From the WSJ:
Finally, It Is Time to Buy a House
Warren Buffett famously once said: “Be fearful when others are greedy, be greedy when others are fearful.”
And if you’re not instinctively scared of the housing market, then global warming, saturated fat, running with scissors and the bogeyman probably aren’t keeping you awake at night, either.
The fact that everyone is scared to dabble in—much less commit to—housing makes it a close-to-perfect investment based on Mr. Buffett’s principle. But buying real estate is a good long-term investment for many more reasons, some of which have only become apparent in recent weeks.
The most striking: Housing prices rose sharply from April to May. The S&P/Case-Shiller Index rose 2.2% in 20 of the nation’s big cities. Prices shot up more than 3% in Chicago, Atlanta, San Francisco and Minneapolis. Even Detroit’s housing market scored a gain, inching up by 0.4%.
Nationally, the increase was the first in seven months. More importantly, the increase matched other data and empirical evidence this spring that foreclosures slowed and inventories were shrinking. Simple economics suggests that as the supply of distressed property slows, buyers will be forced into higher-price properties.
In addition, interest rates on 30-year fixed mortgages have tumbled below 3.5%. For those who can get credit, these aren’t just historically low rates; they are one-sided deals tilted toward borrowers.
…
Here’s where the fear comes in. From 30% to 50% of existing mortgages in the U.S. market are underwater, depending on the estimate. That means many borrowers are trapped in their homes and loans. They either can keep paying and hope prices will improve or walk away, putting downward pressure on home prices.Foreclosure rates have leveled off, but market analysts believe an increase is likely.
Here’s why. Since the financial crisis, 3.7 million homes have been foreclosed on, but an additional 1.4 million remain in the national foreclosure inventory, according to CoreLogic, a real-estate research firm.
Finally, a housing recovery won’t happen, or could be snuffed out, by a rotten economy. There’s never been significant growth in housing with high unemployment. And as Dow Jones’s Kathleen Madigan noted, “Potential buyers must feel secure with their job prospects before they commit to long-term mortgages. Higher loan standards mean banks want to see an applicant’s solid income history before lending.”
There is plenty to be afraid of when it comes to home buying. But in the current investing climate, housing presents an attractive long-term investment that should hold steady or even have upside surprise in the short term.
…
Mr. Buffett would remind us that investments of any kind are not without risk. Each should be considered with the investor’s time horizon and appetites. But he also has acknowledged that real estate is especially attractive when financing is cheap, there is pent-up demand and prices have been driven down by a spooked market. Put another way, it’s time to be greedy.
From USA Today:
Wealthy home sellers capitulate, high end prices drop
Prices for homes listed at $1 million or more have fallen 20% this year, according to RealtyTrac. The average sale price for top-tier real estate has fallen to just over $2 million, from $2.5 million in 2011.
Those prices cuts stand in stark contrast to the broader housing market, which is seeing early signs of price stability and even price increases for the first time in years.
All that price-chopping at the top, however, has sparked a wave of sales as buyers scoop up deals and sellers accept the new reality of lower prices.
The number of transactions for homes priced at $1 million or more has jumped 18% this year, one of the strongest increases since 2008, according to Realtytrac.
Brokers for luxury real estate are already calling 2012 the “The Year of Capitulation” for wealthy sellers.
“I think sellers are now resigned to today’s prices and what’s actually selling,” said Paul Boomsma of the Luxury Portfolio, a marketing group for luxury homes. ” People who are serious about selling are ready to make a deal now, where maybe they weren’t a year ago.”
There are several factors behind the price drops. The high end of the market didn’t fall as much or as early as the broader market, since there weren’t as many distressed sellers that were forced to sell. Those wealthier sellers have hung on to their properties, waiting for prices to approach 2008 levels.
Now that they see that the prices of 2008 aren’t likely to return anytime soon, many are deciding to drop their prices just to get a deal. The increase in sales has itself spurred sales, as wealthy sellers see a larger number homes in their neighborhoods trading at lower prices.
“There is now a critical mass of data so sellers can say, ‘Well, this is the new reality,'” Boomsma said.
From 30% to 50% of existing mortgages in the U.S. market are underwater, depending on the estimate. That means many borrowers are trapped in their homes and loans.
This statement is the reason why I can’t find a house to buy. There’s no inventory. I’m aching to make a bid but 600K plus for a piece of sh1t is not sexy to me.
I notice the same thing in second homes on the NC coast. A good number of homes that I looked at last year and wrote off because the prices were absurd are either withdrawn, sold at steep discounts, or now listed at a deep discount to the prices last year.
I work with a lot 25-30 year old professionals, both male and female. I don’t know of any that are moving in with SOs or getting married or buying real estate. On the first floor we employ a lot of blue collar people in the same age group. They seem to be pairing up, establishing households but I don’t know of any that are buying real estate.
We’re becoming a highly immobile population. Hopefully you like where you live because chances are you’re not going anywhere.
http://deadspin.com/5931920?utm_campaign=socialflow_deadspin_twitter&utm_source=deadspin_twitter&utm_medium=socialflow
Was it the Blow,Meth or combo that claims another soul ?
OT,
I know there are a few brits here, and I hate to throw cold water, but it is painfully clear to me at least that Federer is merely phoning it in, and at worse, is throwing the match.
Add the hometown judging (Murray got one winner that I questioned and the slo-mo showed it was clearly out), and this has all the hallmarks of a fixed fight.
I hope I am wrong. I do want to see him win but the nagging voice of doubt is becoming insistent.
Comrade,
Federer was just tired and Murray has home court advantage. Roger is starting to feel the effects of his age. He can do the grand slams because he has enough time off but the olympics were just too close to the recent grand slam. Murray reached the final of Wimbledon so it wasn’t that surprising. I pretty much figured he would win after he surpassed Djokovich.
#6
My guess is a big pharma c0cktail.
#2 Fast Eddie, I am having the same problem. Been looking in/around Monmouth County for 6 months now. Many properties just absurdly priced. When something comes on that is priced well, there are multiple bidders, each and every time. The property goes quick, often within 2-4 days of listing. I am a cash buyer so bidding wars hold little hope for me: I see adding another $10K as actually paying $10K more. A bidder buying with a mortgage sees it simply as another, what, $40-50/month – chump change, why NOT bid the extra $10K?! (I have yet to run into another bidder who is bidding cash.) It’s starting to look like I’m going to have to suck it up and overpay at some point, with the consolation that at least $10K (or $15K) isn’t that much in the scheme of things. And it’s far less than I would overpay one of these joker-sellers with their overpriced sale listings.
[2] “I’m aching to make a bid but 600K plus for a piece of sh1t is not sexy to me.”
But others are fearful! Jump in time to get greedy! Doesn’t the palpable fear out there make you want to fork over a fortune for a crapshack that comes with a $1,000+ per month in serfdom, er, taxes, with no end in sight for the ballooning property tax bills?
#10
With FHA and 0-3% down mortgages, cash is trash. You’d be better off throwing in a few rolls of charmin to sweeten the deal to bother with the cash buyer line.
Only hope with that strategy is to find someone in a rush to close but that could take a long time.
[10] too,
At this point, you missed the spring rush, and anything on market has either sat for being overpriced or is late to market. There is purportedly a September influx of buyers, and then an influx when bonuses get announced on WS. Looking between those periods may net you something.
But with a lot of press coverage suggesting that the bottom is in (at least more than in prior years), sellers that don’t have to sell are sticking.
One further point. I’ve concluded that, for me at least, it doesn’t make financial sense to take a lowball and get out of dodge unless I think that the market is going to crater before next spring. Much of this is due to the uniqueness of my situation—I can avoid losing money, and may actually make money, by pulling off and relisting in February, so it makes no sense to take a lowball offer unless I felt that the market wouldn’t improve.
[4] expat,
I am talking against my own book, but a while back, I suggested that, for tax purposes, two high earners should live in sin and not get married until one was ready to exit the workforce. Further, they should not buy property if they were professionals because of their propensity to move, and if they did buy, they should buy a vacation home.
Just came back from 4 open houses in Wash. Twp/Ridgewood area. My message: good luck, sellers. In further news, I made a bid on a house a week ago; went about 18% below ask on a house that needs kitchen/bath redo, wall paper removal, etc. They didn’t counter and owners have been riding market down. The house has the property footprint and layout I’m looking for. Those are my biggies. I’ll wait a few weeks and bloody them one more time with a few more $crumbs. If no movement, then let ’em die in the f*ckin’ joint.
[14] Nom – Can’t find a flaw in that logic.
I am talking against my own book, but a while back, I suggested that, for tax purposes, two high earners should live in sin and not get married until one was ready to exit the workforce. Further, they should not buy property if they were professionals because of their propensity to move, and if they did buy, they should buy a vacation home.
[13] Nom – reread as if someone else wrote it:
Much of this is due to the uniqueness of my situation—I can avoid losing money, and may actually make money, by pulling off and relisting in February, so it makes no sense to take a lowball offer unless I felt that the market wouldn’t improve.
[10] 1toomany – I chuckle over this kind of situation a lot. I think what you’re referring to is known as “liquidity preference”. No surprisingly, those with high liquidity preference have high liquidity, like yourself. Cheap and available credit raises prices. That’s why houses are priced where they are and why college educations are priced where they are. Back in ’97 or so a colleague of mine in his late 20’s, already married with a house bought the new small Lexus (really a re-badged Camry) for $29K, largely financed, of course. I thought it was an unwise purchase. I asked him if he had suddenly come into $30 or $40K unexpectedly would he pay $29K cash for the same car. His answer, “Of course not!”
I see adding another $10K as actually paying $10K more. A bidder buying with a mortgage sees it simply as another, what, $40-50/month – chump change, why NOT bid the extra $10K?! (I have yet to run into another bidder who is bidding cash.) It’s starting to look like I’m going to have to suck it up and overpay at some point, with the consolation that at least $10K (or $15K) isn’t that much in the scheme of things. And it’s far less than I would overpay one of these joker-sellers with their overpriced sale listings.
Jackson Browne sound check at Monmouth University. Bringing me back to my college days.
NJC,
Load-out to Stay, one of the best things one could want to hear at a concert. Happy feeding.
Clot should appreciate this:
http://www.nationalreview.com/articles/229215/when-responsibility-doesnt-pay/mark-steyn?pg=1
While Barack Obama was making his latest pitch for a brand-new, even-more-unsustainable entitlement at the health-care “summit,” thousands of Greeks took to the streets to riot. An enterprising cable network might have shown the two scenes on a continuous split-screen — because they’re part of the same story. It’s just that Greece is a little further along in the plot: They’re at the point where the canoe is about to plunge over the falls. America is farther upstream and can still pull for shore, but has decided instead that what it needs to do is catch up with the Greek canoe. Chapter One (the introduction of unsustainable entitlements) leads eventually to Chapter Twenty (total societal collapse): The Greeks are at Chapter Seventeen or Eighteen.
What’s happening in the developed world today isn’t so very hard to understand: The 20th-century Bismarckian welfare state has run out of people to stick it to. In America, the feckless, insatiable boobs in Washington, Sacramento, Albany, and elsewhere are screwing over our kids and grandkids. In Europe, they’ve reached the next stage in social-democratic evolution: There are no kids or grandkids to screw over. The United States has a fertility rate of around 2.1 — or just over two kids per couple. Greece has a fertility rate of about 1.3: Ten grandparents have six kids have four grandkids — ie, the family tree is upside down. Demographers call 1.3 “lowest-low” fertility — the point from which no society has ever recovered. And, compared to Spain and Italy, Greece has the least worst fertility rate in Mediterranean Europe.
So you can’t borrow against the future because, in the most basic sense, you don’t have one. Greeks in the public sector retire at 58, which sounds great. But, when ten grandparents have four grandchildren, who pays for you to spend the last third of your adult life loafing around?
By the way, you don’t have to go to Greece to experience Greek-style retirement: The Athenian “public service” of California has been metaphorically face down in the ouzo for a generation. Still, America as a whole is not yet Greece. A couple of years ago, when I wrote my book America Alone, I put the then–Social Security debate in a bit of perspective: On 2005 figures, projected public-pensions liabilities were expected to rise by 2040 to about 6.8 percent of GDP. In Greece, the figure was 25 percent: in other words, head for the hills, Armageddon outta here, The End. Since then, the situation has worsened in both countries. And really the comparison is academic: Whereas America still has a choice, Greece isn’t going to have a 2040 — not without a massive shot of Reality Juice.
Is that likely to happen? At such moments, I like to modify Gerald Ford. When seeking to ingratiate himself with conservative audiences, President Ford liked to say: “A government big enough to give you everything you want is big enough to take away everything you have.” Which is true enough. But there’s an intermediate stage: A government big enough to give you everything you want isn’t big enough to get you to give any of it back. That’s the point Greece is at. Its socialist government has been forced into supporting a package of austerity measures. The Greek people’s response is: Nuts to that. Public-sector workers have succeeded in redefining time itself: Every year, they receive 14 monthly payments. You do the math. And for about seven months’ work: For many of them, the work day ends at 2:30 p.m. And, when they retire, they get 14 monthly pension payments. In other words: Economic reality is not my problem. I want my benefits. And, if it bankrupts the entire state a generation from now, who cares as long as they keep the checks coming until I croak?
snip
[19] Shore – same here. I first heard Running on Empty on my dorm floor at Rutgers, 77-78.
Load-out to Stay, one of the best things one could want to hear at a concert. Happy feeding.
“We’ve got disco…and 8-tracks and cassettes in ster-ee-0h.”
http://www.youtube.com/watch?v=jtuvXrTz8DY
re: 21-I remember the lecture our sociology teacher gave us in High School and how he warned us we would be putting pillows over our grandparents faces as they slept. What the national review did not mention is China where the one child policy leaves most grandparents begging in the streets. I would not be surprised if China does not embark on a one grandparent policy in the coming decades.
# 10 1toomany …where in Monmouth County ? I have a 3 bed 1 1/2 bath that I’m going to list in about 2 weeks in Little silver ,I’ve owned this home for 30 years ad have always rented it out the only reason I’m selling is because Obama’s new cap gains tax if your interested I’ll e-mail you the address ….
shore (21)-
Thanks. Common sense is an uncommon thing.
Price of Silver is not manipulated ! News at 11:
http://www.zerohedge.com/news/libor-may-be-manipulated-silver-not-cftc-conclude
Just to provide another datapoint…..I live in (prestigeous) Colts Neck in Monmouth County. My cul-de-sac development has roughly 40-45 houses in it. No sales on the loop since 2006. One overtly abandoned house with BOA-face mortgage. The person next door who overpaid roughly $450K on a $700K house in 2006 is stuck with a $1.15M price tag with a weed strewn lot next door and a mosquito infested pool in the back. She takes pains to upkeep the property next door. Across the street from her is a $700K home that has $1.4M in two first lien mortgages on it, yet the occupant remains with no utilities and run a generator in his backyard. This same occupant shaved his hedge in the shape of a phallus in 2010, although it has since grown out. My home and the one across the street are being rented.
Just last night at roughly 4AM, some person(s) destroyed about 1/2 the mailboxes on the street and threw plants and trees into all the pool they could access. On the way out, they scared the fcuk out of my family by banging on the door and hitting the doorbell at 5:20AM……
Happy house hunting….make sure your new home has a hard perimeter……
Bagholder suckers!
1toomany says:
August 5, 2012 at 12:32 pm
#2 Fast Eddie, I am having the same problem. Been looking in/around Monmouth County for 6 months now. Many properties just absurdly priced. When something comes on that is priced well, there are multiple bidders, each and every time. The property goes quick, often within 2-4 days of listing. I am a cash buyer so bidding wars hold little hope for me: I see adding another $10K as actually paying $10K more. A bidder buying with a mortgage sees it simply as another, what, $40-50/month – chump change, why NOT bid the extra $10K?! (I have yet to run into another bidder who is bidding cash.) It’s starting to look like I’m going to have to suck it up and overpay at some point, with the consolation that at least $10K (or $15K) isn’t that much in the scheme of things. And it’s far less than I would overpay one of these joker-sellers with their overpriced sale listings.
[29] chifi – I think that was Jeffrey Otteau terrorizing your neighborhood. He does that every Saturday, but he always picks a different NJ cul-de-sac. Don’t buy a house on a cul-de-sac.
I keep reading here on this blog that real estate in NJ is on the rebound and immune from significant declining values and that it’s the socalled “sand states” where real estate values are and will remain depressed. Maybe Colts Neck is the black sheep of Jersey?
[17] expat,
It was vague and incomplete. That was deliberate.
[16] expat,
“Can’t find a flaw in that logic.”
Would that I had the good sense and the sack to live by my belief and tell the wife to get used to renting.
JJ, can I borrow a little scrote next time?
#39 Chi (previous thread)
Leave? Why would I do that, I hold out so much hope for the USA. I know there are people building perfect communities.
http://www.flickr.com/photos/77232795@N08/7721818072/in/photostream
“A hypocrite takes financial advantage of a system, and then complains as he deposits his outsized paychecks……”
I was cashing an oversized paycheck long before I came over here. In fact, thinking back, I took a paycut when I came over here due to the currency conversion.
“To be clear….the U.S. and NJ are not better than other places in the world or country. But if you feel the need to complain how sh!tty it is here…..THEN LEAVE!”
So I just drove the length of Rt80 in PA for the 2nd time in 3 days. In your new world order, do I have to say its not better that other places in the world, or do you want the truth.
“Qatar, despite its blistering heat and inaccessibility, in 2010 won 2022 World Cup ”
This will be a disaster. There were a lot of teams that could not cope with the heat in the US in June 1994. Add another 20 degrees and you will have players dying on the pitch.
#49 Ragnar (previous thread)
Why would you want to leave. NJ, it is the Libertarian Utopia! Those 566 municipalities determining their own individual destinies? All 566 with their own police force and school boards.
CHI – that sucks drove thru today up route 34on my my way home and did a tour of the homes for.sale.on zillow. Lots of.weed.strewn homes AND EMPTY McMansions. HOLMDEL looks better..
#54 brian (previous thread)
To truly grasp America’s dominance of the technology space, one only needs to look at a list of the largest tech companies in the world. Nine of the ten largest are American. The first European company doesn’t show up until No. 11 on the list.”
Do you have a source on this?
There are two parts of this to consider. The first is that, there are companies such as Samsung that are truly dominant in tech followed by a lot of the Japanese/ Korean that go across many industries.
The second point, for this to hold true, the US should have dominance in the likes of Tech/Pharm in India and China as they have emerged, but that is not the case. In fact, go back to the 2nd world war and look at IBM’s relationship with Japan up through the 80’s and 90’s and you have a roadmap for how not to do it.
The next generation of home buyers? Not!
http://www.nytimes.com/2012/08/05/nyregion/four-men-sharing-rent-and-friendship-for-18-years.html?pagewanted=all
WHAT if you had never settled down? Never taken that job for the health insurance, or decided to start a family? For New Yorkers of a certain age, those are the middle-of-the night questions, the nagging thoughts that occur as they squeeze themselves onto the packed No. 1 train for another day at the office, ignoring that unfinished screenplay or latent desire to chuck everything and live in an ashram.
snip
They have no children, no linear career histories, no readily disposable savings. The four men, all heterosexual, approaching 40 and never married, have lived together for 18 years, give or take a revolving guest roommate, cohabitating in spaces like an East Village walk-up, a Chelsea loft and, now, a converted office space in Queens.
Their latest home, which they have nicknamed Fortress Astoria, takes up the second and third floors of a slate gray concrete block building with floor-to-ceiling windows on 31st Street. The setup is ideal for four bachelors. Bedrooms do not share common walls, and there are communal spaces both upstairs (huge television, sofa) and down (kitchen). There is a lovely garden out back….
snip
The apartment presents itself as a mix of man-child fantasy and discerning urban sophistication — Peter Pan meets the man cave. Action hero figurines, many still in their boxes, are displayed over the doorways, while film snob DVDs (by directors like Akira Kurosawa or Preston Sturges) line the shelves. There are expensive Mac computers in the bedrooms, and the kitchen holds an impressive array of spices (turmeric, pink peppercorns, cardamom), not one but two mortars and pestles, designer Japanese knives and a seltzer-making machine.
But dinner on a recent night was takeout pizza and garlic knots, served on paper plates. And in one of the downstairs bathrooms, a chopstick serves as a toilet paper holder.
Sociologically, the men represent the apotheosis of two trends in American life. While Mayor Michael R. Bloomberg may be promoting the idea of tiny apartments for singles, the most recent census figures suggest that many people do not want to live alone; they prefer or need the company: The number of roommates in nonfamily households in New York City increased by more than 40 percent between 2000 and 2010. At the same time, Americans, especially men, have been pushing back the age at which they first marry — for men, it climbed to 28.2 years in 2010, up from 26.8 a decade earlier.
snip
FM,
I have not been on all that much and seem to have missed some things, where are you from?
NJC,
How is the concert?
“Qatar, despite its blistering heat and inaccessibility, in 2010 won 2022 World Cup ”
Maybe they will use their oil money to build a geodesic dome over most of the country — like what Buckminster Fuller wanted to do to NY City.
http://online.wsj.com/article/SB10000872396390443545504577565322674652392.html
Is the Real-Estate Rebound for Real?
Shore- I just woke up. Jackson put me fast asleep. Finally played Running on Empty, but no Load out/Stay, no Pretender, no other hits. Probably doesn’t have the energy, the man doesn’t eat flour, wheat, sugar, yeast, and a myriad of other foods. He’s beyond skinny.
Kevin Buelle showed up ( he used to be Jackson’s guitar tech) but with no guitars so we knew Bruce wouldn’t be there. Bruce’s cousin and security came but just to see the show. Yawn.
His food limitations must have made your job a real challenge. it soulds like the show must have been a bit of a letdown for the audience.
shore[21]
Even if Greece had 100% privatized retirement system, situation with 1.3 workers per retiree is catastrophic because the society won’t be able to do essentially anything other than taking care of the old people… In this sense, whether the workers are taxed, and taxes are used to pay them back indirectly through the oldsters’ pensions, or money to pay come from some bank accounts, doesn’t really matter. You have to have either immigration or increased retirement age to shift the ratio.
Hmmmm Fear and Loathing is Colt’s neck. In contrast I live in and bought a modest place in a neighborhood where no one uses the public schools (except me of course). My neighbors are highly educated and insular but nobody fears that they’ll have a Yeshiva kid breaking in over spring break. A couple of empty homes and no real crises feel here. My place is fine and seems to demand constant upkeep which we have provided. Unfortunately I will most likey die in this place as most of my elderly neighbors have opted to do. One very recently.
coast (46)-
I moonlighted at a restaurant in Los Feliz (LA) when I lived out there. Jackson Down (the staff’s name for him) came in almost every night. He is a world-class hypochondriac and douchenozzle.
sx (49)-
Must be a bitch to get the stench out of a house where somebody has decomposed.
The author of this article listed the 11 largest tech companies by market cap in order to support his point.
http://www.businessinsider.com/dont-count-america-out-2012-7
1. Apple (USA) $565 Billion
2. Microsoft (USA) $252 Billion
3. International Business Machines (USA) $219 Billion
4. Google (USA) $199 Billion
5. Oracle (USA) $147 Billion
6. Samsung (South Korea) $136 Billion
7. Intel (USA) $128 Billion
8. Qualcomm (USA) $98 Billion
9. Cisco (USA) $88 Billion
10. Visa (USA) $85 Billion
11. SAP (Germany) $73 Billion
Source: S&P Capital IQ. Market caps are reflective of July 20 closing prices. Sorted by companies in the information technology sector.
40.Fabius Maximus says:
August 5, 2012 at 10:12 pm
#54 brian (previous thread)
To truly grasp America’s dominance of the technology space, one only needs to look at a list of the largest tech companies in the world. Nine of the ten largest are American. The first European company doesn’t show up until No. 11 on the list.”
Do you have a source on this?
51. Wasn’t quite like that.
Could be worse — mObility impaired country.
The housing market
Pulling its weight at last
Investors help turn the housing market into a source of growth
http://www.economist.com/node/21559923
[49] sx,
“I will most likely die in this place”
Be careful, you might be giving Clot some ideas.
Wow. Olympian from NJ kicked.out for failing pot test.
And he’s from the Brig, no less.
What are the preferred internet sites plus blogs and forums focused upon reading plus books?
Nom – can i get your email? I have a friend who might be moving to westfield and he is considering renting for a bit to get the lay of the land…
I’ll right away seize your rss as I can’t to find your email subscription link or newsletter service. Do you’ve any? Kindly permit me know in order that I may just subscribe. Thanks.
Wonderful issues altogether, you just won a logo new reader. What might you suggest in regards to your publish that you made a few days in the past? Any positive?
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