From Barrons:
The Big Glut
By ROBIN GOLDWYN BLUMENTHAL
“IT WOULD SEEM TO HAVE IT ALL: four bedrooms, a guest house, a pool and a rock waterfall. But the vacation home in Naples, Fla., hasn’t been drawing much interest from buyers, so the seller recently threw in that most modern of amenities: the $1 million price cut. That’s brought the asking price down a full 25%. “If you want to sell, you’ve got to go back to ’04 prices,” says Chip Harris of Coldwell Banker Previews International, which is handling the property.”
“The market for second homes could use a second wind. After a long string of double-digit annual price increases, a number of second-home meccas across the country are suddenly suffering from plunging sales volume and burgeoning inventories of unsold homes. Result: Naples-style discounting is starting to spread. It hit the town of Pocasset, on Massachusetts’ Cape Cod, just as retired executive Jack Reen was trying to sell his four-acre, six-bedroom beachfront home. He cut the price several times, for a total of 42% off the listing price, before striking a deal at $3.95 million. Reen takes a philosophical view of the experience, noting that the original price was set at the top of the market. “Calling the tops and bottoms is impossible,” he says.”
“Though the official figures on sales prices have yet to reflect the current round of cuts, interviews with real- estate pros and others strongly suggest that the averages are deteriorating in a number of key markets. Just look at green and hilly Litchfield, Conn., about a two-hour drive from New York City. It was a magnet for Wall Streeters during the past five years, and prices climbed accordingly. But in the past 10 months, prices in the lower end of Litchfield’s market — homes of $300,000 to $600,000 — are down 12%-14%, and volume is falling at the next level up, says Stephen Drezen of the local Portfolio Properties Group.”
“”People don’t believe in the laws of supply and demand anymore,” says Alan Skrainka, chief market strategist at Edward Jones. “We’re not saying it’s a bubble, but we’re saying prices are overstated and will likely correct 20% to 25% over four or five years.””
“He rejects a notion advanced by housing bulls that shore communities in Florida and California will be protected because of the limited supply of coastline. “Japanese real estate and land prices went down for 15 years and Japan is an island,” Skrainka says.”
“On the East Coast, signs of a glut have been turning up all along the coastline of New Jersey. In an effort to move inventory, brokers in the upscale summer resort of Stone Harbor have been sending out postcards to vacation renters, proclaiming a three-bedroom condo to be “the perfect investment opportunity” at just $739,000. That’s about what many of the would-be buyers might have paid for their first homes.”
“”The market is definitely in a correcting phase,” says Timothy Richards of Ocean City, N.J., who recently retired as a realty broker and began a second career as a developer. He says buyers are waiting to see what happens with mortgage rates. “Whenever financial markets are in transition, we go into a holding pattern,” he adds.”
In an effort to move inventory, brokers in the upscale summer resort of Stone Harbor have been sending out postcards to vacation renters, proclaiming a three-bedroom condo to be “the perfect investment opportunity” at just $739,000.
If these shore condos were truly the perfect investment opportunity we would never hear about them. The brokers would buy them for themselves.
Anytime someone claims what they are selling is a great investment ask them then why are you selling it instead of holding it or buying more for yourself? Stand back and watch the stammering and hemming and hawing begin.
The Crash has begun!
BOYCOTT HOUSES!
The price floor is caving in.
bababababa
Booooooooooyaaaaaaaa
Bob
Bob,
I always love your posts. YOU HAVE TO MAKE UP SHIRTS WITH “bababababbaba BOYCOTT HOUSES!’
This blog has changed both my wife and my views on buying real estate as we were about to enter mortgage slavery 6 months ago and decided against it due to various articles and slimey real estate agents. I’m so glad we decided not to buy.
Now we are looking to rent elsewhere in Hudson County which is extermely difficult in terms of space and location all due to PRICE. Uuuugh! Never easy in Northern New Jersey. Not to mention that parking is a joke.
If you can live with the lack of culture and a little more commute time, Kearny is just on the other side of the meadows from JC. I’m pretty sure it has midtown direct service now. The housing stock is pretty old, with lots of big 1920’s multiple family houses, but there have been condos cropping up over the past decade or so as well. You’re sure to get more for your money there.
jw
Did anyone go to Open Houses this weekend? I saw a ton of signs, but people were heading to the beach (as were we), and the open houses did not appear to be drawing any attention.
I wonder if this weekend is supposed to be a big weekend for attracting buyers at the shore, and how the results were.
I rented in Hudson County for several years. Yes, its crowded and parking is a pain, but its still possible to find rental housing. Step away from Hoboken and JC — they’re grossly overblown. Look at some of the newer condos and townhouses on River Road in Hudson and Bergen County. You can get a pretty new 2 bedroom with excellent facilities and good commute to NYC for around 2000-2300 (depending on view). Or go up the cliff to Blvd. East. Older buildings, but a little bit of a search will probably give you an older 2 bedroom-1 bath for around 1500.
Complete Boycott.
Spent time at the Beach.
Bob, love your posts.
KBR
Let`s see if Housing sales and starts, mortgage applications goes up despite the rise of FED RATES and Mortgage Rates !!!
Went to an open house this weekend. I noticed that I was the third one on the sign-in sheet, and funny enough, the realtor’s name appeared first,then someone else, then my name. The size of the lot 40X100 scared me with taxes of just under $10,000.
Anon 4:45
Didn’t go to an open house, but we took the real estate section to the beach…does that count?
My sister and I had some good laughs.
I actually saw several people reading the real estate sections.
What does that mean? A lot of people find this situation entertaining?
http://tinyurl.com/nqr37
“…in a panel of 95 metro areas over 23 years…
“…the error-correction specification for house prices and income commonly found in the literature may be inappropriate.”
Does anybody know if AREUEA data is biased(funded by Freddie, Fannie and some Mtg.Co $)?
Saw a “1-4 Open House” sign and planned to do a drive-by after an errand.
Finally drove by at 3:15PM and all the signs and baloons were gone.
Apparently no Greater Fools were showing up, and the bored realtor decided to call it a day early.
Another Open House Boycott success story!
Sharing services may be key to reform
By MARYANN D’URSO
Staff Writer
Saying the state Legislature is on the fast track to dealing with property tax reform, Assembly Speaker Joseph Roberts has developed a blueprint for less costly and more efficient government.
Calling it the “CORE” Reform Plan, Roberts recently met with editors of the Courier News, outlining a four-part plan calling for shared municipal services, school budget accountability, curtailing pension padding and election reforms. To that end, Roberts said he expected to introduce legislation June 1 aimed at reducing reliance on property taxes.
The state, Roberts said, has 337 separate shared services statutes, which he described as “a crazy quilt of disorganization.” Roberts, a Democrat, proposes creating a single, uniform law.
Additionally, Roberts said, current Department of Personnel laws and regulations act more like barriers for agreements between civil and non-civil service municipalities. A uniform shared services and consolidation act, which would be reviewed by the state, would allow a waiver.
Roberts proposes using efficiency benchmarks set by the Department of Community Affairs as a measure in determining state aid from the Municipal Block Grant program, which averages about $35 million annually.
Roberts wants to create 21 “super county superintendents” — appointed by the governor — to essentially act as executive education managers. These superintendents, among other responsibilities, would have the power to sign off on school budgets and approve hirings.
Other reforms recommended by Roberts:
Create a bipartisan task force to work through the summer to revamp the state’s school funding formula
Rein in pension abuse, including capping sick leave and stopping employees from using multiple public jobs to inflate their pensions
Allow municipal governments to treat referendums on shared services as a ballot question
Move school board elections to November, improving voter turnout
In April, voters in the Garden State voiced their fatigue with paying the nation’s highest property taxes — the trough that feeds significant funding for school budgets — by defeating 256 school budgets, the most since 1994. The New Jersey Department of Education reported a 15.7 percent voter turnout, up from last year’s 13.2 percent.
When voters defeat budgets, municipalities are given a chance to work with school districts and trim. They can also preserve the defeat and schools can appeal to Trenton.
Part of Roberts’ blueprint includes allowing the newly empowered county superintendents to “see where the bodies are buried and see where changes can be made,” he said.
A Monmouth University/Gannett New Jersey poll last month showed that New Jersey voters said they believe it will take a constitutional convention to reduce the state’s highest-in-the-nation property taxes. Taxpayers clearly want the taxes cut, but said they were doubtful it would soon happen.
Property taxes were also the top issue in last year’s gubernatorial campaign. Under a proposal offered last year by a governor’s task force, a constitutional convention would have to be approved by voters in the next general election. The measure, however, did not pass the legislature, which ended in January.
from the Courier News website http://www.c-n.com
The best place to live in Hudson County is by far Bayonne. Often hailed as “the Short hills of hudson county”, Bayonne is hard to beat for quality of life, school system and relatively affordable rents. You should be able to rent a very nice apartment in a 2 or 3 family house for $1200 per month.
Asking rents are very different from the rents people are actually paying. These folks can ask whatever they like. But like home prices, rents are negotiable.
Those Craigslist flipper rentals are a great example. Many of those new “investors” are recent buyers. They are likely bleeding cash trying to get renters. I’ve seen some ads up on CL for months.
A good approach would be to offer at least a year lease with a number of months rent paid up-front. Dangle the carrot, so to speak. You’ll likely get a much different reception when the landlord has a $10,000 check in his or her face.
grim
The best place to live in Hudson County is by far Bayonne. Often hailed as “the Short hills of hudson county”, Bayonne is hard to beat for quality of life, school system and relatively affordable rents. You should be able to rent a very nice apartment in a 2 or 3 family house for $1200 per month.
I agree that Bayonne is a good place to stay (in fact, I’m surprised it hasn’t become the next JC, given that it has better schools, waterfront etc.)
My personal preference in NJ is still Weehawken though. Commute to Midtown Manhttan can;t be beat. Nice mix of houses, including some gorgeous mansions. Views of NYC. More expensive than Bayonne.
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