From the AP:
Home Prices Post Biggest Drop in 16 Years
The decline in U.S. home prices accelerated nationwide in July, posting the steepest drop in 16 years, according to the S&P/Case-Shiller home price index released Tuesday.
Home prices have fallen by more every month since the beginning of the year.
An index of 10 U.S. cities fell 4.5 percent in July from a year ago. That was the biggest drop since July 1991.
“The further deceleration in prices is still apparent across the majority of regions,” MacroMarkets LLC Chief Economist Robert Shiller said in a statement.
From Reuters:
US home prices extended declines in July – S&P
Prices of existing U.S. single-family homes across 20 major U.S. metropolitan areas extended their declines in July, according to the Standard & Poor’s/Case Shiller national home price index on Tuesday.
The composite month-over-month index of 20 metropolitan areas fell 0.4 percent in July from June, bringing the measure down 3.9 percent from a year earlier.
S&P said its composite month-over-month index of 10 metropolitan areas declined 0.6 percent in July to 215.94, for a 4.5 percent year-over-year drop.
From MarketWatch:
Existing-home sales fall to 5-year low in August
U.S. sales of existing homes fell 4.3% to a seasonally adjusted annual rate of 5.50 million in August, the lowest since August 2002, the National Association of Realtors reported Tuesday. Sales in August were down 12.8% compared with August 2006. Economists surveyed by MarketWatch were expecting sales in August to fall to a 5.49 million pace. Inventories of unsold homes on the market rose by 0.4% to 4.58 million, representing a 10-month supply at the August sales rate. For single-family homes alone, the inventory represents a 9.8-month supply, the most since May 1989. The median sales price was $224,500, up 0.2% since August 2006. Single-family median prices were unchanged year-over-year at $223,900.
From MarketWatch:
Lennar posts big quarterly loss on write-offs, adjustments
Lennar Corp. reported a net loss of $513.9 million, or $3.25 a share, for the third quarter ended Aug. 31, a reversal from the prior year’s net earnings of $206.7 million, or $1.30 a share. The Miami-based home builder’s quarterly revenue plunged to $2.34 billion from $4.18 billion in the third quarter of fiscal 2006. Analysts, on average, had been looking for revenue of $2.39 billion, according to estimates compiled by Thomson Financial. Valuation adjustments and write-offs of option deposits and pre-acquisition costs, goodwill and financial-services notes receivable totaled $856.8 million in the latest quarter, equating to $3.33 a share, Lennar said. On an adjusted basis, gross margins on home sales narrowed to 14.0% from 19.5%, primarily reflecting higher incentives. Home deliveries dropped 41% in the latest quarter, with the average sales price of homes delivered off 6%. CEO Stuart Miller said Lennar’s cut the size of its work force by 35% and expects to make further reductions during the fourth quarter.
grim (1)-
Man, that’s ugly. The really interesting report this quarter will be KHOV, though.
Wonder if the “sale of the century” put a dent in their inventory.
Ladies and gentlemen, this is your captain speaking, it looks like we have some pretty bad weather ahead, so please buckle your seat belts and hang on for dear life.
Wonder if the “sale of the century” put a dent in their inventory.
I’m sure it did, but the question is, at what cost? Not a cost in terms of dollars, but in damage to the brand.
How many Hov contracts are contingent on their sale? The existing homeowner thinks the spread [sale of the century] has contracted significantly between their pos and a new house. However, the spread hasn’t really come in. They don’t realize that they will not be going to contract at 500k for their pos. I’d be willing to bet that there will be a 35-45% cancellation rate.
The two “quick move-in” homes in their Hackettstown development are still listed as for sale. The sale was “49k off” and these two already have 15-23k of free upgrades in them. I can’t help but think that the sale of the century was an overall failure for khov. I also haven’t seen any fluff articles on the outcome since I was curious too. Papers were quick to report outcomes on sales in the past, I guess khov isn’t talking now..
Lennar [1];
-Biggest quarterly loss in history
-Revenue fell 44%
-41% decline in homes delivered
-New orders plunged 48%
-Value of backlog nosedived 61%
-32% cancellation rate.
http://www.bloomberg.com/apps/news?pid=20601103&sid=a2nPQ7ObH8Vs&refer=us
For economist Existing home sales may be important from macro perspective.
But to me the only important statistic is Months of Supply (MOS). That is the only measure that captures Supply and Demand. Until I see MOS going down, we have not reached bottom.
Server load issues crippling us this morning..
Server load issues crippling us this morning..
Is Suzanne attacking us?
From Reuters:
US home prices extended declines in July – S&P
Prices of existing U.S. single-family homes across 20 major U.S. metropolitan areas extended their declines in July, according to the Standard & Poor’s/Case Shiller national home price index on Tuesday.
The composite month-over-month index of 20 metropolitan areas fell 0.4 percent in July from June, bringing the measure down 3.9 percent from a year earlier.
S&P said its composite month-over-month index of 10 metropolitan areas declined 0.6 percent in July to 215.94, for a 4.5 percent year-over-year drop.
SG, I’m watching the delta in price decline on the way down.
When the delta starts to turn into a nice easy escalator down, (instead of an elevator with a broken cable), I might start walking through doors again.
JB, you’ve been reading articles at the same time I have.
GM employees want job security, they should be teachers in NJ.
Not a good time to strike!
#8 SG we have not reached bottom.
We are not even close, and still the inventory numbers rise. In my (small) area, more listings every day (1 to 2 new ones every othe day).
Some sellers are much more realistic in asking prices, and yet these are are also sitting (they are not IMO all crap).
Other prices seem to be all over the place, with 100K plus and more differences in asking prices for the same houses.
And then of course there are still some people in deep denial, they aould not have gotten these asking prices in 2005, never mind now, and yet there are some of these listings still coming on the market.
It looks very chatoic out there.
For the data geeks out there, here is the S&P Case Shiller dataset. Updated with July data.
https://njrereport.com/files/caseshillerjuly.xls
MOS Chart,
US Months Supply of Houses For Sale at Current Sales Rate; SA
Current month of supply is same to the one in 1991. One thing I am noticing is that during the last boom, MOS raised steadily from 1984 to 1991, while in current boom, the MOS rise happened in last 2 years (2005 to 2007) only. It appears that since the rise was so fast, the fall may be fast as well.
It appears that best time to buy is when MOS comes to bottom from peak like one in 1998 and best time to sell seems is just when MOS start increasing up like in 2005.
My house was just been put on market last week. Last night we got three offers caming at same time! I was so thrilled!
(Of course I know I still have long way to go, attorney review, inspection, closing….)
It seems the price is key, if the house is priced right, there are still a lot of activities! Went to an open house at Millburn on Sunday. By 2pm, I was the fifth on the signing sheet already. Two other families came right after me.
My questions is, how to negotiaate the price with buys at this kind of time? My agent was thinking about best and final last night. But we were afraid that would scare away the buys. So I gave a counter offer and is waiting for their counter backs now….
See signs popping up all over the place especially rentals and fsbo.
These are desperate people. Live within your means, buy what you can really afford and asking means nothing in this market.
If You have strong finances, then you own this market and dictate the terms of any transaction. Better get a really low price cuz if you have to sell in the near future YOU WILL LOSE MONEY. Do not bail out these homeowners especially the ones that already have a huge profit baked in. They will have to reduce their greedy dreams. The other F&^%$# homeowners are going bust anyway. You are not here to bail them or the banks out of their financial conundrum.
Markets work in both directions.
xiaolu #17,
I’m not surprised. We really do seem to be a little insulated here, as funny as that sounds. The NY metro area seems to be the last place on earth that gets affected… if much at all.
So JB (#15),
if I’m reading the data correctly, the S& P index for our area declined over 8% YOY?
#19 gary; Its not and it was not last time, (I lived it), no different this time. No area is insualted, none. Wait and see.
grim Says:
September 25th, 2007 at 9:30 am
Server load issues crippling us this morning..
If you haven’t done so already, I’d consider spammers. thehousingbubbleblog.com also appears to be having issues
schivo: Newyork YOY change is -3.8%
http://www2.standardandpoors.com/spf/pdf/index/CSHomePrice_Release_092512.pdf
From Bloomberg:
Heebner, Top Property-Fund Manager, Sells Manhattan Real Estate
Kenneth Heebner, manager of the top-ranked U.S. real-estate mutual fund, sold stakes in New York property owners because prices will decline as banks, hedge funds and buyout firms fire workers.
The $1.7 billion CGM Realty Fund divested SL Green Realty Corp., Manhattan’s biggest office landlord, since the end of June, Heebner said today in an interview in Boston. The manager, whose fund has returned an average of 40 percent a year since September 2002, cut stakes in real estate investment trusts to a quarter of assets from 75 percent in December.
“You’re seeing a retrenchment in the private-equity, hedge-fund and brokerage businesses, and there could be a lot of layoffs,” Heebner, 66, said. “That could have a devastating impact on high-end residential real estate in New York. Appetite for office space will also decline.”
#19 – we all should have always just lived within our means and none of this would have happened!!! its amazing how common sense like that gets thrown out the window when it comes to money! people are greedy – thats just how we are programmed from birth! unfortunately, as we get older we devise these get rich quick schemes at the expense of those that dont know any better by ‘helping them achieve their dreams’ this would have been fine but on top of that we speculated so much that prices just shot up out the roof! it will correct itself somehow..your ‘live within your means’ advice is better taken before buying a home but for those who didnt heed…times are only going to get tougher….
CAIBC…
Just responding to KL from yesterday – I’m due Nov. 9! So many people have birthdays around that time – seems like everyone I talk to either has one themselves or knows someone with a birthday that week. Must be a good week to be born.
I’m feeling good generally though – if I could just get the new house in order I’d feel much better!
Oh, and in a real estate anecdote, a friend of mine just locked in at 6.325 for a 30 year conforming…my jumbo was 6.5 a few months ago, so rates have risen for sure. She wasn’t sure whether to lock but figured she could get out of it – the fear of rising rates was worse to her than the chance they would drop.
Where did Heebner get those stakes and that hammer? I need one to drive through the heart of the vampire living in my money market fund.
JB,
Thanks for the article.
Wall Street is quick to fire people when business is bad. So where are the massive layoffs?
They are taking place in Detroit, Michigan, and Orange County, California, not New York City.
The auto and mortgage businesses are getting worse fast and Detroit and Orange County are the epicenters of these business.
But judging by their actions Wall Street firms are optimistic about the outlook for their businesses and comfortable with current staff levels.
#25 grim” I just came in from a quick meeting (lower Manhattan),and took a quick stroll around to clear my head.
Anybody who might be skeptical about NYC prices falling, take a walk around lower Manhattan, there is tons of condos/coops that have not come on the market yet.
For instance 20 Pine St (old Chemical Bk) 40 story building, all luxury condos, renovation in progress. 75 Wall St (former NY headquarters of Dresdner Bank) 30+ story office building (only (about 20 years old), being converted to luxury condos.
Down John St, building after building, same thing.
Lots of old little 3/4 story buildings on William, Beaver Exchaneg Place, all luxury condos.
Not to mention the old 40 story Morgan Gty Trust building at 15 Broad St All in a quick 10 minute walk.
From MarketWatch:
Home prices falling faster, Case-Shiller says
U.S. home prices in major cities are falling at the fastest rate in 16 years, Standard & Poor’s reported Tuesday.
For 10 major cities, home prices fell 0.6% in July and are down 4.5% in the past year, the fastest decline since 1991, according to the Case-Shiller home price index released by S&P. For 20 major cities, prices fell 0.4% in July and are down 3.9% in the past year, the largest decline in the seven-year history of the index.
The Case-Shiller index, which tracks multiple sales of the same homes, is considered by many observers to be the best gauge of national and metro real-estate values.
…
“The housing outlook remains grim as home sales decline and inventory remains elevated,” wrote Michelle Meyer, an economist for Lehman Bros. She expects a cumulative 15% decline from the peak in the quarterly national Case-Shiller index.
Economists at Goldman Sachs said the latest data are on track to meet its forecast for 7% declines in home prices this year and next.
There’s no end in sight, but it’s not a disaster for most people, said Robert Shiller, chief economist for MacroMarkets LLC.
#29 pret: Either you are not on the street, or if you have, not for long. Wall St layoffs, 87, 89,91,94,98/00/01.
Typically they start in October, go on until right before Thanksgiving, stop until after Christmas, resume again in January through Feb.
To make a statement that Wall St is comfrotable with staffing levels, is a premature to say the least, and quite frankly how would you know?
Like I have said in the past, you have never lived through a recession, a real estate bust, and of or Wall St, a layoff. Until you have, with all due respect you have no credibility.
Not necessarily because you have not lived through these event, but rather your attitude, that they cannot and will not happen again.
And your denial that there even was a real estate bust in the past.
#17 – We’re in the opposite situation, we just put an offer on a house that’s been on the market for a few months now. They had some recent open houses that drew traffic and now we’re doing best and final with 2 other offers.
hi…i’m down in South Jersey near Philly/Cherry Hill…anyone else here know the area? I know North Jersey is a bit more inflated than us, but does anyone have any opinions on how pricing/comp sales/% off list price…
any info is appreciated
NJGal Says:
September 25th, 2007 at 12:57 pm
Just responding to KL from yesterday – I’m due Nov. 9! So many people have birthdays around that time – seems like everyone I talk to either has one themselves or knows someone with a birthday that week. Must be a good week to be born.
————————–
Let’s see… mid-November take away 9 months… is February 14.
Hmmmmmm. Methinks a strong case to be made why there are so many mid November birthdays!
:)
“But judging by their actions Wall Street firms are optimistic about the outlook for their businesses and comfortable with current staff levels.”
[29],
Oh really? If current conditions linger, I’m hearing 10-20% layoffs. Bear, as we know it, will not be the same. It’s either massive restructuring, 30-50% layoffs, or it will be bought by someone like Merrill or JP.
pretorius Says:
September 25th, 2007 at 12:59 pm
JB, Thanks for the article.
Wall Street is quick to fire people when business is bad. So where are the massive layoffs? But judging by their actions Wall Street firms are optimistic about the outlook for their businesses and comfortable with current staff levels.
pret-a-manger: What I see is a lot of silence and people being close to the vest……to me that speaks volumes. That said, I agree to the extent that all the news from last week came out about a notch and a half stronger that I expected.
My instinct tells me it is posturing….but I also don’t want to act like a naysayer in the face of opportunity.
BTW – RE: i-bank earnings…..draw an analogy to the homebuilders and asset-impairment charges…think of the latitude they had all during 2006-2007 and look at what they are rpeorting now….same thing…stall and hope that the market will bail you out…
#36 BC Bob: I forget to add to my post that if Pretorius did not believe me, that perhaps he might like to check with yourself, or chgofinance.
The old “October surprise” is still the way the street does it in many instances.
One final note for the people that do not get laid off, bonus payments will be down, even in areas that are doing fine.
Yes the most affected areas suffer the most, but they generally do spread the pain around. And some will not get bonus money at all.
Their bonus will be they still have a job.
3b,
I was looking for a job during the 2000-2001 recession, so I know what a recession and the resulting weak job market feel like. Yes, I know the last recession was a mild one. But the downturn in the Wall Street job market was bad.
I do not believe the housing bust and the economic slowdown it is causing will result in massive Wall Street layoffs. A lot of Wall Street people will get coal in their stocking at the end of the year, but their jobs will not be eliminated.
Wall Street firms have been very disciplined about hiring during the past few years, a reversal from the late 1990s situation. These companies are still looking to add space, and tenant bankruptcies in New York office buildings are not rising.
Here are a few relevant charts.
http://media.halstead.com/pdf/Halstead_HeymReport_Dec06.pdf
As of last week, Merrill just laid off approx 10-20% of all staff in GPC (Global Private Client) business, according to a friend of mine who survived- just barely. He had two layers (high paid) taken out above him, as well as a good number of his peers, and is being “redeployed” in a completely different position. Just fyi, the bulk of these cuts were positions based in NJ.
As you might expect, anything MBS related is either in a hiring freeze or in the midst of layoffs as well.
On the flip side, still hearing of strong hiring going on in select areas. But the notion that there are no layoffs occuring right now isn’t accurate…
#36 BC Bob: I heard HSBC was also being mentioned as a potential Bear buyer, do not know if that is still a possibility, in light of HSBC’s difficulties.
#34 Bill:
I am in the Mt Laurel area. The middle (200k – 300k) seems to be holding quite well but the higher end and the lower end seem to have been hit a bit harder. Probably down 5-10% in the high/low end, the middle is holding at about 2-3% down.
As a side note, Marlton is getting hit really hard because of the tax reassessment that’s coming.
I don’t see a whole lot of new inventory, so the prices might hold for a while.
Interesting comments from our economist on how existing homes sales price declines will be much stickier compared to declines in new home prices, as existing home owners have a far higher propensity to sit on their inventory in lieu of selling for a loss. Builders want to stay in business and move their inventory, and will continue cutting prices until someone lifts their offer.
Existing home sellers also tend to be buyers as well (where are they moving to?). It is because of this that they will not lower their offers unless convinced that other sellers will too (ie on the next home they are buying).
Very much a pshycology thing that has frozen the market.
“Hmmmmmm. Methinks a strong case to be made why there are so many mid November birthdays!”
I know, eew. The worst is that I HATE Valentine’s Day – what a cheesy fake holiday. We never even celebrate it, and now I feel like just because of chance I am lumped in with those girls who demand flowers and chocolates and make scrapbooks and stuff! Ugh.
BC Bob,
A week or two ago I wrote a post that was, in your view, so impressive that it caused you to accuse me of plagiarizing it.
It was a serious accusation that I took personally. You promised to track down the book I stole it from. Did you ever find it?
#40 Wall St and discipline do not go together. Youa re right in that “Street emplyment is not at the peak it was prior to the dot-com bust, but it is still quite high.
And the street hs alwasy said int eh past that they have only hired what they need etc, and yet they always manage to have large layoffs.
And osme of the first areas to go, are the non-revenue producing areas;they cut those areas to the bone.
As far as looking for space, means nothing, that can change on a dime.
I rememebr in my old life, my firm bought Kidder Peabody’s old building at 10 Hanover, closed on it right before a round of layoffs and firings;the building sat empty for 3 years.
All I am saying with this is it is far too early to say that layoffs on the street will or will not be massive.
What is true however, is the fact that the street will be laying off this year as opposed to the last few years.
“Did you ever find it?”
pre[46],
My books, that have been read, are packed in storage.
Here’s the price decrease from peak by each area (each area’s peak was determined individually).
-12.4% Detroit – MI
-8.8% Tampa – FL
-8.3% San Diego
-7.6% Washington
-7.3% Phoenix – AZ
-7.3% Miami
-6.3% Las Vegas
-5.8% Boston
-4.8% Los Angeles
-4.5% San Francisco
-4.0% New York
-3.7% Minneapolis – MN
-3.6% Cleveland – OH
-1.5% Chicago
-0.7% Denver
-0.1% Dallas – TX
-3.9% Composite-20
“Bear, as we know it, will not be the same. It’s either massive restructuring, 30-50% layoffs, or it will be bought by someone like Merrill or JP.”
Really?! Njrereport posters enjoy hyperventilating about this company. People continue predicting layoffs at Bear that are not happening.
Although Bear has been the hardest hit of the major New York-based investment banks, they have announced very few layoffs.
Bear has laid off more people in Orange County than in New York, which supports the position I outlined in post #29.
NYC seems to holding up better than other cities.
pretorius Says:
September 25th, 2007 at 1:39 pm
BC Bob, A week or two ago I wrote a post that was, in your view, so impressive that it caused you to accuse me of plagiarizing it.
pret: encore? must of missed that one…
Also, looking at the monthly data, it’s obvios that historically the greatest month to month price increases come in June, May, July, April, and August in that order.
The worst month to month increases come in December, November, January, and October, in that order.
That rate of decline is about to ratchet up in the next 6 months.
Spammers, huh! I guess the syndicate is getting a little worried. It’s tough making payments on the BMW when you can’t find anymore suckers to take the bait.
pretorius,
Are you saying that their won’t be any layoffs on Wall Street?
#50 pret: So your contention is because they have not happend yet, that they are not going to happen? How do you know that they are not being planned at this very moment.
You may have lived through a mini-recession in 01, when looking for a job on the street, but again you have never lived through a layoff while employed on the street.
Can you at least give it to us that using history as a guide, that there could very well be layoffs on the street again?
In an earlier post I outlined how traditionally many street layoffs start in Oct, can we wait and see what happens than?
“Bracing for collateral damage among Wall Street’s big houses”
http://www.iht.com/articles/2007/09/10/business/deal.php
355 njbear; Yes it appears that is what he is saying.
I will translate for you. There will be no layoffs on the street because they have not started yet.
Also I have been on the street for about 6 years now, all good times, I cannot possibly imagine that there could be bad times, such as layoffs and cutting of bonus money.
I also may have purchased real estate recently, and that colors my thinking. If we have bad times including street layoffs, then that will affect my property value.
chicagofinance,
This is the post that BC Bob accused me of plagiarizing from a book he read. Unfortunately we will never know what book it is because BC Bob forgets the book’s title and cannot search for the book because it is “packed in storage.”
It is completely reasonable for home prices, over the long term, to appreciate faster than inflation in certain areas.
Picture identical houses on 1/4 acre lots in upper-middle-class suburbs of the following cities: New York, San Francisco, Detroit, and Cleveland.
Obviously, the New York and San Francisco houses cost more. Their values have risen faster during the past twenty years compared to similar houses in Detroit and Cleveland, and despite being dramatically less affordable using the median-income-to-home-price metric favored by many, their values will rise faster during the next twenty years.
Land is a natural resource like gold and oil. The value of land, and therefore the price of a house located on it, is based primarily on the proximity it provides to economic activity. Home prices rise faster in places where economic growth is stronger because land commands an economic rental payment. This payment rises faster than inflation in areas of strong economic growth like New York and San Francisco, as a growing number of people wielding rising incomes and net worths bid it up. Meanwhile, the economic rental payment remains flat or even declines in areas with weak economic growth.
In other words, a POS cape in suburban New York or San Francisco costs three or four times more than the identical house in suburban Detroit or Cleveland because the value of the land differentiates the prices. Twenty years from now, the same POS will be worth four or five times more.
There will be no layoffs on the street because they have not started yet.
Sounds just like the NAR in 2005. There is no housing bubble because prices haven’t fallen.
#59 pret: It is completely reasonable for home prices, over the long term, to appreciate faster than inflation in certain areas.
How mcuh faster than infaltion, and how much is reasonable? Dnd than take away the stimulants we had in this real estate market, which are rapidly disappearing;then we can talk.
OT: Anyone have any thoughts on MLS#2426651 in Watchung? It’s on “the wrong end of Johnston Drive” and seems overpriced for this market.
http://tinyurl.com/2nrhk5
“How mcuh faster than infaltion, and how much is reasonable?”
A couple of percentage points is reasonable.
Check out this chart I created, which shows that New Jersey home prices rose appoximately 2% per year in real terms during the last housing cycle.
https://njrereport.com/files/nj_ofheo.xls
Oman’s Central Bank Governor Hamood Sangour Al-Zadjali said his country has no plans to lower its interest rates, becoming the third Gulf country with a dollar peg not to follow the recent rate cut by the US, reported Reuters. Of the five Gulf countries that peg their currencies to the dollar – Saudi Arabia, Bahrain, the UAE, Qatar and Oman – only the UAE and Qatar have cut interest rates.
Interesting. Very interesting!!!
“‘Mortgage rates won’t stimulate demand,’ said Scott Anderson, senior economist at Wells Fargo & Co. in Minneapolis. ‘The Fed may be a little impotent here because what caused this housing crash was overpriced housing, not mortgages.’”
Bingo!
BOOOOOOOOOOOYAAAAAAHAHAHAHHAHA
Bob
GSMLS now standing at…..
36,341
I called 37,000 as the start of the panic (OK, a bit arbitrary, but still..).
On a side note, definitely seeing some houses priced far below other sales prices – many below assessed value- not sure what inrelation to past sales comps. Be interesting to see how quickly others follow.
Lots and lots of signs popping up fsbo rentals and realtor signs.
Here comes the next leg down.
Lots of sleepless people these days. Living a nightmare. Funny how all the so called experts coming out finally and acknowledging this bursting bubble.
The desperate ones are easy to spot. Better transparency today vs 15 years ago.
Play hard ball especially if you got the goods.
Get your best deal and do not give an inch.
hehehehehehehehe
Pre,
Your chart makes no sense.
overall latest sales data in my town (westfield) is showing prices flat to a couple of % below last year’s sales. about what i’d expect. course the undesirable of the litter are doing far worse as is expected.
Hehehe,
Why not?
#63 pret: Well prices doubled in my town in less than 5 years. Thats a fact, and that is not reasonable by any stretch of the imagination.
Would like to get your feedback on this situation:
You have town X and town Y. Town X is very prestigious in the minds of the residents who bought pre 2003. Town X really isnt anything super, but it is your typical nice/safe middle class town with decent schools. Unfortunately town X has an average annual tax bill of over $10,000 a year.
Town Y is not nearly as prestigious as town X, but is still a safe town, schools aren’t horribe, etc. Taxes in town Y is average $6,000 a year for the same house/lot as town X.
If both houses are equal in condition/size/price, which town would you rather live in?
deal flow basically shut down a month ago. there are a lot of bankers, lawyers, accountant, consultants and PE people doing very little right now.
the immediate question is how long will their firms pay them to wait this out? the slightly longer term question is what percentage of these people will remain necessary given that deal volumen is not going back to peak levels anytime soon?
a further issue is that hiring is going down as well. So even if broad swaths of people will not be fired (unclear as of now), it seems safe to say that Wall St employment is not going to be quite the economic engine that it has been over the past couple of years
About to vulture another toy. hehehehehehehe
Cash is king….hehehehehehehehe
Someone is going to give me their toy at .50 on the dollar and pay for my time and patience but they do not realize it yet
hehehehehehehe
Rewards are great when you wait for it.
hehehehehehehe
xiaolu #18,
Do us all a favor and bid lower than recent comps(less than a couple month). Millburn open houses activity is not indicative on people’s actual interest or offers submitted. Many folks attending are just nosy neighbors. I’ve only seen 2 or 3 go under contract there in August (and one came back on the market) and most of the inventory has been sitting there for many months.
I heard big layoffs coming Pre.
3b,
100% growth in 5 years can make sense when prices were flat during the 10 years before that. This equates to 5% nominal price growth growth during the 15 period. In simple terms, that is what we just experienced in New Jersey.
pret: In my analysis, I found Inflation + 3% as closer to real estate prices in NJ area.
The first chart at following link shows HPI and line for if prices increased at CPI + 3% increase rate. This line has probably most match to HPI line. But even this line was broken in current boom.
http://www.geocities.com/skgala/newark.htm
These July numbers don’t even reflect August’s credit crunch. Expect some really ugly numbers next month.
What happened to the mortgage application stats? Seems like the popular press has been ignoring some of the indicators lately.
I average about 10-15 open houses each Sunday. Although, I’m more interested in talking to agents and other visitors. Weekend before last we were in the Short Hills/Milburn area. We visited almost every open house in town.
jb
Pre,
Your chart doesn’t make sense.
Great chart SG. Most recent boom looks a lot like the previous one.
One thing also to keep in mind is that while RE in certain cities tends to appreciate at a faster rate than others, these high fliers also tend to be more volatile (I know this is well documented with respect to Boston and SoCal and I expect the same holds for other similar areas).
So even if over the long term, for example, an investment in NY RE is more likely to pay off than a proportionate one in Nebraska, this does not mean that the NY investment is the better one over a shorter period (e.g., 5 yrs)
If both houses are equal in condition/size/price, which town would you rather live in?
I’ll pay the 4K. Thank you.
here is an interesting story about M.Vick with a real estate twist.
“Canadian bank demands $2 million in lawsuit against Michael Vick”
http://tinyurl.com/yqaloc
sas
84: And THAT’s just another reason why I don’t believe you’re even a fraction as wealthy as you claim.
#77 pret: Not when incomes were essentialy flat for 5 years. Housing appreciation was always based on the rate of inflation, and rising incomes.
We have, and have had low FRM’s the problem is the prices are too high, we got around that by offering the funky financing, which is now rapidly disappearing, not to mention the loosening/elimination of lending standards, and the rampant speculation.
Just like before now we prices declining, and then rtemaining flat, probably for at least 5 years (IMO), maybe more.
This is from a JP Morgan note out to their clients today, source od data underpinning this report is NAR.
August Existing Home Sales Decline Further, While Inventory Edges Up; Reiterate Cautious Stance. (Duh!)
Nothing shockingly new, but at least someone out there acknowledges that the huge inventory overhang will not be absorbed unless the spread between the bid and ask shrinks significantly…this is somewhere towards the bottom.
“Total July existing home sales continued to fall, dropping 4.3% sequentially to
5.50 million, roughly in line with the Street consensus of 5.48 million, showing
that this cycle’s trough has yet to emerge. Similarly, single-family fell 3.8%
sequentially to 4.81 mil., while both total and single-family were down roughly
13% YOY. Also, negatively, inventories edged up, remaining at elevated
levels, with total existing homes available for sale up 0.4% seq. to 4.581
million, which we note was roughly in line with trends in our Bi-Weekly
Inventory Watch, up roughly 1% on average in Aug. Accordingly, we maintain
our cautious near-term stance on the group.
• Inventory edges up, remaining at elevated levels. Total homes available
for sale rose 0.4% seq. to 4.581 mil., while months supply rose solidly to
10.0 months, up 5.3% vs. July’s 9.5 months. Moreover, single-family
inventory rose 2.3% seq. to 3.920 mil., while months supply rose to 9.8
months from July’s 9.2 months.
• Existing home sales decline further, showing that this cycle’s trough has
yet to emerge. Total existing home sales fell 4.3% vs. last month to 5.50
mil., roughly in line with the Street’s 5.48 million, and were down 12.8%
YOY. Similarly, single-family sales of 4.81 million fell 3.8% from July, and
were down 13.0% YOY. Regionally, declines were led by the West and
Midwest, down 9.8% and 5.2% sequentially, respectively, while the South
and Northeast fell 2.7% and 2.0% sequentially, respectively.
• Pricing declines slightly sequentially. Specifically, both median and
average prices fell roughly 2% seq. to $225K and $269K, respectively,
following July’s roughly flat month. Importantly, we do not believe
inventories will correct until a more significant fall in pricing occurs.
• Near-term downside to the group remains despite valuation at 0.71x P/B
(large-caps) being at or near prior trough levels. Given the lack of a
positive catalyst over the next few quarters, and our outlook for fundamentals
to remain challenging, if not worsen, we believe near-term downside is
likely. Accordingly, we continue to expect to find a better near-term entry
point, given worsening trends and the large-cap builders’ P/B being near
1990’s 0.7x trough. On a long-term basis, given our outlook for
fundamentals to eventually stabilize, and P/B valuations, even with a 20%
further hit to equity, still trading at the low end of the group’s historical
range, we maintain our positive stance over an 18-month time horizon, and
highlight OW-rated large-cap PHM, and mid-caps SPF and MDC.”
make money Says:
I’ll pay the 4K. Thank you.
The problem is that those 2 houses would not have the same asking price. Currently the “more presitigious town” asking price is likely to be 10% higher, so in your scenario the more prestigious town would have a comparatively discounted asking price.
I’d probably pay the extra $ in taxes.
Small thought. With all the celebration when the DOW broke through the 10000 mark. The drive up to 14000 seemed to be on the back of all the M&A activity.
With the credit crunch and recession looming, is it time for a major correction back to 9000?
There are layoffs every year on Wall Street. Even in the good old times people get kicked to the curb. I used to work at Bear and knowing the company well I can tell you that they will “resize” no matter what even if the collapse of their funds never happened. Given the fact that they had such a massive downturn in earnings they will cut deeply in this order: IT and OPs first, then back office, then dead weight in the front/middle office. My prediction at Bear, 10% cut by Feb. Meaning slightly over a 1000 people given the size of the company. There will be right sizing with the i-banks this year, you would have to be an idiot not to see that it will happen. As I said, it always does, even in the good years. The down years is when the papers pick it up and make it known to a wider audience. I think that most companies actually encourage this since it makes them look like they are acting in the best interest of their shareholders.
3b,
Your salary didn’t go up 130% the past 5 years? You must not be one of the wealthy and intelligent flocking to the economic activity in the NYC area. Looks like Detroit may be up your alley.
#92 Or perhaps Pittsburgh.
#91 Mike: Bear was always notorious for paying lower (vs the rest of the street), and keeping costs down.
They certianly will be laying off, that is a given.
And finally…
Real Estate and Housing Industry Outlook from a Honest Broker !!!
http://www.treasure-coast.us/weeklyupdate09-23-07?ref=patrick.net
So I guess prestige is more important than the actual property taxes?
Okay another question: What would property taxes have to be at this point in time to discourage a buyer from buying in any particular town?
12k
15k
20k??
For example: River Edge is a very nice town, but the high property taxes discouraged me from buying there
#96 tbw; Yep, and now people are starting to challenge their assessments. In a declining housing market, its hard to justify 10k or more a year for POS cape
rising taxes have already turned me away from Glen Rock and Ridgewood….i wont even consider a home there anymore…
yes, rising taxes do play a major role!
#73 skep
I observe the same.
#88
wish there was a way to track the bid/ask spread. I guess there is for the “ask” side but it would be interesting to see the “bid” and how big the spread is.
for those with bids at least
“The drive up to 14000 seemed to be on the back of all the M&A activity.”
They’re mutually reinforcing.
I think a major correction is a near certainty, tho this is my opinion only and not an investment recommendation.
I guess in theory high taxes could be offset by lower price, but the problem is that price is forever and tax rates change. there is something to be said for buying into a town that has demostrated the ability to keep taxes relatively low over the long term, even, I think, if you have to pay a slight premium in price to do so
I like the new format. Great Job Grim.
Just testing some things out for now.
What new format?
He just happened to hit the site at the same time I was testing a change.
Ah
Thought there was something I couldn’t see on bberry.
[96]
Real estate taxes have major influence over our consideration on where to buy, primarily because there is no end in sight. I have yet to see a town in NJ where the taxes are “worth it”. I hear a lot of jibberish about schools and services but taxes are primarily a result of corruption and waste in this state. In addition, given the current fiscal situation of NJ (the ultimate welfare state) and the fact that the only real growth industry from a jobs standpoint is the big Trenton tit, RE taxes will keep going up because (1) money has to come from somewhere (2) there is zero political fall out from raising taxes. NJ voters have proven over and over that they’ll keep sending the same idiots back to manage the state finances.
Anyone know a decent graphic artist?
Need a new header image and color scheme.
gary, you said:
I’m not surprised. We really do seem to be a little insulated here, as funny as that sounds. The NY metro area seems to be the last place on earth that gets affected… if much at all.
I went to a conference last week on mortgage-backed securities. I had a conference on the side during one of the breaks with one of the regulators.
I made that same comment, that the NYC/NJ area doesn’t seem to be as bad off as some places, like Las Vegas.
The person said: “It’s coming.”
The other thing this person noted was that the 2/28’s just started to reset two months ago, and the period for the resets will be over the next two years.
I thought the big spike in resets would start in October, and the key period would be the fourth quarter and maybe next year.
But this person said two years was the key time frame.
conversation, not conference …sorry
#94
I have a few friends in finance, the one in risk management just recently left Morgan Stanley for Bear – here is the kicker – Bear’s offer was 15% higher. If I had to rate this persons skillset I would rate it average at best.
My thoughts were along those of #91 MikeinNJ that layoffs or at least no new additions would be made…. when do these firms make their cuts?
Great Conference Call Moments: Robert I. Toll, CEO Toll Brothers
Friday August 24, 10:53 am ET
Judy Weil submits: The background to this is that Robert I. Toll, CEO of homebuilder Toll Brothers is a pretty sharp guy who can be merciless with analysts and underlings alike who can’t keep up with him.
In general, Toll Brothers (NYSE: TOL – News) conference call transcripts are a great read just to catch Robert Toll’s zingers. But just this once, during last week’s FQ3 conference call, he gets something of a comeuppance.
Just thought I’d share a laugh.
Douglas Kass – Seabreeze Partners
This is a much broader question then has been asked in the conference call.
Robert Toll
That is great to be a short, by the way.
Douglas Kass – Seabreeze Partners
If the administration came to you to resolve the housing crisis, what remedies would you recommend, Bob, to bring supply and demand back into balance over a reasonable period of time?
Robert Toll
I think the most important thing is to immediately address the mortgage concerns. Giuliani was asked in an interview with Kudlow recently, would he bring in any regulation? He said, it was up to the market to straighten things out, and it will. In my opinion, that is probably what the guy said in ’29 that were running the Fed.
I was castigated recently for suggesting a few weeks ago that some government regulation would not be a bad thing. The average reaction was the minute you let the government in you’re begging for disaster. I can generally agree with that. Look what has happened with wetland regulation, for instance. You need a team of lawyers to fill a puddle in your backyard. On the other hand, where would we be without antitrust legislation? We probably have one oil company known in the United States as American Standard. I think a little regulation —
Douglas Kass – Seabreeze Partners
That is a toilet company, Bob.
Robert Toll
Thank you very much. American Standard is. But it was Standard Oil. So I think a little regulation wouldn’t be a bad thing.
Credit Suisse layoffs?
http://www.dealbreaker.com/2007/09/credit_suisse_400_laid_off.php#comments
Housing market video (hope link works)
I guess not
#100
The “low-ball” piece as featured on this site
highlights some of the larger bid/ask spreads between the asking and closing prices, a convergence of the two would indicate a sobering on the part of the sellers and could be an indicator.
Since there is no MM to faciliate liquidity…only forced liquidation upon foreclosure……in theory, and as per the JP report, this [the lowering of the spreads] will manifest itself in the form of declining inventory as the spreads narrow and deals are struck.
On the train home today, read a case for the fed lowering another 50bps in the coming months…as it stands 25bps is baked in.
cheers.
Tom
Was perusing the local newspaper thrown at my doorstep last night. For th coming year, property taxes are going up 5%. They went up on average 11% a year the past 5 years.
And the best part is – 80% of the increase is to fund the pension shortfall for the disguised employment folks, and 20% is for capex. Nice going….
#118 On the train home today, read a case for the fed lowering another 50bps in the coming months…as it stands 25bps is baked in.
If so, that means a major, major recession.
#111 scribe thought the big spike in resets would start in October, and the key period would be the fourth quarter and maybe next year.
They are starting in Oct, the bulk of the resets are through 08. By 09 we should be just about done.
Tom (95)-
Thanks for this link! Boy, has he got it pegged.
3b
I’m new here so I don’t want to ruffle any feathers…do you think this is something that I can post on the forum or is this best saved for weekend discussion?
I like to read Richard’s pieces, he’s been ahead of the curve on some past issues.
I think I’ll just host the relevant stuff off site. Link to the PDF below:
http://www.filefactory.com/file/54bb81/
Did I mention that while I’m hoping for a swift resolution to the matter stateside I have some urine soaked square footage to unload in the Eastern Bloc at euphoric prices….talk about a conflict of interest….
T
Quote of the day from Bob Toll…
“If you believe anyone telling you prices are stabilizing, or even showing signs of stabilizing, you are either on drugs or you have the IQ of a green mango.”
dream (124)-
That wasn’t Toll. It was Mike Morgan, author of that article.
My bad….I just realized the typo. Sorry.
Clot, are your shovels getting a bit blunt? I figure you’ve been in the trenches a while…you’ve been a bit quiet :)
dream (127)-
I’m double-shifting it. I dig in the mine until my air supply runs out. I go in with jackhammers and dynamite. Long anything that comes out of the earth or sea. Shiny or slimy, doesn’t matter. If you can show me the way to the market for pencil lead, I’ll get long it, Texas hedged.
Beans going for the teens, wheat off the charts. Sh*t, I’ll get long the guys who sell ’em the fertilizer.
BTW, I have a list of vultures who are going to pick at the tasty bits in a few weeks. If you’re a seller, start practicing rolling over and playing dead.
All disclaimers.
It’s time to drop the NAR numbers and go with Schiller’s numbers. The NAR has lost all creditibility.
It’s time to drop the NAR numbers and go with Schiller’s numbers. The NAR has lost all credibility.
Mike, no kidding. The NAR is a complete joke and has become a marketing mouthpiece for the sell side.
“I’m double-shifting it. I dig in the mine until my air supply runs out.”
Omar has also called, he’s looking for help in the pen.
“Beans in the teens”
Clot,
But a McMansion and knock down, plant grain.
http://www.beans1.com/%5Cbeans%5Cindex.htm
Buy
Sell
NJGal, (#27)
Of course that’s a good week to have a birthday — also having been born “that week” — I can tell you that folks born in and around the first week of Nov or so were conceived (please don’t ask me to explain this, just look it up…) on Valentine’s day!!
My folks were all too happy to tell me about my conception — I’m still looking for the right Ajax & bleach combo to scrub that image off my oh-so-painful retinas…..
eek. Just thought wanted to know :-)
sl
italics off.
Can someone provide the address, tax, DOM and history for NJMLS# 2735371? Thanks in advance!
Well SL
I was married for 4 years b4 I got pregnant the first time, and I had read that March was a common time to conceive resulting in a december baby. My first son was due on dec 11 born on dec6, The second time I got pregnant was 6 years later – my due date again was dec 11! My second son was premature born 6 weeks early on Nov 7th. Thats my lucky boy!
KL
Mikey Mike
2735371 113 Ballentine Drive – In attorney review listed on 8/30 – has an irregular history, was up for rent, was up for sale 2002 for 489,000 doesnt show a sale reduced all the way down to to 405,000 then listed again in 2004 for 409,000 no sale again.
KL
KL,
nice! he still qualifies for Scorpio status! Our kid was slated for July 4th and decided by the first week of June he wanted OUT. We were caught with no car seat, no crib… buying stuff last minute… it was a kick in the arse to say the least
sl
#123 I like to read Richard’s pieces, he’s been ahead of the curve on some past issues.
And those issues are?
Grim (110)
Contact this guy: http://www.zillexa.com. He’s good, he’s nice, he’s not prohibitively expensive, and he lives in prestigious Bergen County. :) Seriously, though — I’ll vouch for him.