Preliminary December sales data for Northern New Jersey is in..
The first graph plots the unadjusted sales data (closed sales) for the counties listed. Please note the lower bound of the graph, it is set to 1000, not to zero. I do this to emphasize the seasonal nature of the Northern NJ market.
(click to enlarge)
The second graph is another view at the sales data for the full year. Please note that this graph does cross at zero.
(click to enlarge)
The third graph displays only December sales, 2001 to 2006 YOY.
(click to enlarge)
The last graph displays December sales, 2001 to 2006 YOY, broken down by county.
(click to enlarge)
The numbers:
January
Average Sales (2003-2005): 2000
2005 Sales: 2013
2006 Sales: 1705
(Down 15.3% Year Over Year)
February
Average Sales (2003-2005): 1583
2005 Sales: 1578
2006 Sales: 1395
(Down 11.6% Year Over Year)
March
Average Sales (2003-2005): 2193
2005 Sales: 2256
2006 Sales: 2033
(Down 9.9% Year Over Year)
April
Average Sales (2003-2005): 2322
2005 Sales: 2383
2006 Sales: 1817
(Down 23.8% Year Over Year)
May
Average Sales (2003-2005): 2615
2005 Sales: 2725
2006 Sales: 2298
(Down 15.7% Year Over Year)
June
Average Sales (2003-2005): 3486
2005 Sales: 3682
2006 Sales: 2911
(Down 20.9% Year Over Year)
July
Average Sales (2003-2005): 3495
2005 Sales: 3338
2006 Sales: 2428
(Down 27.3% Year Over Year)
August
Average Sales (2003-2005): 3661
2005 Sales: 3668
2006 Sales: 2599
(Down 29.1% Year Over Year)
September
Average Sales (2003-2005): 2854
2005 Sales: 2655
2006 Sales: 1968
(Down 25.9% Year Over Year)
October
Average Sales (2003-2005): 2570
2005 Sales: 2280
2006 Sales: 1867
(Down 18.1% Year Over Year)
November
Average Sales (2003-2005): 2330
2005 Sales: 2135
2006 Sales: 1858
(Down 13.0% Year Over Year)
December
Average Sales (2003-2005): 2671
2005 Sales: 2269
2006 Sales: 2050
(Down 9.7% Year Over Year)
Full Year
2004 Sales: 34,986
2005 Sales: 32,987 (Down 5.7% Year Over Year)
2006 Sales: 24,929 (Down 24.4% Year Over Year)
Caveat Emptor!
James (aka Grim)
The Sales/Inventory Overlay data can be found here:
Sales Inventory Overlay
jb
THe smaller % of YOY sales declines are in winter months – does this mean that winter months are the best time to sell the house???
No, homes “sell” 1 – 2 months priior to their closing date, when the sale is recorded.
So looking at the top chart most homes sell during April and May.
Winter months are sometimes a better time to BUY a home.
Rich
From the NY Post:
FEDS NAB BROKERS IN FRAUD SCHEME
A ring of Russian mortgage fraudsters brokered $200 million in bogus home loans using phony buyers and identity theft, and pocketed more than $4 million in ill-gotten commissions, prosecutors charged yesterday.
The feds nabbed 18 brokers, appraisers and bank employees on fraud charges for ripping off approximately $3.5 million from banks by doctoring mortgage and home-equity loan applications on at least 1,000 properties around the city, New Jersey and elsewhere.
Operating out of AGA Capital, a Brooklyn mortgage brokerage firm, the ring paid straw buyers to pose as legitimate loan applicants, according to an indictment that charges a total of 23 people, some of whom were not yet in custody yesterday.
AGA Brokers Aleksander “Shorty” Lipkin, Igor “Ryzhiy” Mishelevich, Alex “Lyosha” Gorvits and several others are accused of supervising the scheme to submit fraudulent loan applications from 2004 to 2006.
The brokers pocketed between 2 percent and 4 percent in commissions on each sale – to the tune of more than $4 million, the feds alleged.
…
The “buyers” then defaulted on their loans, forcing banks and other lending institutions to either foreclose on the properties or re-purchase the homes at rock-bottom prices, according to the indictment.
From MarketWatch:
Job growth accelerates to 167,000 in December
Job growth in the United States unexpectedly accelerated in December, with nonfarm payrolls rising by 167,000 and the jobless rate remaining at a very low 4.5%, the Labor Department reported Friday.
Job growth was much stronger than the 100,000 expected, dashing fleeting hopes held by some that the Federal Reserve would cut interest rates soon.
Job growth in the previous two months was revised higher by a total of 29,000.
Economists had expected job growth to slow from November, especially following release of the ADP employment report on Wednesday, which showed a 40,000 decline in private-sector payrolls.
The government said Friday that payrolls grew by 1.84 million in 2006, an average of 153,000 per month. The jobless rate fell from 4.9% at the beginning of the year to 4.5%.
Average hourly earnings jumped by 8 cents or 0.5%, far ahead of the 0.3% rise expected. Over the past 12 months, average hourly earnings have increased 4.2%, more than double the inflation rate.
December’s job growth came in strong despite losses in three key sectors: Construction, manufacturing and retail. Construction jobs fell by 3,000 after seasonal adjustment. Residential construction jobs fell by 16,000, but those losses were partially offset by gains in nonresidential construction.
Manufacturing jobs dropped by 12,000 in December, the sixth consecutive decline. In the past year, factory jobs have fallen by 72,000. The losses in December were concentrated in autos, primary metals and textiles. Of 84 manufacturing industries, 44.6% were adding jobs in December.
Retail firms cut 9,000 jobs after seasonal adjustment. Retail jobs fell by 58,000 in 2006.
JB, anyone blessed with mls access – can you please look up the info on mls 709428.
This was taken off realtor site for the month dec. Did it go into attorney review at that time?
What/When was the last sale price of this home.
Thanks in advance.
From the AP:
Freddie Mac Sees Losses for 3Q, 4Q
Home-mortgage financier Freddie Mac said Friday it expects to report losses for the third and fourth quarters of 2006, citing interest rates declines.
The company forecast a loss of about $550 million for the third quarter, versus a profit of $880 million in the third quarter of 2005. During the most recent third quarter, long term interest rates declined by about half a percent.
It estimated its net income would amount to $2.5 billion for the first nine months of 2006, up from $1.4 billion for the first nine months of 2005.
For the fourth quarter, the company also expects to report a loss but did not say how much.
That sucking sound. Is that the the White
Population leaving NJ?
RE Bulls-
Okay, please spin that Northern NJ real estate is not in a pretty major decline. Will wait for replies.
Thank you,
JM
Based on the #’s we have added 91k jobs in education/health care, leisure/hospitality and govt.. We have lost 26k between goods producing, manufacturing and construction. Remember, these are preliminary #’s.
http://www.bls.gov/news.release/empsit.nr0.htm
167k payrolls in dec, revisions upward in oct and nov. fastest income growth in 8 months. 2007 corporate profit general consensus 5% meaning they’re still and will remain flush with cash. bond market rally over. these are all positive signs that the general economy is weathering the weakness in housing quite well. it also bolsters the case that housing might be bottoming out.
By the way, this is the 6th consecutive month with a decline in manufacturing jobs.
Richard,
There is nothing, absolutely zero, in this jobs report that indicates that housing may be bottoming out. If there was no bubble, how can it be bottoming out??
Richard Says:
January 5th, 2007 at 8:58 am
167k payrolls in dec, revisions upward in oct and nov. fastest income growth in 8 months. 2007 corporate profit general consensus 5% meaning they’re still and will remain flush with cash. bond market rally over. these are all positive signs that the general economy is weathering the weakness in housing quite well. it also bolsters the case that housing might be bottoming out.
==================
wow another bottom call…..HAHAHAHAHAHAHAHAHAHAHA
SPRING HOUSING MASSACRE COMING TO A HOOD NEAR YOU.
heheheheheheehehehehe
#8 pesche22 Says:
“That sucking sound. Is that the the White
Population leaving NJ?”
Probably True. I read an article in the NY Times Weekend edition that the white popluation is decreasing. So is the younger population as the cost of housing and raising a family in NJ has become unafforadable for many younger people in the early part of their career.
I see some of the unsold inventory that was expired/withdrawn from MLS in 2006 start to trickle back as *new* listings. I guess they want to beat the rush to connect with the buyers before the 2007 inventory comes on the market.
Atleast they are coming back at prices lower than or at the price the listing expired which is I guess is more realistic than the time when realtors would relist at a higher price after the listing expired unsold.
BC Bob Says:
January 5th, 2007 at 8:59 am
By the way, this is the 6th consecutive month with a decline in manufacturing jobs.
===================
An economy based on printing money and transactions is not fundamentally sound. Setting ourselves up for a short squeeze….. reliance on foreign manufactures and foreign energy supplies …..when do these become a major issue, crisis, is very hard to predict, but the day is edging closer.
FWIW Saudi Arabia is having a difficult time maintaining production levels….increased drilling, new technologies to maximize well output
There are bargains in Ohio
http://money.cnn.com/2007/01/04/real_estate/real_estate_crime/index.htm
Here’s a two-bedroom modified Cape Cod, asking price $17,000. A three-bedroom ranch with 1,352 square feet of living space lists for $19,900. Then there’s the high end of the market: a three-bedroom ranch with a one-car garage: $89,900.
Those are not typos. We didn’t forget to add any zeroes. Yes, in a land where a typical home these days sells for about $251,000, you can still get a nice place in one of the nation’s hottest real estate markets for less than $100,000 – in some cases, much less.
Richard:
The overall economy will trot along for the most part with low to mid single digit retuns on most assets. Retail sales will be held up by the moderate employment growth.
Manufacturing/Housing will continue to worsen and we will see a recession in manufacturing/housing. Remember that most of the growth in employment is coming from services and not manufacturing/construction.
It’s funny how the real estate went from claiming that there was no bubble in housing to “we have hit the bottom in housing slowdown”
To add to JB’s comment from an earlier post, comments for or against housing in this blog or any other will have a miniscule effect on the housing bust/boom if any at all. This asset bubble will run it’s couse like all asset bubbles in history has done.
You can continue to be bullish on housing and I will continue to be short to intermediate term bearish on housing. One of us will be correct. We’ll check back in Dec 2007, if you are still around on this blog.
“We’ll check back in Dec 2007, if you are still around on this blog.”
He’ll be here. The question will be what is his stance at that time. This gives him a whole year to flip flop.
Rich–#3–I’m confused. Isn’t the closing date the date of the sale? Cause what sales info would even be available before that date.
“2007 corporate profit general consensus 5% meaning they’re still and will remain flush with cash. bond market rally over. these are all positive signs”
—
Check those ’06 buybacks vs. reinvest- good for a few people. Not economic growth.
Also:
http://www.forbes.com/free_forbes/2007/0108/036.html?partner=rss
PeaceNow,
It’s just a matter of whether you choose to look at contract sales (property going under contract) or closed sales (execution of that sales contract).
I tend to weight closed sales more heavily than contract sales, since it eliminates the confounding variable of contract cancellations. There are always some number of contracts that fail to execute that result in a property coming back on the market.
However, closed sales are a look back in time. Since it typically takes anywhere from 0-3 months to execute a contract, these sales are from contracts that were signed anywhere from October to December (and in some cases even earlier).
Looking at contracts for December, however, would give us insight into sales that are going to close in the upcoming months. However, if we’re using that as a predictor, we’ve got to account for the current pace of contract cancellations.
jb
#18 – I’ve been watching the Ohio market as well. Much of Indiana is the same way along with Buffalo, NY, the latter being probably the cheapest place to buy a house I’ve seen in the U.S. currently.
I’m not too sure of what work is like in these areas though (particularly in IT) and the Buffalo winters might kill the deal.
Very very cheap though. I look through those listings and wonder what I’m still doing in the NY area.
Richard says
“167k payrolls in dec, revisions upward in oct and nov. fastest income growth in 8 months. 2007 corporate profit general consensus 5% meaning they’re still and will remain flush with cash. ”
Wouldn’t this mean higher interest rates or at least no interest rate cuts?? LOL
You guys are stuck between a rock and a hard place.
From Pat’s post, Forbes article;
“I’ve never seen a pull-back so fast,” says Nardelli. “It takes them 18 months to remobilize. I’m not sure they can turn it on again. If this is a soft landing, it’s not a plane I want to be riding on.”
The soft landing quote says it all.
PeaceNow,
Yea, what Bednar said.
Rich
From the Washington Post:
Cold Sales Give Renters a Break
As home sellers grew more frustrated with the slow local real estate market in recent months, they abandoned their for-sale signs and put their homes up for rent. That has increased choices and cooled prices for tenants in one of the tightest and most expensive parts of the country.
“This is the first sign that the cooling housing market is having an impact on the rental market,” said Gregory H. Leisch, chief executive of Delta Associates, an Alexandria research firm that is scheduled to release a report today showing more vacancies in the region’s apartment complexes.
The report links the shift in the market to the surge in condos, townhouses and single-family houses for rent — both by sellers-turned-landlords and by investor-landlords who snapped up condos during the market boom.
Hat tip to Calculated Risk for the link above.
Also, if anyone has a copy of the Credit Suisse report, “Vacancy Sales Loom Large”, by Ivy Zellman, I’d love to have a copy.
CR offers up this graph from that report:
http://photos1.blogger.com/x/blogger/2825/754/1600/943975/CSvacancy.jpg
Very interesting, as this is one aspect of the existing inventory that hasn’t been given a close look yet.
jb
it also bolsters the case that housing might be bottoming out
Reechard: I know you have already been chastised by others. However, allow me to chime in with my own “I disagree with you.”
From MarketWatch:
Odds of rate cut drop after jobs data
The odds of a rate cut fell, and are now even money through the first half of 2007, after data showed that jobs and wage growth in December was stronger than expected. April fed funds futures fell 0.02 to 94.765, which implies an 6% chance that the Federal Reserve will lower its target for overnight rates to 5% from 5.25% by its policy setting meeting in late March. July futures were down 0.085 at 94.88, which puts the odds of a rate cut by the Fed’s late-June meeting at 52%. Late Thursday, April fed funds futures were pricing in a 14% chance of a cut, and July futures were pricing in an 86% chance.
I am going to repost this link from yesterday. I thought this information was important, but no one commented. You need to understand that I derive most of my personal self-worth from this blog. Without constant affirmation, I begin to curl into the fetal position. Sucking my thumb helps though….
chicagofinance Says:
January 4th, 2007 at 2:29 pm
NJREReport Readers:
Required listening. Bloomberg on the Economy yesterday. This file is 12:27 minutes long. Skip to minute 7:30 and listen to the last 5 minutes.
Key quote:
“….investment grade debt that could default at a 20% rate….”
http://media.bloomberg.com/bb/avfile/vknis63nQrkY.mp3
OH MI IN been gutted out with mfg slump. As standard of living increase around the world when does the cost of mfg on your home turf make sense? Cost of transportation?
A resurgence in mfg production in the US?
Probably not until the last of the high cost auto plants and mfg plants are closed and unions are busted. Don’t think this is to far off.
Existing Homes can be purchased at 50% below replacement cost in these states.
Why should homes in this Bloated area be priced at $300 400 + sq foot? I realize it will always be more expensive here but this gap will close.
HOUSING MASSACRE SPRING 2007
BOOOOOOOOOOYAAAAAAAA (sick moaning half yell)
Bob
Jim Cramer gives his opinion of Lucent-Alcatel
http://www.youtube.com/watch?v=iIUPItnMOSQ&NR
bc bob i said weakness, not bubble. you’re the bubblehead so don’t ask me. and please stop cherry picking data by focusing on quality of jobs. the overall numbers look good and surprised most to the upside.
chicago, of course you disagree, you’re a bubblehead.
antitrump, i’m not bullish on housing but i’m not bearish either.
all i see in the charts jim posted is the same seasonal patterns albeit at a lower transaction level. the trend break was in the jun-aug timeframe but since then it’s following trendline.
jim you should take your numbers and plug them into excel and do a trendline and play with the logarithmic, polynomial and power types and orders of magnitude and see if you can get something above .95
no
yes
yes
We are a net exporter of ag products.
?
all imo
January: Down 15.3% Year Over Year
February: Down 11.6% Year Over Year
March: Down 9.9% Year Over Year
April: Down 23.8% Year Over Year The “Spring Bounce” will save you grubbers!
May: Down 15.7% Year Over Year
June: Down 20.9% Year Over Year
July: Down 27.3% Year Over Year
August: Down 29.1% Year Over Year
September: Down 25.9% Year Over Year
October: Down 18.1% Year Over Year
November: Down 13.0% Year Over Year
December: Down 9.7% Year Over Year
Boooya!
Richard Says:
January 5th, 2007 at 10:44 am
==============
You are useless.
Sorry to be so blunt, but total ponzi credit bubble – house prices spiraling out of control and you call this normal? “i’m not bullish on housing but i’m not bearish either.”
hehehehehehehehe
I took the liberty of deleting my own comment. It was too far off topic to be at all useful to the discussion at hand.
jb
UnRealtor Says:
January 5th, 2007 at 10:47 am
BOOOOOOOOOOOOYAAAAAAAAA (emphasis “sick moaning half yell”)
Bob
pesche22, # 8
That sucking sound. Is that the the White
Population leaving NJ?
Whats the matter pesche, all the color bothering you?
“If this is a soft landing, it’s not a plane I want to be riding on.”
Great quote.
seneca Says:
January 5th, 2007 at 1:57 am
REINVESTOR,
Please take a moment though to consider the situation some of us might be in today. Let me paint a picture for you. Bob Smith is admitedly thrifty with his money. In 2000, the median multiple in the US was around 3.7. In NJ, that meant that Bob’s yearly salary of say $85k could easily put him in a home that was priced at $315k. In Union County where he would look to buy, $315k in 2000 bought you a wonderful 4BR split on a .3-.5 acre piece of property in the “better” part of town in most places.
Fast forward 5 years later. Bob met Mrs. Right in 2004 and married her in 2005. They decide to look for a house. By this time, Bob’s $85k salary grew at 5% per year and he was now earning $108k per year. Thus he could afford a $401k house at 3.7 times his income.
In the 2005 market, $401k in those same Union County communities will net Bob a Cape Cod with outdated everything on a .14 acre piece of property located on a main road.
Do you see how that might be a little depressing for Bob?
The median multiple in the US was 7.2 by 2005. Bob now has to spend at least $778 to net himself a comparable house to the one he dreamed of in 2000. Bob has considered moving to Delaware or some other more affordable part of the country, but he cares for his eldery father and has to regularly drive him to his doctors appointments. He is locked into staying in NJ for family reasons.
REINV, do you have any empathy for Bob here? Bob heeds your advice and doesn’t want to buy the Lexus when he can only afford the Corolla but it feels a little odd to him that even though he earns more money now, his buying power has dwindled away to not much. Bob doesn’t want your sympathy, but since we live in a society, it might be nice if you could at least empathize with his situation, which maybe you do?
This was posted in a string yesterday and I thought I might respond over here.
I guess I should get the violins and hankies out and just cry my eyes out for Bob here.
Let me use an analogy to respond. The Lexus LS 400/430/460 series of vehicle is the finest production vehicle ever made in my opinion. It routinely tops buyer satisfaction and reliabilty ratings while Mercedes and BMW vie for the bottom. I’m fortunate to own an LS 400.
The new LS 460 is an automotive marvel, but the car will set me back $ 81,000 with all the options. I can’t ever justify paying that much for a car under any circumstances, but I do like Lexus quality. Rather than get mad and demand that Lexus accomodate me by reducing the price of the LS 460, I’d rather go out and buy a used LS for less than a quarter of the new price knowing that a used LS is still a durable vehicle that I can drive for a long time. The moral of the story here is that I adapt to the market conditions rather than demand that the market adapt to me.
Bob (and many others here) are wasting time demanding that the market accomodate them rather than doing what they need to do to accomodate themselves. Home prices in New Jersey aren’t going to revert back to year 2001 levels. Bob needs to recognize that and adapt to changed circumstances. He also needs to stop being resentful of the fact that he passed on the opportunity to buy when he could have.
So no, my empathy is limited for anyone who is not prepared to adapt to changed circumstances, but instead prefers to complain, resent and hate on homeowners and investors such that class wars are created.
Richard may be neutral, and I’d say the market is at a stalemate. Sellers won’t budge much on price, buyers won’t either. Hence volume is drying up.
The effect of this will be a chill on all those who depend on a normal or healthy level of sales transactions for their livlihoods. RE agents, obviously, but also RE attorneys, home furnishing stores and many of the building trades.
There’s still a lot of complacency. Sellers feel entitled to their asking price, at least within 3 or 4%, because, after all, real estate has been such a great investment and you can’t lose.
What will change this dynamic? Spring inventory build, if it materializes. So we wait and see.
My assessment refers to our local NJ market. There are many markets in worse shape.
Take at least 25% off 2005 peak prices for houses/more for Condoshacks Says:
I have been folowing this board for the last six months and I just want to hear one optimistic or positive commment from Mr.25%off. Just one, a little one. OK a very little one.
twice shy Says:
January 5th, 2007 at 11:06 am
“Richard may be neutral…”
Reechard is not neutral. He’s stuck in neutral.
nwbergen,
I suspect he would say that “25% off 2005 peak prices” is a positive comment ;)
“Richard may be neutral…”
Reechard is not neutral. He’s stuck in neutral.
For now.
Next week he may be extremely bearish.
Again.
Chicago – Thanks for posting the Bloomberg audio. I’m but a dolt in this whole thing, but one thing I cannot escape from is the reality that people with no real income have lots of expensive stuff I wish I had, like, oh, I dunno, a HOUSE. The only rational explanation is that they were borrowing beyond their means, which the data seems to support.
With all the recent sub-prime bad news floating around I have no idea why this story isn’t getting more traction. It’s not that I wish ill upon the people who are going to lose their shirts, but there are going to be a LOT of people losing money on what they assumed to be a great investment. With great returns comes great risk, so maybe it doesn’t come as any surprise, but I can’t imagine this story not developing further.
nwbergen,
Things look increasingly positive for buyers looking to put a roof over their family.
Things look increasingly negative for realtors and greedy sellers who have already cashed checks in their mind which account for 20% appreciation x 5 years.
Common sense. During boom times (2 years ago), those who profit most from the boom are happy. During bust times (today), those who profit most from the bust are happy.
Surely, this has been bear-hunt week in NJ.
http://www.youtube.com/watch?v=BPU5liJpmo8&mode=related&search=
33 “I thought this information was important, but no one commented”
Agree with it. No other comment. It’s bear-huntin’ week and I’m too annoyingly busy to get into a bear-brawl, then not be able to spend the needed time on it.
If you ever want to see keeping up with the Jones to the excess, visit Orange County, CA. Better yet, take the cheaper route and watch the “The Real Housewives of Orange County” on BRAVO channel. Its the same thing here in NJ, just to a lesser extent. Keeping Up used to be limited to clothes, now it cars (leased Mercedes, Ranges)….and the ultimate…buying a house. Its truly is a Ponzi scheme in that one hiccup (lose your job, ARM adjust)…everything can come come crashing down. You can delay the pain for a few months by living off your credit card I guess, but that’s not the life I want to live.
Long winded way of saying that the sudden but expected changes in sub-prime market….is one of many hiccups that are coming down the pipeline
25% off peak 05 prices, is wonderfulr wonderful news. it will restore sanity to the market,a nd some to people.
25% off peak 05 prices, is wonderfulr wonderful news. it will restore sanity to the market,a nd some humility to people.
Here is my worthless North Jersey forecast for 2007. I was waiting on the December data to finalize my opinion.
1) We’re going to see the decline in sales volumes taper or become flat in Q1.
2) Sales volumes will run roughly equal to 2006, on average, in H1.
3) Look for the pace of sales to increase as prices fall. This would be similar to what we saw coming out of the 80s/90s slump.
4) Should we see a dramatic increase in mortgage rates or statewide unemployment sales volumes may fall further.
5) Should we see a dramatic reduction is subprime credit, sales volumes may fall further.
6) It is unlikely that we will see further double digit declines, even if the scenarios in #4 and #5 play out.
7) At this point there is too much uncertainty to attempt to predict what the H2 ’07 will bring. If I was pressed to offer a forecast, I would take the most conservative position I could, which would be that 2007 sales volumes would be roughly equal (+/- 2%) with what we saw in 2006.
8) Residential construction jobs will decline throughout the year.
9) Permits and new construction will decline throughout the year.
10) Active inventory will rise even higher in 2007.
jb
Sales volume forecast? Yeah grim, your forecast is worthless.
I now take my rightful seat alongside the other pompous prognosticators.
jb
Thanks for the explanation, jb, and I’m with you on when a sale occurs. (And I went back and re-read Rich’s post, and realized I’d read his sentence wrong the first time.) But I would think that anyone reading this blog knows to look back a couple of months (at least) to determine when an offer was made and a contract signed.
Hey Jim, your post on the latest stats was deleted on the home buying forum in nj.com
ChiFi – After listening to Low on Bloomberg, I am thinking of changing my username to Still Skeptical.
I also clicked on Cramers comments and if that guy wasn’t made for YouTube, I don’t know who was. Very funny stuff, I am leaving it open to replay once an hour to get me through the day.
Pat – Forgot about Peter’s run-in with Yogi on Family Guy. Big Fan, good stuff. I am sure you are in no way advocating anyone on this board take that approach with the bears on here.
My contribution for the morning: Seeing lots of listings in Westfield coming on at much more reasonable asking prices. Richard, not sure what you are telling people in town but keep it up because the prices are taking some nice steps back to reality. Splits finally coming on at prices that start with a 6 instead of an 8.
JB while you are at it, what are your predictions price wise for 2007. Thanks
Reposting.
Does anyone has info on what was the last sale date and price for this home in NJ:
MLS ID: 709428
att,
Can’t help ya, that looks like a GSMLS number.
JB,
Did you get my emails withthe Bergen data for NJ RE Bear?
Rich
JB,
You have H1 and H2 in your forecast. Were they Q1 and Q2? If not, what are H1 and H2??
thx,
CC
First half and second half of year
5) Should we see a dramatic reduction is subprime credit, sales volumes may fall further.
Some quotes from artichles (link: http://realtytimes.com/rtcpages/AdviceForBorrowers.htm)
The latest statistics from the Federal Bureau of Investigation confirm that mortgage fraud is on the upswing.
“We can’t find a chart that doesn’t show up in a big way,” special agent Bill Stern said at a conference on the topic earlier this month in Las Vegas.
Even worse news, the FBI’s mortgage fraud coordinator in Washington said, is that the trend is moving away from rogue individuals who pull off the scams and toward members of organized crime.
“Mortgage fraud is now a criminal enterprise that puts dollars in the hands of people who also are involved in such other crimes as drugs, murders and gangs,” Stern told the conference.
Do “Low-Doc” Home Mortgage Borrowers Have Something to Hide
Nearly two-thirds of brokers said a significant number of their clients were “self-employed with unreported income,” and 45 percent said their self-employed clients had “not filed tax returns.”
One of every five brokers said “divorce or other legal circumstances” made low-docs attractive to clients. One of every seven said their borrowers had significant “immigration status” issues they didn’t want on the public record. And finally, an eye-opening 8 percent said they knew their clients were actually “unemployed” — so documenting their income was not feasible.
How do you self-employed, and not file tax return – isn’t it a federal crime????
SO they are unemployed but got a home loan??
(My comment, Al)
Bell Tolls For Subprime Lenders And Loans
This week Middletown, CT-based subprime lender Mortgage Lenders Network USA (MLN) pulled the plug on its loan originating operations after growing from 7 to 1,800 employees in 10 years.
Considered the 11th largest subprime mortgage company, feeding some 12,000 brokers, Agoura Hills, CA-based Ownit Mortgage Solutions bought the farm in late 2006. It recently filed bankruptcy to stave off investors including Merrill Lynch & Co., JPMorgan, Chase & Co., Credit Suisse First Boston and other mortgage purchasers who were demanding Ownit own up and buy back more than $165 million in loans on which borrowers had missed payments.
Early last year, the nation’s largest subprime lender, Ameriquest Mortgage, agreed to a record $325 million predatory lending settlement and then proceeded to cut 3,800 jobs and shutter branches
Ameriquest, along with partner lender Argent Mortgage, H&R Block’s Option One, Sebring Capital Partners, NetBank and a growing list of other subprime lenders all have lending operations that have either shut down or are facing the auction block
I think the owner/owners should be criminally prosecuted for all their private posessions…
And I think we will see some of them will be eventually – may be not this company but quite a few others…
TO summarize – I think the subprime credit crunch is already started, and by summer will be in full swing….
So Grim, I think your forecast is a bit too optimistic, but that’s just my opinion. I say 10% discounts by next september in listing prices, and 20% discounts by Cristmas in selling prices.
Thanks Rich in NNJ.
What’s the difference between gsmls and mls?
I can feed that no.(709428) on the realtor site and see the house. Isnt that the site where a real estate agent also would look?
If everything stays status quo with the economy in 2007, I expect to see prices down 5% on average (nominal) in 2007. No pain, no pain. I don’t, however, expect prices to increase. Without a downturn to the economy, it is likely that we may experience a longer term downward grind in pricing over the next few years as the speculative excesses are worked out.
This forecast gets thrown out the window should we see the economy move into recession or we start to see credit contraction and lending standards increase dramatically.
In either scenario, I believe the higher priced end of the market will be hardest hit.
jb
James,
Am I being censored? I posted a comment this morning that is still awaiting moderation
My last comment posted right away. I guess the moderation has to do with the lenght of the post?
“and please stop cherry picking data by focusing on quality of jobs.”
Richard,
Are you implying that I am somehow skewing the #’s?? The total is just the sum of the parts. The BLS #’s, not mine, show we are increasing jobs in fields such as education, health,leisure and govt. Declines are continuing in manufacturing and construction. How is this cherry picking??? That’s simply what the report states.
However, I do plan to cherry pick around the end of 2007, early 2008. By the way, I’m still waiting to hear from you regarding one compelling reason to buy at this time. SILENCE.
re101,
Not the length, you got trapped by the word filter.
jb
JB,
Could you care to comment on why the higher end will be affected more. In the absence of a recession, with sub-prime credit crunch, I would expect the deterioation will start from the lower-priced house.
“The moral of the story here is that I adapt to the market conditions rather than demand that the market adapt to me.”
re101,
Exactly. That’s why, after being a homeowner and RE investor for 20 years, I liquidated. I listened to the market. The market was yelling, at least to me, it’s screaming sale. Market data, at this time still indicates this.
So 5% reduction in prices for 2007, how much do you believe prices have decreased from end of 2005 to end of 2006.
I guess what i am trying to get a handle on is where are prices now, and how far away form 2003 prices are we at this early point in 07.
JB,
Does the 5% include the free mercedes, mortgage payments for 2 years, free closing costs, etc..??
“This forecast gets thrown out the window should we see the economy move into recession or we start to see credit contraction and lending standards increase dramatically.”
JB,
Is this a Otteauism???
The sucking sound continues on the folks
leaving NJ. The smart ones anyway.
How about the 20% tax cut we going to get
that or what?
Monmouth County continues to grow.
And the housing stocks continue to hold up
JB I was hoping to see a 10 to 15% decline in prices in 2007. I just read an articel int he WSj which apartment prices in Manhattan droppedd over 5% from the 3 to the 4th quarter of 2006, so a 10 to 15% drop in 07 to me at least does not seem far fetched.
My rental house is being sold in 07, I have toe opportunity to buy it but choose not to, so I am trying to figure things out etc.
If I buy now, I know I will regret it, but I have to do something over the next 12 months.
Does anyone know where I can find information on Middlesex county
>>I’m still waiting to hear from you regarding one compelling reason to buy at this time. SILENCE.
look at our host’s most recent post #59 to start. i would tend to agree with most of it except prices will on average remain flat in nominal terms. but you’re a diehard bubblehead, no amount of discourse or compelling will change that.
“prices will on average remain flat in nominal terms”
Richard,
Oh really?? I thought it would be more like this;
Richard Says:
June 26th, 2006 at 4:36 pm
seriously folks, in a stalemate does anyone really think the seller with ridiculous asking prices will wait out the buyers? it’s so easy to get turned off when wanting to buy something at today’s prices. the I HAVE TO GET IN NOW BEFORE PRICES GO UP!!! mentality is dead dead dead except for the few stragglers who are uninformed or very late to the party.
Could you care to comment on why the higher end will be affected more. In the absence of a recession, with sub-prime credit crunch, I would expect the deterioation will start from the lower-priced house.
NNJeFF,
A subprime credit crunch will limit the purchasing ability of subprime borrowers at all price points. Don’t make the assumption that only subprime exists only on the low end, that simply isn’t true.
jb
Richard,
Your argument; “prices will on average remain flat:
My argument, I’ll keep it brief, no need to fill up this blog with the supportive data;
All FACTS;
1) Inventory levels
2) Sales data
3) Affordability Index
4) 80-100% increase in prices while incomes were up approx 15-20%
(2001-2005)
5) HB’s sentiment index
6) HB’s walking away from land options
7) Increase in consumer debt 1995-2005
8) % of buyers in 2004 & 2005, investors (i.e, spec. flip) and vacation
homes
9) Mortgage index
10) Amount of I/O’s up for renewal in 2007
11) Fraudelent Appraisals
12) Bogus income declarations
13) Increase in lis pendens
14) Increase in first stage of foreclosure
15) Sub Prime lenders dropping like flies
16) Restrictive lending[upcoming] to the sub prime
17) Massive credit bubble
That’s all for now.
Is this a Otteauism???
To an extent.
But keep in my that was my conservative view. My personal forcast is.. well.. much more grim.
I feel we’re going too see foreclosures continue to tick upwards, I feel we’re going to see lending standards tighten, we will see a subprime crunch. I still stand firmly by my original forecast of 30% real price declines at the bottom.
jb
Richard: Do you care to comment ont he dismal state of NJ’s economy, or does that not matter.
JB: In your opinion how long will it take to get to that 30% drop?
BC Bob Says:
January 5th, 2007 at 12:54 pm
“The moral of the story here is that I adapt to the market conditions rather than demand that the market adapt to me.”
re101,
Exactly. That’s why, after being a homeowner and RE investor for 20 years, I liquidated. I listened to the market. The market was yelling, at least to me, it’s screaming sale. Market data, at this time still indicates this.
BC Bob, I’ve read some of your comments here and while they don’t quite reach the level of militancy and hate that Unrealtor, Booyaa Bob, NJGal, Pat and RichinNNJ consistently exhibit, they nevertheless are suspiciously bearish. You will continue to remain under observation to determine if you fall into this camp.
My comments were directed towards buying real estate and not selling. Specifically, those comments were to address the issue of all the bantering about high NJ real estate prices.
You might want to step lightly when talking about selling as to some that might seem as if you took advantage of the situation. It wouldn’t take much for some here to turn on you.
I haven’t read this thread, but most would be interested to see the housing info below. Less opinion, more fact.
http://denisebroesler.blogspot.com/
Newbie,
There’s a Prudential broker in Metuchen who compiles reports on Middlesex County and specific towns in terms of asking price v. actual selling price. He used to publish his reports on his Web site, but now he requires that you send him an email to get a report on a specific town. His name is Ed Chaparro. Here’s the link to the form for his “sales history report”:
http://www.edchaparro.com/Sales_20_History_20_Report.html
Newbie,
Also, there’s a weekly column in the Star-Ledger on homes bought and sold.
For the electronic version, which includes the last 18 months of sales, go to NJ.com. On the right, under “Marketplace,” click on “Real Estate.” Under “Find Your New Home,” click on “Homes for Sale.” The next screen has “Search Homes for Sale” on the left.
But if you look to the right, there’s a menu of items under “Inside Real Estate.” Down bottom, there’s a link – “Home Sales Records.”
That’s where you can search for the last 18 months of sales in the town you’re interested in, organized alphabetically by street address.
If you’re interested in a house that is currently listed for sale with an MLS number (njmls.com), there are people on this blog who can help you research the sales history of a particular house so long as you have the MLS number.
Hope this helps.
2007 is going to be much worse than 2006.
Reasons:
1) Buyer psychology has changed from “Buy anything mania!” to “How far will prices drop?”
2) Lending standards will tighten January 31st, 2007.
3) Sellers are moving past the denial phase and into the acceptance phase.
4) Realtors are starving, and their savings are drying up. Realtor pressure will increase on greedy sellers to align asking prices with market realities, and will drop listings where sellers are still living in a fantasy world.
5) Information dissemination. The Internet has changed the game, and realtors no longer control market information (though they still try).
6) Historic precedent. Never before have prices “stabilized” at a peak, let alone the 100-year-peak we witnessed in 2005:
http://graphics10.nytimes.com/images/2006/08/26/weekinreview/27leon_graph2.large.gif
We have a massive correction unraveling before our eyes, with several more years before it’s over.
7) Adjustable rate mortgages continue to adjust upward, squeezing “owners” who got in over their heads (i.e., a great many).
8) Buyers can no longer camp out in an “OK” house for two years, cash out, and move up to the house they really want. Now, when they sell, they’ll take a $75,000+ hit from what they paid two years ago, at least. This segment of the market is dead.
9) Flippers are gone from the market. Whoever was left in 2006, got out. Whoever failed to exit already, is screwed.
10) Lower comps are rolling in. Greedy sellers could hang their hopes on the bloated 2005 comps. Now they see the declining 2006 comps, and will want out before things get worse.
11) Boooya!
“You might want to step lightly when talking about selling as to some that might seem as if you took advantage of the situation. It wouldn’t take much for some here to turn on you.”
We love BC Bob — buy low, sell high! Kudos to him for seeing the market madness and making a profit.
The problem is, many try to deceive and distort people into buying high, and claim the market was not one of madness but “normal.”
reinvestor101 Says:
You will continue to remain under observation to determine if you fall into this camp.
RE cracks out the whoop-a55!
Bost: Is that all you can muster? A little weak, no? ;-)
“BC Bob, I’ve read some of your comments here and while they don’t quite reach the level of militancy and hate that Unrealtor, Booyaa Bob, NJGal, Pat and RichinNNJ consistently exhibit…”
Seriously, enough already. I asked you on another thread to name ONE SINGLE TIME when I was ever militant or hateful. I am starting to think that you are an absolute lunatic at this point. You are now exhibiting the same behavior you claim to despise in others on this site. In addition, you have not once addressed my question as to why you assume that simply because I am bearish on real estate I am somehow hateful?
Grim, seriously, is it necessary that he continue to be allowed to say such things? Can anyone point to a time where I have even sounded REMOTELY like Booya Bob?
And for the record, I don’t really find any of the above listed people’s comments in any way “hateful” – that’s a very strong word, and perhaps you should be careful how you use it. Although I don’t know why I bother – karma will bite your butt one day REInvestor.
again I raise my question of how can sales for the Northeast as a whole only be down 9.6% YoY? All of the major metropolitan areas are down roughly 25%.
one word:
pain
if you are a seller.
pain
cross off 07.
SAS
NNJGal, I was slightly miffed when he put me on at fourth after you. It was like a slap in the face.
REINV: Next time you do your list, move me up one.
FWIW, I do think the continued strong numbers make epic collapse of housing increasingly unlikely. wages are rising rapidly across the board and particularly at the high end, which is disproportionately represented in this area.
Isn’t a more likely scenario persistently high inventory and flat to slightly negative appreciation for several years while wages catch up?
Sribe, thanks for post 96!
Do you think the NJ.com’s Home Sales Records miss any sales?
Btw, I bookmarked the link:
http://www.nj.com/realestate/homesales/
I have come across one house that seems to have gone through some shady dealing:
3 dickinson drive, south brunswick, nj 08824.
Can anyone tell me what it sold for – if at all?
I think this blog helps put a perspective inspite of the spin going around everywhere else.
Both sides of the fence need to come here more often!
that is, continued strong employment numbers
Amen Pat – I just don’t see how we fit on there. I think what’s really going on is that he wants so badly to think that everyone here is an evil hateful person. But since it’s clearly not true, and he can only find perhaps one person whose posts have been somewhat “gleeful” regarding the downturn (yes, you Booya, sorry!), he has lumped frequent bearish posters into his little “group.” Since that group only exists in his head, which seems to have become more unhinged than even Booya’s posts, I guess we should not be worried.
“FWIW, I do think the continued strong numbers make epic collapse of housing increasingly unlikely. wages are rising rapidly across the board and particularly at the high end, which is disproportionately represented in this area.
Isn’t a more likely scenario persistently high inventory and flat to slightly negative appreciation for several years while wages catch up? ”
Funny that you say that, because even though I am apparently an evil, hateful, bearish nightmare, I agree with you. I think we’ll see more price drops this year, but I do think it will stabilize. That means that you’re typical 600K POS Cape will still be worth 600K in 5 years but so be it. It’s happened before. If you buy for a long term committment (and don’t have crazy financing and ridiculous debt), even though you’ll be losing money in real terms, if you can afford it you might make out ok. Plus, for most people wages go up over time. It may all balance out.
NJGal – don’t worry about RE “Nancy Grace” Investor.
To paraphrase his/her response to my Bob Smith example of the buyer who faces a doubling of the median multiple, “He BOUGHT his ticket, he KNEW what he was getting into, I say, let ’em crash.” [borrowing from the immortal words of Airplane]
This is not a person ripe for rational debate when the counterpoint analogy of the challenges of finding shelter for ones family is the example of a luxury sports car. Its a bit like telling the cancer patient on experimental drug treatment who finds out that it hasn’t worked that “its too bad, cause hey, I wanted a Pepperoni pizza but I could only afford a plain one so I adjusted to the market just as you have to adjust to the fact that you are gonna die.”
LOL…Just do what I do.
Imagine Reinvestor is an Econ101 professor who is simply trying to get us to kick it up a cranial notch with a little anger. [Like the aerobics instructor you love to hate, but in the long run, if she doesn’t kill you, she helps you.]
Skep-tic (#105)-
As usual, right on the mark. Your anticipated scenario corresponds to RE up/down trends in the NE since WWII. I do think, however, that the most recent price spike is way more amplified than in previous booms, and some price accomodation is still forthcoming.
Can any body offer any prior sales information on these 2 njmls #’s 2639773 and 2640251
Thanks, much appreciated.
skeptic; The employment numbers were not strong fro NJ.
#113 –
someone had posted some info yesterday, and then I had posted this, not sure if you saw it, I posted just about things got a little crazy around here:
lurkerA Says:
January 4th, 2007 at 2:10 pm
re #27
I normally lurk but we looked at those two houses so I figured i would comment.
Regarding the cape – we were told that the couple were both corporate attorneys (no kids) and had decided to leave NYC for the ‘burbs. Well, they couldn’t take the commute and were moving back to NYC. It was charming inside, nicely laid out, but the kitchen was awful. The entire upstairs needed work (they were using one of the downstairs bedrooms as their master). Apparently they “started” to redo the upstairs but hadn’t finished. We were also told they were very “flexible” on the price and would consider any offer.
We walked out laughing.
Regarding the colonial – it looks nice in pictures, right? That’s because you can’t see the broken windows or the cracks in the back of the house. We also walked out laughing.
NJ Gal: Please say it is not so, 600K for a POS Cape, i just cannot being myself to do that.
600K is a ton of money to spend int eh hopes that it may work out.
It was on thing when the cape went from 200k to 300K, but from 300k to 600K, I just do not see it. Maybe I am crazy, maybe this time it really is different, God help us if it is.
A coherent, measured response from a realtor? (#112)
Looks like I picked the wrong week to quit sniffing glue.
Clot,
If you look at Unrealtor’s favorite chart (it’s worth looking at repeatedly!), it is clear that RE has become much more volitile in the past 20 yrs.
However, I continue to believe that we saw a significant deflation in prices in 2006 that were not accurately reflected in the numbers.
First, because of incentives.
Second, because of high inventory, the houses that did sell were the best of the lot.
Third, because prices have not been moving in unison in all segments / geographic areas. E.g., condos and high end houses may have dropped in price as much as 20% in many places, while your bread and butter SFHs have held up better.
For much of 2006, all available housing stats were in free fall. Now all of these same stats appear to be flattening.
I do not think potential buyers have much to lose by continuing to wait, but I personally do not expect to see a repeat of 2006.
Rentlord,
You’re welcome :)
Your question: I know of at least one house that’s showing up in realtor.com and also nytimes.com as having been sold back in August, but it’s still not listed on NJ.com.
So maybe they do miss one here and there, but not usually.
There’s a lag of a couple of months between the data published in the paper version of the Star-Ledger and the electronic version on NJ.com.
On realtor.com, you can search the immediate area you’re interested in under “What’s Your Home Worth?” on the home page.
I’m not sure how to find home sales records in NYtimes.com, but there’s a link there somewhere when you search for houses for sale in a specific town. That one will produce about two pages of recent home sales in a specific town.
“NJ Gal: Please say it is not so, 600K for a POS Cape, i just cannot being myself to do that.”
Well, I certainly HOPE that’s not how it is – I think our economic health would be all the better for the long run if prices connected again to fundamentals. But it’s a scenario I COULD see happening. That said, I’m not buying any such thing. Actually, I’m not as offended by the 600K capes, some of which I find charming, as I am by the 600K splits, which I find just gross.
again I raise my question of how can sales for the Northeast as a whole only be down 9.6% YoY? All of the major metropolitan areas are down roughly 25%.
NAR EHS data is a sampling of MLS data. I’ve repeatedly asked for a list of what MLS systems are sampled on a monthly basis, but have never received that data.
jb
…militancy and hate that… RichinNNJ consistently exhibit
Methinks you have a reading comprehension problem.
Rich
skeptic; Why not a repeat of 2006? It would seem to me that this thing is just getting started.
Mike,
Just tell me what you want to see, and I’ll provide it.
I routinely post spreadsheets of all MLS sales for any given month. I do, however, remove personal information like names and addresses to (somewhat) protect the privacy of the sellers/buyers.
See below:
Sales-Dec06.xls
jb
NJ GAL How about a 600k ranch, that lookes like the contianer on a tractor trailer?
Can people be this insane?
JB,
Did you get all the monthly data I sent and did you forward it on?
Thanks, Rich
The fundamentals are the best overall guideposts, but they are not unwavering.
For example, the percent of income that people spend on other basic needs such as food and clothing has been steadily declining for a century. Americans on the whole have more discretionary income than ever before. Some of this may be devoted to housing.
Something else that has steadily changed over the past 30 yrs or so is Americans’ increasing willingness to assume more and more debt. The rise in homeownership during this period is not unrelated.
Again, the fundamentals are still fundamental, but it doesn’t make much sense to refuse to adjust them at all in light of trends like the above
“NJ GAL How about a 600k ranch, that lookes like the contianer on a tractor trailer?”
We once had a realtor show us a disgusting – and when I say disgusting, I really mean it – ranch on a 40 x 150 foot lot in Westchester asking about 550 (could have been a little more or less). It was a total dump – even she said so, and only drove us by because she didn’t think it was our style (to say the least!). A few months down the road, I notice it for 899 – someone had bought it and slapped on some stucco and put in some new fixtures. It was just as ugly as before – like the lovely places rising everywhere in Queens and Brooklyn. I suppose someone bought it, but I would have to think that someone is completely dumb or totally lacking in taste.
Rich,
Didn’t get a chance to send it on yet, will do in a bit.
jb
Richard Says: “antitrump, i’m not bullish on housing but i’m not bearish either.”
Nice hedge. Positions youself to flip either way. Kerry might be looking for a running mate in for the 08 presidential elections.
bergen,
2006 was a very sharp move down for housing. Transactions off 25% YoY and inventory up roughly 40% YoY is a huge move that I can’t see happening again.
I tend to think that the sharp rise in inventory and the sharp decrease in transactions has already had a substantial effect on prices, but of course it’s possible that the major effect on prices is yet to be seen.
“Something else that has steadily changed over the past 30 yrs or so is Americans’ increasing willingness to assume more and more debt. The rise in homeownership during this period is not unrelated.
Again, the fundamentals are still fundamental, but it doesn’t make much sense to refuse to adjust them at all in light of trends like the above”
I agree to an extent, but the willingness to take on more debt is highly dependent on other factors, and also highly dependent on psychology. I would not include this as a fundamental, per se, because it’s just too volatile. You have to ask why people are willing to do this, and whether it’s a willingness or more that they feel the need to do so – ie, if I don’t buy now I’ll get priced out, I just MUST have that new BMW and flatscreen, mom I HAVE to have an Ipod – you get my drift. There are some real reasons debt becomes palatable – like low rates. But there are an increasing number of things that can make it less palatable, like rising rates, or external events, or a credit tightening. Granted, those factors haven’t occurred to a large extent yet, but I wouldn’t count them out.
600k Cape Cod and yet, it could be worse.
http://guests.themls.com/profile_page.cfm?mls=06-142171
Yes, thats a 1Bed 1 Bath, its NOT a typo. But you know, they ain’t making any more land 9 blocks from the Santa Monica Pier and just 2 blocks from the 10 Freeway.
Something else that has steadily changed over the past 30 yrs or so is Americans’ increasing willingness to assume more and more debt. The rise in homeownership during this period is not unrelated.
The period we are all questioning here is the past 4 years, not the past 30. I agree with the long-term changes you mention, but I can’t seem to believe that 30 years worth of fundamental shift would manifest itself in such a short timeframe. I’d expect underlying structural changes such as these to manifest themselves smoothly over the entire time period in question.
jb
And to think I have to make a decesion in all of this in less than 12 months. What a joke!
“BC Bob, I’ve read some of your comments here and while they don’t quite reach the level of militancy and hate that Unrealtor, Booyaa Bob, NJGal, Pat and RichinNNJ consistently exhibit, they nevertheless are suspiciously bearish. You will continue to remain under observation to determine if you fall into this camp.”
Sorry I don’t fall in the same camp. Suspiciously bearish??? Under observation??? Is that what happens when you take the chips off the table?? You must have been in a coma for the last year if I am in the observation stage.
Simply, I feel that this is setting up to become the biggest financial bust in our lifetime. Nothing suspicious about that.
Regarding selling: I’ve been more than forthcoming pertaining to that. I never bought RE with the intention of making 15-20% per year. Owning property was always a good investment along with a life style. At the same time, the investment grew at or near the rate of infaltion. What I witnessed in 2002-2005 was similar to the floor of the commodity pits. It was just as ludicrous as the day traders of the dot com. Bidding wars??? For a house??? Costs going from 10x their rental value to 25X. This was the biggest damn p/e ratio in the history of RE. When this market gravitated from a slow appreciating asset to get me in at any cost, I took notice. Anytime markets deviate from their underlying fundamentals at an unsustainable, irrational, maniacal amount, the bells start to toll. I was not looking to sell. The market told me to sell. All I did was recognize the sheer lunacy and reacted.
Again, no observation required; BUST.
Or did the entire country wake up on September 7th, 2002 and say to themselves, “It sure feels like a good day to lever up. Honey wake up, today is the day we put ourselves deeper in debt than ever before!”
jb
JB,
I agree that the change over the past few years was irrational. I am only saying that in light of the factors I mentioned, it is unlikely that we will ever return to traditional measures of affordability like 2.5 times yearly income.
Similarly, the fact that so many people lease cars is irrational, but leases are not going away.
Unless there is some catastrophic event that erases the recent huge gains in one fell swoop, this unwinding will happen gradually. And the longer prices stay irrationally high (and they have been so by traditional measure for almost a decade), the more people will tend to acclimate to the new normal.
I don’t think the new normal is 2005, but maybe it’s 2003 or 2004
Skep-tic (#127)-
Not to sound like a dot-com era investment banker, but I think some recent changes in the RE marketplace have rendered it permanently different, for better or worse:
1. As much as the permabears hate to admit, the tax advantage of paying no capital gains on 250K (single) or 500K (married) on the sale of a primary residence has changed the homownership game forever. HOW it has changed it remains to be seen. I think, though, that the immediately measurable effect has been one of focusing homeowners’ attention to the pure investment aspect of their purchases and creation of a mass willingness to buy and sell more frequently. Those factors play into your observation of increased volatiity.
2. Although RE is a difficult-to-liquidate asset class, the rise of new vehicles to extract equity has given the homeowner access to a source of cash that heretofore hasn’t existed. That’s definitely gas on the volatility fire, although the facile permabear assumption that all equity extraction is squandered on flat-screen TVs and other worthless purchases remains to be proved. There is also evidence that the prudent US homeowner has used wealth to either retire higher-interest debt or create more wealth.
3. The current downturn in RE has been accompanied- and abetted by- a new phenomenon: the buying public’s access to RE information. Because RE info is immediately available to the public through multiple forums (esp. financial media and blogs), market trends that used to take months and years to develop now appear to be playing out in mere days and weeks. The
buyer/seller “standoff” of 2006 already shows signs of passing; in previous markets, this may have required 1-2 years to play out. This may further contribute to increased short-term volatility AND may explain why many are predicting a moderation of the recent downturn in 2007.
I generally run screaming from anyone involved in markets who makes the claim that “the game has permanently changed”; however, only blindness would lead us to not admit that certain aspects of RE have changed…and that we’ve only begun to take the measure of those changes.
to continue the car analogy, people have become gradually accustomed to more extreme forms of financing to buy cars. now 6 yr loans are the most common, whereas they didn’t even exist a few years ago.
Just like the 6 yr car loan, consumers latched onto IO mortgages and the like very rapidly.
The point is I don’t think you can isolate mortgage debt from other forms of consumer debt. Americans have proven ever since the mid-70s that they will rapidly borrow using any new vehicle that is made available to them. The housing run up might just be the latest example of this phenomenon
Skep-tic,
But does the financing vehicle precede the demand for the product, or does it follow?
I do not believe they are concurrent in the genesis of a demand cycle.
#140 and #139.
Similar arguments were are thrown around during every asset bubble. This time it is different, it may correct a little bit, etc, etc.
The price of house is a factor of many inputs including:
Supply/Demand
Interest Rates
Income
Emotion
etc.
The price can be irrational for extended periods of time but over periods, the price correct. I know that houses are not the same as other commodities or stocks, but end of the day there is a cost of carry on the house and incomes have to be able to afford the cost of carry. Dreams don’t pay the mortgage.
Payrol could be up 160K+ jobs for november. How does that affect the affordability of most people in NJ??
BC BoB: So what would you do if you were me. I have to be out of my rental house before the end of 2007, the thought of going to another rental house is not enticing.
Should I bite the bullet and buy? Should I low ball, swallow and do another rental?
Its getting a little depressing.
Clot,
I respectfully disagree with your third point. I think you are vastly overstating the importance of media and information. I’m not saying it isn’t important, nor am I saying that the speed of information hasn’t increased. I’m saying that the majority of buyers aren’t using this information to make or break a decision. Unfortunately, I think this is more of a convenient rationalization or explanation than the cause..
jb
AntiTrump-
I don’t think Skep-tic & I have stated that the laws of economics are out the window (I like your sly use of the word “irrational”…why didn’t you follow it with “exuberance”?). We’re just talking about one aspect of the market- volatility- and its causes and consequences.
Reversion to the mean is always the correct assumption when you’re talking “big picture”. However, it’s not a useful concept to apply when you narrow your focus.
Anti,
I agree that the question always returns to can people afford it?
the question I have is whether most people actually can afford a higher multiple than the traditional multiple for housing, and whether people have simply become more willing to spend up to their limit than before.
An analogy might be the P/E multiple for S&P which has more or less risen fairly steadily since the early 80s. Same asset, but people are willing to pay a lot more for it than 30 yrs ago
Grim (#144)-
You’re probably right on the statement that a majority of buyers are not taking advantage of more, better and faster information when making purchase decisions. Emotion trumps all in this game. “I like it” and “I want it” are still music to my ears…and yes, there are people saying these things, even today. Yet, buyers buy on emotion, then use facts to justify the purchase they just made; and, the facts out there today are a helluva lot better- and more accurate- than they used to be.
And, the EMPOWERMENT that the public has derived from the RE game opening up has changed the game forever. Even the most naive of buyers comes to the table with sharper expectations and better BS detectors than ever before. Even a emotionally-charged buyer who gets a whiff of something false is on to the next agent, next house or next town. Contrary to the opinion of the permabear set, the public…not agents…are driving the game now.
Skep-tic (#146)-
Check those S&P multiples. Multiple compression has been the more recent state of affairs.
scribe – thanks very much for the feedback . I shall check both the places.
148
point taken, but you get my drift. fundamentals aren’t static
148
point taken, but you get my drift. fundamentals aren’t the only important factor, even over long periods of time
skep, grim, others:
“…the question I have is whether most people actually can afford a higher multiple than the traditional multiple for housing, and whether people have simply become more willing to spend up to their limit than before…”
I think the point to which clot refers is that the definition of LIMIT is higher than in the past, and it creates a structural shifting out of the demand curve and ceteris parabus [i.e. holding other variables constant] raising prices. Hard to argue with that logic.
However, we must bear in mind that we are functioning in a new environment of unrelenting liquidity. To assume this state of the capital markets is permanent is folly. I really think that Japan will eventually find its way back to firm footing, and China will have a policy shift in the 2009-2010 range. This change will ultimately change our own market dynamics.
I will throw out a wildcard……petro-money….if the crude market continues to sell off, I swear it will eventually affect the bid on UST – I feel it in my bones…..
Skep-
Totally agree. BTW, I think multiple expansion will be a big stock theme of 2007.
njmls 2639773 and 2640251, any help on sales price history of these 2 listings would be greatly appreciated. Thanks.
NJGal Says:
January 5th, 2007 at 3:07 pm
Amen Pat – I just don’t see how we fit on there. I think what’s really going on is that he wants so badly to think that everyone here is an evil hateful person. But since it’s clearly not true, and he can only find perhaps one person whose posts have been somewhat “gleeful” regarding the downturn (yes, you Booya, sorry!), he has lumped frequent bearish posters into his little “group.” Since that group only exists in his head, which seems to have become more unhinged than even Booya’s posts, I guess we should not be worried.
A historical reference might be helpful here in my response. When Hitler was on his pogroms in Nazi Germany, the “good” people remained silent. Can you imagine how the course of history might have been dramatically different had the “good” people found their voice and spoken up! As it was, the so called good people weren’t distinguished from the goose stepping Nazi’s upon Germany’s defeat. All suffered.
Booyaa Bob is pursuing a pogrom of sorts on this blog. I’ve called for “good” people to join me in repudiating him. I’ve had no takers. Moreover, your own silence has been deafening.
Don’t be surprised when the “good” people are painted with the same brush that paints Booya. Don’t get mad at me, go after Bob!
RE – please do not use WWII references
ChiFi (152)-
Do you even think the Fed knows what the M3 is? I’ve heard they stopped referencing money supply in their communications because they have no idea.
I guess Kim Jong Il must have his Xeroxes printing overtime.
Seneca Says:
January 5th, 2007 at 3:12 pm
NJGal – don’t worry about RE “Nancy Grace” Investor.
To paraphrase his/her response to my Bob Smith example of the buyer who faces a doubling of the median multiple, “He BOUGHT his ticket, he KNEW what he was getting into, I say, let ‘em crash.” [borrowing from the immortal words of Airplane]
This is not a person ripe for rational debate when the counterpoint analogy of the challenges of finding shelter for ones family is the example of a luxury sports car. Its a bit like telling the cancer patient on experimental drug treatment who finds out that it hasn’t worked that “its too bad, cause hey, I wanted a Pepperoni pizza but I could only afford a plain one so I adjusted to the market just as you have to adjust to the fact that you are gonna die.”
First of all, the Lexus LS is a sedan, not a sports car and secondly the analogy applies, you just refuse to accept it.
Look, the market is not going to provide you with a bib, diapers and a blanket so you can get “warm and cozy”. You can’t make ceaseless demands on the market to provide you an affordable home. You have to adapt to the conditions and deal with them as they are. You could have bought in 2000, but you chose not to do so. You incurred an opportunity cost because of that. Rather than move on, you want to get the opportunity again. Sorry, Mr. Market doesn’t work like that.
A rational response is to either buy what you can afford in NNJ and accept the fact that the residence might not be what you want for the price or move to an area where you can get what you want.
The non-rational response is to continue to pine for the days of old (which are never coming back).
“Similarly, the fact that so many people lease cars is irrational, but leases are not going away.”
Apples and oranges.
A car lease is not “irrational” at all. The math can actually work for a lease (you pay for the portion of the car you use, and it calculates the same as “owning” and trading in a new car every 3 years).
(I’d advise buying a 3-year-old car outright instead, but that’s another discussion.)
The math doesn’t work today for buying a house.
Emotion trumps all in this game. “I like it” and “I want it” are still music to my ears…and yes, there are people saying these things, even today. Yet, buyers buy on emotion, then use facts to justify the purchase they just made; and, the facts out there today are a helluva lot better- and more accurate- than they used to be.
I agree Clot.
jb
re101,
I would have guessed you were a domestic car owner. It was a bit of a surprise to me when you mentioned that you drive a foreign car.
jb
reinvestor101 Says:
January 5th, 2007 at 5:16 pm
Look, the market is not going to provide you with a bib, diapers and a blanket so you can get “warm and cozy”.
Are you calling me a baby?
You can’t make ceaseless demands on the market to provide you an affordable home.
When did I demand that the market provide me with an affordable home?
REInv, I was only inquiring if you as a human being had any empathy for the common man. You answered the question and I appreciate that you took the time to do so.
I don’t demand anything of this market. I have the freedom to make decisions about where the market is headed and I make those decisions with my wallet. I have made the choice to see how the Spring plays out and since I have no compelling reason to buy now, I am no worse off for that decision.
As for the Lexus, the LS 400 I drove in 1990 felt rather sporty but you are quite right, it was a sedan then just as it is now.
sorry bc bob, that wasn’t my post either. does it seem consistent with my diatribe? think i’ll start logging in as you and saying stuff. nah i’m too busy with important things not trolling prior posts.
All the predictions, prognostications, forecasts, crystal ball gazings, guesses, myths and urban legends regarding the 2007 RE market listed by contributors here would put Nostradomus to shame. Jeanne Dixon is turning over in her grave…
So what is the record of the Nostradamuses here where made fearless predictions in the beginning of 2006? 2005?
“we must bear in mind that we are functioning in a new environment of unrelenting liquidity. To assume this state of the capital markets is permanent is folly.”
definitely agree, but there is little indication that this will relent soon
James Bednar Says:
January 5th, 2007 at 5:23 pm
re101,
I would have guessed you were a domestic car owner. It was a bit of a surprise to me when you mentioned that you drive a foreign car.
jb
James,
The president of Ford Motor is a Lexus LS 430 owner and he sees the car as I do; the finest production vehicle ever made. We wants to get Ford to meet that quality standard as a way to save the company.
In a year where GM and Ford are losing market share, Toyota gains. This is all attributable to gross mismanagement of the domestic automakers. They aren’t making the cars that people want and they went overboard on SUV’s which no one is buying due to high gas prices.
If domestic automakers made a car that had the same durability as that of Toyota, Nissan and Honda, I’d buy in a heartbeat, but alas that’s not the case.
Of course, the domestics are also dealing with legacy costs that the Japanese are not due to the former power of the left leaning unions in this country. Unfortunately, that leaves them with fewer resources to compete. So, the left is really partially to blame for the conditions of our domestic automakers. The rest owes to management blunders.
RE-
GM is the largest purchaser of Viagra in the US. They are an HMO, not an auto manufacturer.
Drat! Moderated for using the word “Via–a”.
chicagofinance Says:
January 5th, 2007 at 5:06 pm
RE – please do not use WWII references
What’s wrong with WWII references??
clot: that word in Russian means “strumpet videos”
reinvestor101 Says:
January 5th, 2007 at 7:15 pm
chicagofinance Says:
January 5th, 2007 at 5:06 pm
RE – please do not use WWII references
What’s wrong with WWII references??
RE: hot button topic – potential to create distracting acrimony beyond just everyone’s difference of opinion on real estate
skep-tic.
One thing to keep in mind is that some of, the products that made home buying *affordable* by offering extremely low teaser rates for the first year etc, is harder to get now.
We are already seeing the effects of this.
You have to realize that many of the favourable factors that you mentioned haven’t changed that much in the last couple of month, yet sales have droped by 24% YOY in NNJ.
I strong beleive this correction is going to be a slow and painful process.
ChiFi (126)-
Well, if you have ED (ere**ile dysfunction), you won’t have much interest in those “strumpet videos”.
But, of course, if you worked for GM, the world’s largest purchaser of the popular ED medication Via**a (the mention of which got my last post shot into the black hole of moderation) you’d get your little blue pill gratis.
Of course, Toyota will be kicking GM’s a** all over the lot, while within five years, 40% of the population of Detroit will be manufacturing crystal meth in their Eight Mile Road trailer homes.
Sorry, the little blue pill will put you into moderation every time. As will it’s cousins C-ls and L-tra.
jb
Do you guys have any recommendations for realtors in Bergen county? Ridgewood/Midland Park area.
“sorry bc bob, that wasn’t my post either”
Richard,
Hah!! Simply lily-livered. Hiding behind the veil of a post on a RE blog,how superficial. Didn’t spend one minute checking your posts, someone else had provided this. Suck it in, you caved, now take the pounding in the next 3-5 years.
I do CK, drop me an email.
jb