Pessimistic or realistic?

From Page 1 of the Wall Street Journal

Housing Chill Grows Worse, Bites Consumers
By SUDEEP REDDY and MICHAEL CORKERY
September 26, 2007; Page A1

The housing market is going into a deeper chill, and consumers are starting to shiver.

Sales of existing homes in August fell sharply, and home inventories by one measure soared to an 18-year high, according to data released yesterday. One major home builder, D.R. Horton Inc., is auctioning homes this weekend with starting prices for some units at 50% off an earlier price.

The housing market is worrying consumers, raising fresh concerns about economic growth. Consumer confidence fell this month to its lowest level in almost two years, a new survey showed. Retailers such as Lowe’s Cos. and Target Corp. said they’re feeling the pain. Both reported softer-than-expected sales Monday.

“The combination of all this is indicative of an economy that has lost quite a bit of momentum,” said Joshua Shapiro, chief U.S. economist at the consulting firm MFR Inc., an economic forecasting firm that advises investors.

Optimists believe the Federal Reserve’s aggressive move last week to cut interest rates will help keep the economy out of recession. Also, exports are rising, thanks to a weaker dollar, and business investment is holding up.

Still, the pace of housing’s downturn is accelerating, surprising even some bearish analysts.

From the Record:

Mortgage woes taking a toll

Home sales dropped in August for the sixth month in a row, reflecting the recent mortgage crunch, the National Association of Realtors reported Tuesday. And the NAR said it expects similar results for September.

Sales declined 4.3 percent from July, to an annual rate of about 5.5 million existing homes – a pace well below last year’s 6.5 million sales and 2005’s record 7.1 million sales.

In another sign of housing distress, the Standard & Poor’s Case-Shiller Home Price Indices, also released Tuesday, found home prices down an average of 3.9 percent from July 2006 to July 2007 in 20 metropolitan areas around the nation. The New York metropolitan area was down 3.8 percent in that period.

“The decline in home prices clearly continued into the summer months,” said Robert J. Shiller, chief economist at MacroMarkets LLC.

And in one more piece of pessimistic housing news Tuesday, Miami-based homebuilder Lennar Corp. said it lost $525 million in the third quarter, as home contracts and deliveries plummeted by more than 40 percent.

Lennar has a number of developments under way in New Jersey, including Dehart Place, a town house complex that is part of the redevelopment of central Morristown, and Henley on Hudson, a luxury condo and town home development on the West New York waterfront.

Prices of most units at both Dehart and Henley top $1 million.

Somebody should tell the Daily Record, not to ask a real estate agent their opinion on the market. What he got was a sales pitch, not an accurate assessment of the market. After all, everyone knows that there has never been a better time to pay a commission buy or sell a home.

Coldwell Banker exec: Real estate back to ‘normal’

Real estate is still one of the best investments you can make, says Ronnie Laiken, president and chief operating officer of Coldwell Banker Residential Brokerage in New Jersey/Rockland County, N.Y.

As she sees it, things are back to normal after the frenzy of recent years.

Sellers “should be aware that buyers are doing their research and checking comparables,” she says.

“We experienced an unusual market where prices were inflated, but now the market has stabilized. We didn’t have a bubble that has since burst but a market that is transitioning back to a more normal market.

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257 Responses to Pessimistic or realistic?

  1. grim says:

    From MarketWatch:

    Credit Suisse cuts 150 jobs in mortgage-backed operations

    Credit Suisse Group said Wednesday it will begin pruning its mortgage-backed securities unit by laying off 150 employees, the result of market turmoil sparked by the U.S. subprime mortgage crisis.

    “In line with the current environment and outlook, we’ve made targeted reductions, primarily in mortgage-backed securities businesses,” Credit Suisse said in a statement to Dow Jones Newswires. A spokesman confirmed that about 150 jobs – primarily in mortgage-backed securities – are set to go.

    “Unlike private banking, investment banking is incredibly dynamic on both sides: when business slows, jobs are cut very quickly to adapt,” Venditti said.

    Credit Suisse isn’t the first bank to respond to the crisis with job cuts. Last month, Lehman Brothers Holding Inc. (LEH) shut its subprime lending unit, and other Wall Street firms have scaled back mortgage-securities operations as a result of the crisis.

  2. grim says:

    From MarketWatch:

    Weekly mortgage applications down 2.8%

    The volume of mortgage loan applications filed last week decreased a seasonally adjusted 2.8%, while interest rates on fixed-rate home loans increased, the Mortgage Bankers Association reported on Wednesday.

    This week-to-week decrease stemmed entirely from a 7.3% drop in applications for mortgages to purchase homes, according to the Washington-based MBA. Applications to refinance an existing mortgage were up 3.3% in the week ended Sept. 21, compared with the previous week.

    Applications to refinance existing mortgages accounted for 46.4% of overall volume last week, up from 43.5% the previous week, while adjustable-rate mortgages made up 12.2% of applications, down from 12.6%.

    The interest rate on a 30-year fixed-rate mortgage averaged 6.38% last week, up from 6.29% the previous week. The 15-year fixed-rate mortgage also increased, averaging 6.06% last week, up from 5.99%.

    The rate on one-year ARMs, however, headed in the other direction, averaging 6.09% last week, down from 6.39%.

  3. Frank says:

    “Engineers: NJ Infrastructure Crumbling”

    Mr. Corzine, raise the taxes, what are you waiting for? You know how to do it. The sooner the better, it will keep more people out of state, then you will not need roads or water anymore.

  4. grim says:

    First Martha, now Mickey? Sign me up, I’ve always wanted a race-car bed.

    KB Home To Offer Disney Home Product Options Under Pact

    KB Home Wednesday said Walt Disney Co. home products will be offered at KB Home Studios, which are design centers where KB Home customers select options to personalize their new homes, beginning in 2008. The California home builder said Disney home-product options may include flooring, window coverings and lighting. The company said designs will feature Disney characters and franchises.

  5. Kim says:

    Asking prices for starter houses in the town we want to buy in are coming down! One 2-bedroom, 1-bath starter home just sold for around $375K! NO house has sold in this town for that since about 2003! Now similar houses are priced under $400K, when they used to be listed in the mid- to upper $400s. I am starting to think we actually might get a house for around $350K in a year or two!!

  6. CAIBC says:

    if you dont mind me asking Kim…which town are you refering to..

    thanks

    CAIBC

  7. grim says:

    I always like to keep an eye on USA Today. Not because I particularly care for the reporting, but because thousands of Holiday Inn Express customers are reading it this morning. If you’ve ever been a business traveller for any length of time, the only real constant among hotels seems to be the fact that there will be a USA Today outside your door in the morning. Because of this, I think they have a certain amount of captive readership. Folks who might never pick the thing up will grab it and page through over a cup of coffee. How much can media shape public opinion? I don’t have any idea. But I do know that articles like this will do little to help build confidence in the market, and so much of the real estate market is based on confidence…

    Housing likely to continue to flail

    The end of the real estate recession seems nowhere in sight, in light of a slew of bleak news Tuesday of falling sales and prices, a severe decline in construction and deep losses and layoffs at one of the nation’s largest builders.
    Sales of existing homes fell last month to their lowest point in five years, the National Association of Realtors says. The NAR says it expects more dismal figures for September as the housing market reels from the crisis in the mortgage industry.

    But the September figures might be much worse. Re/Max International, which analyzed existing-home sales in five major cities for USA TODAY, says September totals so far are down sharply from last year. In Baltimore, Tucson and Seattle, for example, sales in the first three weeks this month are off more than 40%.

    “I’ve given up forecasting how low housing sales will go,” says Joel Naroff, president of Naroff Economic Advisors.

  8. skep-tic says:

    these next 3 months are critical. if there is ever going to be a sudden “pop” of this bubble, now is the time

  9. Bloodbath in Winter 2007 says:

    Kim, they’ll be coming down further in the coming months.

    We check Glen Rock and Ridgewood just for kicks on a weekly basis, and in our price range (400-600k), a house or two has been added each week.

    Also from that Record article:

    “Lawrence Yun, NAR’s senior economist, blamed disruptions in the mortgage market, including a sudden rise in interest rates on jumbo loans — those for more than $417,000. In addition, several mortgage companies collapsed or pulled back on loan commitments when investors shunned the mortgage-based securities. That left buyers scrambling for mortgage money.”

    This is why I believe houses in the 500k-700k range will be coming down. Jumbo loan rates are too high, and it’s very, very difficult to get loans right now.

  10. grim says:

    From Bloomberg:

    U.S. Durables Orders Fell by Most in Seven Months

    Orders for U.S.-made durable goods fell in August by the most in seven months, raising concern business investment will soften.

    Demand for products meant to last several years fell a greater-than-forecast 4.9 percent after a revised 6.1 percent gain the prior month, the Commerce Department said today in Washington. Excluding transportation equipment such as airplanes, orders declined 1.8 percent after a 3.4 percent gain.

    The drop in demand followed the biggest jump in almost a year, an illustration of how volatile the figures tend to be, economists said. Still, with housing in long-term decline and access to credit more costly and difficult, industrial demand may cool even as exports climb and inventories remain lean.

    “Things are starting to cool a bit for business spending,” Michael Gregory, a senior economist at BMO Capital Markets in Toronto, said before the report. “Part of it is the uncertainty over demand going forward and part of it is that costs of borrowing have gone up.”

    Economists had forecast durable goods orders would fall 4 percent, according to the median estimate of 74 economists surveyed by Bloomberg News, after a previously reported 6 percent rise in July. Estimates ranged from a 7.9 percent decline to 1 percent gain.

  11. 3b says:

    #5 I am starting to think we actually might get a house for around $350K in a year or two!!

    I think it will be no more than a years time, probably by next Spring?Summer. T

    The reality IMO is finally starting to be accepted by sellers, and those that have not purchased recently or extracted all of their equity, can and are lowering prices.

  12. John says:

    The good news is that Newsday today has a big front page story about the Housing Squeeze. It isn’t till John Q Public sees big stories in their local papers about the housing crash that individual sellers will cut their prices.

    These folks don’t read the economist, WSJ or NY times and price based on what some soccer mom got for her house last year. They need a pale of cold water thrown in their face before they adjust their prices.

  13. chicagofinance says:

    grim Says:
    September 26th, 2007 at 8:28 am
    I always like to keep an eye on USA Today. Not because I particularly care for the reporting, but because thousands of Holiday Inn Express customers are reading it this morning. If you’ve ever been a business traveller for any length of time, the only real constant among hotels seems to be the fact that there will be a USA Today outside your door in the morning.

    grim: unless you make sure the front desk leaves a copy of the WSJ for you

  14. mr potter says:

    “Real estate is still one of the best investments you can make, says Ronnie Laiken, president and chief operating officer of Coldwell Banker Residential Brokerage in New Jersey/Rockland County, N.Y.”

    What a joke these realtors are. “things are back to normal’….’we are a company with a heart’. Gimmie a f&*$ing break. You are desperate and and if you had any class at all, you would be embarrassed by the article.

    More from the article

    “Coldwell Banker exec: Real estate back to ‘normal’

    Real estate is still one of the best investments you can make, says Ronnie Laiken, president and chief operating officer of Coldwell Banker Residential Brokerage in New Jersey/Rockland County, N.Y.

    As she sees it, things are back to normal after the frenzy of recent years.

    Sellers “should be aware that buyers are doing their research and checking comparables,” she says.

    “It’s a company with a heart,” she said. “We feel that no commission is worth our reputation. If we give our word, we will keep it. We take pride in keeping our word.”

  15. 3b says:

    #8 skeptic: If there isever going to be a sudden “pop” of this bubble, now is the time.

    I think we have had that pop at this point.

  16. grim says:

    This isn’t the first time we’ve heard about this trend. Paying the home loan or mortgage just isn’t a top priority anymore.

    From the AP:

    Late Payments Down for Credit Cards

    Late payments on credit card bills dipped in the second quarter, while delinquencies on home equity lines of credit climbed to a 5 1/2-year high, painting a mixed picture of how people are managing their debt.

    The American Bankers Association, in its quarterly survey of consumer loans, reported Wednesday that late payments on credit card bills dropped to 4.39 percent in the April-to-June quarter. That was down from 4.41 percent in the first quarter and was the lowest reading since the final quarter of 2005.

    Late payments on home equity lines of credit, however, jumped to 0.77 percent. That was up from 0.60 percent in the first quarter and was the highest reading since the final quarter of 2001.

    People “may feel helpless when faced with a mortgage reset they can’t afford but they still want to keep up with other payments,” Chessen said, explaining why late payments are down for credit cards but are up mortgages. “People need to pay for gas and their cars so that they can get to work.”

  17. SG says:

    Well more charts.

    This one is for comparison of Housing compared to If Housing increased at CPI rates. Housing numbers are Case/Shiller index since 1987 in NY area. I have multiple plots comparing if house prices increased at rate of CPI, CPI + 1% and CPI + 2%. Pick the one you like.

    http://www.geocities.com/skgala/shiller_vs_cpi.htm

    Bear in mind that Shiller index start with 1987, which was peak of last bubble.

  18. 3b says:

    The Realtors’ quote from Coldwell:”We experienced an unusual market where prices were inflated, but now the market has stabilized. We didn’t have a bubble that has since burst but a market that is transitioning back to a more normal market.”

    We had prices that were inflated, but they were not a bubble? Inflate? Bubble?

    So now this bubble that was not a bubble, but only an inflating of prices, has nto burst, but merely transitioned.

    These guys are unbelieveable.

  19. skep-tic says:

    #15

    I agree. I think when the Sept sales numbers come out, Oz will be revealed

  20. Kim says:

    #6 – Hanover Township (Whippany/Cedar Knolls)

  21. skep-tic says:

    great chart SG.

    so if this plays out like last time, then looks like modest downturn in nominal prices with most of the erosion done by inflation over 5+ yrs.

    difference today I think is that the slope is much steeper, which suggests a more steep correction, i think

  22. Pat says:

    #16 never fear…soon we’ll all have to pay our mortgage payments on line with a credit card…that way, folks will keep current.

    Row! Row! More Oarsmen! Row!

    http://biz.yahoo.com/iw/070925/0306734.html

  23. grim says:

    SG,

    Are you sure you want to use the CPI? You don’t think CPI less Shelter would be a better gauge?

    Keep in mind that the CPI measures, albeit indirectly and perhaps erroneously, the cost of housing. The All items less Shelter figure eliminates the impact of Owner’s Equivalent Rent on the CPI. By deflating with the headline CPI, you are underestimating the amount of appreciation.

    The less Shelter figure is the one typically used to make these kinds of comparisons. Freddie Mac, OFHEO, CEPR and others will all gauge appreciation against CPI less Shelter.

  24. RentinginNJ says:

    these next 3 months are critical. if there is ever going to be a sudden “pop” of this bubble, now is the time

    I’m actually expecting more of a series of “pop-ettes”…smaller to moderate “bursts”, with a small uptick in sales… followed by periods of relative stability with plenty of pontification about how “we have reached the bottom”…followed by the realization that the “pop-ette” wasn’t enough to sustain sales or burn off enough inventory…followed by another “pop-ette”.

  25. John says:

    It is a great time to buy and sell!!!!!! Either way you can only make money in real estate!!!!!!

  26. Glen says:

    I guess all real estate really is local:

    http://www.cnbc.com/id/20975091

  27. SG says:

    Well, some interesting charts,

    I have added Months of Supply (MOS) to the price and CPI chart.

    http://www.geocities.com/skgala/shiller_vs_cpi.htm

  28. bi says:

    Here is the link to NAR report yesterday which was conveniently ignored in this blog:
    “Regionally, existing-home sales in the Northeast slipped 2.0 percent in August to an annual pace of 1.00 million, and are 5.7 percent below a year ago. The median price in the Northeast was $282,300, up 3.6 percent from August 2006”

    http://www.realtor.org/press_room/news_releases/2007/ehs_aug07_sales_fall_temporary.html

  29. grim says:

    bi,

    What, exactly, are you accusing me of?

  30. skep-tic says:

    I think we’re about 4 weeks away from NAR revising their forecast lower for the 10th time this year

  31. SG says:

    Keep in mind that the CPI measures, albeit indirectly and perhaps erroneously, the cost of housing. The All items less Shelter figure eliminates the impact of Owner’s Equivalent Rent on the CPI. By deflating with the headline CPI, you are underestimating the amount of appreciation.

    Good point. My thinking is, if you are not owning, but are renting, you are paying the price somewhere else. By and large most folks on the board are trying make decision on whether to keep renting or buy a house to live in. If it was for Investment purpose, I think removing rent component may make sense.

  32. Mitchell says:

    Yet I bet in Jersey there are real estate agents are still pushing the idea dont miss the boom as house prices wont be this low for long.

    In a way this is good for the truely real real estate agents because it will eliminate a bunch of real estate agents that just got into the filed because they heard they can make a ton of money but really dont enjoy thier field.

    Now if we could only do that with the Tech sector.

  33. lisoosh says:

    RentinginNJ Says:
    “I’m actually expecting more of a series of “pop-ettes”…smaller to moderate “bursts”, with a small uptick in sales… ”

    Someone posted a while back a link to a theory that bubble bursts and declines follow a “waterfall” model – sharp drops followed by a short term plateau followed by another drop. I think the average number of “waterfalls” was three before an approximate bottom was reached.

  34. Pat says:

    C’mon bi29, didn’t you read all the MSM releases (finally!!!) as to why median price changes (on the way down, i.e., in a housing recession) are not indicative of actual market conditions?

    Isn’t the Shiller index good enough for you? It’s good enough for cash money investors.

    JB posted the Shiller numbers, and then posted them again yesterday.

    If you truly believe the NAR median stats, please provide a report of your recent home purchases and/or investment position in housing/housing related stocks. Please speak clearly into the microphone.

    – Yeah, O.K., I’m pmsing with little patience for ignorance today.

  35. Bloodbath in Winter 2007 says:

    Ignorning a NAR report? This blog should be shut down!

  36. SG says:

    Affordable Homes in Every State
    Coldwell Banker’s annual apples-to-apples comparison of homes across the country shows a lot of variety in house prices—and in local economies
    by Maya Roney

    I wonder if there was a way we could identify affordable towns in NJ.

  37. I run my local development’s .Org website and I happened to get the .Com from the original developer of the neighborhood. I had an option for renting homes on the site but was approached by the HOA board if I would remove the rental option.

    Being that I dont produce an income from my websites and that I wanted my house value to hopefully remain up and finally that I only had one rental listing I removed the option for rentals. I dont belive it has stopped anyone from renting out thier home after all if you cant afford to own your going to have to rent or live with someone else.

    But I will say our HOA is quick at putting in an architecture board and rules to help prevent the rental option or at least make sure they are at least cutting thier grass and keeping up in the neighborhood. For the first time I am seeing something good come from being a part of a community in trying to keep home values up while keeping people who want dont care if they create a delta house next door.

    This was more in response to the guy who posted about renters than the original article.

  38. Clotpoll says:

    grim (4)-

    Will they also be offering Disney financing products?

    I want a Goofy mortgage.

  39. Clotpoll says:

    Kim (5)-

    Won’t take 1-2 years. RE busts are characterized by the biggest chunk of the decline happening fast and ugly (it’s the “rush for the exits” so many here reference). 1-2 years from now, we could already be into a multi-year flat phase.

  40. Joeycasz says:

    Yet I bet in Jersey there are real estate agents are still pushing the idea dont miss the boom as house prices wont be this low for long.

    My father just mentioned to me a couple of weeks ago that a real estate agent was trying to convince him that real estate will be “back to normal and be going back up” soon (Spring/Summer) in NJ.

    I laughed.

  41. Clotpoll says:

    ChiFi (13)-

    Elitist.

  42. mr potter says:

    Bloodbath….the NAR’s recent press releases are a joke and should be viewed as propoganda. Not sure what side of the equation you are on(realtor,buyer or seller) but its very hard to take these clowns seriously given the content of the press releases and their agenda.

  43. We are still on the rise here in the Charlotte area but we are seeing it taper off. I do believe its not because of house prices but because of people in other areas arent able to sell thier homes in other areas to move here. We had quite a few home sales but the owners couldnt get here so they would rent the house out until their NJ/NY home sold. Needless to say its about 9-15 months before they arrive.

    Charlotte is still way below the norm in pricing and if you really want to be ticked off just over the border in an area called Fort Mill, SC. Fort Mill has excellent schools too. The gov stated that they will be cutting property taxes by about half. The taxes they pay is nearly nothing now and cutting them in half you can imagine that property values there will probably increase or cause a housing boom. To Give you an idea a house there is about $100.00 a sq ft NEW! so a 3,000 sq ft house new is about 300K and the property taxes now are most probably about $1,800 a year and look to drop to under 1K for a 3,000 sq ft house. This to me is why Charlotte is still on the rise for property value its because the housing is still half the cost of other areas and dont have the outragous property taxes on top of it all. Were seeing some California, Vegas, and Denver people moving here now. Before it was mainly NY/NJ/OH/DE/MD.

    I live in Mooresville, NC now and I have a 3,000 sq ft house nearly on the lake that I paid 257K for a little over 2 years ago that is just over 2 years old. This area is still undervalued or is going through evening up with the surrounding states that are overvalued. As far as jobs go I make about 85% of what I used to make on a perm basis as when I lived in NJ but I have to add that I took a lower position as well because I dont need to work the high stress positions any more to make ends meet.

    I guess what I am saying is while I love NJ the economy of NJ became un-livable and you may be better off quitting than trying to make things work in NJ and just leave the state and go to a place where the economy isnt so out of whack like your JOB to HOUSE cost ratio.

    With the Job to House value ratio It wasnt a difficult decision. I will also add that Merck has been hiring up a lot here lately. I used to work for them some time ago and this may be the sign they talked about 5 years back of moving operations out of NJ to NC. If Pharma moves out of NJ then the state will really dump. What Merck does the others usually do too.

    Best of luck to everyone.

  44. Clotpoll says:

    Rent (25)-

    “Pop-ette”? Is that the sister of Pop Tarts?

    I still prefer the “dead cat” terminology.

  45. Clotpoll says:

    I want to see Roubinator saying “pop-ette”.

  46. Mitchell says:

    To: Joeycasz

    Is there anything a real estate agent wont say today? Were they 20 years old too?

    The first sign to me 2 years ago was when our own real estate agent in Toms River NJ put her 800K house up for sale and was going to rent a small place a little further south. Needless to say she was an excellent real estate agent who knew her stuff. Unlike many others we interviewed for selling our home.

    Desperate!
    The last sign was I graduated 20 years ago and they sent out a reunion CD will all our addresses and e-mail etc. One of the people we gratuated with is a real estate agent and has since been sending everyone home listings when nobody asked for them.

  47. mr potter says:

    Q4 Numbers will be most telling.

    I think the Q4 sales and price numbers will be most telling. Many homes on the market, many custom homes that sit empty. Houses move if prices are deeply discounted.

    It will be interesting to see if the builders\sellers blink in Q4. Otherwise, it will be a cold winter.

  48. mr potter says:

    #47 Mitchell

    All you need to know about where things are headed is the fact that Ara Hovnanian bought a beautiful piece of property in Rumson on the Navesink River. 6 plus acres and its now on the market for $7M.

    Ara recently stated that we are ‘at the bottom’. This is BS as he knows it is getting worse. Why sell at the bottom I say ?

    WHAT WHAT THEY DO – NOT WHAT THEY SAY !!!

  49. JBJB says:

    “If Pharma moves out of NJ then the state will really dump.”

    It has already started. While there were always be some level of big pharma activity in NJ, a slow bleed over the next few decades will reduce the footprint substantially. This is hapening now within J&J and BMS. One thing is for sure, nobody is opening any new faciltities in this state.

  50. zieba says:

    BEGIN RANT.

    This just in: Country is going down the tubes. More at eleven!”

    These two hop a fence, have a few kids, bid up the cost of housing, sign on the dotted line and move into a 599K dump…but when it comes time to pay…oh, sorry amigo not us…

    http://www.nytimes.com/2007/09/25/business/25broker.html?em&ex=1190952000&en=6f0884c25999d6cd&ei=5087

    I really don’t see a difference between signing on the dotted line and taking a pull from the neighborhood pusher…. “Cmon’ maaaan, everybody’s doin’ it!” You either have the upbringing and smarts to say no or you join that group…

    These people are adults, albeit low skilled and undeucated, but come the [BLEEEP] on!!…. I’m living within my means and these clowns are buying 600K houses. I don’t blame the mortgage lenders at all.

    Predatory lending my ass, I prefer targeted niche marketing …is Nabisco a predatory food manufacturer for targeting kids with colorful ads for sugar laden Pop Tarts? Come to think of it, I don’t fault the hustlers and pushers either… it’s a free market, hustle away, if you’re not bright enough to see the downside of taking the pull or signing on the dotted line…well you know what, gosh darn, you’re just going to have to pack your crap and git’ on up n out to the other side of the fence.

    Ben! You bozo! You sold me out….sigh…
    Ben, I understand you feel pressured to keep the music playing for your Goldman pals…

    END RANT.

  51. scribe says:

    From the FT:

    US subprime losses set to mount

    By Stacy-Marie Ishmael and Saskia Scholtes in New York

    Published: September 25 2007 20:44 | Last updated: September 25 2007 20:44

    {snip}

    Lehman Brothers estimates increased payments will send 1.5m subprime borrowers into foreclosure.

    The Federal Reserve’s cut in the overnight rate to 4.75 per cent last week will not necessarily help all subprime borrowers because 73 per cent of adjustable-rate subprime loans are based on the six-month London interbank lending rate.

    This is the rate at which banks lend to each other has hovered around 5.1 per cent.

    An average subprime adjustable rate mortgage in the last two years would have been offered with a 7 per cent interest rate.

    These will initially reset to between 9.45 per cent and 10.85 per cent, according to Deutsche Bank and Loan Performance.

    http://www.ft.com/cms/s/0/40487dc6-6b99-11dc-863b-0000779fd2ac.html

  52. Mitchell says:

    JBJB – I knew things were decreasing in Pharma but didnt know it was at that point already. Ouch

    This might be Merck considering pulling up anchor and moving out of state. Charlotte was to become Merck’s main data center. Not sure if it is now but I have been visited by a bunch of NJ co-workers who have been down here a lot in the past year.

    Merial – Moved to Duluth, GA years back because the company could get their return on the move within 4-5 years.

    Aventis talked about moving a lot of operations oversees.

  53. qwerty says:

    Newsday’s front page today:

    Adjustable-rate mortgages: now it hurts

    Come next November, Kathryn Clejan’s adjustable rate mortgage will get a whole lot more expensive. In fact, she estimates, it could rise by $1,986 a month, which the single mother of two boys can’t afford.

    Clejan is carrying a $496,000 interest-only mortgage on her Manhasset home with monthly payments of $1,760. Though she says she knew when she took out the loan in 2003 that the payments would balloon at the end of five years, she had no choice. She needed the lowest possible rate or faced losing her home.

    http://www.newsday.com/business/ny-bzarm0926,0,5927841.story

  54. scribe says:

    From Bloomberg:

    Plosser Says Fed’s Rate Cut May Spur Inflation (Update1)

    By Scott Lanman and Anthony Massucci
    Enlarge Image/Details

    Sept. 26 (Bloomberg) — Federal Reserve Bank of Philadelphia President Charles Plosser said last week’s interest-rate cut could cause inflation to accelerate and that policy makers must be ready to reverse course if needed.

    “Cutting the funds rate has the potential for aggravating inflation, there’s no question about that,” Plosser told the New Jersey Technology Council late yesterday. Should inflation or price expectations rise in coming months, “the outlook will be affected and policy may have to be adjusted.”

    http://www.bloomberg.com/apps/news?pid=20601068&sid=aCw9scWxBA8A&refer=economy

  55. grim says:

    From Reuters:

    Sen. Schumer-Credit rater changes may be needed

    The credit rating industry may need to change its structure to address concerns about conflicts of interest, U.S. Sen. Charles Schumer said on Wednesday.

    “The question looms: Should the structure be changed or should there be two types of agencies out there — one that is paid for by investors and one that is paid for by the issuer?” the New York Democrat said in an opening statement at a Senate Banking Committee hearing.

    The Senate panel held the hearing to look at the role of credit rating agencies in the recent subprime mortgage market meltdown.

  56. grim says:

    New ARM reset chart from BOA. Looks like BOA is forecasting ARM resets to peak mid-2008, a bit later than many others have forecast.

    http://calculatedrisk.blogspot.com/2007/09/arm-pain-updated-bofa-reset-chart.html

  57. Mitchell says:

    #51

    There is a comic in LA that does a stand up routine where he says.

    “I always dreamed of owning a million dollar home. I just didnt envision it being a 2 bedroom fixer upper”

  58. grim says:

    From MarketWatch:

    Fed cut sends long-term rates up

    Greg McBride, senior financial analyst for BankRate.com, says that many would-be home buyers are about to be stripped of a misperception, namely the idea that when the Federal Reserve Board is cutting interest rates mortgage rates will fall as a result.

    In a radio interview with Chuck Jaffe, MarketWatch senior columnist, McBride noted that the Fed is combating the economy, but some observers worry that its bigger-than-expected move might be opening the door to inflation, a concern which has pushed mortgage rates up slightly since the Fed’s most recent move.

    According to BankRate.com, the average 30-year fixed rate mortgage in the country currently carries a rate of 6.4%, which represents a reversal of course. The average mortgage rate had dropped below that level, to roughly 6.25%, in the two weeks leading up to the Fed announcement Sept. 18 that it was cutting the target for the federal funds rate to 4.75% from 5.25%.

  59. grim says:

    From Bloomberg:

    SEC Probes Whether Issuers Pressured S&P, Moody’s

    U.S. Securities and Exchange Commission Chairman Christopher Cox said the agency is probing whether Wall Street pressured Standard & Poor’s, Moody’s Investors Service and other credit-rating companies to give top rankings for subprime-mortgage bonds.

    The SEC is examining whether the firms were “unduly influenced” by issuers and underwriters that paid for the credit ratings, Cox said in testimony prepared for a hearing by the Senate Banking Committee in Washington today.

    Senator Jim Bunning, a Republican from Kentucky, described the process as “like a movie studio paying a critic to review a movie and then using a quote from his review in the commercials.”

    Moody’s and S&P executives disputed the claims.

  60. Mitchell says:

    #54

    So lets see

    In 5 years her house value declined. You have to always assume this or that your house may need some repairs even if its new.

    She paid next to nothing into the pricipal because she had only been there 5 years.

    She cant afford the $200 increase and that signifies she has nothing to put down should she try and sell and move on.

    Interest rates are higher than they were 5 years ago so refinance is out of the question on her own.

    Her best bet is to go and attempt to renegotiate the loan or the bank will own a negative asset.

    Who is to blame the realtor, the mortgage company or the buyer?

    In a way the realtor for not advising the client they are cutting things too close.

    Second the Mortgage company for approving such a razor sharp close mortgage on someone who doesnt have any extra.

    While they can scream this is unfair its the buyer who overextended themselves and should have never purchased a home at the limits of thier budget. The buyer probably thought they could sell the home in 5 years for much more than what they paid and over financed trying to get rich quick. Sorry but I blame the buyer most of the time when they dont have an extra $200.00 from the beginning. Its easy to blame the mortgage and realtors most of the time and they do deserve some blame but the buyer needs to know their limits.

  61. Clotpoll says:

    scribe (52)-

    “The Federal Reserve’s cut in the overnight rate to 4.75 per cent last week will not necessarily help all subprime borrowers because 73 per cent of adjustable-rate subprime loans are based on the six-month London interbank lending rate.

    This is the rate at which banks lend to each other has hovered around 5.1 per cent.

    An average subprime adjustable rate mortgage in the last two years would have been offered with a 7 per cent interest rate.

    These will initially reset to between 9.45 per cent and 10.85 per cent, according to Deutsche Bank and Loan Performance.”

    That just about says it all.

  62. Orion says:

    I’ve signed up for Wells Fargo REO listings and yesterday I received 30, yes, 30 new listings (including one in Basking Ridge!).

    Are REO’s included in the housing supply numbers?

  63. njrebear says:

    http://www.moneycafe.com/library/6mlibor.htm

    The Last Reported (September) 6 month LIBOR Rate is: 5.53500%

    The rates averaged below 2% from 2002 through 2004.

  64. grim says:

    Are REO’s included in the housing supply numbers?

    As existing homes inventory? Only if they are MLS listed.

  65. lisoosh says:

    Mitchell Says:
    September 26th, 2007 at 11:09 am

    “She cant afford the $200 increase and that signifies she has nothing to put down should she try and sell and move on.”

    You misread – it is a nearly $2000 a month increase.

    Other than that I agree – what on earth was she doing taking out a $500k mortgage.

  66. grim says:

    Holy (Sacred) cow!

    From Bloomberg:

    Vacation Home Sellers Face $2 Billion Tax Bill in U.S. Measure

    The House Ways and Means Committee may approve higher taxes for owners of vacation homes when they sell in order to cushion tax relief for homeowners in foreclosure.

    The panel will vote today on a Democrat-drafted provision that would make it harder for owners of vacation homes to exclude $500,000 in profit from capital gains simply by moving into them for at least two years. The provision would raise $2 billion in additional taxes over the next decade, according to an estimate by the congressional Joint Committee on Taxation.

    Democrats have pledged to pay for tax breaks with offsetting tax increases or spending reductions elsewhere in the federal budget.

    The proposal would gut a tax-saving strategy to pay for tax relief for homeowners facing a tax bill from debt forgiven in a foreclosure, one analyst said.

    “I thought vacation homes were something of a sacred cow,” said Mel Schwarz, an official in the national tax office of the accounting firm Grant Thornton LLP in Washington. “This would shut down what has become a popular planning tool.”

    The provision is supported by the National Association of Realtors, the National Association of Home Builders, and the Mortgage Brokers Association, which are anxious to see tax relief adopted to protect homeowners from levies on forgiven debt.

  67. Paul says:

    All

    I am reading this website almost daily for the last 9-10 months. Very helpful site. It has become a habbit for me. Thanks Grim.

    I have a question. I wanted to buy a townhouse in Edison,NJ and was searching since Nov 2006. The price that was asking that time and the price now being asked is more or less still the same. The price is ridiculous to me for example a 2 bedroom townhouse in West Gate, Edison is 370k. I did not give any offer yet as the asking price is itself high for me.

    My question is we are reading almost everyweek some bad news about housing market but where is the impact of it in Edison,NJ? I understand the listed price did not go up and remained constant but at the same time it did not come down.

    Is there any chart/graph to show any impact in that city.

    Regards
    Paul

  68. zieba says:

    #61

    Do either the mortage company or the realtor have a fiduciary responsibility towards the buyer? NO.

    I don’t know when realtors started getting clumped in with attorneys, probably at the same time prices for POS capes crossed the half million mark..you figure hey…this guy is presiding over the biggest transaction of my life… he must owe me a duty…

    BZZZZZZZZZZZZT!
    Go back to start do not collect $100.

  69. skep-tic says:

    #67

    interesting idea, but I wonder whether this would really offset tax relief for debt forgiveness. a sizeable portion of second homes were purchased during the bubble and most probably have little equity. in fact, many of these second home owners are likely to be the same people defaulting on their mortgages right now (i.e., flippers). so I don’t really see how this works out to a sensible policy, except that politically it allows Congress to appear to help the little guy while sticking it to the big bad rich man

  70. READ MY LIPS: Do not pay more than 35% of income says:

    Kim Says:
    September 26th, 2007 at 7:52 am
    Asking prices for starter houses in the town we want to buy in are coming down! One 2-bedroom, 1-bath starter home just sold for around $375K! NO house has sold in this town for that since about 2003! Now similar houses are priced under $400K, when they used to be listed in the mid- to upper $400s. I am starting to think we actually might get a house for around $350K in a year or two!!
    ===========

    Buying a 2 bedroom for $350K is a good deal?
    HELLO!

  71. grim says:

    I have a question. I wanted to buy a townhouse in Edison,NJ and was searching since Nov 2006. The price that was asking that time and the price now being asked is more or less still the same. The price is ridiculous to me for example a 2 bedroom townhouse in West Gate, Edison is 370k. I did not give any offer yet as the asking price is itself high for me.

    Paul,

    A 2br/2.5ba townhouse in Westgate (182) sold for $300k on 05/30/07 (MLS# 2379014).

    Another 2br/2.5ba with an updated kitchen (240) sold for $342k on 07/05/07.

  72. READ MY LIPS: CAPITULATION COMING TO A HOOD NEAR YOU IN 08 & 09 says:

    HEHEHHEHEHEHE!

  73. John says:

    Read this article from yesterdays big paper in the UK and you will be shocked that they learned nothing from our housing bubble.

    http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2007/09/25/nmortgage125.xml&ref=patrick.net

  74. njpatient says:

    #57 grim
    great link – thanks

    quoting from the link:
    “CS and UBS are apparently only looking at securitized loans”
    Oops.
    “Also, CS and UBS apparently only include the first reset when the loan goes from “fixed to floating”. Perhaps BofA includes subsequent resets too, double counting some loans.”
    This would make a lot of sense. I had wondered about this when we looked at the previous charts, which showed a sudden drop off next year. It seemed to me that this couldn’t be taking into account that ARMs don’t just reset once – once they’re out of the initial fixed period they reset periodically, and it stands to reason that their would be re-set waves going out for years once the fixed period ended.

    I think the BOA numbers are far more accurate, and the spike at 10/07-12/07 is the same one we’ve seen before but now we know that it is not the worst of, nor the end of, the bad news.

  75. njpatient says:

    #21 skep
    “so if this plays out like last time, then looks like modest downturn in nominal prices with most of the erosion done by inflation over 5+ yrs.

    difference today I think is that the slope is much steeper, which suggests a more steep correction, i think”

    There are other differences today: in the previous bust, there hadn’t been a proliferation of Goofy Mortgages (to use Chifi’s term), nor the same degree of leverage, nor the credit issues arising out of the CDO/MBS mess, nor the fact that every clod in town was buying second and third houses for their “portfolio”, all of which will now be unloaded in circs when folks in prior downturns would have chosen simply to remain in their homes.

    Yes, the drop will be steeper and more painful.

  76. SG says:

    By FT.com

    US subprime losses set to mount
    By Stacy-Marie Ishmael and Saskia Scholtes in New York

    Analysts expect house prices to decline and predict such a fall could devastate homebuyers who took out subprime mortgages in late 2005 and 2006.

    Many of these borrowers took out adjustable-rate mortgages in the belief that rising housing prices would increase their home equity and enable them to refinance their loans before rates rose.

    However, falling prices could leave some of these borrowers with negative equity in their homes and make it increasingly unlikely that they will qualify for new mortgages in an environment of tighter lending standards.

    “If you’re a subprime borrower with no equity, or even negative equity because the value of your home has fallen, then you’re in a deep spot,” said Christopher Cagan, director of research and analytics at First American CoreLogic, a mortgage risk assessment firm.

    Late payments and defaults on subprime mortgages are already four times the historical average. They are set to rise as some 2.5m households face rapidly rising mortgage payments in the next 18 months.

    More than $350bn in subprime home loans will shift to higher interest rates, with initial rate increases boosting costs by 30 per cent or more, Credit Suisse says.

    Over the life of the mortgage, the rate will continue to rise. The adjustment frequency may be once every five years or as often as once a month, depending on the terms.

    Lehman Brothers estimates increased payments will send 1.5m subprime borrowers into foreclosure.

    The Federal Reserve’s cut in the overnight rate to 4.75 per cent last week will not necessarily help all subprime borrowers because 73 per cent of adjustable-rate subprime loans are based on the six-month London interbank lending rate.

    This is the rate at which banks lend to each other has hovered around 5.1 per cent.

    An average subprime adjustable rate mortgage in the last two years would have been offered with a 7 per cent interest rate.

    These will initially reset to between 9.45 per cent and 10.85 per cent, according to Deutsche Bank and Loan Performance.

  77. Imus says:

    Still not seeing any kind of real price reductions in Summit, Short Hills or in NYC proper (West Village, Soho, UWS, etc.).

  78. SG says:

    Nice Op-Ed piece,

    The American Dream gone nuts

    This is the American Dream gone nuts. A big part of the sales pitch is to portray homeownership as the most superb of investments. In truth, the return on residential real estate hasn’t been all that great.

    From 1980 to 2005, money invested in the Standard & Poor’s 500 returned an average 12 percent a year, while home values even in the hot-hot markets of New York and San Francisco gained an average 7 percent a year.

    Furthermore, explains Thomas Z. Lys, a business professor at Northwestern University, much of the real-estate gains represented mere inflation. And when you subtract the tons of money homeowners spend over the years on property taxes, mortgage costs, plumbing repairs and remodeled bathrooms, the return is even less.

    Sure, we can factor in the value of leveraging (you might see your house price go up after putting only 20 percent down) and that people who don’t own homes have to pay rent. But in the end, Lys concludes, the chief value of the house is … as a place to live.

    There are sensible responses to the mortgage crisis — and they don’t include bailing out anyone. First off, let it be a lesson to careless borrowers and investors who didn’t consider the risks they were taking. Second, the federal government should tighten up consumer protections on home loans: Do away with overly confusing or abusive mortgages. Third, everyone should stop hyping homeownership as something that every red-blooded American must pursue.

    History tells us that real-estate mania will return. But let’s now enjoy a few years of thinking about our homes as homes.

  79. njpatient says:

    #68 Paul
    “My question is we are reading almost everyweek some bad news about housing market but where is the impact of it in Edison,NJ?”
    You are making your judgment that prices are not falling merely by looking at the asking price. The asking price may still be the same, but in 2006 they were getting that price, and now they’re not. I can’t access actual selling price numbers for Edison at the moment, but I assure you that they’ve dropped from 7/06 to 7/07, and I think that if you have the patience to wait until the dead of winter and see the actual selling price numbers for August and September, you’ll see that price capitulation is occurring.

  80. njpatient says:

    #70 Skep
    agree completely

  81. SG says:

    Helicopter Ben Earns His Wings

    Those who believe the Fed should reduce interest rates to ward off a recession or stabilize home prices simply do not understand the situation. More credit is not the solution: it is part of the problem. Our economy is on the brink of disaster because irresponsible Fed policy encouraged Americans to borrow and spend too much and created an unprecedented national real estate bubble. The last thing the Fed should do is entice Americans to borrow more money they cannot repay, buy more imported products they cannot afford, and attempt to blow more air into the deflating real estate bubble.

    Unlike previous bouts of Fed easing, this time any additional liquidity will not artificially pump up the economy or the housing market, but merely accelerate the rise in consumer prices and eventually push up long-term interest rates as well. If Americans are having problems making mortgage payments now, think of how much more difficult the task will become when food and energy prices double. If you think mortgage rates are high now, wait to you see how much higher they rise after a few rate cuts. After all, with the dollar in free-fall, will foreign savers really want to buy our mortgage backed securities, or lend us any more money at single digit interest rates?

    For some reason everyone seems to think the Fed can bail out homeowners and mortgage lenders without anyone picking up the tab. There is no such thing as free lunch, especially if served by the Fed. If Congress does not raise taxes to fund a legitimate, although ill-advised bailout, then the Fed can not perform the same task for nothing. As the additional dollars the Fed creates reduce the value of all other dollars already in circulation, the cost for the “bailout” is simply borne by all holders of U.S. dollars.

    The irony of the situation is that on September 11th, while in Germany, Bernanke delivered a speech in which he admitted that we need to increase our savings and declared that the inevitable adjustment to our current account deficit would have both real and financial consequences. Bernanke’s actions, which reward borrowers and punish savers, merely exacerbate those imbalances, ensuring even greater consequences when the inevitable adjustment finally occurs.

    Of course, the most comical spectacle of all was Alan Greenspan’s attempt to steal the spotlight. During his media blitz to promote his new book, he simultaneously disclaimed any responsibility for the problems we are now facing while forecasting that both inflation and interest rates would eventually rise to double digit levels. He even admitted on “60 Minutes” that he personally had already diversified his own assets out of the U.S. dollar. I guess it’s fairly easy to read the writing on the wall when you are the one with the spray paint. Greenspan sowed the wind. Unfortunately the entire nation is about to reap the whirlwind.

  82. John says:

    The housing market is going into a deeper chill, and consumers are starting to shiver. Sales of existing homes in August fell sharply, and home inventories by one measure soared to an 18-year high, according to data released yesterday. . . . . The housing market is worrying consumers, raising fresh concerns about economic growth. Consumer confidence fell this month to its lowest level in almost two years, a new survey showed. . . . . . “The combination of all this is indicative of an economy that has lost quite a bit of momentum,” said Joshua Shapiro, chief U.S. economist at the consulting firm MFR Inc., an economic forecasting firm that advises investors.

    . . . . Overall, sales of existing homes tumbled 4.3% in August to an annual pace of 5.5 million, the slowest in five years, the National Association of Realtors said yesterday. More worrisome: The number of homes for sale is enough to satisfy 10 months of demand at the current pace. Two years ago the figure was below five months. Analysts cite excess supply in forecasting that an upturn in sales and prices may not come until 2009.

    Home prices in July fell 3.9% from a year earlier, according to the S&P/Case-Shiller home-price index. The index, which tracks prices in 20 U.S. metropolitan areas, hadn’t measured that big of a decline since just after the 1990-91 recession.

    The bottom is “not yet in sight” for housing, said Mr. Shapiro, the economist. He said the growing number of unsold homes “argues for accelerating declines of prices.”

    The Conference Board said yesterday that its index of consumer confidence dropped to 99.8 in September from 105.6 in August, putting it at the lowest point since November 2005. The survey ended on Sept. 18, the day the Fed lowered interest rates by half a percentage point. The share of consumers reporting jobs as “hard to get” rose to 22.1% from 19.7%.

  83. zieba says:

    #83
    So true! Yet only obvious to so few……

  84. HEHEHE says:

    Form Dealbreaker, Pre this is in NYC

    JPMorgan Will Not Be Outdone By Credit Suisse, Hush Hush About Plans, Though
    We hear Syndicated Leveraged Finance analysts at JPM, currently in training, were rounded up yesterday and told that “there will be people leaving this group.” No mention of how or when the cuts will come. Heard anything similarly vague and sinister? Let us know.

  85. Paul says:

    Thanks for the update on West Gate, Edison, NJ. Per that information that means the price indeed fall. It is encouraging as now I can give some lowball offer.

    Till now I was just browsing the listing and when I spoke to realtors they hide these facts. Obviously they will hide as they don’t want to give this truth out as that will lead to many such low(correct) offers.

  86. DebtVulture says:

    Imus, you aren’t looking hard enough in Summit/Short Hills.

  87. SG says:

    Paul: You may want to keep track of actual sales. I use following site to get recent sell transactions.

    http://citimortgage.domania.com/homepricecheck/index.jsp

    Also in my local news paper they put daily recorded sales. Its available on their website as well, which makes it easy to track.

  88. RentinginNJ says:

    The provision is supported by the National Association of Realtors, the National Association of Home Builders, and the Mortgage Brokers Association, which are anxious to see tax relief adopted to protect homeowners from levies on forgiven debt.

    Of course they are in favor of this. The current forgiveness of debt tax liability will keep many people in their overpriced homes because the tax bill for walking away or doing a short sale could be gigantic.

    Many of these people will try to sell, but will “need to” hit their unrealistic price (a price that won’t clear in the current market) in order to avoid a short sale and the tax liability that comes with it.

    By doing away with the tax liability, the NAR can get transactions (& commission checks) flowing again.

  89. chicagofinance says:

    I love the Shake Shack reference….

    The story of job cuts at Credit Suisse are all over the wires today. The official body count is 150. The most serious carnage came in an unsurprising area of originating and processing residential mortgages. The same areas that Lehman and Bear Stearns cut back.

    These aren’t considered “Wall Street” jobs by most folks in finance, and cuts those positions have been met with shrugs. If you’ve spent at least a couple of hours sober in the last two months, you probably knew mortgage origination was taking a haircut.

    But at least some of those losing their jobs were New York based mortgage bond traders and sales staff, according to a Credit Suisse executive who spoke to the New York Post’s Roddy Boyd. This is the first time we’ve heard the credit crunch monster chewed up some actual traders.

    Good news is that the actual number of job cuts seems to be far smaller than the rumored four hundred. The better news is that lines might be a bit shorter at the Shake Shack. Those bond trader boys can eat.

  90. 3b says:

    #78 Still not seeing any kind of real price reductions in Summit, Short Hills or in NYC proper (West Village, Soho, UWS, etc.).

    You will.

  91. grim says:

    CIT layoffs in Mahwah are scheduled for this week, NJ WARN has the number at 137.

    CIT will end home mortgage operation

    CIT Group Inc., the nation’s largest independent commercial-finance company, said Tuesday it will close its Livingston-based home-lending unit and eliminate 550 jobs around the country within the next 30 to 60 days.

    Company spokeswoman Mary Flynn said in a telephone interview that she did not have any information on how many, if any, of those jobs are in New Jersey.

  92. grim says:

    From Bloomberg:

    House Panel Passes $2 Billion Tax Rise on Vacation-Home Sales

    The House Ways and Means Committee, seeking revenue to help homeowners in foreclosure, unanimously approved higher taxes on the sale of vacation homes.

    Americans who own two homes frequently sell one and live in the other for two additional years to claim the benefit twice, which is permissible.

    The proposal adopted today would allow only a portion of the profit on a vacation home to be excluded from tax, depending on how long the property has been owned versus lived in.

    For example, if a married couple owned a vacation home for eight years, then lived in it for two years before selling, only 20 percent of their profit would be eligible for the capital- gains exclusion.

    The Realtor group applauded the broader legislation, which would spare homeowners who have their mortgages forgiven from a surprise tax bill from the Internal Revenue Service; U.S. law generally taxes the value of forgiven debt as high as 35 percent. The legislation would be effective retroactive to Jan. 1, sparing many of those who lost their homes to foreclosure this year from a surprise tax bill if their mortgage was canceled.

    More than 2 million Americans are likely to lose their homes as low introductory interest rates on mortgages are reset to higher levels and borrowers struggle to make payments, according to the Center for Responsible Lending, a research organization in Durham, North Carolina.

  93. SG says:

    NYTimes Op-Ed

    Save the Day
    By STEPHEN S. ROACH
    Published: September 25, 2007

    Why worry about a weaker dollar? The United States imported $2.2 trillion of goods and services in 2006. A sharp drop in the dollar makes those items considerably more expensive — the functional equivalent of a tax hike on consumers. It could also stoke fears of inflation — driving up long-term interest rates and putting more pressure on financial markets and the economy, exacerbating recession risks. Optimists may draw comfort from the vision of an export-led renewal arising from a more competitive dollar. Yet history is clear: no nation has ever devalued its way into prosperity.

    So far, the dollar’s weakness has not been a big deal. That may now be about to change. Relative to the rest of the world, the United States looks painfully subprime. So does its currency.

  94. grim says:

    Interesting legislation, but there may be unintended consenquences. We may very well see jingle-mail becoming commonplace again.

    Underwater on a loan? Leave the keys under the front mat and simply walk away.

  95. 91 & 93 – re: job cuts – You have to remember that a lot of the jobs affected by these cut backs are consultants (IT and otherwise) that won’t nec. show in the direct lay-off numbers as these people were never employees to begin with.
    Keep an eye on JP as Jamie Dimon spent a good deal of time getting rid of the various consultants/contractors over the past few years. If you were going to find a bloodbath that’s where I would expect to see it.

  96. biluva says:

    #97
    and don’t forget about the offshore peeps doing backoffice support for the departed or soon to be

  97. biluva says:

    nevermind. it’s irrelevant

  98. bi says:

    68#, you can use trulia to find recent sales (not in last 3 months though). for example,
    288 Westgate Dr, Edison, 08820 $351,000 94 Westgate Dr, Edison, 08820 $361,000 202 Westgate Dr, Edison, 08820 $360,000 115 Westgate Dr, Edison, 08820 $350,000 107 Linda Ln, Edison, 08820 $390,000

    but i am not clear it is 2brs or 3brs.

  99. bi says:

    72#, grim,
    these two are right off the rail track. for the townhouses a little off the track, it can still be sold above 350K. a lot of immigrants like edison since they want their sons/daughters to be next thomas edison.

  100. syncmaster says:

    a lot of immigrants like edison since they want their sons/daughters to be next thomas edison.

    It’s because they want to fit in and not be the odd family out.

  101. Richard says:

    >>These guys are unbelieveable.

    so are you 3b.

  102. Richard says:

    reading this blog i should sell my house right now and take 100k less just to get out of it before it’s worth nothing. the only big swings in prices i see are cherry picked listings in which we have zero detail on. sure prices have softened a bit but so what what does that really mean if you plan to remain long term like it seems people here want to? what is it $600 a month to borrow $100k over 30 years? renters and savers have been punished for years as the deck is stacked in favor of the homeowner. the advantages are retreating a bit but don’t for a second think the game will change anytime soon.

  103. njpatient says:

    Richard Says:
    September 26th, 2007 at 2:15 pm
    reading this blog i should sell my house right now and ….

    and yet you keep coming back, don’t you??

  104. Everything's 'boken says:

    Bulletin board ad-

    5,400 Sq Ft home Poconos $460,000 to 480,000

    Paid $560,000 and added 30K to home. Second Home. Like New 5,400 square foot home. 2.04 Acres, 2 Kitchens, 6 Bedrooms, 3 living rooms, 3 and 1/2 baths, Garages, Jacuzzi, new carpeting in Bedroms, Hard wood floors, surround sound system, Alarm

  105. chicagofinance says:

    for Bost….it’s buried in today’s paper…

    WSJ
    ‘Joba the Heat’: The Yankees’ Rookie Justin Chamberlain
    By ALLEN BARRA
    September 26, 2007, D12

    Major League Baseball in the 21st century may be the most ethnically diverse of all major sports, with some current rosters looking like a veritable United Nations. The New York Yankees alone field players from Japan, Taiwan, Puerto Rico, Panama, the Dominican Republic and Venezuela, as well as players of mixed ancestry such as white and African-American and white and Thai. Curiously, one ethnic group is mostly unrepresented, Americans Indians. Now, 22-year-old Justin Chamberlain of Lincoln, Neb., is changing that in a high-profile way.

    If you’ve been following baseball since early August, you don’t know him as Justin, and by the time you read this it’s likely no one will ever call him that again. To Yankee fans, Nebraskans and an increasing number of awestruck American League hitters, the name is “Joba” — pronounced Jah-buh, like the character from Star Wars, Jabba the Hut. Those who have seen his phenomenal fastball in person have dubbed him “Joba the Heat.”

    [edit]

  106. kettle1 says:

    Grim, maybe i am slow today, but what do you mean by jingle mail????

  107. chicagofinance says:

    it’s a much longer article….mentions Allie Reynolds…if interested, I can post the rest

  108. njpatient says:

    chi – thought you were a Mess fan?
    Joba sure is fun to watch.

  109. njpatient says:

    “mentions Allie Reynolds”
    “Joba the Heat”

    I’m glad we no longer have to nickname EVERY native American indian ballplayer “Chief”.

  110. x-underwriter says:

    Grim, maybe i am slow today, but what do you mean by jingle mail????

    Jingle mail is when you mail your lender the keys to your place. The envelope jingles when you shake it.
    Doing so tells them that they can take it back to foreclose

  111. Mitchell says:

    House prices not falling but most arent selling either.

    You have to understand prices are sometimes set by the sellers for many different reasons and one could be that they cant sell for less because they bought even higher, Some dont realize their houses are worth less, its not all apples comparisons. So these houses sit for a long time or until someone who isnt very education on the surrounding area comes in and buys it. lastly someone who is from an area that costs much more like 750K thinks they are getting a bargain because of what houses in the area have sold for.

    Apples comparisons:
    The 2br 2ba place next door sells at a high value lets say $500K but has options like cul-de-sac, larger lot, recently remodeled kitchen and bath, etc. The problem is and has been happening for some time that the guy next door or down the road thinks his place is worth $500K even though that havent done didly to the place in the last 15 years. Its the same junk they bought only used for the last X years. Yet they have the misconception they are worth the same.

    If that were the case then the value of my car should go up in value when I park next to a newer more expensive one that has recently been redone. This simply isnt true.

    People rarely look at the LAND value then the HOUSE value sitting on the land. NJ is basically having a control issue because all houses are based upon proximity instead of the value of the home sitting on the land. While it does make a difference its getting very hard for people to realize because the house down the street sold for a large amount doesnt mean yours is worth that and realtors need to push this message instead of telling sellers what they want to hear. But then if a realtor doesnt tell the seller what they want to hear the house gets listed with the person who does tell them what they want to hear.

    The main problem is educated home owners and by all the chap 11 and forclosures tells you most home owners are not smart.

    The way to tell if you have been taken for a ride by your realtor is that they tell you what you want to hear and when they get you to sign on the line that your listing with them in about a month when your house isnt sold they start telling you that you need to drop the price of your house to sell it. This is an indication they didnt give you the proper information from the beginning and have instead told you what you want to hear so you sign on after that they could care less about their commision on 10-20K of you having to drop the house price.

  112. chicagofinance says:

    njpatient Says:
    September 26th, 2007 at 2:31 pm
    chi – thought you were a Mess fan?
    Joba sure is fun to watch.

    nj: I told you the riddle that my Yankees friends say…….What is true about the Mets and a bridge in Minneapolis?

  113. 3b says:

    #105 njpatient: Thats because deep down, he knows we are right.

  114. chicagofinance says:

    About a year ago I was touting large cap global as a general portfolio overbalance…..I also was railing against index funds. One of the reasons that I was railing against index funds was that “…to many market participants were indexing”, and it was causing inflation on the marginal of otherwise pedestrain stocks……note this development, and subsequently we will likely have two broad trends in my opinion: #1 a further (NOTE: RELATIVE) rally in this sector leading up to about January-March; and #2 an subsequent overvaluation of these types of stocks.

    Vanguard Set to Unveil Mega-Cap Funds As Investors Balk at Risks Of Small-Caps, Offerings
    May ‘Come at Good Time’
    By DAISY MAXEY
    September 26, 2007; Page C13

    Vanguard Group is supersizing its mutual-fund lineup.

    Just as volatility is driving investors away from the risks associated with smaller-cap stocks, the Valley Forge, Pa., index giant plans to launch three mutual funds that will invest in mega-caps, or companies with market capitalizations ranging from just under $3 billion to nearly $500 billion.

    Vanguard has filed with the Securities and Exchange Commission to launch the Mega Cap 300 Index, Mega Cap 300 Value Index and Mega Cap 300 Growth Index funds. The funds, which will be introduced in December, will track the market-capitalization-weighted MSCI US Large Cap 300 Index and its value and growth subsets.
    [edit]

  115. chicagofinance says:

    edits to about:
    “too” not to
    “margin” not marginal

  116. Orion says:

    Not sure if this was posted, but worth a listen:

    Bicameral Hearing on Subprime Crisis/Shiller’s testimony – 7min.

    http://video.google.com/videoplay?docid=2632104576923946755&q=robert+shiller&total=12&start=0&num=10&so=0&type=search&plindex=3

  117. xiaolu says:

    As you might remember from my yesterday’s post, I am selling my house now.
    We got another offer last night. Picked up one (not the highest) and will finialize tonight. Actually three offers are smiliar in number, the other one is a little bitter low. It is 4% less than listing price but still 20k higher than the estimate I got from two senior realtors. Are they more conservative these days?

    Cross my fingers….

  118. x-underwriter says:

    Subprime: Big talk, little help

    Just as I predicted a month or two ago. People who make enough money to pay for new loan won’t be having trouble with the one they have now.

    But based on what the credit counselors have seen from lenders’ responses, “if a borrower is behind because of the rate hike, in general that is not enough of a reason to modify the loan. The borrower needs to have a reason (e.g., losing one’s income or a medical crisis) and proof they can make the modified payment,” said Erica J. Sandberg, CCCS of San Francisco’s financial education and communications advisor.

    http://money.cnn.com/2007/09/26/real_estate/few_loan_modifications/index.htm?postversion=2007092614

  119. njpatient says:

    “What is true about the Mets and a bridge in Minneapolis?”

    Heh. One collapsed in slow motion, though.

  120. dreamtheaterr says:

    a lot of immigrants like edison since they want their sons/daughters to be next thomas edison.

    Bi, most probably they don’t even know the town was named after him.

  121. chicagofinance says:

    We had this topic last week. A more user friendly approach to the subject. This information is for discussion purposes only.
    If you are interested, seek out the article.

    NOTE: IF YOU SPECIFICALLY ARE INTERESTED IN NON-USD EXPOSURE, ENSURE THAT THE PM DOES NOT HEDGE CURRENCY RISK AS PART OF THEIR PORTFOLIO STRATEGY. THIS FACT MAY NOT BE EASY TO DISCERN, OR WORSE MAY BE PURPOSELY NOT DISCLOSED.

    WSJ
    Dollar Daze: Investing With a Weak Currency
    Greenback’s Slide Prompts Many to Seek Foreign Refuge; Still Vulnerable to Bad Picks
    By JEFF D. OPDYKE and JANE J. KIM
    September 26, 2007; Page D1

    Even if you never travel abroad, never buy a foreign car and invest only in American stocks, the falling dollar is potentially a problem for your investments.

    That’s prompting investors to put more money into non-dollar-denominated assets. International stock funds saw net inflows of investors’ cash in the past two weeks, after posting net outflows since the beginning of August, according to AMG Data Services. Meanwhile, U.S. stock funds have had net outflows so far this month.

    The dollar yesterday dropped to a record low against the euro and has hit multiyear lows against other major currencies, after the Federal Reserve cut short-term interest rates last week. The latest tumble continues a downdraft that started in 2002 and that many currency experts say still has more years remaining, due largely to concerns about a slowing U.S. economy and a yawning trade deficit. Economists at Standard & Poor’s project the dollar will continue to fall through 2009 and then stay flat through 2011.

    [edit]

  122. dreamtheaterr says:

    Chifi, do you only dislike index funds or ETFs also?

  123. 3b says:

    #119Cross my fingers…. Until the deal closes. closes.

  124. bi says:

    119#, with 4 offers lined up, i would sit and let them increase the bid. seriously. you can sell it at 1% or 2% less. friend of mine sold his home in east brunswick one month ago at the price at 630K (5K more than asking) with three offers in one day.

  125. 3b says:

    #104: but so what what does that really mean if you plan to remain long term like it seems people here want to?

    It means once you have over paid, you will have always over paid, and that will not cahnge. The purchase price can never be refinanced.

    If you overpay by 10k, 25K, perhaps no big deal. Overpaying by 50k, 100k 150K, a big deal IMHO, plus all the additional interes one would have paid on that amount that one over paid. Again a big deal in my opinion.

    Advocating buying and over paying because it may all work out in the end, is IMHO foolish.

  126. bi says:

    119#, you should also look at other factors from the offer sheet and from your broker to make sure the deal will go throgh smoothly. some buyers may give you hard time during home inspection.

  127. 3b says:

    #103 Richard: so are you 3b.

    Uncalled for, but than again not surprising.

    Perhaps oh wizened one you can translate correctly for us what the realtor was saying.

    If what she said does nto qualify as spin, than nothing does.

  128. njrebear says:

    xiaolu,
    How does your offer compare to peak prices?

    Thank you.

  129. Mitchell says:

    Where does everyone think the bottom is here.

    After looking at the data from the S&P Home Price Index I would have to believe it needs to drop 30 points to come into line with what it should be. While this will vary by areas its a pretty big drop. I cant see it staying anywhere near where it is because you wont see some first time home buyers unless it drops at least 20 points.

    Comments anyone

  130. xiaolu says:

    Bi,

    Thanks for the suggestion. That’s why we picked up the second highest one. I know that family and they are decent people. For the highest one, their inital offer was much lower and attitude was picky. I don’t want to waste time on them.

    I am quite content already and don’t want to push my buyers to edege.

  131. Aaron says:

    I believe the proper term is ‘Native American’
    not ‘American Indian’

  132. Marito says:

    Hey, dreamtheaterr, I surely didn’t expect to see myself defending bi on any topic whatsoever, but this is different. Educated people tend to look up to America in underdeveloped countries, especially in terms of innovation and etc. I’m sure that many guys finish HS in India knowing who Edison was. Here, guys finish HS and don’t know where India is.

  133. xiaolu says:

    njrebear,
    I am not sure how much did my house worth at peak time. According to my realtor, it might can be shot to 5%-7% higher.

  134. Orion says:

    Mitchell #131,

    IMO, when people can easily manage PITI that is 30% of monthly income, then we have hit bottom. Until then, it’s la-la land.

  135. Orion says:

    Grim #65,

    Some REO’s are MLS listed, some are not. So I’d guess the ones that aren’t MLS listed are not counted as existing homes inventory.

  136. 3b says:

    #135 Marito:Here, guys finish HS and don’t know where India is.

    Or Canada.

  137. dreamtheaterr says:

    Marito, point taken. Of course people know of Thomas Edison. Immigrants come to the US because of a chance to pursue their dreams and expand their creativity amidst endless opportunities.

    My point was simply that people don’t move to Edison NJ because they want to be the next Edison. Would you move to Alexandria, Egypt because you want to be the next Alexander? Probably not.

  138. Orion says:

    OT-

    A state official told me the additonal city tax imposed on homesellers WILL pass. If anyone disagrees with this additonal tax, you’d better start calling Trenton today.

  139. John says:

    Bring them on over and I will kick them in the ear and make them half deaf.

    dreamtheaterr Says:
    September 26th, 2007 at 2:57 pm
    a lot of immigrants like edison since they want their sons/daughters to be next thomas edison.

  140. Hehehe says:

    People move to Edison to be near the economic activity in NYC, duh.

  141. chicagofinance says:

    ETFs bastardize the index concept, but those based on a specific index [versus those in development to be actively managed] are completely misleading. Sector ETF’s are by-definition active management.

    The postive qualities of ETF’s are convenience, immediate broad exposure, cost efficiency.

    Sector or focus removes the broadness and some ETF have high expense considering that they are doing nothing.

    USES? A nice place to park money until you figure out the detail of your strategy.

  142. bi says:

    135#, 139#,
    It may be true in some failed school district. But I would argue that some top-ranked public schools are better than those in India or Chinese. The schools in U.S. encourage creativity and individualism while the schools in some developing countries tend to emphasize test scores. This is why almost all the great inventions in last century were happened here. And I believe it will remain true in our lifetime. While BC Bob always think other currencies are backed by more valuable asset, I believe American Dollar is backed by the most valuable asset – the most creative people.

  143. dreamtheaterr says:

    #143, John I didn’t say that. It’s in italics….track the messenger.

  144. 3b says:

    #146 bi: believe American Dollar is backed by the most valuable asset – the most creative people.

    There you have it people, currency backed by people.

  145. Clotpoll says:

    reech (104)-

    You’re so cute when you’re in denial.

    BTW, I just went on my first visit to a prospective seller with a $1,000,000 house that must be sold short. He lives in Somerset Co’s version of Brigadoon, too.

    Funny thing is, in our little Brigadoon, I can show you five listings right now @ 800K+ where the seller is underwater.

  146. John says:

    This is strange – While working with Alexander Graham Bell to discover words of greeting, Edison is credited as creating the word “Hello” as a telephone greeting in 1877.[44][45][46] Bell, however, preferred “Ahoy-hoy” as a greeting.[47] (Hello is a variant on the old word hallo.)

    Edison had three sons and three daughters and all three sons never had kids – you would think that would be impossible considering one of his kids was the governor of NJ and another was a big shot at GE!!!!!

  147. Clotpoll says:

    ChiFi (107)-

    The WSJ should stick to finance. Johnny Damon is also American Indian.

  148. John says:

    dreamtheaterr Says:
    September 26th, 2007 at 3:47 pm
    #143, John I didn’t say that. It’s in italics….track the messenger.

    still funny. By the way Edison was not an imigrant, his parents were but they moved from canada so they spoke english.

  149. Clotpoll says:

    3b (127)-

    You don’t know whether you’ve overpaid until you attempt to sell your house.

    There is no way of knowing you’ve overpaid at the time of purchase.

  150. JBJB says:

    Any opinions on a good locations (in NNJ or CNJ) for a couple with one working in Allendale and the other on the Upper East Side?

  151. njrebear says:

    clot,
    Reech makes the appearence of being in denial.

  152. BuyNextYear says:

    Here is a funny comment that I came across on WSJ about a housing article:

    “I am trying to sell a home in San Jose now and having one heck of a time…these buyers think I should mark down my price by 25%!!! I wonder what they are smoking? I can see 3 to 5% markdown, but not one cent more…I have even offered to finance them if they put down a substantial downpayment! “

  153. 3b says:

    Clot: As much as I value your opinion, I do disagree.

    If I bought a house 2 years ago @450,and the same house is now being offered at 399k, has not the person who purchased 2 years ago over paid?

  154. Hehehe says:

    No wonder my SKF got it’s wings clipped:

    Buffet Interested in Bear Stearns?

    http://www.thestreet.com/_yahoo/newsanalysis/stockpickr/10381578.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

  155. njpatient says:

    #124
    I imagine Chifi feals about index funds as Clot does about FSBOs and I do about DIY legal forms.

    #134 Aaron
    Duck.

    #143 John
    Oh, my.

  156. njpatient says:

    “If I bought a house 2 years ago @450,and the same house is now being offered at 399k, has not the person who purchased 2 years ago over paid?”

    If you can truly make the one-to-one comparison, which isn’t always the case, then of course you’ve overpaid.

  157. John says:

    House Panel Passes Tax Rise on Vacation-Home Sales (Update1)

    By Ryan J. Donmoyer

    Sept. 26 (Bloomberg) — The House Ways and Means Committee, seeking revenue to help homeowners in foreclosure, unanimously approved higher taxes on the sale of vacation homes.

    The panel adopted a Democrat-drafted provision that would make it harder for people who sell their second homes to exclude as much as $500,000 in profit from capital-gains taxes. The provision would raise $2 billion in additional taxes over the next decade, according to an estimate by the congressional Joint Committee on Taxation.

  158. njpatient says:

    just looked up and realized I’d invented the word “feals” at 159. It means what it sounds like, fwiw.

  159. njrebear says:

    it’s just not vacation homes….

    it is ALL second homes.

  160. Richard says:

    3b, why don’t you spend more of your time on your career instead of sitting on this board all day and maybe you can afford to buy a house some day. sheesh.

  161. Richard says:

    >>Funny thing is, in our little Brigadoon, I can show you five listings right now @ 800K+ where the seller is underwater.

    i can show you 10 that aren’t.

  162. njpatient says:

    “3b, why don’t you spend more of your time on your career instead of sitting on this board all day and maybe you can afford to buy a house some day. sheesh.”

    I think this highlights the fundamental divide between the current RE bulls and bears. The bulls, like Richard, think that the only reason anyone would not buy a house today is because they’re too poor to do so. The bears think that anyone with a few hundred K to spare who can’t think of a better place to park it than in a down payment for a house is none too bright.

    So there it is.

  163. Richard says:

    >>Reech makes the appearence of being in denial.

    i’m up $350k on my house since i bought it and around $200k on my rental even with the recent ‘corrections’. i could give a rats @#$% what happens it has no effect on me. i just think it’s funny how everyone here spouts all this data about this or that house that’s underwater or is losing money and the bargains are just round the corner. tell you what. why don’t all you house hunters print out these facts and go talk to some sellers who are in denial and see if they’ll drop their prices for you. good luck.

  164. njpatient says:

    “i can show you 10 that aren’t.”

    Wow! So there are SOME folk in Brigadoon that aren’t under water? The place is bullet proof!

  165. njpatient says:

    “i’m up $350k on my house since i bought it ”

    No. Until you sell it, you are up precisely $0.

  166. Pat says:

    168 Richard. Definite anger stage brewing there, Richard. Do you have any wine or something to take the edge off?

  167. dreamtheaterr says:

    Richard aka Beardstown Lady, chill. At this rate, your huffing and puffing will bring your house down.

  168. Pat says:

    bi, re: “Those Creative Americans”

    How do you know it’s not simply a function of process and market channel availability?

  169. Richie says:

    im up $500k!!!!!!!!!!!! corrections cant bring me down!!!!!!!!!!

  170. commanderbobnj says:

    John Says:(#150)
    September 26th, 2007 at 3:50 pm
    “…This is strange – While working with Alexander Graham Bell to discover words of greeting, Edison is credited as creating the word “Hello” as a telephone greeting in 1877.[44][45][46] Bell, however, preferred “Ahoy-hoy” as a greeting.[47] (Hello is a variant on the old word hallo.)…”

    Commanderbob sez: What is also interesting about Edison and Bell is that Edison invented the (carbon) transmitter (to speak into) for Bell’s original telephone invention, and made it very practical to put it into everyday use—-Before, one would have to use the same device to both receive and then spin it around to transmit your voice !

    Many of you here may not know this, but Edison’s 1st wife and Thomas Edison jr. are buried in an elaborate plot in the Mt Pleasant Cemetery off Route 21 (McCarter Highway) in north Newark—-This very old Cemetery is well worth the visit on a Sunday—The Edison ‘monument’ of a tombstone has a small limestone bench on the plot—Edison lost his young wife to sickness in the early 1880’s and they say that he would visit often and sit on that bench after working in his factory —-I brought my kids there when they were young and would have them sit where that famous inventor (my ‘hero’ as the Greatest American inventor)sat.

    If anyone takes a trip to Mt.Pleasant Cemetery, Be sure to ‘check-out’ the Newark Fireman’s plot—-A ‘step’ back to the 1890″s !

    BOB

  171. Eagle says:

    Bloodbath (and others following Ridgewood market):

    THought you might get a kick out of finding the ultimate results of the house I previously inquired about with multiple price reductions and in-and-out of attorney review a few times, with final asking of 850. Ultimately sold for 810, but now listed for rental at 4900/month. (That would seem not even to cover mortgage and taxes)

  172. versity says:

    I am in the unfortunate position of having to sell in this market. We met with a broker today and she said her commission was 3.5%. Is that normal? If not, what is?

  173. chicagofinance says:

    Darling, Hernandez give Mets best broadcast team in baseball

    http://sports.espn.go.com/espn/print?id=3036927&type=story

  174. njpatient says:

    They’re certainly better than John Sterling, that self-aggrandizing blowhard.

  175. John says:

    Actually Edison is very well know in the Indian Community in New Jersey. The invention of the lightbulb alows Dunkin Donuts and 7/11 to stay open all night and has greatly reduced indian unemployment.

  176. Pat says:

    Thanks, commanderbob. Not something I’d just know to check out.

  177. John says:

    What the heck is the difference between a vacation home and a second home? If a second home is not rented out and is somewhere you go on weekends what is the difference. A lot of guys I work with have studios in the city for when they work late and their regular home to me the tax treatment should be no different than the guys who own hamptons and shore houses.

    If bush really wants some fun he should take away the mortgage and RE deduction on second homes.

  178. bi says:

    177#, 3.5% is below normal in my opinion. 6% was norm before but you can get 4% to 6% in general. I am wondering what kind of service she provides. is it eclusive listing?

  179. versity says:

    i think it would be exclusive. but really we just started so i’m not sure. do you think she quoted just her commission? in other words is she saying “i’ll charge 3.5% and then you’ll tack on whatever the buyer’s agent wants”?

  180. versity says:

    i would have asked her myself but it was my wife that met with her.

  181. pretorius says:

    John #182,

    There is a big difference because 2nd homes can be used for vacation or investment.

    Demand for vacation homes remains solid due to demographic shifts. The baby boom generation is beginning to retire, and this generation of retirees is the largest and richest in history.

    Meanwhile, investors’ demand for residential investment properties has diminished. Flippers, who in general are savvier than people think, have exited the market because the current environment of stagnant prices makes it very difficult for them to make money.

  182. bi says:

    184#, in listing agreement, it will spell out how many percent the buyers agent will earn. if it is no more than 2%, some buyers agent will not bother looking at it (unless it listed over $1M).

  183. versity says:

    thank you bi. obviously a lot more reading to do. i thought there was a quick and easy answer.

  184. John says:

    An investment property is not a second home. It is an investment. That has a whole set of different rules that a vacation home that the owner can take advantage of. I think they are cracking down on what I see the executives on Wall Street are doing. I know a few who at 55 with kids gone sell the main home tax free and roll the profits and buy a Condo in NYC and a home in the Hamptons and then work 2-5 more years in NYC and then sell that condo tax free and then move to hamptons for a few more years and then sell that home tax free. It is the rich man’s welfare.

  185. Mitchell says:

    The link below shows the 100 largest-by-population markets among the 290 metro areas that are forecast to have declines of 1 percent or more. In an analysis that considered mortgage rates, the local job market and other factors, the study makes projections on when those markets would peak, when they would hit their worst point, and how much the total decline would be.

    Edison, NJ -13.3% Q4 2008

    http://money.cnn.com/2007/09/19/real_estate/steep_home_price_drops_coming/index.htm?postversion=2007091915

  186. BC Bob says:

    “Flippers, who in general are savvier than people think”

    [186],

    Bull markets turn idiots into geniuses.

    It took me 20 years to flip, I guess it just took me longer to get it, as compared to the savvy ones.

  187. BC Bob says:

    Chi,

    Joba: Great article. Where’s the rest?

  188. SG says:

    xiaolu: which town your house is located? What is the sell price range?

    The town and price range seem to have lot to do with getting quick offers.

  189. njpatient says:

    “Flippers, who in general are savvier than people think,”

    Oh.

  190. pretorius says:

    Sure, some flippers are getting killed. But most have quietly exited the market and are trying figure out how to invest all the cash they earned during the last few years.

    I have a hard copy of a study that examines flippers’ returns. It is the best report that I have read on the topic. I will try to find it and have it posted here.

    Has anybody seen thoughtful reports on flippers’ investment performance? FYI – I am only interested in real reports, not mainstream media articles.

  191. pretorius says:

    I found an electronic copy of the study. I cut and pasted the conclusion here.

    “On the surface, it would seem reasonable that flippers get the same rate of gain as the market was getting. Why would they so often get (not merely individually, but on a group median basis!) double or even triple the annual rate of appreciation that the market was experiencing? Why wouldn’t they get the same level of return that the general market got?

    The only conclusion is that flippers were exercising a level of intelligence and “savvy” above that of the general market! It looks like flippers, as judged by their returns, had more investing intelligence than the market
    in general.”

    http://www.facorelogic.com/uploadedFiles/Newsroom/Studies_and_Briefs/Studies/FlippingStudy_r3(1).pdf

  192. pretorius says:

    Here is the link again.

    http://tinyurl.com/3dbk2g

  193. chicagofinance says:

    BC Bob Says:
    September 26th, 2007 at 5:25 pm
    Chi, Joba: Great article. Where’s the rest?

    Bost: too long; to off-topic…D12 today’s WSJ, or ask grim to e-mail the link

  194. READ MY LIPS: CAPITULATION COMING TO A HOOD NEAR YOU IN 08 & 09 says:

    http://youtube.com/watch?v=tkuW8bCjC6c

    BOOOOOYAAAAAAAAAHAHAHHAHHAHAHA

    Bob

  195. chicagofinance says:

    bi Says:
    September 26th, 2007 at 4:54 pm
    177#, 3.5% is below normal in my opinion. 6% was norm before but you can get 4% to 6% in general. I am wondering what kind of service she provides. is it eclusive listing?

    bi: you get “happy endings”

  196. njpatient says:

    “The only conclusion is that flippers were exercising a level of intelligence and “savvy” above that of the general market! ”

    I’m sorry, but that’s really sad. Homes are not like stocks; any reasonably savvy person setting out to make a profit by buying and selling homes is competing with every single idiot America has to offer. If you can’t beat the average return, then there is something very, very wrong with you.

    Of course, right now, the average return is negative…

  197. chicagofinance says:

    I call bull$hit here. Merrill has the advantage and they are going to stick it to the competition. All the other spin is for effect….

    http://www.bloomberg.com/apps/news?pid=20601103&sid=a5rTUAmDH7pc&refer=us

  198. njpatient says:

    #199 Booyaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaahhh

    Oh, snap!

  199. njpatient says:

    pretorius – I’m sure it’s in there, but can you show me where in that study it showed that they adjusted for the cost of flippers’ renovations? Even HDTV does that…

  200. pretorius says:

    Njpatient,

    New Jersey home prices rose 126% during the last peak to trough period, according to OFHEO, with the peak ocurring in 1Q07.

    If it was so easy to beat that return, did you flip a lot of properties during the boom?

  201. pretorius says:

    Nj patient,

    Fair point about renovations, although I am sure that many of these flips were newly constructed homes which required the flipper to make zero renovations.

  202. Theo says:

    JBJB Says:
    September 26th, 2007 at 3:59 pm
    “Any opinions on a good locations (in NNJ or CNJ) for a couple with one working in Allendale and the other on the Upper East Side?”

    How about Allendale, or Ho-ho-kus, Paramus, Ridgewood, Oradell, etc. etc…… It’s really not that hard, just screw the NYC commuter.

    Why would you want to live in CNJ with jobs in Allendale and NYC?

  203. njpatient says:

    “If it was so easy to beat that return, did you flip a lot of properties during the boom?”

    No, because diversified stock market investments during the same period would beat that return without needing a bubble to do so.

    I answered your question despite your sidestepping mine. But then, I’m a gentleman.

  204. njpatient says:

    “I am sure that many of these flips were newly constructed homes which required the flipper to make zero renovations”

    Yes, of course. I’m sure you’re right.

  205. pretorius says:

    What question did I sidestep?

  206. Jim says:

    Re 168

    Richard there will be no reason to convince sellers to lower their prices, between builders dropping prices over $100,000 and foreclosures hitting the market houses will be abundant.

    The old supply and demand economic story, two years ago if you told a realtor or home owner prices would drop they laughed at you .

    Today it is reality…buy a clue!

    Two years from now people who cannot sell their house will be hurtin puppies, and well under water.

  207. dreamtheaterr says:

    ““Flippers, who in general are savvier than people think”

    Investors never discuss losses, only winners. I’ve never met a bad investor.

  208. pretorius says:

    dreamtheaterr,

    Read the report I posted in post 198. Lots of evidence that flippers are in fact savvier.

    Report controls for renovation spending by calculating returns on flips with 3 to 6 month holding periods. Major renovations require a longer holding period than that, considering design, permitting, construction, and marketing phases.

  209. BklynHawk says:

    Hi, could some kind soul please look up MLS 2737739.

    Thank you. I will buy you a drink at the next get together. Speaking of which, any more progress?

    JM

  210. Essex says:

    ground hog day here.

  211. BC Bob says:

    “Sure, some flippers are getting killed. But most have quietly exited the market and are trying figure out how to invest all the cash they earned during the last few years.”

    Move over George Soros.

    Nonsense to think “most” have quietly exited. Sounds very subjective. What % is “most”? Are these 2005,2006,2007 flippers? How about the flippers who have empty properties jammed up their #ss? Take a look at Belmar properties. They are quietly hoping for a category 5.

  212. UnRealtor says:

    Pretorius #197, the conclusion of that article doesn’t hold water:

    “Why wouldn’t they get the same level of return that the general market got? The only conclusion is that flippers were exercising a level of intelligence and ‘savvy’ above that of the general market!”

    It wasn’t because of flipper brains or savvy, it was because they could create value above and beyond the market by performing repairs and enhancing properties, which were ballooning in value to start.

  213. Essex says:

    Flippers really screwed the market up for people who just wanted an honest home. No pity for the pain they might feel. Others bought and sold and made money, now they need a marketable skill. Good luck.

  214. BC Bob says:

    Do flippers trade lumber?

  215. Essex says:

    No but they have mourning wood.

  216. BC Bob says:

    Essex [219],

    No different than the flippers of the late 1990’s, flipping stocks. A bubble created these geniuses also.

  217. Essex says:

    I was in that bubble…..two IPOs from 1998 to 2001….both had potential…one gave me real hope…..and both…..crashed and burned big time. Now I got a real job.

  218. BC Bob says:

    Essex,

    I sat next to those that said WB had lost it, that he was insignificant. I have no idea where these same individuals are sitting today.

  219. pretorius says:

    Unrealtor,

    Do you really believe these flippers could design a renovation, acquire the permits, carry out the construction, market the property, negotiatate a deal with a buyer, wait for the title work to be completed, and close – all in 3 to 6 months?

  220. Essex says:

    The guy I worked for started a firm with 3 guys in a bedroom….ran it up…ran it down…hired his brother in law during an especially crucial time….went from $1B to a parting gift of just over $10m after taxes…in 4 years. Go figure.

  221. JoeBuyer says:

    Sellers “should be aware that buyers are doing their research and checking comparables,” she says.

    “We experienced an unusual market where prices were inflated, but now the market has stabilized. We didn’t have a bubble that has since burst but a market that is transitioning back to a more normal market.

    This is far from normal market and buyers are not buying in to this normal line.
    Blah blah blah. It’s normal. Not!

  222. pretorius says:

    A mental midget can read a report and find something in it to criticize. A better person thinks and writes a thoughtful response.

    I produced a report that concluded that flippers beat the market. Nobody has responded with convincing contradictory evidence.

    BC Bob, why do you keep bringing up lumber?

  223. JoeBuyer says:

    ” produced a report that concluded that flippers beat the market”

    which flippers are you talking about?
    Lots of flippers in deep trouble now.
    It’s a terrible time to buy a house at asking right now.

  224. pretorius says:

    JoeBuyer, see the report linked in post 198.

  225. JoeBuyer says:

    OK some flippers made money, but i can show you story after story how many flippers are losing badly now. real estate has winners and losers. No different than any other investment.

  226. pretorius says:

    JoeBuyer,

    I agree that there is no shortage of human interest stories in the mainstream media that highlight busted flips. But do you know of any other thorough studies on the topic?

  227. JoeBuyer says:

    I do not need to know studies. I know first hand. Saw a few friends make out big in internet bubble when they bought ciena and sold before the collapse and know many others that got burned.

    Same with housing. Know a few that did well in housing, but know a few that are really in fianncial trouble.

    In the end it seems to me that when it comes to bubbles more lose than win in my circle. It is being able to get out before the collapse.
    When pf the smart flippers in real estate I know says it is way to early to get back in. He saying like 2010 is the year with large price drops from here.

  228. BLB says:

    So CF, you’re getting quite a bashing from the kannekt klowns tonight.

    These would be the same people who label others “bitter” with no sense of irony.

  229. JoeBuyer says:

    Listen to this one. One hotshot had all his retirment money in Lucent. at the peak had roughly $900,000 + in the stock. when I last spoke to him several years ago had under $150,000 in the stock. He was waiting for it to come back. A lesson most flippers or homeowners would be smart to learn now as prices continue their descent lower.
    The smartest fipper I know made a kiling in NJ and Fl real estate. Got out of both markets in nick of time.
    He said he would not enter either market until 2010 or until rentals vs purchase make sense again.He said we need a big drop to make this possible.

  230. pretorius says:

    Joe buyer,

    I agree with your flipper friend, except it will probably be even longer before flipping makes sense again.

  231. BC Bob says:

    “BC Bob, why do you keep bringing up lumber?”

    First time I have brought this up in awhile. Just figured that maybe some of these flippers decided to trade lumber. There even was someone on this site that claimed we were in a bull market, after lumber was off approx 40-50% from its high.

  232. HEHEHE says:

    chicagofinance Says:
    September 26th, 2007 at 6:10 pm
    I call bull$hit here. Merrill has the advantage and they are going to stick it to the competition. All the other spin is for effect….

    http://www.bloomberg.com/apps/news?pid=20601103&sid=a5rTUAmDH7pc&refer=us

    I could be mistaken but wasn’t a Merrill Lynch analyst the first to pull the trigger on the other brokerages and downgrade all of them back in July/August. Why BS, I mean GS, and the rest of these are trading at these prices boggles my mind.

  233. JoeBuyer says:

    wow lumber off 50%. Now all the renovations and flipping has come to a halt. Most were paying peak lumber prices and wall board prices to repair and renovate houses.
    I am glad i waited to buy. Got to give my friend all the credit though.This seems like a great board with smart people.

  234. BC Bob says:

    Only up to 9/06. I can’t imagine what it looks like now. Maybe the flippers should start competing with HOV, flip the deal of the century.

    “One out of five flippers who sold a home from April to June of this year lost money on the deal, says Home Smart Reports . That’s the highest ratio of losses in two and a half years.”

    “In all but four of the last 23 quarters, the flippers who lost money lost a greater amount than the flippers who made money,” says Mike Ela, president of HomeSmartReports.com.

    “Investors, according to the NAR, purchased one out of every four homes sold last year. They primarily bought in the bubble markets of California, Florida, Arizona, and Nevada, says USA Today.”

    “The paper points out that many flippers are still holding firm on their selling prices, hoping to get out with a profit.”

    http://247wallst.blogspot.com/2006/09/1-in-5-flippers-losing-money.html

  235. JoeBuyer says:

    “The paper points out that many flippers are still holding firm on their selling prices, hoping to get out with a profit.”

    They will never learn.

    One hotshot had all his retirment money in Lucent. at the peak had roughly $900,000 + in the stock. when I last spoke to him several years ago had under $150,000 in the stock
    This guy wanted to get back even. I believe his cost basis was $300,00 or$400,000.

  236. BC Bob says:

    “wow lumber off 50%.”

    JoeBuyer,

    From its peak in 5/04.

  237. Essex says:

    #235–Listen to this one. One hotshot had all his retirment money in Lucent. at the peak had roughly $900,000 + in the stock. when I last spoke to him several years ago had under $150,000 in the stock.
    +++++++++++++++++++++++++++++++++++++++

    Did some business with them in 98….bought a bunch at 50 or so…sold at 70….my broker said it was ‘like att’…widows and orphans fund…no one should be without it…..then it went to single digits….I was shocked. Completely blown away. But glad I’d sold.

  238. Essex says:

    Oh, and the similiarity between the decimation of the portfolio–all eggs/one basket….and this latest crisis are interesting. Homes were the retirement nest egg for many. Now, not so much.

  239. pretorius says:

    BC Bob,

    Thank you for that link. I dug a little deeper and found the source data.

    Flippers earned profits in 141 out of 147 MSAs in 2006. Amazingly, the guy who wrote the article concluded from this data that “flippers are losing money hand over fist.”

    http://www.homesmartreports.com/docs/hsrnews/flippingactivity92106.htm

  240. BC Bob says:

    [245],

    2nd Quarter, 2006. LOL! The dance at the bottom didn’t even begin at that point. Love to see 2nd quarter 2007.

    Wasn’t the largest concentration of flippers in CA, NV, AZ and FLA? Most flippers have quietly exited and trying to figure where to place their cash, in these states? I do agree with you on one point, they are quiet.

  241. was looking says:

    receiving listings from my realtor who rented me my apt about a year ago – came looking for me to discuss my buying plans etc and now receiving mls listings in union county.
    Just my impression but it seems the prices for town homes/condos are priced higher than that of SFH’s. Any reality to this?

  242. HEHEHE says:

    Man the Mets know how to blow a ballgame.

  243. syncmaster says:

    5.05 was good while it lasted. F*** you, Ben.

    Dear xxxxx,

    We are writing to let you know HSBC Direct has adjusted your Online Savings Account interest rate to 4.50% APY*.

  244. mr potter says:

    Thanks Ben……….what a jackass

  245. dblko says:

    Too bad about HSBC. What are other good places to park cash?

    Some investment advisor at my bank tried to talk me into non-taxable short term insured municipals, but I did not follow up at that time. Does anyone has an idea what this is all about?

  246. chicagofinance says:

    RE: Lucent stock….

    When I worked at AT&T, I had long drawn out conversations with other employees about how important it was to avoid AT&T exposure. I was always met with blank stares. With one exception. One guy said to me, oh don’t worry about me, I’m diversified. I own just as much Lucent as AT&T……..

  247. njrebear says:

    BHP, Rio Tinto, Vale May Increase Iron Ore Prices 30%

    http://www.bloomberg.com/apps/news?pid=20601087&sid=a3MsHgljSTLg&refer=home

  248. njrebear says:

    “i’m up $350k on my house since i bought it and around $200k ”

    Is this the one you bought in 2006?

  249. njpatient says:

    #214
    “Report controls for renovation spending by calculating returns on flips with 3 to 6 month holding periods.”

    Horse pucky.

  250. otis wildflower says:

    “With one exception. One guy said to me, oh don’t worry about me, I’m diversified. I own just as much Lucent as AT&T……..”

    ROFL!

    (Bought IBM with employee discount at adjusted $25/share, sold at $108.. Was kicking myself that I sold before the peak, but after it laid around in the doldrums for awhile, I learned: you can _never_ time the peak, if you try you’ll end up on the other side…)

  251. Zhang Fei says:

    Roach: Yet history is clear: no nation has ever devalued its way into prosperity.

    I wish he would spell out in greater detail the consequences of devaluation. He huffs and puffs and gives us dire warnings of bad things to come. But the reality is that South Korea came back big from its devaluation. As did the UK from Soros’s currency attack. Every devaluation has within itself the seeds of a revaluation – the country’s wages and assets become cheap relative to foreign markets, and prompt large inflows of foreign direct and portfolio investment. Brokerages making leveraged bets based on assumptions of stable currencies (like Goldman Sachs) may take huge losses if a major devaluation happens, but it’s not the job of the Federal Reserve to shield wealthy Wall Street speculators from the consequences of their arrogant, unwise and, frankly, stupid actions.

    By the way, in the early ’80’s, the dollar bought roughly 2 Chinese yuan (RMB). Today, it buys 7.5 Chinese yuan. The Chinese devaluation vs the dollar – since the ’80’s – doesn’t seem to have hurt the Chinese economy much.

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