either way, you buy in 6/06 and turn around and try to sell in 7/07? After a year of no income? The more I see of residential RE the bigger can of worms the whole business becomes.
everyone agrees that prices of houses are falling, they just don’t think it’s their own particular house
The RE industry has done a reasonably effective job of playing-up the “real estate is local” theme. Despite the fact that we have pretty much seen a nearly simultaneous world-wide price boom, many people don’t make the connection between their home’s value and the rest of the world.
Their little slice of heaven is somehow different. It must just be coincidence that everybody else’s home doubled in price along with their home. After all, their house is extra nice, close to the train, in a town with good schools, close to a major city, in prestigious Haughty County, in an area with great weather…go ahead and pick your reason. The owner is a savvy decision maker, entitled to their price for making such a good investment decision.
Go to any open house in the country…tell the realtor that you are concerned about this whole “bubble thing”…you will hear the answer above…The bubble is someplace else…There is no bubble in ________. This area (or home) is special because ________.
Unrealtor #97,
LOL!! I love reading your posts.
“Cheyne Capital slashed the gearing of the hedge fund’s London-listed vehicle on Monday after selling assets hit by the US subprime mortgage crisis for only half their assumed value.
Queen’s Walk Investment, a listed vehicle founded by Cheyne, said that it had lost €67.7m ($91m) in the year ending March 31, or €1.67 per share, compared with a profit of €9.7m the previous year.
ADVERTISEMENT
The loss partly stemmed from problems in the UK mortgage market, where the fund had placed highly leveraged and risky bets which turned sour. But Cheyne also held 12 per cent of its assets in risky securities backed by US subprime mortgages, which have experienced a spike in late payments and defaults in recent months.
During the first quarter of this year, Queen’s Walk wrote down the value of these securities by almost 50 per cent, officials said on Monday.”
http://www.ft.com/cms/s/45a57c40-1f0b-11dc-ac86-000b5df10621,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F45a57c40-1f0b-11dc-ac86-000b5df10621.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2Fee9a9066-2347-11dc-9e7e-000b5df10621.html
From Bloomberg:
Mortgage CDO Pipeline Dries Up Amid Fund Bailout, JPMorgan Says
The pipeline of collateralized debt obligations backed mainly by subprime mortgages is drying up and may shut down amid concerns about the integrity of the market following the near collapse of hedge funds run by Bear Stearns Cos., JPMorgan Chase & Co. said.
The amount of high-grade, structured finance CDOs that are being offered to investors has plunged to $3 billion, from $20 billion a month ago, JPMorgan said in a report dated yesterday. CDOs are pools of asset-backed securities, bonds or corporate loans divided into securities with different credit ratings and maturities to cater to investors’ preferences.
…
The damage to the $1 trillion CDO market could freeze what has been a large source of liquidity for the credit markets, Tim Backshall, chief strategist at Credit Derivatives Research LLC, said yesterday.
y new bride and I went to some open houses this past weekend. We saw one house that I’ve had my eye on for some time.
http://www.24masonave.com
It’s a flip. The agent said that straight out as soon as we walked in, but I knew it already. According to Zillow, the flipper bought the house for $412,500 on 9/25/2006. It went on the market less than a month later. A friend of mine with access to MLS told me that it initially listed for $575K(!). It’s now at $530K.
The renovations seem well done and fit with the style of the house. The flipper made some good choices, including knocking down the wall between two of the tiny bedrooms and making a proper master. The house in the “Presidential” section of Babylon Village, a more upscale neighborhood and somewhere we’d really like to live. Quite frankly, my wife loves this house.
On the other hand, it’s still a pretty small house. I’m looking for small, since it’s just me, the wife and our cat, but smaller should mean cheaper. The living room is minuscule and it has big, old fashioned radiators that take up a ton of space. I can’t imagine where you’d even fit a couch. The lot is very small and, because of the configuration of the house and the garage, There’s literally no backyard.
Another thing that bugs me is the basement. It’s just over six feet from floor to joists. I’m 6′1″ and my bride is just under six feet tall. It’s usable as a laundry room, but I was hoping to have a basement to use as an exercise area. That’s right out for this house.
The house is still way overpriced. It’s still a small house on a small plot of land. That’s why it’s been on the market for eight months. There are some negatives, as I pointed out, but we’d be more than happy to live there if the price was right. A “right price” for us, at this point, would be about a 20% haircut for the seller. While I’m sure he’s motivated, he’s been paying a mortgage on that house for eight months, I doubt he’s quite that motivated yet.
It’s too bad, because, of all the homes we’ve seen so far, we like that one the best. Nothing to do but wait.
Enough already we need stats on soutern New Jersey to, how are we going to fight some of these corrupted township Tax Assessors.
89 jamey,
aren’t you sweaty when you get to work. Do you shower at work?
I have to respect that. I’m lazy to go play tennis these days.
#114
this is actually quite scary. as much as I want house prices to go down, I think the decline we’ve been experiencing so far is the best of both worlds– decently declining RE with overall strong economy.
“The pipeline of collateralized debt obligations backed mainly by subprime mortgages is drying up and may shut down”
[114]
Shut down? That sounds terminal.
By the way, where is that individual who constantly chirped that excess liquidity was the new paradigm, send me a wake up call when 10 year is over 5%, etc., etc.?
“as much as I want house prices to go down”
Hope your not looking on the Gold Coast:
New COnstruction Contracts SURGE:
“Page 50
(link removed -jb)
Average monthly contract sales in Hoboken 2007: 103
2006: 70
Average monthly contract sales in downtown JC 2007: 70
2006: 36
47% increase in contract sales in Hoboken in 2007 vs 2006
Nearly 100% increase in contract sales in downtown JC in 2007 vs 2006
Donald,
How exactly did you get a link to a subscribers-only report?
jb
“How exactly did you get a link to a subscribers-only report?”
HMMNNN. Exposed yet again.
Yo troll, lets see how many of those Hoboken contracts end up getting canceled?
I’m waiting to hear back from Otteau as to whether that should be a public document or not. I have a feeling that there is a loophole that let that document slip out.
The eNewsletter I post here is free to anyone who wants to sign up for it. No real issues with me posting a copy of it.
But that document? People pay real money for access to that information.
jb
As to the surge in contracts earlier this year, we discussed that on a number of occasions.
The positive contracts numbers earlier this year have deteriorated. You can find more recent data here:
http://njrereport.com/files/contracts.xls
Otteau himself has acknowledged the more recent slump:
http://njrereport.com/index.php/2007/05/26/still-hoping-for-a-quick-recovery
In New Jersey, the market seems to have slowed from March to April — just when things would ordinarily be revving up. The number of sales contracts signed in April declined in 20 of 22 counties monitored by the Otteau Valuation Group, which does market analysis for brokers. Even in Hudson County, which encompasses such sought-after riverfront towns as Hoboken and Jersey City, sales volume declined 21 percent.
jb
As well as:
http://njrereport.com/index.php/2007/05/16/recovery-or-a-mirage
Up until that point, Otteau said the housing market in New Jersey looked like it was ready to bottom: Contract sales activity rose 10 percent in January and 2 percent in February, due to a decline in mortgage rates and home prices. In addition, the state’s tight labor market translated into higher salaries at the beginning of the year — all of which made housing more affordable in the state and fueled home sales, he said.
…
“(Back in January and February ) it looked like we were heading into a 2007 recovery, but all of that changed in March because of the tightening of lending standards due to the subprime crisis and the public perception that the subprime problem could turn the housing market upside down,” Otteau said.
grim: some of this stuff was posted to kannekt….in what form, I do not know - go check if interested….bear in mind, that moderator may have also been policing
From Reuters:
Subprime Crisis Opens Banker, Broker Rift
WASHINGTON (Reuters) - The crisis in the U.S. subprime mortgage market has heightened tension between mortgage lenders and brokers who both hope to shape any laws aimed at stamping out dangerous loans.
Legislation requiring more disclosure by mortgage brokers could be introduced as early as this week and is likely to widen a rift that has opened with heated rhetoric in recent weeks.
More at: http://www.reuters.com/article/ousiv/idUSN2216964420070626?src=062607_1314_DOUBLEFEATURE_lake_tahoe_wildfire
Excerpt from Reuters story above:
“Frankly, it’s too easy to hang a shingle and call yourself an expert in mortgages,” Robbins said, calling for stronger broker standards.”
jlb, yanni, others:
why does everything have to be black and white?
think about things as a continuum…….further, frustration at an imperfect system [one that has consistently functions as a cottage industry despite technology and competitive forces] is no reason to lash out at it’s intermediaries.
Let’s use reverse logic:
If you add no economic value, you are doomed in the long-run.
Realtors continued to exist, and the competent and ethical ones thrive, so………?????
Chifi, there are always people who need help for a service and in effect create the market. There is always the DIY guy who thinks or perceives he or she can do it on their own too.
Both can and will co-exist. I was not bashing the intermediary but merely pointing out that using an intermediary does not guarantee ‘not leaving money at the table’.
(129) Does your reverse logic account for rent-seeking behavior by realtors’ groups with the various state governments, cartel-like behavior vis-a-vis access to the MLS, etc.?
I believe all these things make realtors’ fees artificially high. The argument is not “they add zero value”. The argument is that they don’t add value commiserate with their fees in many (most) cases.
Most buyers I would hope would be smart enough to look BOTH at FSBO listings and MLS/realtor listings. When we purchased our home late last year we indeed looked at both and did not find much FSBO. Though there was one FSBO that we visited that I just today again spotted on FSBO.com for $30K less than the poor soul paid for the house in 2005 (and $30K less than it was listed for late last year), and this was before $30-50K in upgrades I estimate he put in…yikes!
At the end of the day as I buyer I could not care if a house was FSBO or not. A house was worth what it was worth to me and I would imagine most buyers feel the same way. In the end we found the best of both worlds, a Foxtons house! This house had sat and sat for 5 plus months on the market. When we visited the house guess how many realtor cards were on the table….3! The local realtors literally would not show it. I found it on MLS and my realtors were more than happy to show it (only of course AFTER I mentioned it). It was an estate sale and the sellers were desperate to unload it.
If your house is priced right I think it will sell FSBO, realtor whatever. The key of course is marketing. Realtors get lots and lots of calls from prospective buyers and in that way they serve to control the market on a basic level, at least in my town.
“If you add no economic value, you are doomed in the long-run.”
I think that it’s a fair possibility that the value that realtors add is not an “economic” one. As we’ve recently discussed on this blog, the jury is definitely out on whether FSBO sales or sales through realtors show a greater return.
I personally use a realtor, and the reason that I do has nothing to do with economics (I don’t think my realtor will get me a better price, whether buying or selling) and has everything to do with convenience. I will be fully involved in evaluation, negotiation and even the legalese, but I don’t have time for all the legwork. Folks with enough scratch to buy a house (a) often don’t have time to fully commit to the intensive and time-consuming effort required to buy or sell a house on a solo basis and (b) often have the scratch to afford some hired help.
I hire someone to mow my lawn, not because I think I’ll make a profit doing so, nor because I’m incapable of doing as good a job, but because I don’t have the time and I do have the money.
That’s why we’ll have realtors with us for the forseeable future.
#131
I would agree, but “commensurate”.
I knew someone would correct the spelling, and that the spelling correction would be followed up with “what a douche, this is a blog for petes sake, reasonable spelling errors are allowed”
“Pete’s”
:)
I believe the proper term is “douchepump”
“If you add no economic value, you are doomed in the long-run.
Realtors continued to exist, and the competent and ethical ones thrive, so………?????”
The NAR is thriving — is that due to its strong ethics and value add, or its cartel position?
I believe all these things make realtors’ fees artificially high. The argument is not “they add zero value”. The argument is that they don’t add value commiserate with their fees in many (most) cases.
I agree.
Realtors can add value. However, the “value” they add today is really based on creating artificial barriers to market participation and then removing these barriers for the requisite 6% fee (for example, blacklisting discount services). It’s more akin to the “value” one might get from paying “protection” to Tony Soprano’s crew. Are the services of a realtor really worth $30,000 on a $500,000 house? Am I really getting $30k in value?
Does anyone know the status of DOJ’s complaint about the MLS?
OT, but Blackstone is trading below IPO price. Poor Stephen Schwarzman is a billion
bucks poorer in just 2 days.
Equally OT, but S&P dropped below 1500 for the first time in a while. Is there any technical significance to this?
RentinginNJ #139,
Bingo!! You’re getting warmer!
NJ market will decline like Florida
(Big news) From Reuters
Further loan deterioration seen for Alt-A market-S&P
Delinquency rates are rising for so-called “Alt-A” home mortgages held by U.S. borrowers who are rated above the subprime category but below the more pristine prime borrower, said Standard & Poor’s in a report on Tuesday.
“Although the vast majority of Alt-A borrowers are making regular payments on their mortgage loans, there are strong–and growing–indications of deteriorating performance in the 2006 vintage,” S&P said.
The rating agency said the percentage of Alt-A loans that are 90 or more days delinquent in 2006 is 2.5 times higher than the previous year’s figure and more than 4 times that of 2004.
After 14 months, 90-plus-day delinquencies stand at 4.21 percent for 2006 Alt-A loans versus 1.59 percent for 2005 vintage and 0.91 percent for 2004 loans, it said.
Many Alt-A borrowers used the mortgages to refinance second homes or investment properties, but with U.S. home prices stagnating, and lending criteria being tightened, it will be harder for Alt-A borrowers to sell or refinance their mortgages.
S&P said the most disconcerting trend is how quickly the performance of these delinquent borrowers has deteriorated.
“We continue to see migration from 60-plus-day to 90-plus-day delinquencies within the 2006 vintage, suggesting that homeowners who experience early delinquencies are finding it increasingly difficult to refinance or work out problems, as opposed to being able to cure falling behind on payments,” the rating agency said.
So much for hopes that subprime issues wouldn’t spill over into the Alt-A space.
jb
Love this sentence from a just-posted RE article on MarketWatch.
“The optimists admit the market is still very sick, but they see hope in the fact it’s getting sicker at a slower pace than before.”
Lol……
Worth a click:
http://bigpicture.typepad.com/comments/2007/06/who-owns-troubl.html
jb
#144 goes to again show how poor a predictor FICO score is of future payments. When it’s easier to get a 600K mortgage than a $6K used car loan, something is terribly awry.
This bloodbath will not differentiate between a subprime, Alt-A or Prime borrower. Anyone mortgaged to the hilt, either by stretching to buy, refinancing to leverage and buy more properties, or HELs for vacations will be sucked into the black hole.
For those who follow Sam Zell’s comments:
http://financial.seekingalpha.com/article/39379
So did Zell call a top? Or did his move cause it?
jb
#144 goes to again show how poor a predictor FICO score is of future payments.
From the second page of that article:
An average Alt-A borrower has a FICO credit score of 700 to 715. FICO scores are a tool used to measure creditworthiness.
Wow, the average is 700 to 715 for Alt A?
I, for one would have expected it to be lower!
with full employment, very few people should be defaulting on mortgages.
the reality is that underwriting standards went out the window across the board. FICO scores are nearly meaningless when there is widespread lying about income and willingness to lend amounts far beyond safe debt to income ratios
EVERYBODY DANCE NOW
#130 - #131 - OK, I know discussions get blurred when we are limited to at best several typewritten sentences. So, I appreciate the color.
However, as a seller, wouldn’t everyone agree that a less prepared and savvy buyer is your preferred buyer.
It’s not that you are attempting to evade or be unethical, but ultimately, someone who is more easily convinced to transact [if influenced by emotion, all the better] at less rigorously bargained terms BY DEFINITION is a better transaction partner, no?
If a Realtor can bring more of those to the table, have them bid against each other simultaneously so that it has less to do with purchasing real estate and shifts the focus to everyone’s competitive spirit……isn’t it possible that even a well prepared FSBO could be outgunned by more than 6% [or whatever metric/margin?].
Maybe I am closeminded, but nobody in the LOD has yet to convince me that they are anything other than pennywise/pound foolish. Seriously. I am not trying to insult anyone. I honestly believe it. Is it a flawed system? Absolutely. Does it work? yes Caveat Emptor? you bet your bippies…..
Yes, I will be my bike tomorrow. I am really excited to pedal everyday to work. I use to do this, but I became lazy, and gained 12 lbs.
I just went to my Dr. today to get my physical and consultation before I ride.
I will be riding 8 miles total. 4 to work, and then back.
We have employee showers in the gym, at our office. So, I will shower there. I think I will get up earlier to beat the sun. I expect it will take me about 5 min/ mile.
ok, enough bable from me ;)
SAS
From the WSJ:
“Worries about the economy could be discouraging people from living on their own. Household formation, measured by the increase in housing units occupied by owners or renters, took a huge drop in the first quarter. If the pace holds, it could mean trouble for a housing market already facing high inventories and falling prices.
Households had been forming at a pace of about a million a year, but that has dropped more than half in the first quarter. At the end of the period the total number of households stood at 109.7 million, an increase of just 415,000 from a year earlier, according to the Census Bureau.
The pace of formation typically declines during economic slowdowns. So the latest drop is surprising amid a strong job market, rising wages, record household wealth and a stock market near record levels, said Lawrence Yun, senior economist at the National Association of Realtors. “Given this positive economic backdrop, for household formation to weaken this much is implying that people have the financial capacity but they don’t have the confidence to move on their own,” he said in an interview. Instead, they may be finding roommates or moving in with their parents.
The numbers should make homebuilders especially nervous. Housing starts in May were at a pace of 1.5 million a year. Construction normally should be at a pace that accounts for household formation plus replacement of about 300,000 units that are demolished, Mr. Yun said. That means housing starts are almost double what they should be, and that doesn’t even take into account weakness across the rest of the housing sector.
Unless household formation picks up this quarter, the housing supply could become even more bloated. Today’s report on new-home sales and the S&P/Case-Shiller Home Price Indices showed price drops as inventories rise. –Sudeep Reddy”
I should add…
Caveat Venditor: let the seller beware
r.e. Otteau
If there is a pattern of the press taking Mr. Otteau’s comments and reports out of context, maybe he should realease some more info for free. Or at least a few soundbytes and sniglets so we can tell fact from fiction.
Because at this point in time, I think Mr. Otteau’s credability is going down with the RE market.
Sorry JB, I know you have a rapport with Mr. Otteau, but either your rapport may be clouding your judgement, or I just need to know his true work better… therefore I need a sample. And not a sample that going to cost me $19.95 in three easy installments.
btw- I am always willing to be stood corrected.
It keeps my ego in check ;)
SAS
post 155,
I mean “buy” my bike tomorrow.
sas
Sorry but the link posted in #119 should not have been made public. That document is available to subscribers only.
jb
sas
What bike did you decide on in the end?
From Reuters:
SEC’s Cox says agency probing 12 CDO matters
The head of the U.S. Securities and Exchange Commission told lawmakers on Tuesday that the agency has opened 12 enforcement investigations into matters surrounding collateralized debt obligations.
“There is now a commonality of interest between banking regulators and securities regulators when it comes to safety and soundness” issues, SEC Chairman Christopher Cox said in response to a question from a member of the House Financial Services Committee during a hearing.
the latest drop is surprising amid a strong job market, rising wages, record household wealth and a stock market near record levels, said Lawrence Yun, senior economist at the National Association of Realtors. “Given this positive economic backdrop, for household formation to weaken this much is implying that people have the financial capacity but they don’t have the confidence to move on their own,”
What did he say?… “people have the financial capacity but they don’t have the confidence to move on their own”?
It’s the weather…it’s subprime problems…and now in the 1st quarter suddenly we have become a nation of timid mice, afraid to leave mommy & daddy? This is the latest excuse from NAR?
It’s affordability dummy.
All of those factors cited are really nice…good job market…stock market …the problem is that house prices have far outstripped these positive factors. First time buyers do not have the financial capacity to buy at these prices.
By the way, he cited “record household wealth” as a positive factor. This is largely a result of home equity resulting from high prices. First time buyers fueling household formation have not shared in that wealth.
RentinginNJ Says:
June 26th, 2007 at 4:42 pm
By the way, he cited “record household wealth” as a positive factor.
Rent: That is the equivalent of saying Evan Almightly has higher box office receipts than Gone With The Wind.
Friends,
We recently purchased a home and took posession. Two days after closing found that sellers has not delivered termite repair certification. Our attorney withholded 3000$ of the sellers money . By law sellers have ti fix termites and they agreed for it. what are our options.
Thanks,
Ramesh
James Bednar Says:
June 26th, 2007 at 10:54 am
New piece by Gross up at Pimco:
Looking for Contagion in All the Wrong Places
grim: companion piece
http://www.bloomberg.com/avp/avp.asxx?clip=mms://media2.bloomberg.com/cache/vZzEWpM2veMg.asf
Act 1- Market implodes on its own, without warning turns on a dime.
Act 2- Lending requirements start to become more restrictive.
Act 3- Mortgage rates rise.
Act 4- Pipeline of CDO’s backed mainly by subprime may shut down.
How many more acts to come? That dance, along the bottom? Moved, once again, several floors down.
“people have the financial capacity but they don’t have the confidence to move on their own”
Issue: My uHaul is full of cash, but I don’t know how to hitch it. Can a realtor help?
Any guesses what NARs next excuse is going to be?
grim: unmoderate tough guy
“What bike did you decide on in the end?”
Tomorrow I go to the bike shop. I think I will try the Fugi first..
btw–
anyone one of its illegal to ride your bike with an ipod on. I know it may not be the smartest thing to do, but is it illegal?
I have my favorite Burt Bacharach albums on it.
SAS
(154) chifi, I hear your point, but even if the realtor drums up some fish and gets them bidding against each other, could it possibly overcome the fee? Particularly in a flat/declining market where there is no longer any mania? “I have to buy now, or I’ll be priced out forever!!!”
I have to think if a realtor was that good he’d be selling something much more lucrative and much less cyclical than houses.
Any guesses what NARs next excuse is going to be?
Blaming the builders for “overbuilding”.
jb
#154 Chifi
“However, as a seller, wouldn’t everyone agree that a less prepared and savvy buyer is your preferred buyer.
If a Realtor can bring more of those to the table, have them bid against each other simultaneously so that it has less to do with purchasing real estate and shifts the focus to everyone’s competitive spirit……isn’t it possible that even a well prepared FSBO could be outgunned by more than 6%”
That could well be the case. However, if it is, it is a good argument that a buyer should be looking at FSBO’s since, if the argument holds, the FSBO will not go for as high a price.
Right?
Yan: I don’t think I ever properly explained why I refer to you as Rock ‘N Roll Yanni.
I’m no fan of these guys.
http://www.youtube.com/watch?v=lNp4tMcpM10
Any guesses what NARs next excuse is going to be?
dreamtheaterr,
People “lacking the confidence to move out on their own” really threw me for a loop.
I never would have dreamed that up as an excuse in a million years.
With an excuse like that, anything could be next. Maybe “nice weather is keeping people at the beach and away from home shopping”?
I know what it won’t be though: “prices simply are too high and need to reestablish their historical relationship with the underlying fundamentals, such as income”.
njpatient Says:
June 26th, 2007 at 5:17 pm
#154 Chifi
“That could well be the case. However, if it is, it is a good argument that a buyer should be looking at FSBO’s since, if the argument holds, the FSBO will not go for as high a price.
Right?
Yes - this course is what savvy buyers do…..doesn’t clot say he salivates???
People “lacking the confidence to move out on their own” really threw me for a loop.
I never would have dreamed that up as an excuse in a million years.
Runs along the same lines as the “Suzanne researched this” aka “emasculate your spineless husband into buying” commercial.
jb
“Any guesses what NARs next excuse is going to be?”
Last excuse will be Greenspan. Then it will be time to start the engines.
patient: you are spot on…..if you are a buyer, [NOTE - ALL THINGS BEING EQUAL] you want to pick through the FSBO first…..it’s like wearing a “Kick Me” sign.
I’ll never get tired of this.
http://youtube.com/watch?v=Ubsd-tWYmZw
I especially enjoy the part where she yells “What!” at him a second time and does that little head shake thing.
jb
Re 114,
small house, iffy basement, small lot….buyers remorse.
BC Bob,
We recently purchased a home and took posession. Two days after closing found that sellers has not delivered termite repair certification. Our attorney withholded 3000$ of the sellers money . By law sellers have ti fix termites and they agreed for it. what are our options?
Thanks,
Ramesh
How do you explain the 25% surge in Hudson County contract sales compared to last year? Hudson County generated the highest rate of increase.
#180 - JB- thanks for posting that again. Maybe I’m easily amused but I just watched it 3 times because it makes me laugh every time.
I wonder….what WAS his point? Poor sap never got to say.
“But honey, the point is that after PITI we won’t be able to afford food.”
nice little sell off in the commodities today.
Some of the people in Asia are starting to worry about the China bubble. Personally, I don’t see it as a bubble. I see it as the going through the industrail boom at a velocity alot quicker than the USA did. Also, simulataneously going through the tech boom too.
Now, the interesting questions remain, what happens to China once everyone is in the cities?
What is the next phase for the USA? ex.Information services, etc..
And Europe, they are sleeping at the wheel..
SAS
How do you explain the 25% surge in Hudson County contract sales compared to last year? Hudson County generated the highest rate of increase.
Explain two months of data (January and February) for a single county? One heck of stretch to try that.
Why was Salem Co down -8% during that same time period, or Cape May up 9%, or Hunterdon down 10%, or Monmouth up 13%?
Maybe it was those Wall Street bonuses, or maybe it was just volatility due to the fact that January and February are typically two of the slowest transaction months of the year.
Remember, January and February saw contracts jump across most of North Jersey.
http://njrereport.com/files/contracts.xls
Weather? Low rates? Random walk?
jb
anyone one of its illegal to ride your bike with an ipod on. I know it may not be the smartest thing to do, but is it illegal?
I doubt it’s illegal, I know motorcyclists routinely wear earplugs to prevent hearing damage. However, if it’s distracting it’s probably not wise.
BTW, would the recent hedge fund fun be related to the LCDX exchange? Someone I know back in NYC was getting LCDX errors in some ODBC transactions, maybe that was just the name of the exchange and it was overheating? ;)
JB,
What did the May Otteau report say about Hudson County?
Re: 181
Thanks for your input.
The area I’m looking in has mostly older homes. Many, like the one I looked at, are a century old or more. Homes of that vintage often have shorter basements.
I don’t mind a small house or a small lot or both. In my price range, that’s pretty much what I’ll be looking at unless I want to live further from the village.
Ramesh,
At this point, the best person to talk to about this is going to be your attorney.
How bad is/was the damage?
jb
“pretorius Says:
June 26th, 2007 at 5:52 pm
How do you explain the 25% surge in Hudson County contract sales compared to last year? Hudson County generated the highest rate of increase.”
Two new Toll Bros buildings on the waterfront with flippers diving in.
I can’t wait to see the cancellation rate on those when it’s all said and done. They aren’t even done with the Maxwell Place and they’ve booked the new sales on the others while they are nowhere near completing them.
Ramesh,
How did your attorney/lender allow you to close without this? Get your attorney on the horn.
I am not familiar with the legal consequences once you close.
ChiTroll (92)-
So true. A FSBO that goes easily just means one of the parties exercised- in the words of Neil Young- a kinder, gentler machine gun hand.
JLB (96)-
“Putting ego aside might be easier for a homeowner than a realtor.”
JLB, do you really think it’s AGENTS who are suggesting the whacked-out prices most homes carry these days? I’m keeping some sort of decent sales pace going because I’ve been able to convince my clients to sell against the hordes of egomaniacs out there raging in total denial of reality.
Man, that statement of yours gave me the best laugh I’ve had in a week.
Un (97)-
The only apparent wall is the one between your ears.
JB #90
What threw me when reading Gross was not his reference to hookers with 6-inch heels, but his reference to “tramp stamps”. Did a double and triple take when I saw that….
dream (104)-
Often the most dangerous bungling buffoon is the one who doesn’t know that he is one.
Like most homeowners who try to sell FSBO.
“A FSBO that goes easily just means one of the parties exercised- in the words of Neil Young- a kinder, gentler machine gun hand.”
Proof please.
“I’m keeping some sort of decent sales pace going because I’ve been able to convince my clients to sell against the hordes of egomaniacs out there raging in total denial of reality.”
Perhaps you left money on the table.
From Reuters:
Ex-Countrywide execs plead guilty to insider trading
Three former Countrywide Financial Corp. (CFC.N: Quote, Profile, Research) executives agreed to plead guilty to charges they conducted insider trading in the mortgage lender’s shares in the week leading up to a disappointing earnings report, federal prosecutors said.
Alan Cao, Quan Zhu and Jun Shi admitted to betting that Countrywide shares would decline after learning the Calabasas, California-based company’s results in the third quarter of 2004 would fall short of analysts’ forecasts, according to the U.S. Attorney for the Central District of California.
…
The pleas were announced after Countrywide shares had fallen 2.6 percent on Tuesday on speculation the company might be the target of a government probe related to subprime loans, and that the FBI was raiding its headquarters.
Assistant U.S. Attorney Beong-Soo Kim would not comment on whether the U.S. Attorney’s investigation has concluded, or whether other Countrywide executives are being targeted.
Laura Eimiller, a spokeswoman for the FBI’s office in Los Angeles, said “the FBI is not conducting a search warrant at the office of Countrywide Financial in Calabasas.”
Countrywide spokesman Rick Simon said the company was aware of rumors of raids, but was unaware of such activity and believed the rumors “unfounded.” He was not immediately available to discuss the pleas.
Ramesh,
Some questions;
1) I assume that you had a termite inspection done. ??
2) If yes, what damage, if any, did it indicate?
3) What does your attorney say?
I will call a couple of lawyers after I receive your feedback. Can’t promise that I’ll be able to connect with them tonight.
Clot/KL/Lawyers in the House,
See post # 182.
Clot, School Rezoning, for 20 points.
Within same school district, but very disparate schools - required disclosure if known?
Jamey, Wool, for 30 points.
Do wool socks have the same beneficial effect for people with a pre-disposition toward sweaty feet?
J.B. thanks for the link to the Bloomberg article with the CDO ownership percentages listed. Not sure those listed in the tables are correct though. Ex, listing “Asset Managers” or “Insurance” as the owners of X% tells us…what? Anybody have anything more on that?
How do we feel about a recession? Still think one is going to happen? If so, why?
Sorry for another question, but here’s a puzzling one:
So we’ve been looking in Bergen County (mostly Ridgewood and Glen Rock) for awhile. Recently, we expanded the search into Essex County. Noticed a few things in houses priced in the 400k-550k range in the Caldwell section …
a) you get more house and yard at that price than you do in Bergen
b) schools are nearly as good
c) taxes don’t seem to be as high
We haven’t completed research, but anyonegot a clue what’s up?
do yourself a favor and stay in bergen
county.
“I especially enjoy the part where she yells “What!” at him a second time and does that little head shake thing.”
Every time I watch that, I throw up a little in my mouth.
“How did your attorney/lender allow you to close without this? Get your attorney on the horn.”
Ramesh, you may have to take your damages out of your own attorney for legal malpractice, if you can’t get them out of the seller. Seems like negligent legal work to OK a closing in those circs.
“We haven’t completed research, but anyonegot a clue what’s up?”
The answer to that question is “because it just is.” Maybe it is because the majority of the richest towns in NJ are located in Bergen so therefore the prices here are higher.
And Essex schools are NOT as good as Bergen’s top districts, like Tenafly and Cresskill.
“do yourself a favor and stay in bergen
county.”
I agree. I was tempted to leave to get more house for my money, but, at the end of the day, its’ about location. Every time I turn on the 5 and 11 o’clock news, I see Essex County a lot more than I see Bergen. Not a good sign…
this state is turning into a thrid world
state.
Bergen county may be the last to fall.
Gangs are law enforcements biggest problem
in NJ.
clot #195
“JLB, do you really think it’s AGENTS who are suggesting the whacked-out prices most homes carry these days?”
It’s both agents and idiot homeowners, IMO. The homeowners are going to hire the agent who quotes them the highest recommended listing price - standard race-to-the-bottom/adverse selection type problem.
and they just busted 18 gang members last week, in Westwood,Emerson,Hillsdale
Hudson County sales are up because people who can’t afford Manhattan go there to buy condos. For the price of a 5th floor walk up on the Upper East Side, you can get a brand new condo with every ammenity imaginable in Hoboken. And then you also have all the flippers. You also have lots of big name developers, like Toll and K Hov so they attract many high end buyers.
#179 Chifi
“patient: you are spot on…..if you are a buyer, [NOTE - ALL THINGS BEING EQUAL] you want to pick through the FSBO first…..it’s like wearing a “Kick Me” sign.”
I was positing that this fits within the original theory proposed. But what of the study that came out recently with the conclusion that FSBO sellers do marginally better than sellers represented by agents?
Otteau’s report is flawed. He says that homes depreciated 10% in 2006 and called NAR’s report of homes appreciating 2.4% in 2006 unreliable. And why is this? He did a good job explaining everything else, but he was very vague about the most important part of the report. Why did home values go down 10% in clear contrast to NAR’s numbers? Because he said so?
“You also have lots of big name developers, like Toll and K Hov so they attract many high end buyers.”
The “high end buyers” go for Toll, eh?
How klassy!
“Why did home values go down 10% in clear contrast to NAR’s numbers? Because he said so?”
Among other things, because NAR’s numbers (purposely) don’t take into account rebates at closing, seller-paid installation of CAC, e.g., agent discounts, etc., all things intended to artificially inflate the perceived sale price (but which in fact reflect the actual value of the property).
On another note, when did this blog become the official repository for NJ gang activity? I grow weary…
“On another note, when did this blog become the official repository for NJ gang activity?”
This blog has gangs on it. The owners vs. the renters.
“I can’t wait to see the cancellation rate on those when it’s all said and done.”
Cancellation rates will be very low because the condos the flippers bought are worth a lot more now than they were when they bought. Not only will they lose their deposits, but they will also lose any appreciation if they back out.
FYI: I won’t be on this site for a week so don’t get worried that I am missing. I am going on a self imposed internet vacation. I spend way too much time online.
“The “high end buyers” go for Toll, eh?
How klassy!”
Toll is the nation’s larget luxury home builder.
“Agents, if you aren’t attending the Otteau Spring and Fall Workshops, you really are missing out.”
No thanks. I would rather attend the Trump Learning Annex seminars!
Seems that construction is booming in San Diego. Better buy some stocks in concrete right away:
http://forum.skyscraperpage.com/showpost.php?p=2916815&postcount=1701
See you guys in July…
mike NJ (132)-
You’ve pegged it well. Price is part of marketing…but marketing is DEFINITELY NOT part of price.
The FSBO is limited in marketing leverage, so the exercise shifts to much more of a pricing game. There’s little else at the FSBO’s disposal to drive traffic and interest.
Since everyone here likes talking about gangs:
LINCROFT – Roughly 40 percent of North Jersey municipalities have reported a significant gang presence within their communities, authorities said this morning.
About 45 percent of 477 local police departments surveyed statewide said they have pursued a gang presence in their municipalities, State Police Superintendent Col. Rick Fuentes told nearly 300 attendees at the New Jersey State Gang Summit.
“If you’ve got a gang presence, you’ve got a gang problem,” Fuentes said.
http://northjersey.com/page.php?qstr=eXJpcnk3ZjczN2Y3dnFlZUVFeXkzJmZnYmVsN2Y3dnFlZUVFeXk3MTU4OTU2JnlyaXJ5N2Y3MTdmN3ZxZWVFRXl5Mg==
njpatient (133)-
Your reason for using an agent- convenience- is actually the #1 reason people all over the US use one.
Financial gain or savings is around 4th or 5th on the list…and has been for years.
ChiFi (154)-
I think in more rigorous, circumspect terms there are buyers who are more motivated than others to meet or even exceed the market for certain homes in certain situations. What gets overlooked by the LOD contingent on this board is that not all buyers are the same…nor are all qualified buyers for a particular type of housing all motivated to pay exactly the same price for it. People’s situations, expectations, schedules and needs all differ, and this difference expresses itself in the buyer pools that form around different selling propositions.
Anyone who honestly believes that the buyer pool for FSBOs is the same as for listed properties is engaged in in some seriously ostrich-like thinking. There is a reason behind stratification in any kind of market, and FSBOs notoriously bring out the self-service/discount-minded crowd of buyers.
You don’t go to Trader Joe’s expecting to pay Zabar’s prices. You don’t go to Wal-Mart or Costco for Armani prices and service. The discount proposition is implicit in the FSBO…whether the seller intends it or not. The equation? Self service + no assistance= discount.
Rob (171)-
There’s as much action for the Realtor in a heavy market downswing. Prices don’t have to just go up for us to do well.
IMO, we’re about 8 weeks away from one giant rush for the exits. In fact, my office is already seeing unusually-heavy scheduling of listing appointments right now…normally NOT a heavy “listing” time of the year.
BTW…what- other than certain pharmaceuticals- would you consider to be more lucrative to sell?
njpatient (173)-
Exactly. FSBOs are where the deals are.
“BTW…what- other than certain pharmaceuticals- would you consider to be more lucrative to sell?”
Clot,
BSC?
gary (200)-
It’s an accomplishment to get to the table these days.
For every listing I sell in my area, another 25 don’t even draw offers.
Gangs are everywhere. They dominated Los Angeles and California in general 3-4 years ago … and they’re on the East Coast as well. I don’t think anywhere is going to be immune to gang activity.
As for the school question, per this list
http://www.njmonthly.com/topschools/hslist.lasso
there about a dozen public schools in Bergen better than the Caldwell area we’re looking at. It’s not a chasm, either.
Between getting a bigger house for less, and being much closer to NYC (for job purposes), one has to wonder if the difference in, say, Ramsey (27) or Ramapo (28) and North Caldwell (34) is that different?
gary (199)-
Proof? How about my own FSBO purchase experiences?
I follow only one golden rule of RE:
Don’t steal in slow motion.
The compliant, cheerful, agreeable FSBO buyer is either a pea-brained fool…or he’s got you.
Everybody says win-win deals leave everyone happy. I’ve never found that to be true. The best deals for both buyer and seller (that I’ve been a part of) seem to leave each party a little irritated. I think that’s because in order to gain, both parties had to give up something of true value. That always hurts a little; the realization of what’s been gained seems to come a little later.
Ramesh (182)-
I’d have your attorney tell that seller the escrowed $3,000 will soon be put toward the termite repair. Schedule the repair, and pay for it from that pool of money. Return any unused portion- along with receipts- to the seller.
Then take your attorney’s phone number, and burn it. Never call him again.
He should’ve never let you close with a repair left undone.
Pat (203)-
School quality is not a point of disclosure. It is entirely subjective, and no dollar amount of remedy could ever be reasonably placed on a perceived “defect”.
patient (207)-
Dude should slap the taste outa that byotch’s mouth.
Not serious about that.
#174 Chifi, I’ve watched them every year since I came to the US in 2001. I don’t care much for the vocalist (which is one reason the band didn’t make it big commercially), but the rest of the musicians are par excellence.
Even better music has been produced by the side projects they have been involved in.
How priceless is it to hear realtor™ Clot rail on about “egomaniacs”?
Nearly had me in tears.
Pat (#203)
Woolens don’t absorb odors, and are far better at resisting the bacteria that cause synthetics to reek. Wool is also far better at wicking away perspiration than any other fibre. That might mitigate foot odor, but it won’t cure it outright.
Synthetic bike stuff is lighter, usually more aerodynamic, cheaper, and comes festooned with all sorts of team colors. But wool is just flat-out better.
So late today that probably no one will see this, but I wanted to put it out anyway, because it’s good to keep track of stuff.
If anyone has posted something similar,earlier, my apologies.
First, on new home sales:
While the overall number was revised down for April (no surprise there), the NE number was revised up.
I have no idea why that would be and based on what I have seen and the builders I’m talking to, it sure doesn’t seem like everything is sanguine with sales right now.
According to the latest revision, April new home sales in the NE this year were better than they were in 05.
I have no idea how that could be possible.
Second will be next post.
njpatient Says:
June 26th, 2007 at 8:08 pm
#179 Chifi
“patient: you are spot on…..if you are a buyer, [NOTE - ALL THINGS BEING EQUAL] you want to pick through the FSBO first…..it’s like wearing a “Kick Me” sign.”
I was positing that this fits within the original theory proposed. But what of the study that came out recently with the conclusion that FSBO sellers do marginally better than sellers represented by agents?
patient: you have to do better than that……at a minimum give us the source data, metrics, method of calculation, and most importantly who did it and what bias they may have brought the study…..these requests are fair, no?
“People’s situations, expectations, schedules and needs all differ, and this difference expresses itself in the buyer pools that form around different selling propositions.”
Clot, very well said.
“LINCROFT – Roughly 40 percent of North Jersey municipalities have reported a significant gang presence within their communities, authorities said this morning.”
This kind of diversity leads to a more vibrant community. So it’s a good thing. Right?
OK, on the Otteau thing.
Otteau’s gripes about RealtyTrac are misplaced not just for the reasons JB cites, but for two other reasons as well.
The first one is, in general, the numbers appear with absolutely no context provided in which to understand them.
For most people saying there are 500 foreclosures or 5,000 doesn’t make any difference because they have no idea what the number means. Yes, they know 5,000 is bigger than 500, but if you asked most people how many houses there are in NJ it would not surpise me if you got answers from 1M and 20M.
I would bet most people on this board couldn’t get within 100,000 without looking it up.
Anyway, the second problem with Otteau’s complaint is that he puts the emphasis in the wrong (or at least most convenient) place.
He cites the 147 foreclosures and puts it against the 71K homes for sale. See how puny it is?
As JB notes, there has to be a place to talk about the NODs etc., because they have something to say about the health of the housing market and excluding them distorts the picture of the market’s health.
Here’s another way to look at those 147 REOs.
As I’ve mentioned before, foreclosures count as sales. That means 147 of the 1,090 existing home sales in NJ in May were actually banks foreclosing on homes.
Off the top of my head, I would think having 14% of sales in a market being foreclosures is an indication of problem, but to be fair, I don’t have the context.
If could be perfectly normal, but I doubt it.
FYI,
I do have the number of Owner Occupied homes in NJ as per the Census 2005 update. If anyone wants to guess, I’ll post it tomorrow.
Clotpoll. Thanks.
Jamey Thanks. I’m off to the Army and Navy store this weekend to see if they have woolen socks for little kids. Maybe I’ll jazz them up and dye them in stripes and tie-dye. I personally don’t mind the cotton socks, but my little one won’t wear sneakers cause of the “wet.”
This blog is a veritable smorgas”board”.
A warning about wool though, it’s not hypoallergenic.