Warm up the bulldozers?

From the Star Ledger:

Gov. Christie: New Jersey considering buying flood-prone neighborhoods

Gov. Chris Christie said today he wants the state to use a portion of the federal Sandy aid money coming to New Jersey to buy up whole neighborhoods prone to flooding.

At a press conference with U.S. Housing and Urban Development Secretary Shaun Donovan today in Sea Bright, Christie said he would only entertain offers of buyouts for large swaths of contiguous properties, not individual parcels, to maximize mitigating flood hazards.

In the first of three rounds of HUD funding from the $50 billion federal Sandy aid package to the Northeast, New Jersey received $1.83 billion in Community Development Block Grants. Another $11 billion in those grants will be distributed in two rounds to the states walloped by Sandy.

Jennifer Herrick, whose Sayreville home was flooded twice in the 32 months before Hurricane Sandy hit on Oct. 29, said she welcomes the news, but remains “cautiously optimistic.”

She said the town has hired a buyout facilitator to help residents who want to sell their chronically flooded homes. So far, she said, about 180 owners in three different neighborhoods have submitted letters of interest in buyouts.

This first round of grants, though, will not be used for buyouts. Christie said. The first batch of money will go toward rebuilding and elevating homes damaged in the storm, he said. Another portion will be used for an aggressive marketing campaign for the Jersey Shore, he has said.

Donovan said some HUD money can be used for buyouts, but the bulk of it will go to rebuilding. He and Christie stressed the buyouts, through the state Blue Acres program, would have to be voluntary and would have to be large scale.

“This has to be a decision that the community comes together because you’re asking a family to give up a place they’ve lived for 50 or 100 years or even longer. That’s in some ways the toughest decision a family ever makes,” Donovan said. “There are communities (where) buyouts make sense because the community chooses to do that.”

He said he will not condemn properties.

“It’s certainly not something where I’m going to make the decision to condemn certain areas in this state and tell people they cannot rebuild. I’m very uncomfortable with using that authority,” he said. “We have it if we need to but I don’t think in this circumstance it’s the right thing to do. It’s much more appropriate to let the community come to some type of consensus and if they do then I certainly would be willing to sit with (Donovan) and discuss the possibility of using some of this money.”

This entry was posted in Economics, New Jersey Real Estate, Politics, Shore Real Estate. Bookmark the permalink.

231 Responses to Warm up the bulldozers?

  1. grim says:

    From CNBC:

    My Mansion’s Worth How Much? Wealthy Fight Assessors

    By any measure, Vernon Hill has a very nice home.

    His 29,236-square-foot Italianate mansion in Moorestown, N.J. has marble floors and walls, a billiard room and an ornate foyer with a black-onyx fountain. Its centerpiece is a $2.9 million “Lemon Room” – a two-story space filled with lemon trees and windows that look out over the landscaped gardens.

    But Hill, the founder of Commerce Bank, claims the home is worth far less than the town’s tax assessor claimed. While the assessment for the home was $21 million, Hill’s attorneys said the value is around $10.1 million and therefore should be subject to lower taxes.

    A tax judge has disagreed. New Jersey Tax Court judge Patrick DeAlmeida ruled last week that Hill’s house is actually worth $34 million – far more than either Hill or the town claimed.

    “The home is extravagant, its amenities extraordinary, and the improvements on the property are uniquely opulent,” the judge wrote in the opinion.

    The good news for Hill is that he won’t have to pay taxes based on the assessment of $34 million. Because the township didn’t file a counterclaim, the $21 million assessment was upheld.

    Yet the Hill case shows how wealthy homeowners – especially in areas with high property taxes – are still challenging and fighting what they perceive as overly high tax assessments on properties after the housing crisis. In the court case, Hill and his attorney, Steven Irwin, claimed that the higher assessment was based on misleading comparisons and faulty assumptions. They also said the house would be difficult to sell at such a high price.

    While Irwin declined comment on the Hill case, he said that, in general, townships in New Jersey are frequently miscalculating assessments for tax purposes. One of the central problems, he said, is that the state calculates a home’s worth based on its replacement value, rather than the lower resale value.

    Because of this and other errors, said the lawyer, “I’m going to have a thriving business.”

  2. The Original NJ ExPat says:

    Frist’

  3. The Original NJ ExPat says:

    [2] That’s a math joke, btw. http://en.wikipedia.org/wiki/Prime_%28symbol%29

  4. Mike says:

    Good Morning New Jersey

  5. grim says:

    Stores wiped out, left the Food Town with a jar of Hearts of Palm, Worcestershire Sauce, and canned Scungilli. I have no idea what Hearts of Palm is, but at least I have some gas for the generator.

  6. Mike says:

    Our Governor is a big fan of the cop killer in LA who stated he would like to see him in the White House in 2016. He also asked the Governor to do your wife and kids a favor by eating less and walk at night. “We want you around for a long time your leadership is greatly needed”

  7. Essex says:

    The wheels are coming off of society.

  8. The Original NJ ExPat says:

    [1] From the article –
    According to the ruling, Hill and his attorney maintained that the house was “overbuilt, was constructed to suit plaintiffs’ tastes, is unlikely to attract a high-end buyer who could otherwise construct a home to suit his or her own tastes, and has amenities that are expensive to maintain.

    So by this logic, If I buy an elegant mansion and then proceed to paint it purple and build an expensive to maintain personal indoor water park in the backyard I should be able to grieve my taxes and have them lowered?

  9. The Original NJ ExPat says:

    [8] If anything, it should go the other way. If you’re hell-bent on showing the world that you have enough cash to buy stupid stuff, the town should raise your taxes to help you buy the most stupid stuff – more municipal employees.

  10. grim says:

    8 – IMHO – The quality or price of fixtures and finishes should be irrelevant here. Taxation should be based on square footage of the property and the structures, the number of rooms, bedrooms, bathrooms, etc. It’s the only way to keep subjectivity out of the picture. What is the value of a glass room filled with lemon trees? $1? $2.9 million? $5 million? You can argue about what might be considered opulent, you can’t argue about the square footage.

    If I put a solid gold shitter worth $450,000 in my crap shack, should my house really be taxed the same as a much larger property (worth, say, double)?

  11. The Original NJ ExPat says:

    [6] Mike – Sometimes I make myself laugh just by reading slow:

    He also asked the Governor to do your wife

  12. The Original NJ ExPat says:

    [6] Mike – BTW, I doubt Christie said publicly that he would like to see a cop killer in the White House in 2016.

    Our Governor is a big fan of the cop killer in LA who stated he would like to see him in the White House in 2016.

  13. grim says:

    11 – Felt the same when when I checked the weather website.

    MASSIVE … DUMP

  14. grim says:

    From the Star Ledger:

    Homes of the week: Mountain Lakes and Red Bank

    This single family home in Red Bank sold for $2,875,000 in May of 2012. According to its listing on Trulia, it is approximately 6,168 square feet on a lot size of 2.48 acres.

    The home was built in 2000, and was previously sold in 2009 for #3,100,000.

    The property tax for this house is $111,113 (compare that to the property tax at the Mountain Lakes home also in this gallery, which is $19,619).

  15. The Original NJ ExPat says:

    [10] grim – When I read about black onyx fountain, I thought the same thing, but for a different reason. I was thinking about possible tax advantages of storing precious metals as fixtures or amenities. In the case of the solid gold sh1tter, could that house pass to heirs based on assessed value?

    If I put a solid gold shitter worth $450,000 in my crap shack, should my house really be taxed the same as a much larger property (worth, say, double)?

  16. grim says:

    In the case of the solid gold sh1tter, could that house pass to heirs based on assessed value?

    It would be much easier if pops just hands junior a sack full of gold on his death bed. What inheritance tax?

    That’s why I never really understood why someone would “invest” in precious metals using exchanges/funds. You lose out on what is probably the most important aspect of precious metals, the fact that they are almost untraceable if used for transaction or transfer (IRS – I’m only joking here, we all know pops blew his money on hookers and crack).

  17. charlie says:

    One is a prime number. First is not, actually not even a number. Numbers form a group with operations among the group e.g 1+2=3 takes two elements of the set to get another. But first + second is not third. Capisce?

  18. The Original NJ ExPat says:

    [16] True, but I was thinking in terms of hiding assets in plain sight. I imagine if the IRS were seizing assets they’d have no problem snatching a Matisse off the wall, but could they unscrew and seize gold doorknobs under the same order?

    It would be much easier if pops just hands junior a sack full of gold on his death bed. What inheritance tax?

  19. The Original NJ ExPat says:

    [17] charlie – It’s a different mathematical concept, used in formulas. Has nothing to do with prime numbers.

    One is a prime number. First is not, actually not even a number.

  20. charlie says:

    I get it now

  21. grim says:

    Anyone interested in being #2? If this guy is doing rum, why not some jersey sweet corn whiskey? Could do a jersey peach moonshine done in the Polish sliwowica style.

    N.J. approves first distillery since prohibition

  22. charlie says:

    Now I dont get it. The link you posted mentions ‘ as the shorthand for a function derivative. I thought you meant first’ as “the other first” ; Grim being the true first….OK nuff gottawork; Im one of them makers….

  23. Mike says:

    OK NJ It’s early and I had it arse backwards, the killer is actually a fan of our Governor. Never great at typing and another reason I don’t post that much. But here you go http://www.nj.com/news/index.ssf/2013/02/hunted_ex-cop_applauds_christi.html

  24. Comrade Nom Deplume. Apparently. says:

    Hearts of Palm, Worcester and scungilli. Mmmmm, sounds like dinner!

    Nah, I’m having pizza.

  25. Comrade Nom Deplume. Apparently. says:

    Vernon Hill. Now there’s a flashback.

    I remember learning a few things about him while he was in charge at Commerce, and remarked at the time that I was amazed that the regulators weren’t up his arse with a microscope.

    Turns out they were. It just didn’t become public for another six months.

  26. Essex says:

    Every day, it seems a new report comes out praising the ongoing housing recovery. In Georgia, home prices are up 5 percent over last year, a year in which we also had one of the highest foreclosure rates in the country. Seems a little odd, doesn’t it? Don’t foreclosures usually drive down the market?

    That’s because the housing “recovery,” as they’re calling it, is fueled almost entirely by Wall Street private equity firms, hedge funds and the Fed’s unwavering support. After creating a massive bubble in home prices that eventually burst and caused our economy to go into a tailspin, these guys have decided to come back for more, and figured out a way to profit off their destruction — by turning foreclosed homes into rentals and securitizing the rental income.

    Many are claiming this is the “private-sector solution” for the recovery we need to get the economy going again. The argument goes that investors snapping up these homes and fixing them up does more for the community than letting the houses just sit there, blighting the neighborhoods and lowering values.

    That argument might have made sense for the pilot program Fannie Mae launched last year. In that bulk auction deal, investors had to agree not to sell properties facing foreclosure for a designated period of time. Many of the homes were occupied with tenants, and vacant homes had been on the market and not sold for at least six months. Of course, that deal proved too restrictive for most Wall Street types, leading the sale in Atlanta to eventually fall through.

    The Blackstone group, the biggest player in the new REO to rental market, has spent $2.5 billion in the last year purchasing 16,000 homes, a number that amounts to over $100 million per week. Property records show that many of the homes Blackstone has acquired in Fulton County over the last few months were purchased on the courthouse steps at the monthly foreclosure auction, or through short sales—when a lender agrees to accept less than the amount owed on a loan. The vast majority of these homes are not empty, but occupied by homeowners who fell behind during the great recession.

    The sale often represents the last nail in the coffin of foreclosure in Georgia, a non-judicial foreclosure state where there is very little opportunity or time to make good once a homeowner falls into default. Blackstone, operating under its subsidiary, THR Georgia, buys the homes for cash, usually at deep discounts from the principle balance owed on the mortgage. Take one of the homes it snapped up at the November auction as an example: THR purchased the Southeast Atlanta home at auction for $90,000. The principle due on the mortgage that was foreclosed upon was $219,300.

  27. grim says:

    Criminals.. From Bloomberg:

    Beware the Next Nefarious Up-Charge: Whiskey, Neat

    “I’ll take a Woodford, straight up,” I said.

    “Do you want it neat, or do you want it chilled?” she asked politely.

    “I don’t really care,” I said. “I just don’t want any ice.”

    The Woodford arrived. It wasn’t much of a pour. I finished it quickly and ate a burger.

    I asked for the check. My drink was $13. A little steep, but isn’t everything in Manhattan? There was also a $2 charge for “neat.”

    In all my years of bourbon drinking, this was something new: I was being charged extra for drinking my Woodford straight. Or perhaps I was being penalized for not imbibing it on the rocks?

    I asked my waitress to clarify. She summoned the manager, a friendly young guy. He told me with a smile that I got extra Woodford without ice. He said this explained the extra charge. What’s more, he told me that this was common practice in the city.

    “Well, this is the first time I’ve ever seen it,” I responded, adding that my bourbon wasn’t exactly jumbo-sized.

    “Oh, no, sir,” he assured me. “Everybody does it.” They offered me another one free, just to make up.

  28. Fast Eddie says:

    Last week there were no added listings and few open houses because of the superbowl. Prior to that, it was the holiday season. Of course [sarcasm]. This weekend, it’s a snow storm. Gee, I wonder what “obstacle” will prevent a new batch of over-priced, smell hole, pieces of sh1t to hit the market next week?

    Another 10% decline will bring us closer to that trend line. Within the next 12 months we should be pretty close. 3.8% 30 yr. rates and scarse inventory is doing nothing to raise the price on the scattered hunk of sh1t that’s out there, so any blip upward in rates and/or inventory is going crush the price a little more.

    Let’s be perfectly frank and stop the bullsh1t: very few have 20% to put down on a $575,000 house with multiple blemishes on top of $13,000 in taxes and assets to spare. And please, save me the lecture on those houses selling within a week; when there’s nothing left on the buffet table except scraps of crudite, people will grab at anything.

  29. Fast Eddie says:

    grim,

    unmod please.

  30. grim says:

    Another 10% decline will bring us closer to that trend line. Within the next 12 months we should be pretty close.

    Don’t see it, I just don’t. Short of a massive re-entry into recession with skyrocketing unemployment, what would be the event to precipitate this kind of decline? We didn’t see declines even remotely approaching these numbers over the past two years. So, with the economy clearly better in 2013, why are prices are going to do worse this year, than in 2011 and 2012? Heck, from 11/2009 to 11/2012, declines for this area are only 5.7%, in total. We’re talking about a $550k house in 2009 selling for $520k 3 years later, and in a market where $25k price variation at that price level can be attributed to random noise alone? (Buyer fell in love with the house because it reminded her of the house she grew up in and her sister lives a block over, bang, you’ve got a house that closes at $25k over market).

    The worst two years (Nov to Nov) in recent history were 2008 and 2009, with declines of 8.7% and 7.4% respectively.

    So really, we would need what, conditions worse than were experienced in 2008/2009 to get a greater decline? We’re talking a return to near 10% unemployment nationally, huge dislocation in the lending markets, widespread talk of global depression, resetting mortgages, failing banks, etc.

    A more realistic bearish forecast would be continued declines of 1-2% annually over the next 3 to 4 years, slow bleed. End of the world? Nah. Decent houses in Wyckoff would still be selling for 700 grand.

    Of course, nobody likes that kind of forecast because nobody wins. Owners see value eroded, buyers continue to sit on the sidelines. In the end, 10 years passes and very few people were able to take advantage of the situation.

  31. Comrade Nom Deplume, Scungilli Chef Extraordinaire says:

    Every day, I believe Clot a little bit more . . . .

    “The pessimistic take is that the jobs aren’t coming back. Andy Stern, former president of the Service Employees International Union, says the long-term unemployed are among the first to suffer from what he predicts will be a more generalized job drought, which will be the result largely of automation. Says Stern, who stepped down from the SEIU in 2010 and is a senior fellow at Columbia University’s Richman Center for Business, Law & Public Policy: “You ain’t seen nothing yet.”

    http://www.businessweek.com/articles/2013-02-07/the-u-dot-s-dot-long-term-unemployment-crisis-stumps-economists#r=read

  32. Comrade Nom Deplume, feeling very Clot-like says:

    [32] redux

    I look at the trend of the long term unemployed and how it factors into long term employment numbers, and how that factors into the macroeconomy. It ain’t good, and the almost inevitable result will be continued hits on the stimulus opium pipe.

    Any GOPers who stand in the way of the opium pipe will get run over, we will have Eurosclerosis, the debt problem will only be one so long as there are makers to tax, and ATEOTD, we are all bagholders once demand growth tanks and the death spiral begins.

    It may not make economic sense to buy a nompound. It may make more sense to set one up illegally by squatting on government land and paying off anyone whose job it is to notice.

  33. Fast Eddie says:

    A more realistic bearish forecast would be continued declines of 1-2% annually over the next 3 to 4 years, slow bleed.

    So be it. 36 months instead of 12. The 10% further decline is inevitable. Let’s see how those who got s.uckered in 2006 feel in 2015. There are those who are solvent and there are those who aren’t. Oh, and there’s that slightly elusive thorn in the side called property taxes which will increase unabated into infinity regardless of those running for the entrance or the exit.

  34. JJ says:

    “Let’s be perfectly frank and stop the bullsh1t: very few have 20% to put down on a $575,000 house with multiple blemishes on top of $13,000 in taxes and assets to spare”.

    I dont think it is a cash issue. I am always shocked with how much cash people have at their disposal. It could just be, high taxes, folks moving to smaller houses, less commute, expensive water front homes etc are not attractive any more now is flipping or investment properties

    I used to do reviews of customer accounts back in the 1980s and early 1990s. Sometimes when bored I peak at them by zip code etc to see some stuff. I recall once 15 years ago my sisters neighbor up the block an old women who lived in a 80×100 colonial, nice older four bedroom colonial came up and she had 100 million in savings. Back a long long time ago in College I worked at master card then briefly at American Express I see amazing things being charged from folks with average addresses. 20% down is peanuts, chump change for the average person. However, if you feel RE is no longer desirable, taxes and insurance are skyhigh it aint the price.

    And if people feel it is less an investment they want to pay less or put down less in case they want to walk away.

  35. Comrade Nom Deplume, feeling very Clot-like says:

    Whoa, what was I saying about demand growth tanking? I didn’t know Clot took a job at the CBO.

    http://www.businessweek.com/articles/2013-02-07/prepare-for-weaker-economic-growth-budget-office-says#r=nav-fs

    I especially love the last line: “According to the CBO, it’s over.”

  36. Fast Eddie says:

    And so, that 700K house becomes 645K in 4 years from now. Imagine if they would’ve bought for 925k in 2006? It’s almost suicidal to think about it.

  37. Painhrtz - Don't just stare at it. Eat it! says:

    Nom I love this – Eurosclerosis

  38. grim says:

    37 – Who cares if it was suicidal, their loss if your gain, no? Or isn’t that value?

    If the $925k is $700k – Does that represent value in your eyes?

    If that $700k becomes $645k – is that value?

    At what point does it become value? Never?

  39. JJ says:

    $1 dollar.

    grim says:
    February 8, 2013 at 9:02 am

    37 – Who cares if it was suicidal, their loss if your gain, no? Or isn’t that value?

    If the $925k is $700k – Does that represent value in your eyes?

    If that $700k becomes $645k – is that value?

    At what point does it become value? Never?

  40. Fast Eddie says:

    grim,

    I’m having a hard time seeing value at 645K in a house that looks like a bomb hit it, located in semi-flood zones or having the Parkway run through your yard or having no yard or having a 9 x 9 bedroom on the first floor converted to a dining room and on and on. For 645K, it should be a NICE house. Not gold faucets, but just a nice house on a decent property. Right now, it doesn’t exist and it doesn’t exist because people are f.ucked financially and can’t sell or u.gly Mary is waiting for the next s.ucker to come by and fund her fat @ss lifestyle.

  41. Juice Box says:

    I echo Eddie’s sentiment, I am seeing plenty of POS where I am looking in Middletown NJ, and I am looking in the 700k range.

  42. Comrade Nom Deplume, suffering from eurosclerosis says:

    OT Alert

    Soooo Jersey. You just cannot make this stuff up.

    http://www.nypost.com/p/news/local/beauty_bridge_plunge_Hh6B7xhFLce0uEbWvjE0PO

    apologies if posted already

  43. Fast Eddie says:

    Juice [42],

    The only thing available is absolute sh1t at 400K or delusional sh1t at 700K. It’s a f.ucking quagmire and 1 or 2 brave souls settle for 1 out of 8 on the checklist while holding their noses and praying for survival.

  44. Nomad says:

    36 – ST unemployment at 4.9% + LT unemployment at 3.0% = 7.9%

    I wonder what the real unemployment rate is because there is no way it is 7.9% Also, what is the underemployment rate and what is the average income for this pool today vs their income of say 5 years ago and what % are now contractors paying their own health insurance nut.

    In the Garden State, how many of the jobs lost in big pharma over the last decade are coming back? Maybe 20% if we are optimistic?

    Grim – any analytics to determine how many people that got fixed rate mtgs from say 2003 – 2007 have refinanced in the last year? Given lower interest rates, seems like it would be a good move. Would be interested to know the % that did refi. The people I know who fall into this group that have not done a refi are those who have no spare cash / savings or what little cash they have covers the other financed items they use to prop up their lifestyles.

  45. The Original NJ ExPat says:

    That’s true, but it’s mostly because they’ve grown up with no work ethic and debtor’s mentality. Even if they had the 20% to put down they’d be much smarter to put down 40% on a property half the cost. That’s what we did in 2002 and we live in that same home today with a nearly paid off mortgage. I think there’s a big divide between the people with the “I’d look great in that today” types vs. the “Holy crap, how much will that cost me a month even after I get it all paid off” types like JJ and I. Besides, you *need* a small place if you have a stay-at-home wife. Do you know how much crap my wife could fill a McMansion with when she has all day to do it? Some guys try to limit their wives’ expenditures with dollar limits. That doesn’t work. I limit mine by square feet.

    Let’s be perfectly frank and stop the bullsh1t: very few have 20% to put down on a $575,000 house with multiple blemishes on top of $13,000 in taxes and assets to spare.

  46. Essex says:

    To be read in the voice of Paul Harvey.

    And on the eighth day God looked down on his planned paradise and said, “I need someone who can flip this for a quick buck.”

    So God made a banker.

    God said, “I need someone who doesn’t grow anything or make anything but who will borrow money from the public at 0% interest and then lend it back to the public at 2% or 5% or 10% and pay himself a bonus for doing so.”

    So God made a banker.

    God said, “I need someone who will take money from the people who work and save, and use that money to create a dotcom bubble and a housing bubble and a stock bubble and an oil bubble and a commodities bubble and a bond bubble and another stock bubble, and then sell it to people in Poughkeepsie and Spokane and Bakersfield, and pay himself another bonus.”

    So God made a banker.

  47. JJ says:

    Ok I have a homeowners question. So I got a new oil furnace and oil tank. My fuel oil company did it and now this week they send me a letter I have to get notarized to get permits. They will process it for me. But I am nervous as it goes back to the building dept of my town and the inspectors.

    Is this just a rubber stamp. I dont want anyone from town going to my house. Do I even need these permits for anything. Sounds like a can of worms. I mean I bought house their was a oil burner and oil tank, it had a service contractor and it appeared to work and home inspector checked it out. I would not even think of asking for permits. Why do I need these permits?

  48. Essex says:

    God said, “I need someone to build homes in the swamps and deserts using shoddy materials and other people’s money, and then use these homes as collateral for a Ponzi scheme he can sell to pensioners in California and Michigan and Sweden. I need someone who will then foreclose on those homes, kick out the occupants, and switch off the air conditioning and the plumbing, and watch the houses turn back into dirt. And then pay himself another bonus.”

    God said, “I need someone to lend money to people with bad credit at 30% interest in order to get his stock price up, and then, just before the loans turn bad, cash out his stock and walk away. And who, when asked later, will, with a tearful eye, say the government made him do it.”

    God said, “And I need somebody who will tell everyone else to stand on their own two feet, but who will then run to the government for a bailout as soon as he gets into trouble — and who will then use that bailout money to help elect a Congress that will look the other way. And then pay himself another bonus.”

    So God made a banker.
    Brett Arends is a MarketWatch columnist. Follow him on Twitter @BrettArends.

  49. joyce says:

    Fast Eddie,
    I agree with a bearish outlook for the housing market, even in Northern NJ/NYC. Will some places be ‘insulated’… yes, but only temporarily. That being said, I would like to know why you think 10% lower or 650k is the benchmark. That seems to be an arbitrary figure. I grew up in Morris County, and am no longer there… but I still peruse the MLS in the “nicer” towns like Madison, etc. You can get a lovely home for that much there. I know you’ve said before you need a certain location so that won’t work. Which bring me back to your arbitrary figure… why that much in that location do you think 650k should be the threshold?

  50. joyce says:

    There aren’t any homeowners on here to answer your question… only home debtors.

    48.JJ says:
    February 8, 2013 at 10:10 am
    Ok I have a homeowners question. So I got a new oil furnace and oil tank. My fuel oil company did it and now this week they send me a letter I have to get notarized to get permits. They will process it for me. But I am nervous as it goes back to the building dept of my town and the inspectors.

    Is this just a rubber stamp. I dont want anyone from town going to my house. Do I even need these permits for anything. Sounds like a can of worms. I mean I bought house their was a oil burner and oil tank, it had a service contractor and it appeared to work and home inspector checked it out. I would not even think of asking for permits. Why do I need these permits?

  51. yome says:

    For a first time homebuyer key is FRM vs rent

  52. The Original NJ ExPat says:

    Is it just me, or did gary seem a lot happier less spitting mad when he was salaried-jobless and nice-homelss compared to now when he’s just nice-homeless?

  53. Comrade Nom Deplume, suffering from eurosclerosis says:

    I’m also beginning to agree with Grim and Clot, and their views are not entirely mutually exclusive.

    Most suburbs will eventually decay, the cancer that will spread from poor, industrial and welfare-statist satellite cities and towns around urban centers will spread, leaving only reasonably healthy downtowns with central business districts and hip, educated, working homeowners/renters, and exburbs with either productive rural land or wealthy enclaves of “horsey country.” Train towns will survive as outliers. Everything else will descend into trailer trash without the axles and cinder blocks.

  54. Fast Eddie says:

    Joyce,

    I’m using 650K as an example. I could go to Lodi and find a dynamite house for 650K or go to Saddle River and find a shed for 650K. Forget about the actual number; in the more desirable towns where I’m looking, you have a choice of 3 piece of sh1t house at 450K or 2 piece of sh1t house at 700K. Sure, you can find the 580K house here and there but be prepared to a) knock out walls; b) renovate a bath and a kitchen or c) live with a 30 foot retaining wall at the edge of your yard to block out the noise from an interstate highway. Again, when there’s nothing left on the buffet table except a slice of bologna, you either eat that or walk away.

  55. JJ says:

    Joyce

    Tricky Tricky, just go off phone with building dept so the oil burner company is filing cause it is plumbing work. Therefore they want to pay a $25 plumbing fee. Town wants to send a plumbing inspector into my house. Oh yea, the furnace company that has been installing furnaces forever, who happened to send the guy who last serviced my furnace who has 25 years experience needs a building dept bozo to double check his work.

    It is a land grab for money.

  56. Comrade Nom Deplume, suffering from eurosclerosis says:

    [53] expat,

    Must be this gloomy weather.

    You getting anything up there? I for one would be happier with a foot of snow. If you have to have winter, might as well make it interesting.

  57. yome says:

    #45

    HARP dont require you to have money or savings to refi. They even pay everything. Not a single dime will come from you. You dont need to be underwater either. Only requirement is a job and you kept your monthly payments and current

  58. joyce says:

    what happened to ’3b’ … no posts for a while, I guess he found the home he was looking for?

  59. The Original NJ ExPat says:

    For a while. When the lesser parts of the Brig, Glen Rock, Glen Ridge become the “bad” parts of those same towns we’ll find that iron rails conduct currency at an ever reducing amperage.

    Train towns will survive as outliers.

  60. joyce says:

    Who pays the fees? Who eats the lower interest? I’m sure HARP was the first instance of an actual free lunch.

    58.yome says:
    February 8, 2013 at 10:31 am
    #45

    HARP dont require you to have money or savings to refi. They even pay everything. Not a single dime will come from you. You dont need to be underwater either. Only requirement is a job and you kept your monthly payments and current

  61. The Original NJ ExPat says:

    Nom – It’s just starting right now. Snow Emergency/Parking Ban begins at 12PM, MBTA shuts down at 3:30PM. Our cars are parked on the side street since yesterday until the last flake falls. Luckily my Sushi place, Starbucks, and Liquor store are within walking distance. We have underground electric service and a fireplace, so we never have a problem. There. I jinxed it.

    You getting anything up there? I for one would be happier with a foot of snow. If you have to have winter, might as well make it interesting.

  62. chicagofinance says:

    …..and on the ninth day he said “I need a polished white-bred version of a crack dealer…..so he invented the pharmaceutical salesman.”

    …..and on the tenth day he said “I need a population of toothless, sunburned, hick, alcoholic, wifebeater-mouthbreathers…..so he invented Kentucky.”

    Essex says:
    February 8, 2013 at 10:08 am

  63. Happy Renter says:

    [10] “Taxation should be based on square footage of the property and the structures, the number of rooms, bedrooms, bathrooms, etc. It’s the only way to keep subjectivity out of the picture.”

    Exactly. Grim for Governor.

  64. chicagofinance says:

    My colleague left yesterday at 2:30PM for Killington. He says he hopes to be back on Sunday……

    Comrade Nom Deplume, suffering from eurosclerosis says:
    February 8, 2013 at 10:26 am
    [53] expat, Must be this gloomy weather.
    You getting anything up there? I for one would be happier with a foot of snow. If you have to have winter, might as well make it interesting.

  65. grim (28)-

    Ask for it neat, they have to serve it in a perfectly clean glass. Extra labor.

    Yet another sign of the apocalypse.

    “I asked for the check. My drink was $13. A little steep, but isn’t everything in Manhattan? There was also a $2 charge for “neat.”

  66. plume (36)-

    It’s over, all right. In fact, the realization that it’s over is beginning to spread.

    “I especially love the last line: “According to the CBO, it’s over.”

  67. joyce says:

    I’m not trying to pick a fight. I think your latest response is exactly what I mean. When inventory is low for whatever reason, it’s tough to find a house with no flaws. Plus, there are houses out there below what you want to pay that can be renovated.

    55.Fast Eddie says:
    February 8, 2013 at 10:24 am
    Joyce,

    I’m using 650K as an example. I could go to Lodi and find a dynamite house for 650K or go to Saddle River and find a shed for 650K. Forget about the actual number; in the more desirable towns where I’m looking, you have a choice of 3 piece of sh1t house at 450K or 2 piece of sh1t house at 700K. Sure, you can find the 580K house here and there but be prepared to a) knock out walls; b) renovate a bath and a kitchen or c) live with a 30 foot retaining wall at the edge of your yard to block out the noise from an interstate highway. Again, when there’s nothing left on the buffet table except a slice of bologna, you either eat that or walk away.

  68. Happy Renter says:

    [63] …..and on the ninth day he said “I need a polished white-bred version of a crack dealer…..so he invented the pharmaceutical salesman.”

    [43] http://www.nypost.com/p/news/local/partner_blasts_rant_fashionista_5EliEkxv2ak7Pnf1THvFQL

    (“A beautiful young fashionista jumped to her death from the George Washington Bridge last night . . . . Medication, including Adderall and Klonopin, was found in her bag”)

    And I add:

    http://www.nytimes.com/2013/02/03/us/concerns-about-adhd-practices-and-amphetamine-addiction.html

    http://onpoint.wbur.org/2013/02/06/adderall

    To all the parents out there — keep your kids off of this shite.

  69. Happy Renter says:

    Grim unmod please

  70. plume (43)-

    Duh. Anybody knows you need to have whiskey ready in your purse in order to take the edge off the Kl0n0pin and Adder@ll.

    “Medication, including Adder@ll and Kl0n0pin, was found in her bag, according to sources.”

  71. joyce (68)-

    The inventory is low, and all the reasons it’s low can be traced to some sort of market manipulation, direct or indirect.

    When Mr. Market finally speaks in these alleged “insulated” areas, it will be loud and painful.

    No one will be spared. No one.

  72. The Original NJ ExPat says:

    [48] JJ – Because without the paperwork (permits) it would just look you are handing money over to your town for no good reason. There are laws against causing that.

    Why do I need these permits?

  73. “Jersey fashionista” is an oxymoron.

  74. The Original NJ ExPat says:

    It’s not tough to find a nice house. It’s just tough for most people to work up the nerve to knock on the door and ask them to sell to you.

    I’m not trying to pick a fight. I think your latest response is exactly what I mean. When inventory is low for whatever reason, it’s tough to find a house with no flaws. Plus, there are houses out there below what you want to pay that can be renovated.

  75. The Original NJ ExPat says:

    [74] If you don’t ask, the answer is always “no”.

  76. nwnj says:

    God said: “I need someone who can launder money for gun runners, drug cartels, and despots. ”

    God made a banker.

  77. Fast Eddie says:

    Joyce,

    Plus, there are houses out there below what you want to pay that can be renovated.

    Certainly, I agree. I’d be buying my house on a 50 X 100 lot with a different address for 200K more. All just to renovate on top of it. I should be able to buy my house on a slightly nicer property for 200K more in a town ABC. Then, I’ll understand. But even that doesn’t exist. And then I’m expected to rip half the place apart. That’s great for whoever is willing to burn that much dough. That game doesn’t taste well to me. If that’s the case, I’m going to have to dupe someone into buying my house for a lot more than expected and use that “free” money to move up a level. I understand the game, I just hate the f.ucking players.

  78. Painhrtz - Don't just stare at it. Eat it! says:

    clot Scrapple cannon? is that like a Bacon Bazooka? Anti Personnel Pulled Pork?

  79. JJ says:

    You pay near me 200K more for the same identical home in a better neighborhood. Then if you want a bigger or nice home add on 200K. Usually, unless you have a minimum of 400K to spend you cant buy a better home in a better neighborhood. And that is min. Near me I figure its around a 700K figure. That is to get a house in a better neighborhood that is remodeled, larger, good street, train town, close to city, good schools etc.

    Fast Eddie says:
    February 8, 2013 at 11:10 am

    Joyce,

    Plus, there are houses out there below what you want to pay that can be renovated.

    Certainly, I agree. I’d be buying my house on a 50 X 100 lot with a different address for 200K more. All just to renovate on top of it. I should be able to buy my house on a slightly nicer property for 200K more in a town ABC. Then, I’ll understand. But even that doesn’t exist. And then I’m expected to rip half the place apart. That’s great for whoever is willing to burn that much dough. That game doesn’t taste well to me. If that’s the case, I’m going to have to dupe someone into buying my house for a lot more than expected and use that “free” money to move up a level. I understand the game, I just hate the f.ucking players.

  80. I think the name Scrapple Cannon is self-explanatory.

  81. joyce says:

    I know some people have posted anecdotal stories of this working. I agree there’s no harm in trying. But can you really fault people for not employing this strategy? You probably do not know what the inside of the house looks like. You have no idea if they want to move at all. If they don’t, you’ll be paying a huge premium. If they do, you have no idea if they are going to accept a reasonable offer (who gets to define reasonable?).

    74.The Original NJ ExPat says:
    February 8, 2013 at 11:02 am
    It’s not tough to find a nice house. It’s just tough for most people to work up the nerve to knock on the door and ask them to sell to you.

  82. joyce says:

    Forgive me, Eddie. But it reads, at times, as you are entitled you some standard of home for your price.

    According to Grim’s definitions of looking vs. browsing (which are absolutely correct), I was looking in 2007 and changed my mind on buying. Now, I occasionally browse. I got frustrated but never felt entitled to a house in 2007 for what I considered a reasonable price.

  83. “…But what if this era is not just a cycle but the terminal phase of Global Capitalism 1.0?

    This heretical thought arises from the school of economic history pursued by Fernand Braudel and those he inspired. I have long recommended Braudel’s three volume history of early capitalism as essential reading for anyone seeking to understand modern global capitalism: Civilization & Capitalism, 15th to 18th Centuries:

    The Structures of Everyday Life (Volume 1)
    The Wheels of Commerce (Volume 2)
    The Perspective of the World (Volume 3)

    Of those continuing this “long duration” analysis, I find much of interest in the work of Giovanni Arrighi (The Long Twentieth Century: Money, Power and the Origins of Our Times) and Immanuel Wallerstein (recommended to me by correspondent Lew G.) (World-Systems Analysis: An Introduction).

    This school sets the current iteration of world capitalism as beginning in the 1450s. Everything that characterizes modern global capitalism was already operational by 1500: stock and bond exchanges, hedging with derivatives and insurance, joint stock ventures, highly profitable global trade, commercial credit/paper, central States funding their wars with privately provided credit, etc.

    In Wallerstein’s analysis, the current form of global capitalism is running out of road. He identifies three long-term forces that are undermining capitalism’s key function, the accumulation of more capital:

    1. Urbanization, which has increased the cost of labor.
    2. Externalized costs (dumping private waste into the Commons, environmental damage and depletion, etc.) are finally having to be paid.
    3. Rising taxes as the Central State responds to unlimited demands by citizens for more services (education, healthcare, etc.) and economic security (pensions, welfare).”

    http://www.zerohedge.com/news/2013-02-08/guest-post-terminal-phase-global-capitalism-10

  84. joyce (82)-

    In NJ, you only have the right to pay your taxes and shut the f up.

  85. joyce says:

    Another thought: perhaps this strategy worked or could work well back in the day of tiny steady price increases and closer knit neighborhoods.

    74.The Original NJ ExPat says:
    February 8, 2013 at 11:02 am
    It’s not tough to find a nice house. It’s just tough for most people to work up the nerve to knock on the door and ask them to sell to you.

  86. Fast Eddie says:

    Joyce,

    I’m not entitled to anything. I’ll choose the entry point into the game when (if) I feel it fits my style. There was a time when you found a house, liked it and bought it. I’m a 2 time house owner over the last 17 years. The entitlement mentality falls on the other side of the tracks, not my side.

  87. Comrade Nom Deplume, The Scungilli Cannon says:

    [84] cannon

    In PA, you have the right to pay taxes, STFU, and concealed carry.

    Booyah!

  88. Comrade Nom Deplume, The Scungilli Cannon says:

    [83] cannon,

    Is that a prediction of a Capitalistic Dark Ages????

  89. Comrade Nom Deplume, The Scungilli Cannon says:

    I just got a letter from the Surrogate’s Office regarding a pro bono client’s request for a filing fee waiver.

    Basically, it said “Fcuk you, pay me.”

  90. xolepa says:

    JJ, I don’t know if the rules are different in NY, but in NJ heating work is not considered plumbing work, unless the heater is connected to a potable water supply. An example would be a boiler with tankless coil or an indirect hot water heater hookup. If it’s just a furnace, that sucks because all a furnace does is put out hot air. Over twenty years ago, I put in two new furnaces in a two family of mine. We took both units as my new residence was being built. Either way, I never got a permit. Just called the local gas company afterwards to do an inspection. Covered my butt that way. Don’t want to say it, but having the fuel oil company do the work was a big mistake. They have to cover themselves as they are regulated to the max. They probably had no choice. I would have done that work myself or found a self-employed guy to do it after hours.

  91. JJ says:

    It is a tankless oil burner that also provided the hot water to house, so heat and hot water.

    I had no choice. After Sandy every oil/boiler company had a waiting list with their customers first. If I did not go with my current company I had a month wait longer. I also tried to get a plumber but none had the oil burners/tanks.

    I just dont want them snooping since I did a new bathroom, electrical, sheetrock etc I am just going to ignore it for now. Normally you need a plumbers permit first but due to Sandy they waived it and now I dont see how you undo it.

    xolepa says:
    February 8, 2013 at 12:24 pm

    JJ, I don’t know if the rules are different in NY, but in NJ heating work is not considered plumbing work, unless the heater is connected to a potable water supply. An example would be a boiler with tankless coil or an indirect hot water heater hookup. If it’s just a furnace, that sucks because all a furnace does is put out hot air. Over twenty years ago, I put in two new furnaces in a two family of mine. We took both units as my new residence was being built. Either way, I never got a permit. Just called the local gas company afterwards to do an inspection. Covered my butt that way. Don’t want to say it, but having the fuel oil company do the work was a big mistake. They have to cover themselves as they are regulated to the max. They probably had no choice. I would have done that work myself or found a self-employed guy to do it after hours.

  92. Essex says:

    Bankers and financial advisors add about as much to the economy as a hunk of dog shit.

  93. daddyo says:

    “what would be the event to precipitate this kind of decline? ”

    I would say the movement in the mortgage rate from 5% in Feb 2011 to 3.5% in Feb 2013 had a LOT to do with the home price appreciation during that period. Unless we move from 3.5% down to 2.0%, I would have to agree that most of our rapid appreciation story is over, and we are likely to resume our regularly scheduled slide in home prices. In other words, I find it highly unlikely that home prices can meaningfully appreciate in a steady mortgage rate environment.

    On top of that, how exactly are people supposed to afford more house if incomes are following prices up? Home prices and incomes do not exist in separate worlds.

  94. JJ says:

    Home prices and incomes do not exist in separate worlds.

    They do in New Jersey

  95. daddyo says:

    “Who pays the fees? Who eats the lower interest? I’m sure HARP was the first instance of an actual free lunch.”

    The agencies eat some of the fees, and the mortgage investors holding the existing agency mortgages eat the rest. Guess who holds most of those agency mortgages? Institutional investors like mutual funds and pension funds.

    There is no free lunch.

  96. All Hype - Mr. Oil, Mr. Gas, Mr. Coal says:

    “It’s over, all right. In fact, the realization that it’s over is beginning to spread.”

    Have no fear Clot, Dirty Harry now realizes it, things will change…..

    http://finance.yahoo.com/news/eastwood-dc-doesnt-damn-142108503.html

  97. joyce says:

    daddyo,
    I hope you know I was being rhetorial and sarcastic.

  98. yome says:

    CBO’s track record on the economy in recent years has been nothing short of abysmal. If you want some cheap fun, take a look at CBO’s projections for the economy from Janaury of 2008 (Table E-1). Get a load of that 4.8 percent unemployment rate that we are supposed be enjoying right now following three years in which GDP growth averaged 3.3 percent (and that’s with no recession in 2008-2009).CBO’s predictive ability had not improved much a year later when the economy was in the middle of the free fall following the collapse of Lehman. Its projections from March of 2009 hugely underestimated the severity of the downturn and projected that the economy would have largely bounced back to full employment by the end of 2011, even if there was no stimulus from the government or extraordinary measures taken by the Federal Reserve Board.These projections were about as wrong as they could possibly be. We would have done every bit as well finding a drunk person on the street and asking him for his economic forecasts for the next five years.

  99. daddyo says:

    I know you were, but lots of people don’t know it, including high ranking gov officials.

  100. plume (88)-

    A hundred years of financial pestilence.

  101. joyce says:

    yome,

    Govt predictions are crap… what about your beloved predictions for social security?

  102. BearsFan says:

    98 – the CBO said in 2002 that US debt in 2012 would be 7-8% of GDP. they nailed that one too…

  103. The Original NJ ExPat says:

    Uptite 8 minutes ago

    “Any one caught driving after 4 p.m. faces up to one year in jail and $500 fine.”

    I agree safety first, but is he serious?!

    OOBME 13 seconds ago in reply to Uptite

    Carring a hand gun w/o a license gets a person probation, driving in the snow 1 year in jail………NOT.

    pirelima 2 minutes ago in reply to Uptite

    That is more then they get in Lawrence for murder.

    comments powered by Disqus
    February 8, 2013
    Mass bans vehicles at 4 p.m.; offenders face fine up to $500, 1 year in jail
    Frickin’ Democrats. Now the Nanny state is ready to put you in jail for a year just for driving. Period.

    http://www.eagletribune.com/latestnews/x1525012659/Mass-bans-vehicles-at-4-p-m-offenders-face-fine-up-to-500-1-year-in-jail

    The Eagle-Tribune

    BOSTON (AP) — Massachusetts Gov. Deval Patrick has declared a state of emergency for blizzard that could bring near 3 feet of snow.

    Patrick signed an executive order banning all vehicles from roadways starting at 4 p.m. today. Ban applies to all roadways, including highways and secondary roads. Any one caught driving after 4 p.m. faces up to one year in jail and $500 fine.

  104. The Original NJ ExPat says:

    I don’t know how that happened. Ignore the first 7/8 of the above post. It didn’t look that way before I hit post.

  105. Gubmint and media use the weather to further frighten and entrap the populace.

  106. The Original NJ ExPat says:

    F that link, it must be on them. Here’s the meat:

    The Eagle-Tribune

    BOSTON (AP) — Massachusetts Gov. Deval Patrick has declared a state of emergency for blizzard that could bring near 3 feet of snow.

    Patrick signed an executive order banning all vehicles from roadways starting at 4 p.m. today. Ban applies to all roadways, including highways and secondary roads. Any one caught driving after 4 p.m. faces up to one year in jail and $500 fine.

  107. chicagofinance says:

    A swine’s phallus?

    Scrapple Cannon says:
    February 8, 2013 at 11:18 am
    I think the name Scrapple Cannon is self-explanatory.

  108. The Original NJ ExPat says:

    [64] I would be *all* for this, but that certainly isn’t how it works now. If towns left the populace free to upgrade their home in a reasonable way (bath, kitchen re-mods, maybe even finished basements) without attacking the individuals right after the spend you would spur more improvements and jobs and then just quietly raise the taxes on everyone as the town improves. Tax grieving would also be simplified:

    Homeowner: You raised my assessment and I haven’t done jack squat to improve my house in 30 years.
    Town: Too bad. Everyone else has.

    Disclosure: I have a 1928 8 gallon flush toilet and a 1979 kitchen which Boston classifies as “semi-modern”. I would keep the toilet, but totally redo the kitchen if I knew there were no immediate and direct tax ramifications.

    [10] “Taxation should be based on square footage of the property and the structures, the number of rooms, bedrooms, bathrooms, etc. It’s the only way to keep subjectivity out of the picture.”

    Exactly. Grim for Governor.

  109. The Original NJ ExPat says:

    A Scrapple Cannon is just any generic Central PA assh0le, right?

  110. chi (108)-

    Sometimes, a cigar is just a cigar.

  111. grim says:

    I would say the movement in the mortgage rate from 5% in Feb 2011 to 3.5% in Feb 2013 had a LOT to do with the home price appreciation during that period. Unless we move from 3.5% down to 2.0%, I would have to agree that most of our rapid appreciation story is over, and we are likely to resume our regularly scheduled slide in home prices.

    No correlation between mortgage rates and home prices unless you cherry pick dates, and if you do so, you can find dates to either prove or disprove your thesis. The fact of the matter is that home prices have both risen and fallen when mortgage rates were both rising and falling.

    There are many economic measures that have changed from that date to current, you can pick any one of them and make a plausible case. For example, unemployment has fallen from 10% in 2009 to 7.9% in 2013. Would you argue against the position that a stronger labor market might positively influence home prices?

  112. joyce says:

    “Would you argue against the position that a stronger labor market might positively influence home prices?”

    No, I would not. I would argue that the labor market hasn’t imroved and the reduction in U3 is due to how the statistic is calculated.

  113. The Original NJ ExPat says:

    I have a spreadsheet at work that I created about a year ago. I found some great data from two different source with median income and median home price over all the MSAs (?), whatever all the major metropolitan areas are called. When I cobbled together all the data and color coded it, it was amazing to look at. I think I had data from the 1960′s until the end of the current bubble. The magic number was very close to 3. Median home prices at 3 times median income. The individual areas over time were amazing to behold. Places like Buffalo stayed at 2.4-2.6 or so all through the bubble. No place was over 4 EVER before the early 2000′s except San Fran and Hawaii. “Great” areas of the country were like 3.1-3.4 (Irvine, Metro NY). Then all of a sudden, when nothing except SF and HI was over 4, Sand States, CA, NJ, FL, etc. rocketed up to 5, 6, 7, 8 & 9. It was just crazy to look at. I don’t think we’ll ever be normal again until the whole country dips below 3 again (reversion to the mean) and then we’ll climb back.

    Home prices and incomes do not exist in separate worlds.

    They do in New Jersey

  114. The labor market will not improve until such time as sustenance farming becomes a necessity in the US.

  115. Fast Eddie says:

    For example, unemployment has fallen from 10% in 2009 to 7.9% in 2013. Would you argue against the position that a stronger labor market might positively influence home prices?

    No argument here. The 2005 salary that was 100K is now 70K. Toss in property taxes that will increase unabated and you’ll have equity depreciation for the forseeable future. That’s what I call a positive influence on house prices.

  116. grim says:

    Case in point, 30yr mortgage rates fell from a high of 6.88% in July of 2006, to a low of 4.64% in October of 2010, a decline of 2.24 percentage points (that is greater than your change above by 74 basis points).

    During this exact same time period, the national S&P case shiller composite 20 (seasonally adjusted) fell from 204.93 to 143.36. This represents a 30% decline in home prices, nationally.

    Home prices were plummeting when mortgage rates were plummeting. If a 224 basis point reduction in mortgage rates couldn’t stop prices from falling 30%, how the heck did a 150 basis point change result in a jump?

    See what I mean about cherry picking?

  117. It’s not about rates. It’s about solvency.

  118. Fast Eddie says:

    I don’t think we’ll ever be normal again until the whole country dips below 3 again (reversion to the mean) and then we’ll climb back.

    Any questions?

  119. The Original NJ ExPat says:

    When we’re back at 9.25% ARMs (which was a “good” rate in 1987), we’ll find out what houses are worth. Of course we’ll still be measuring in dollars, which is a faulty and unreliable yard-stick.

  120. The Original NJ ExPat says:

    [119] gary – The last time I brought up reversion to the mean grim posted that it’s merely a theory, not a law. While technically correct, he was a new homeowner and expectant father and perhaps prone to a smidge of bias;-)

    I don’t think we’ll ever be normal again until the whole country dips below 3 again (reversion to the mean) and then we’ll climb back.

    Any questions?

  121. Fast Eddie says:

    In the end, water always finds its own level.

  122. JJ says:

    I have proof the world is going to hell in a handbasket.

    Got off phone with FEMA who owes me some money that they agree with me I deserve but a system snafu is preventing payment, so I go to FEMA what should I do, they tell me here is a number of a law firm getting free govt funding call them up and sue us for payment.

    So the US govt is paying for my attorney to sue the US Govt for payment. But I hear it happens all the time, medicare, SS lawsuits etc all have free lawyers that work on govt grants. I however, find it amusing. Imagine the private sector paying peoples legal fees to sue them

  123. daddyo says:

    “Case in point, 30yr mortgage rates fell from a high of 6.88% in July of 2006, to a low of 4.64% in October of 2010, a decline of 2.24 percentage points (that is greater than your change above by 74 basis points).

    During this exact same time period, the national S&P case shiller composite 20 (seasonally adjusted) fell from 204.93 to 143.36. This represents a 30% decline in home prices, nationally.”

    I would say imagine what the decline would have been without a lower rate. There absolutely is a correlation between prices and mortgage rates, it’s just not always easy to one-to-one. There has to be, absolutely has to be. There are four major factors in home affordability, Underwriting, Incomes, Taxes, and Mortgage Rates. Debt Service Coverage has an upperbound, this is fact. People cannot stay in a situation long-term in which they are paying more than they can afford to pay. We have millions of data points on this relationship.

    The reason home prices went down from 2006 to 2010 was because the impact of stricter underwriting (no more subprime) and lower incomes more than offset the lower rate. If you want prices to go up, you must lower mortgage rates, lower underwriting standards, lower prop taxes, or increased incomes.

    You can explain almost every single trend in housing with those 4 factors.

    And I know this isn’t a good supporting argument, but I will mention that the Fed’s entire coping mechanism the past 4 years has been to lower mortgage rates in order to slow and eventually reverse the decline. We have about 800 pages of Fed governer speeches to back that up.

  124. relo says:

    Gary,

    Dare to be prestigious. (jk, I’ll duck and cover now.)

    MLS # 1304011

  125. Kinda like a bankster holding a first lien suing himself in an FK when he’s the second lienholder.

  126. JJ says:

    According to the NAR There are three factors, Location, Location, Location

  127. Fast Eddie says:

    relo,

    Too prestgious for me, I can’t afford the Golf and Country Club dues. It sold for $792,000 in April, 2007 and is currently listed for $699,900. That’s a $1666 loss per month on investment. Ouch.

  128. grim says:

    The reason home prices went down from 2006 to 2010 was because the impact of stricter underwriting (no more subprime) and lower incomes more than offset the lower rate.

    Jesus no, that’s not even close.

    Perception changed, it was psychology. Everything else that followed was reactionary, the fallout of the change in psychology. Specifically, the examples you cite above, are effects, not causes.

    The mortgage industry? The horse left the barn long before they decided to tighten standards. Lending standards tightened as a result of increasing delinquencies, which didn’t show themselves until prices were clearly in free-fall. Please don’t tell me that you think this group had the foresight to adjust their risk exposure prior to the home price decline. We spent full years on this blog specifically tracking this. It wasn’t until we saw the highest rated tranches of MBS getting downgraded on an almost daily basis before the gears of the securitization machine ground to a halt.

  129. The Original NJ ExPat says:

    Here in Boston if you shovel out your space, it’s kind of understood that you can place a chair in that spot to save your space when you come back. About 10 years ago I took two beige plastic and steel folding chairs and taped red construction paper to them with my wife’s name and our phone number, going for the sympathy vote. These chairs have held steadfast marking our spots for a decade now. Further, the two pieces of red construction paper that I have my wife’s name and our phone number still are extant with the original packing tape. It just occurred to me where we got these chairs. I carried them out of Yankee stadium after a post-season win we attended in 1996. They’re the chairs they place behind the last row at the box lever. For a decade I’ve been marking our shoveled out spaces, here in Boston, with quasi-collectible Yankee stadium seats.

  130. Statler Waldorf says:

    “save me the lecture on those houses selling within a week; when there’s nothing left on the buffet table except scraps of crudite, people will grab at anything”

    Exactly. Which is why waiting for perfect conditions is not the best strategy. Pay 10% more than bottom prices, get the house you want, and enjoy current low interest rates. Weeks ago I showed you a cream puff house in Essex Fells, and the houses you have posted about since are not even close to the quality of that property (or its school system).

  131. JJ says:

    In my old buick back in college days I used to always run stuff like that over, funny thing I would never then park in the spot, then next guy would come by and park and get keyed. I always felt like a cross between House and Elementary watching the ants fight over a bread crumb.

    Once I had a sixth sense. As I nailed this guys trash can a month before and took it under my car with me shook it loose up the road. About a month later guy had a new can in spot so I went for it. Last second it just felt too easy and did a sharp left nicked the can but it did not fall over. So I parked a block up and walked back, guy put cinder blocks in the damm trash can.

    Sadly you cant trust anyone anymore. But your Yankee chairs most certainly would have went right under car.

    I stopped doing it as some realtor screwed me big time. I took out an open house sign on a lawn and the guy really nailed it in and the damm thing took out my tire, I kept going on the flat and changed it a mile up the road. It even dented car. Realtor must have had it happen before. Funny part is it totally messed up guys front lawn as I dragged sign under car right across lawn. Realtor also drive me nuts that sign was mine for the taking.

    Well story ends car is dented, I have spare on and I make an appointment to get it fixed and say damm a realtor finally beat me. Well luckily the car was stolen the day before. No realtor will every curse me again, they are trouble. Thank go they use balloons now, they dont dent my car

    The Original NJ ExPat says:
    February 8, 2013 at 3:41 pm

    Here in Boston if you shovel out your space, it’s kind of understood that you can place a chair in that spot to save your space when you come back. About 10 years ago I took two beige plastic and steel folding chairs and taped red construction paper to them with my wife’s name and our phone number, going for the sympathy vote. These chairs have held steadfast marking our spots for a decade now. Further, the two pieces of red construction paper that I have my wife’s name and our phone number still are extant with the original packing tape. It just occurred to me where we got these chairs. I carried them out of Yankee stadium after a post-season win we attended in 1996. They’re the chairs they place behind the last row at the box lever. For a decade I’ve been marking our shoveled out spaces, here in Boston, with quasi-collectible Yankee stadium seats.

  132. daddyo says:

    “Perception changed, it was psychology. Everything else that followed was reactionary, the fallout of the change in psychology. Specifically, the examples you cite above, are effects, not causes.”

    And what precipitated the perception change? Underwriting. I’m not saying mortgage underwriters got tighter, I’m saying the ability to get a subprime mortgage vanished completely. The fact that originators couldn’t sell subprime mortgages or correctly value them in the market led to the complete withdrawal of the option. In 2006, we simply got to the end of the road on loosening on underwriting and the near-term end of the road on rates, and the house of cards collapsed. The psychological change came as a result. People didn’t just suddently decide not to like housing.

  133. freedy says:

    http://www.forbes.com/sites/jennagoudreau/2013/02/07/the-states-people-are-fleeing-in-2013/

    NJ number one again in people leaving, not coming . Sell ,sell to who?

  134. The Original NJ ExPat says:

    My wife just advised me that I absent-mindedly exited that ’96 Yankees playoff game with three chairs. I still have one more in the closet that has never stood in the snow. Apparently I had two chairs in one hand and a third chair and a Shipyard Ale in the other hand.

  135. Juice Box says:

    Speaking on scrapple and gears of the securitization sausage machine. Irish white pudding is really a form of scrapple usually fried and served up for breakfast, pretty much everything is tossed in and you aren’t an Irishman if you haven’t eaten it for breakfast.

    Seems the securitization sausage machine it is set to expand to all corners of the economy. It is not just real estate anymore.

    Black pudding or Blood pudding is my favorite. I could eat that stiff fried everyday and die a happy man at 50.

  136. JJ says:

    “ Half of the harm that is done in this world is due to people who want to feel important…they do not mean to do harm…they are absorbed in their endless struggle to think well of themselves. ”

    — T.S. Eliot

  137. The Original NJ ExPat says:

    4:10PM If you’re on the road in MA you’re gettin’ a $500 ticket or going to jail for a year. I expect a rash of homeless are hot-wiring cars right now hoping for 3 hots and a cot.

  138. Juice Box says:

    It’s days like this I miss my Hummer.

    http://www.youtube.com/watch?v=mAYKvWmsCBQ

  139. yome says:

    Price of house at 2 to 3x income at interest rate of 6 to 8 percent is equal to 3 to 4x income at 3 to 4 percent i nterest rate. No?

  140. Juice Box says:

    re # 138 – JJ – Most of the “harm” caused in corporate America these days is due to “people who want to feel important” and the Peter Principal combined with Xanax, hense “they are absorbed in their endless struggle to think well of themselves”.

    I am dealing with one now. My first though is to help them get a promotion out of my neck of the woods. Save the Robots as I usually say, alas few get it…..

  141. grim says:

    The house of cards was predicated on rising prices. All it would take for housing to collapse was to simply not appreciate anymore.

    Yes, you read that right. All it would take for a collapse, was for prices to simply not rise anymore.

    How do I figure?

    You need to look at house prices in terms of discounting future hypothetical cash flows. If your estimate of future cash flows is based on 10% annual appreciation, you’ll pay significantly higher price for a house than someone who implicitly performed the same calculation at using 0% annual increase. Your perception of future value was significantly higher than theirs was.

    That’s why folks paid more for housing than it was worth. It was OK for me to spend $500k on a house today, even though it was a significant stretch, because it would be worth $1m in ten more years.

    Now, if that house in ten years is only going to be worth $500k, why on earth would you pay $500k for it today?

    You wouldn’t.

    And the house of cards collapsed.

    Public perception was predicated on continued annual appreciation, it was the new normal. No one could fathom a market in which prices were flat, let alone declined.

  142. The Original NJ ExPat says:

    I would say 340 days a year I miss Hummer.

  143. Juice Box says:

    re#141 – Yome – quoting JJ problem only arises when you do that math with two incomes. Does not matter what the interest rate is a real man makes his wife barefoot and keeps her in the kitchen.

  144. Juice Box says:

    damm in mod, repost

    re # 138 – JJ – Most of the “harm” caused in corporate America these days is due to “people who want to feel important” and the Peter Principal combined with BIG PHARMA, hense “they are absorbed in their endless struggle to think well of themselves”.

    I am dealing with one now. My first though is to help them get a promotion out of my neck of the woods. Save the Robots as I usually say, alas few get it…..

  145. Fast Eddie says:

    Statler Waldorf,

    Get the house I want? F.ucking where? Essex Fells is light years from work/school and the 70 other towns I’ve been looking are selling sh1t or at least trying to pawn their sh1thole. And, once again, property taxes are not part of the equation… especially Essex Fells! Have you been following the conversation? And please, spare me with the “best school” bullsh1t, that’s a sales pitch.

  146. The Original NJ ExPat says:

    [142] grim – your premise ignores or assumes too many constants. First of all, demographic distribution. Second is misunderstanding of chicken and egg.

    Let’s exaggerate and assume that we have BOTH a much smaller consumer base based on age demographics AND a trend of stagnation of income.

    Alert the media. We have both.

    Now ASSUME New York remains the financial capital of the world, if only in VOLUME of workers. I’ll leave this open to debate, but I don’t think it will.

    You can certainly just look at price and assume that based on price levels it all ends and stops/starts there. But that’s stupid.

    The house of cards was predicated on rising prices. All it would take for housing to collapse was to simply not appreciate anymore.

    Yes, you read that right. All it would take for a collapse, was for prices to simply not rise anymore.

    How do I figure?

    You need to look at house prices in terms of discounting future hypothetical cash flows. If your estimate of future cash flows is based on 10% annual appreciation, you’ll pay significantly higher price for a house than someone who implicitly performed the same calculation at using 0% annual increase. Your perception of future value was significantly higher than theirs was.

    That’s why folks paid more for housing than it was worth. It was OK for me to spend $500k on a house today, even though it was a significant stretch, because it would be worth $1m in ten more years.

    Now, if that house in ten years is only going to be worth $500k, why on earth would you pay $500k for it today?

    You wouldn’t.

    And the house of cards collapsed.

    Public perception was predicated on continued annual appreciation, it was the new normal. No one could fathom a market in which prices were flat, let alone declined.

  147. yome says:

    I always thought, it is the amount of manageable monthly payment that you can justify against rent. Income will go up as years passby and FRM stays the same which can bring it down 2x as years passby. Mortgage payment will look a lot less than renting due to annual 5 percent increase in rent Assuming staying put and taxes going up at minimal

  148. grim says:

    Here is a perfect example, the Federal Reserve Senior Loan Officer Opinion Survey – July 2006:

    On net, about 10 percent of domestic institutions indicated that they had eased credit standards on residential mortgage loans over the past three months, the same fraction as in the April survey. In line with other evidence of a slowdown in housing activity this year, domestic institutions reported that demand for mortgages to purchase homes had continued to weaken over the previous three months. About 60 percent of respondents saw weaker demand for such loans, a significantly larger net fraction than in the April survey.

    Lenders were still easing standards into the early days of the decline.

    Credit standards wouldn’t begin to tighten for another 6 months, from the Fed SRO Survey, January 2007:

    On balance, about 15 percent of domestic banks reported that they had tightened credit standards on residential mortgage loans over the past three months, the highest net fraction posted since the early 1990s. Almost 40 percent of domestic institutions—a somewhat smaller net fraction than in the October survey—indicated that demand for such loans had weakened over the previous three months.

    This was still only 15% of lenders, a small fraction, it wasn’t until June of 2007 that the spigot was really tightened, a year after the decline in demand was noted:

    Of the forty-two institutions that reported having originated nontraditional residential mortgages, around 40 percent noted that they had tightened standards on these mortgage products. Of the sixteen institutions that reported having originated subprime residential mortgages, about 56 percent indicated that they had tightened standards on such loans.

  149. The Original NJ ExPat says:

    What’s the payments? About 25 years ago I worked on a software application for used car dealers to up-sell used car purchasers. I was incredulous that consumers were only concerned with the payment, not the duration. Personally, my first experience was deciding between a 1984 Honda CRX at $6700 plus a $1000 dealer vig ($7700) or a VW GTI at $8300 with no dealer markup. Back then, I think, it was only 3 year loans. I was simply appalled at how much it would cost me for either car over just *3* frickin’ years. Also, much as I hated the $1000 mark-up on the $6700 car, it was still a better deal than the $8300 car. In the end I borrowed $5000 from my girlfriend and financed the remainder on my Honda into a 1 year loan. I can’t tell you the final purchase price with tax and other crap, but I can tell you that the payments were exactly $273.81 per month and then it was over. How many of us actually get to the “then it was over” part these days.

    I always thought, it is the amount of manageable monthly payment that you can justify against rent. Income will go up as years passby and FRM stays the same which can bring it down 2x as years passby. Mortgage payment will look a lot less than renting due to annual 5 percent increase in rent Assuming staying put and taxes going up at minimal

  150. The Original NJ ExPat says:

    Starting to look a little blizzardy outside.

  151. BearsFan says:

    150 – ” I was incredulous that consumers were only concerned with the payment, not the duration.”

    dead on. this is a credit story first and foremost, and the slack has been used up.

  152. grim says:

    By late 2005, inventory levels started to get very high, and by early 2006, it had become clear that appreciation in certain submarkets had slowed, or had gone negative. I remember that Boston specifically, had gone negative in early 2006. Purchase activity had started to fall in late 2005 as well, corresponding with the inventory jump, by early 2006 it was clear that purchase activity was going negative as we’d seen a few months of consecutive declines in activity.

    By mid-2006, it had become obvious that numerous submarkets were topping over, and by late 2006, declines were evident across the board as numerous charts crested over. DC, Tampa, Phoenix, Boston was a lock at that point, the trend was pointing down.

    It wasn’t until March or April of 2007 that it was clear the subprime market was in crisis. Nobody was really reading the Mortgage Implode-O-Meter blog until around that same time.

  153. yome says:

    I purchased my first house 18 years ago equal to what I was paying in rent in one of those luxury apartments. It was a struggle at first but got better when I was not getting hit by the 5 to 10 percent increase in rent and salary almost tripled in the time period. When rent was costing $1800 to over $2000 today and thinking I can refi what I paid for in 96 at $500 a month today I am making $1500 a month on rent payment I dont have to make.If I chose to finish paying off the mortgage, i can give the house away and still be ahead. Of course I did not go that way., I chose to buy a second home cash from the 1st and let my son make the last 10 years payment when I retire in 5 years and he gets the title. I will sellnthe second home add to my retirement

  154. grim says:

    Now, let’s look at median household income nationally:

    2005 – $46,326
    2006 – $48,201
    2007 – $50,233
    2008 – $50,303

    How could housing prices have topped in 2006 when household incomes were still rising? By 2007? Prices falling, income rising. 2008? Still no decline. It wasn’t until 2009 that we saw household incomes drop, where they fell to $49,777.

    What about unemployment rate.

    December 2005 – 4.9 – Rock and roll
    December 2006 – 4.4 – Fantastic
    December 2007 – 5.0 – Still beautiful.

    It wasn’t until late 2008 that we started to see strong upward movement in unemployment.

  155. BearsFan says:

    the 40yr gov’t backed loan will have to become the norm….

  156. The Original NJ ExPat says:

    The demographic decline following the baby boom doesn’t matter a bit? Seems like we post a lot of price stats and pretend that a shrinking demographic with a stagnating income doesn’t bear further inspection?

  157. Fast Eddie says:

    Long-term shifts in the U.S. economy coupled with the recent recession means Americans are more likely to pack up and move for employment-related reasons. Although the total number of residential moves is down, new data shows a clear pattern of the states that people are fleeing the fastest.

    Moving company United Van Lines released its 36th annual study of customer migration patterns, analyzing a total of 125,000 moves across the 48 continental states in 2012. The study provides an up-to-date, representative snapshot of overarching moving patterns in the U.S., and reveals a mass exodus from the Northeast.

    At No. 1, New Jersey has the highest ratio of people moving out compared to those moving in. Of the 6,300 total moves tracked in the state last year, 62% were outbound.

    “New Jersey has been suffering from deindustrialization for some time now, as manufacturing moved from the Northeast to the South and West,” says economist Michael Stoll, professor and chair of the Department of Public Policy at the University of California, Los Angeles. “And because it’s tied to New York, the high housing costs may also be pushing people out.”

  158. grim says:

    157 – Honestly, I have no idea what you are talking about. I don’t understand how 147 fits with the specific discussion around the pre and post conditions of the bubble bursting.

    Are you saying that the housing market behavior from 2005-2007 has something to do with demographic changes? Post up some numbers, I’m interested.

  159. Juice Box says:

    Grim – 2006 = ancient history….

  160. Essex says:

    DJSussone is killing it on 105.1 … NYC til 10 PM. Worth listening too. Break open a 40.

  161. cobbler says:

    grim[142]
    Some impressive houses of cards:

    http://cardstacker.com/projects_nycskyline.html

  162. Punch My Ticket says:

    Grim, regarding your thoughts on property taxes on improvements, it’s an old idea. An extreme version was proposed by Henry George in the late 1800′s, with taxes levied only on land value.

    The capability exists today, because assessors commonly distinguish land value and building value when assessing. Most jurisdictions levy one mill rate against the sum of the two values, but there’s no reason that has to happen. In theory, different mill rates could be charged on each piece. George’s thesis was that the improvements should be charged at zero. Wikipedia says that Harrisburg PA uses another variant today, levying a mill rate on vacant land that is 6x the mill rate on a built property.

  163. Ragnar says:

    Grim in his many posts above is right on target regarding the dynamics of the housing crunch. Credit standards tightened only after non-payments began rising and MBS stuff started collapsing. The lenders (or should I say loan marketers) wanted to keep the good times rolling. It was all classic bubble mentality, momentum buyers with leverage. Then it stopped and fell harder than people expected (as always happens in bubbles).

  164. The Original NJ ExPat says:

    [159] grim – No way! You think there is no demographic shift? I’ll put together some numbers for you tomorrow. I’ll show you how Upper tier sellers, when they decide to come to the market, will have no buyers. Well, not none, but not enough.

  165. relo says:

    164: Agreed, speaking from experience at (then) ground zero.

  166. relo says:

    161: Yea, boyeee.

    Change of pace at 10 to 89.5.

  167. The Original NJ ExPat says:

    Had the kids outside for a few minutes. Oh yeah, it’s blizzardy.

  168. cobbler says:

    expat [165]
    Gary is an example of an upper-tier buyer who can’t find sellers…

  169. The Original NJ ExPat says:

    [169] cobbler – run that through your mind a few times. Is that because the home occupiers are like, “NFW am I giving up this irreplaceable spot of earth, this is the best rapidly value increasing investment in the world and I’m going to let it ride!” Of course not. It’s because the would-be sellers are trapped.

    expat [165]
    Gary is an example of an upper-tier buyer who can’t find sellers…

  170. cobbler says:

    expat [170]
    I dare to say that most upper tier owners in “better” parts of Bergen County (where he is looking) are not “trapped”…

  171. joyce says:

    cobbler,
    I would also dare to say that a greater % of the upper tier bergenites are not trapped than other areas. However, the point is real estate being leveraged (sometimes highly leveraged) all it takes is a relatively small % to cause problems.

  172. joyce says:

    Comrade,

    Tax question if you’re willing: why would I receive a 1099int related to car loan interest if I cannot deduct that interest anywhere in the filing?

  173. grim says:

    Underwater in North Jersey, the picture is more surprising than you think:

    http://www.zillow.com/visuals/negative-equity/#10/40.9094/-74.3204

    Most mid-tier towns in NJ have a negative equity rate of 15% or better, most higher tier towns have a rate of 10% or higher. Just a cursory look shows 5-6% being the lowest numbers found locally. In both tiers, it looks as if the vast majority of underwater borrowers are only in the 100-120% LTV range, only slightly underwater.

    It’s not until you get to NJ’s lowest tier areas that you see huge levels of underwater owners and deep negative equity.

    Newark, for example, with a 69% negative equity and a surprising number of owners near the 200% underwater level. Paterson 58%. East Orange, 55%. Etc etc.

    Wyckoff 6%, Chatham 6%, Summit 6%, Short Hills, 5%.

    Bifurcated, the worst areas have a rate that is more than 10 times worse than the top areas.

    This is why when you look at the overall state statistics for underwater homes, you get a very different picture. Corelogic says 19%, almost 1 in 5 homes underwater in NJ. Looking at the town by town, or county-level data, you see the vast majority are clustered in the worst areas, and the best areas, are basically untouched.

  174. grim says:

    And just a rough estimate of equity.

    So we know 1/3 of homes in NJ are owned outright, the other 2/3s have some mortgage.

    Looking at the equity by MSA breakdown for NY Metro, it estimates 36% of mortgage holders have at least 60% equity, and another 14.3% have at least 40-60% equity.

    So just doing some quick math. 33% of the total market has 100% equity, an additional 24% have 60% equity or better, and another 9% have at least 40% equity.

    Add ‘em up, approximately/roughly/whatever – 66% of homeowners in the region have at least 40% equity in their home.

    Now, remember the negative equity breakdown map above, the same will apply to homeowner equity, it is highest in the top tier areas and lowest in the low tier areas. So, I would expect for top tier towns, that 66% of homeowners having at least 40% equity should be even higher.

  175. grim says:

    So don’t start believing you are some kind of hero rescuing an underwater homeowner, or doing somebody a favor.

    Chances are, you aren’t, unless you are looking in Newark, Orange, Plainfield, or Camden maybe.

  176. grim says:

    165 – No way! You think there is no demographic shift? I’ll put together some numbers for you tomorrow. I’ll show you how Upper tier sellers, when they decide to come to the market, will have no buyers. Well, not none, but not enough.

    Oh I do, but the trends you are talking about are going to take another 20 years to play out, not 2, and didn’t have anything to do with the bubble bursting. I’d wager a guess that the real estate bubble had more influence on demographics than the other way around.

  177. grim says:

    Thoughts on inventory.

    We very regularly spoke about the fact that the housing bubble had pulled buyers forward. Instead of buying at some later period, they accelerated their decision to buy and became owners earlier than they had planned or otherwise would have naturally. This pull forward of demand would inevitably cause a drop-off in demand in the future.

    Now, if you believe this (and most of us did at the time), you also need to believe the second half.

    The bubble pulled sellers forward at the top.

    Oh gosh! I said it.

    For every buyer there needs to be a seller, these sellers (and their inventory) needed to be pulled forward from the future as well.

    So, to some extent, the low level of activity in comparison to during the bubble, as well as the low level of inventory, is to be explained by the pull forward model.

    Likewise, we have the corresponding psychological shift. Everyone wanted to be buying and selling homes during the bubble, quick, honey, let’s move up! During the recent past, the levels of inventory were significantly higher than in the pre-bubble “normal” market. Inventory levels pre-bubble were very, very low compared to during the bubble, and were even lower than they were today. To some extent, I think we all got used to the abundant supply of homes on the market, and started to expect that as the norm. So now, in today’s market, the shelves look pretty bare. When, in reality, this level of inventory was considered pretty normal.

    What I think we are going to see, is the average length of homeownership (in years), start increasing significantly from even the pre-bubble levels. I’ve got to look at the numbers, but the oft-quoted figure was typically 7 years, on average.

    This number is directly related to the churn in the market. The lower the average length of homeownership, the higher the level of average inventory. As the average length of homeownership increases, the average level of inventory declines.

    So what will impact the length of ownership?

    1) Underwater or near negative equity. If you can’t sell, you’ll stay, longer than the typical 7, in order to build the equity to move (if you ever move).

    2) Mortgage lock-in, and this is one of the major trends I’m looking at in the near future. Should mortgage rates go up, borrowers are going to be less inclined to move if it means losing their sweetheart mortgage rate. I know I wouldn’t give up my 3.95% for a 5.5%. So what’s it mean? I’ll stay longer.

    3) To some extent I believe #2 is going to drive remodeling and renovation levels higher, which will in turn lead to families staying in the same homes longer.

    Strong factors that I think are going to be putting upward pressure on the length of ownership number, which in turn will have a damping effect on inventory.

    The big question is to what extent this behavior will offset any housing dislocation from retiring boomers.

  178. grim says:

    Jesus, almost 7 years ago to the day we were having the same discussion:

    grim says:
    February 7, 2006 at 3:46 pm

    The records set at the peak 2005 may seem like something to cheer now. But they make YOY declines in 2006 a given. Nothing scares the market more than hearing about declines. The same momentum that pushed prices up will drag them down.

  179. Fast Eddie says:

    It’s because the would-be sellers are trapped.

    Of course! They can’t sell. And there’s no metric to gauge those hanging by a thread. Sure, they’re making payments but it’s a treacherous path. It was the equivalent of a financial Sandy during the bubble. You have no idea how many are hurting.

  180. Mike says:

    7 When you talk about length of home ownership, where I grew up 30-40 years was was nothing and you knew everybody on all four sides of the block by their first name. Then again you had General Motors, Singers, Phelps Dodge, Bayway Refinery, Gordons Gin, GAF Corp etc. People worked at these places for life and never moved.

  181. Fast Eddie says:

    Can anyone tell me why I hover the cursor over all this listings on the Trulia map and they’re either in foreclosure or pre-foreclosure? I’m talking about the “upper” tier towns. 4 out 5 that are supposedly for sale are in that “foreclosure” state. Is that map not accurate?

  182. The Original NJ ExPat says:

    [178] Baby boomers will be ages 50-67 this year. They will be *continually* removing themselves (or being removed) from the workforce for the next 20 years, that is true, but they are done buying bigger houses NOW. The trough of the baby BUST generation is made up by those who were born in 1975. Hell, from 1965 to 1980 the US birth rate doesn’t even come CLOSE to matching the PRE baby boomers born DURING WWII. The Heart of the baby boomers are right now selling to the grim generation, and there are way, way, more sellers than buyers even if their houses aren’t listed yet. If you were born in the baby bust you’ve never seen what a legitimate housing boom looks like. When I was 5 years old I saw brand new 4BR 2.5 bath colonials snatched up by *exclusively* 20-somethings. Can you imagine streets and streets full of 25 year old stay-at-home Moms? No wonder the Fuller Brush man always looked so happy when he came knocking.

    165 – No way! You think there is no demographic shift? I’ll put together some numbers for you tomorrow. I’ll show you how Upper tier sellers, when they decide to come to the market, will have no buyers. Well, not none, but not enough.

    Oh I do, but the trends you are talking about are going to take another 20 years to play out, not 2, and didn’t have anything to do with the bubble bursting. I’d wager a guess that the real estate bubble had more influence on demographics than the other way around.

  183. grim says:

    Baby boomers will be ages 50-67 this year. They will be *continually* removing themselves (or being removed) from the workforce for the next 20 years, that is true, but they are done buying bigger houses NOW.

    We don’t need them to buy bigger homes, we only need them not to sell the ones they have. I say 20 years, because we need this age cohort to *die* for the full impact to be felt. The major countertrend is low retirement savings forcing boomers to remain in the workforce for longer than anticipated, a topic that is discussed here at least once a week. Boomers still near peak earnings will be reluctant to sell and move to lower price areas because they face poor job prospects upon relocation. Remember, this cohort has among the highest free & clear homeownership rate and has among the lowest basis of home price paid. The only way this inventory is fully released to the market is that this age cohort dies.

  184. grim says:

    And you are discounting the impact of the echo boomers entering peak earnings as the tail end of the baby boom die off.

    As much as I hate quoting the Harvard Joint Center…

    81 million Echo Boomers born from 1981 to 1999
    78 million Baby Boomers born from 1946 to 1964

    And given the propensity for the echo boomers to prefer urban and city living, I’m going to take my chances in the NY Metro, versus, say, the entire “middle part” of the US, save for Chicago.

  185. chicagofinance says:

    I’m not joking…pure bought and paid propaganda. Clot’s McMansion slumlord is the correct image to cite.

    “As much as I hate quoting the Harvard Joint Center”

    grim says:
    February 9, 2013 at 9:38 am
    And you are discounting the impact of the echo boomers entering peak earnings as the tail end of the baby boom die off.

    As much as I hate quoting the Harvard Joint Center…

    81 million Echo Boomers born from 1981 to 1999
    78 million Baby Boomers born from 1946 to 1964

    And given the propensity for the echo boomers to prefer urban and city living, I’m going to take my chances in the NY Metro, versus, say, the entire “middle part” of the US, save for Chicago.

  186. Ragnar says:

    I watched the movie “Queen of Versailles” last night. Free for Amazon prime members. Old guy “time share king” takes the money made selling subprime timeshare loans and spends it building a 90,000sf house on his trophy wife, then bankers pull credit, and hillarity ensues. Rolling in money and stepping in dogpoop, drowning in bling.

  187. grim says:

    187 – It’s one of the only sources that used consistent duration for both groups (18 years). Most other sources use variable timings which makes comparisons across different sources difficult.

    They aren’t even the most aggressive of the statistics, the often quoted CBS News Gen Y report cited 80 million Echo Boomers from 1982 to 1995. So not only a larger group, but a larger group in a significantly smaller time period.

  188. The Original NJ ExPat says:

    [185] grim – Which boomers have the low retirement savings? The ones in Glen Rock? The ones in Closter and Alpine? The ones in Ridgewood? Saddle Brook? Ho-ho-kus? I’m betting most 50+ year olds paying $20-$50K in property taxes don’t have empty 401k’s. In fact I bet they’re banging in their $22.5K in early in the year like I do. Now Clifton and Passaic may be a whole different matter, but that won’t matter. It won’t matter because the people who can retire not only will retire, they *are* retiring. And they are downsizing and moving out because $20K taxes plus maintenance on $750K 4BR house in a train town with good schools makes no sense to someone with no kids and no job, you have to agree with that, right? Now there are definite strata here, let’s list them:

    A. I’m so stinking rich I’ll pay taxes out the a$$ forever and not care.
    B. I’m retired with a big 401K and other assets and my wife likes this town so I’ll stay.
    C. I’m retired with a sizable portfolio but this housing cost and these Winters suck.
    D. I *could* retire but I’m making so much money now, it’s hard to think about quitting.
    E. Retirement is looking iffy, but my income is pretty high, if only I could save more.
    F. My house is paid off, my career is done and if I don’t sell this house I won’t be able to retire. I need that money and HAVE to move.
    G. My husband retired 10 years ago and now he’s dead. Now I can finally sell this house(this group is more pre-boomers).
    H. The kids are grown and out and our only chance of retiring is downsizing so we can save more for retirement.
    I. Just S-O-L.

    All of the above boomer groups think about selling at the least and are largely leaning toward selling if not outright planning to sell right now. Also worth considering is that many of the towns we discuss have Wall Street incomes. Wall Streeters do not work until they’re 75 in finance, they’re mostly done by 60, if not earlier. I think it’s borderline delusional to think that the largest generation is just going to shiver through their retirement years, pay their huge maintenance and tax bills until they ultimately leave their large empty houses feet first. Maybe groups A, B, and part of C do, but not D, E, F, G, H & I. One more significant leg down and they will be trampling each other for the exits.

    We don’t need them to buy bigger homes, we only need them not to sell the ones they have. I say 20 years, because we need this age cohort to *die* for the full impact to be felt. The major countertrend is low retirement savings forcing boomers to remain in the workforce for longer than anticipated, a topic that is discussed here at least once a week. Boomers still near peak earnings will be reluctant to sell and move to lower price areas because they face poor job prospects upon relocation. Remember, this cohort has among the highest free & clear homeownership rate and has among the lowest basis of home price paid. The only way this inventory is fully released to the market is that this age cohort dies.

  189. The Original NJ ExPat says:

    Forgot to touch on this one. That is a zero sum game, essentially. Every one of us boomers who stays working keeps the next generation down and not earning higher incomes that much longer. That is, unless we are in a huge wage growth phase which we are not. I’m really kind of astounded at how contained the incomes are of talented and employed late 20′s and early 30′s kids. This is like “cash on the sidelines” in the stock market. There is no such thing. Unless new shares are being issued or IPO’d, every dollar of cash that comes into the market leaves in the hands of the seller. zero sum.

    The major countertrend is low retirement savings forcing boomers to remain in the workforce for longer than anticipated, a topic that is discussed here at least once a week.

  190. grim says:

    191 – So what is your recommendation. Buy or Rent, and where? Des Moines? Columbus? San Fran? NYC? Key West? San Antonio? Prague? London? Ecuador?

  191. chicagofinance says:

    The End Is Nigh (Deer Hunting for Humans Edition):

    BERLIN — A southern New Jersey man is charged with murder after authorities say he used a bow and arrow to kill another after a fistfight.

    Twenty-five-year-old Timothy Canfield of Berlin was charged Tuesday.
    Authorities say Canfield was at his home when another resident got into a fistfight Monday night with 25-year-old Kereti Paulsen of Cape May Court House.
    After the fight broke up, authorities say Paulsen was outside the home and Canfield followed him with a compound bow and a quiver of arrows.
    They say Paulsen was shot in the stomach and died after the arrow tore through a vein in his pelvis.
    Authorities say Canfield admitted to dumping the bow and arrows in a wooded area in nearby Winslow. He is being held at the Camden County Jail.

  192. The Original NJ ExPat says:

    [186] They don’t buy anything unless Apple sells it. iHouses?

    And you are discounting the impact of the echo boomers entering peak earnings as the tail end of the baby boom die off.

  193. Juice Box says:

    re: boomers.

    Anecdotal but my recent housing hunt has uncovered lots of cognitive dissonance.

    Two of the homes I looked at recently were boomers looking to retire to Florida. 11k in taxes on both homes and looking for the full boat 700k price tag. 1st house was built in early 80s and they just paid off the mortgage, kids are grown and moved out etc, need to downsize, house was not updated since they bought it yet they still expect full boat price?

    2nd home same thing with a twist extended family four generations live there now, son with his wife and their two kids who were saving up to buy a home. 700k with new kitchen but everything else needed to be gutted, infact the addition needed to be dynamited along with the strange fountain out front and the weird landscaping out back.

    Another home our tour guide took us to see was a divorce sale. 26 yr old son still living there did not even want to get out of bed as the realtor was showing us the house. House was dirty, carpet was disgusting, and needed updating. Kitchen was classic 80s look, baths need to be redone etc all from the 80s, and they still wanted the full boat close to 685k.

    Other than that I am still waiting for spring selling season inventory to arrive, our realtor has been knocking on doors so she says to get a feel for what will be coming on the market soon. She does not have any encouraging news..

  194. juice (137)-

    Sorry; is this the NJ Cannibalism Report?

    “I could eat that stiff fried everyday and die a happy man at 50.”

  195. Fast Eddie says:

    Juice Box [195],

    Sounds like we can switch places and tell the same tale. You know, it’s different here and it’s very competitive, so I’ve been told by a few house tour guides in the past. The last piece of advice was a few weeks ago when I was told at an open house that the “price was warranted.” That was after I asked why the house is still for sale after 5 months and multiple open houses. They’re all looking for the jackpot and for you to correct their lifelong lack of financial planning.

  196. Fast Eddie says:

    I guess no one wants to guess why I see more foreclosure and pre-forclosure listings on a number of house sites than regular listings? Perhaps there are only a few that are solvent? No, it couldn’t be, it’s different here.

  197. The Original NJ ExPat says:

    My recommendation is to not limit your mobility. Buy or rent where you want to live and work, obviously. But if you buy, buy because you want to truly own and have a plan to do so. Save and put down a 40% down payment on the smallest place that meets your needs and be able to *easily* service the debt on one income. Now you’ve got absolute skin in the game and will probably charge forward to eliminate your debt instead of staying in perpetual service to it. If a super job opportunity pops up anywhere on the globe you can quickly sell, even at a loss, and not have to bring money to the closing table. Besides, who cares about the loss if you’re moving somewhere far away for presumably an even larger financial gain? If you end up staying where you are, and you’ve bought small, you can start throwing money at your mortgage to kill it off. Now if you really want to go bigger after that, you have 100% equity to use as your down payment on your next place.

    191 – So what is your recommendation. Buy or Rent, and where? Des Moines? Columbus? San Fran? NYC? Key West? San Antonio? Prague? London? Ecuador?

  198. gary (198)-

    In the end, it’s 100% about solvency, whether it’s RE or sovereign debt.

    As BC used to say: “qualified buyers??? Where are the qualified sellers?”

  199. Fast Eddie says:

    Meat,

    You uttered one of the top 10 lines ever posted on this site yesterday: “It’s not about rates, it’s about solvency.” I’m paraphrasing but I couldn’t agree more.

  200. I’m not running a wine store because real estate sales was such a viable and growing business since 2008.

  201. Juice Box says:

    re # 197 – More like the NJ Carnivore Report

    I made bacon this morning just enough to enjoy the smell and have a few slices with my breakfast. Tonight I will be firing up my charcoal grill and grilling up a 1.5 inch inch thick top butt sirloin that I marinated for a few hours in soy, garlic, brown sugar and pepper. If i don’t leave the house tomorrow I may do some baby-back ribs slow cooked in the afternoon.

  202. Thanks for clearing that up. Never know when you can come across a connoisseur of the long pig.

  203. The Original NJ ExPat says:

    [135] freedy – thanks for the article.

    At No. 1, New Jersey has the highest ratio of people moving out compared to those moving in. Of the 6,300 total moves tracked in the state last year, 62% were outbound.

    “New Jersey has been suffering from deindustrialization for some time now, as manufacturing moved from the Northeast to the South and West,” says economist Michael Stoll, professor and chair of the Department of Public Policy at the University of California, Los Angeles. “And because it’s tied to New York, the high housing costs may also be pushing people out.”

    no, No, NO!! Grim says you have to stay here until you die! And no selling your house either!

  204. Juice Box says:

    Off to find a hill to for my son and I to sled down. Around here the picking are slim, Steven’s University has one but the Campus Cops will probably kick us out.

    Enjoy the snow anyway you can.

  205. The Original NJ ExPat says:

    Here’s some fun Vintage stuff:

    http://www.voncannonrealestate.com/marketTrends/Baby_and_Echo_Boomers_How_Generational_Trends_Affect_the_Real_Estate_Market.php

    The Echo Boomers are the second largest generation in the United States, second only to their parents. Children of the Baby Boomers, Echo Boomers are the only generation to come of age with the technology of the twenty-first century. They are very different from their predecessors and are more willing to take risks. Their parents, Baby Boomers, were the first generation to have two income households, multiple careers and a 50% divorce rate. Most Echo Boomers were born between 1977 and 1995. They have more lending and mortgage options and purchase larger, more expensive homes at earlier ages.

    Real Estate Weekly has reported that as Echo Boomers “continue to move into adulthood, they are also suddenly becoming a strong buying and renting force. There are 80 million Echo Boomers in the United States, roughly one third of the population, who currently invest $170 billion in real estate each year.” Their buying power, combined with that of their parents is a force that will continue to grow and evolve throughout 2006.Baby Boomers are less affected by rising costs and higher interest rates than other generations and they will pass this stability on to their children.

  206. Grim says:

    OMG Kardashians at GSP!!!

    This is why Bergen is worth $750k, you just don’t get this kind of culture in Racine, Wisconsin.

  207. Comrade Nom Deplume says:

    Joyce,

    If you are the payor, I don’t see why except that your loan may be held by a servicer that handles commercial loans and it doesn’t make sense for them to segregate noncommercial borrowers. It is cheaper to mail surplusage than to deal with it.

  208. Comrade Nom Deplume says:

    [135] freedy,

    This statistic is quite unscientific and doesn’t mean net population drain, but what it does mean is a drain of people who can afford moving moving charges. These are the people you don’t want to lose, and NJ is losing them.

  209. 30 year realtor says:

    Fast Eddie, there are homes hitting the market with regularity that can be expanded and renovated where total cost will not exceed $575,000 in decent communities like Wash Twp, Fair Lawn, Waldwick, etc. Splits, capes, ranches in the $350 range that for another $200 in combined hard and soft cost can be made into a home you would be thrilled with. Yes, it is an enormous undertaking but so worth it in the end.

  210. Maybe Juice can catch and roast a Kardashian.

    They sure have meaty rumps.

  211. Fast Eddie says:

    30 year [211],

    How about we cut to the chase and find the $575,000 house already expanded and renovated in Wash Twp. that I’ll be thrilled with? :)

  212. joyce says:

    Thank you. Yup, the payor. And thought the form had no bearing personally… thanks for confirming.

    Comrade Nom Deplume says:
    February 9, 2013 at 1:06 pm
    Joyce,

    If you are the payor, I don’t see why except that your loan may be held by a servicer that handles commercial loans and it doesn’t make sense for them to segregate noncommercial borrowers. It is cheaper to mail surplusage than to deal with it.

  213. Comrade Nom Deplume. Apparently. says:

    [214]. Joyce,

    Also, IRS collects a LOT of data. The servicer has to report this even if not to you. But it likely generated a corresponding report to you, even if you don’t need it.

  214. Westjester says:

    Re 208
    You don’t get any culture in Racine. There it’s all about the ‘sha.

  215. WickedOrange says:

    The States People Are Fleeing In 2013
    http://finance.yahoo.com/news/the-states-people-are-fleeing-in-2013-194007689.html

    Well played NJ, well played.

  216. chicagofinance says:

    The End Is Nigh (What Do You Expect From Dumb Rednecks in Kentucky Edition):

    The distillery behind Maker’s Mark bourbon is reducing the amount of alcohol in its bottles by 3 percent to meet a rise in global demand, company officials said today.

    The bourbon brand — which famously used the slogan “It tastes expensive… and is” in the ‘60s and ‘70s — looked at “all possible solutions” and “worked carefully” to reduce the alcohol by volume of the beverage by 3 percent.

    Maker’s Mark is distilled to 45 percent alcohol by volume — or 90 proof — and, after the change, would go down to about 44 percent ABV or 88 proof, according to Quartz.

    Company execs said the move would ensure there is “enough Maker’s Mark to go around” while it boosts production at its distillery, but the move is sure to leave a bitter taste in the mouths of some drinkers.

    “Usually you’re going to notice that,” Williamsburg bartender Erik Lane, 31, said of the lowering in proof. “If I started putting a half shot of water in the bottom of everyone’s beer just to make the keg last longer they’d notice.”

    “I don’t think the proof really matters [for a drink to be enjoyable]. But when that’s your reason for doing it, I just think that’s a cheap business practice,” Lane, an occasional Maker’s Mark imbiber, added.

    It is unclear when the watered-down beverages will hit the market.

  217. Juice Box says:

    re: # 212 – 30 year realtor – A bulldozer might be more appropriate. Problem with many of those homes is the lot size.

  218. Fast Eddie says:

    Juice Box [219],

    Amen. Open the new French doors from your dining room and step into your neighbors kitchen.

  219. Juice Box says:

    eddie – My brother’s in haughty BC has a neighbor who is remodeling, they blew out the back, the lot is 6k sq ft and they are adding a two story addition out back. They will have almost no yard and an 80 year old 1 car garage in the far back corner. At least there is the 6ft high white plastic fence to keep them from killing each other.

    I will take a wooded acre in Middletown at least there is room to breathe..

  220. Fast Eddie says:

    Juice,

    Just about every house I see, whether it’s a scheduled showing or open house, includes the conversation of blowing out walls, re-doing kitchens and baths or adding whole sections. You can’t do additions on those 350K makeovers. There’s no property and it just really f.ucks up any ambience the neighborhood may have had to begin with. The only other option? Buy the 575K piece of sh1t on halfway decent property and sink every last dollar you have into the joint. Who’s the s.ucker in the room? It ain’t gonna be me.

  221. Ernest Money says:

    Great. The solution to PBC shitboxes is to turn the whole county into Staten Island.

    It is the end of days.

  222. Fabius Maximus says:

    #222 Fast Eddie

    The last 200 posts and probably the last years worth of posts on your house search can be summed up, by “this market aint going to sh1t skittles for you”. So how serious are you at moving? You have house, location and price. Most of the time, you can have two out of the three and most people will compensate with price. Some nuggets come onto the market that hit all three, but they either never hit the MLS or are gone in days. Grim has shown you properties that you have passed on that went straight away. Yes there is a lot of garbage on the market, but there are a lot of birds circling the clarion.

    Just like gold mining, to find a nugget, you need to sift through mountains of dirt. You seem to be spending your weekends kicking tires. Forget Wash Twp. It has 3200 properties of which 80% are not going to meet your criteria. It currently has 30 properties available for sale. Even if that triples as the market picks up, you are not going to find anything that meets your requirements.

    The ones I do feel sorry for are the ones on the hook to buy your place. When they finally walk away I really hope you write a check to cover their inspections.

  223. gluteus (224)-

    Why don’t you write them the check? They agreed to the contingency, and they did it with eyes open. Gary owes them nothing.

  224. Fabius Maximus says:

    #225

    True they are owned nothing but with that, is there a reasonable expectation for an actual execution of the contract. Its funny that you were the one that always railed against people for not being serious buyers. I think on their next contract they can add a Brigadoon rider? You have six months to find Shangri-La or you pay up.

  225. glutueus, you sound more and more like a guy who likes managing outcomes. Must be your collectivist upbringing.

    BTW, I have an equal problem with sellers and buyers who aren’t serious. Gary and his buyers are both serious, and they are both disadvantaged by a rigged market run amok.

  226. Mikewaited/Mikeinwaiting says:

    “Great. The solution to PBC shitboxes is to turn the whole county into Staten Island.

    It is the end of days.”

    And on that note from Clot stopping in so say HI!
    Been busy as b*lls, hope all are well, miss you guys…………..
    Grim how is life with your bundle of joy? ( I know been there,enjoy!)
    Gary my friend give it up I know you ain’t paying for that sh*t neither would I ,so stop b*tching.
    JJ I am well aware everyone you know has a DP plus an extra hundred K or two,LOL!

    Not to leave the rest of you guys out but off to bed, I certainly have a jibe or two for all given the time.
    Warm Regards,
    Mike

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