From the New York Times:
Decline Seen In Home Prices In New Jersey
By ANTHONY DEPALMA, SPECIAL TO THE NEW YORK TIMES
December 14th, 1989
The days of steeply climbing house prices are over, and the 1990’s could begin with prices dropping by as much as 12 percent, according to a report released today by Rutgers University based on three million house sales in New Jersey.
”This really is the end of a housing and economic era in New Jersey and the Northeast region,” said Dr. James W. Hughes, a professor of urban planning who wrote the report with Dr. George Sternlieb.
The study, ”New Jersey Home Prices,” confirms what anyone who has bought or sold a house or apartment this decade already knows: prices have gone out of sight. But the sheer mass of the data gives new insight into how the increases have profoundly changed the market in nearly every one of the 567 municipalities in the state.
The authors said that although their data were drawn just from New Jersey the trends and general conclusions can be applied to the entire New York metropolitan region. Cooling in Mid-1988
Using computers, the authors examined all house and apartment sales in the state from 1965 to mid-1988, a total of three million transactions. They show that although house prices here remained at or below national levels through the beginning of this decade, they soared starting in 1985.
From 1980 to mid-1988, the median sales price rose to $141,900 from $57,500, with many communities, among them Alpine and Saddle River in Bergen County and Mantoloking in Ocean County, exceeding that by hundreds of thousands of dollars.
Since then, however, prices have cooled considerably, with no increases seen. In some cases, there have been declines, a trend that could continue, depending on the economy.
…
The housing bubble burst after Wall Street started laying off stockbrokers in 1987. Companies started to cut back, the high prices made many corporations move employees elsewhere and the demand for housing eased. Houses that had sold in three months were sitting on the market for nine months or longer, and sellers began lowering their expectations.Professor Sternlieb said house prices had already declined in spots and could drop 4 to 12 percent next year, depending on economic conditions will determine whether prices remain depressed. Adjustment in Attitudes
The realignment could change the way that people think about housing, Professor Hughes said. Instead of stretching to buy as much house as possible and banking on appreciation, buyers may be content with less housing and put more money into savings accounts.
very interesting. Sounds a little familiar I think we’re in for a huge slide down especially with more houses coming on the market after labor day weekend. I looked at realty Trac and in essex there are a staggering 2000+ pre-forclosures. Essex has a lot of lower-income housing but that seems like a huge number. It’s kind off like the tech bubble when the bulls claimed everything was fine and got pumeled by the bears. I would love to own a stock or fund that hedged bets agains the realty stocks.
grim:
Get ’em where it hurts.
Hit ’em right in the “facts”.
chicago
That article could have been written today.
View in visual form:
http://tinyurl.com/e4so5
Yup, looks we’re heading for a “soft landing.”
It would be easy to compare “then” to “now” but you also have to keep in mind that transportation to NYC was not as convienent back then. To date, NJ Transit has made many enhancements and have developed many commuter rail stations which can easily transport commuters to NYC. Not to mention, NJ has seen job growth and salary increases since the 1990s. Additionally, NYC has become a safer haven since the 1990s and has been cleaned up substantially. You can not take these factors away. Although a housing slow down is possible, due to the recent run up on prices, you can not realistically expect this to be the end of the NYC Metropolitan area real estate market. It just won’t happen. Sellers are not reducing prices, and will not sell at a ridiculously low price! What do you all want? A house for free? That seems to be the case with some calling for 50% or more declines in house values. If you keep on waiting for the big crash to happen, you are unfortunately missing out on home ownership (which is what I suspect you all desire) and could be at risk of being further priced out. Just my .02
“Sellers are not reducing prices”,,, and they are not selling houses, wait yes they are reducing prices and still not selling.
Price declines are long due. Just too much inventory on the market right now, and more being added literally hourly.
Prices are going down and buyers know they are going lower so they refuse to buy.
Down down it goes.
Anonymous said…
8/30/2006 07:19:18 PM
Oh boy, we does one begin??? I haven’t heard this one, NJ Transit will be the savior to this industry???
Regarding job growth and wages,have you been reading some of Grim’s posts pertaining to this??? We are losing/lost high paying telecommunications, info technology and manufacturing jobs and replaced them with lower paying service jobs and the govt sector. Is this your definition of job growth??? Since 2000 “real” wages have been flat, house prices are up approx 80% over this time frame. How does your definition of wage growth correlate with these substantial price increases??
Sellers are not reducing prices??? Have you checked out price reduced on this site???? Look it’s very simple; a massive over-supply of homes, flat real wages,rising taxes,no demand and prices that are in no way supported by fundamentals are all a recipe for disaster. By the way, I am not missing out on home ownership. I saw the absurdity/frenzy and decided I did not want any part of what I saw unfolding, I sold in 8/05. Remember, sellers don’t determine prices. A house is only worth what a buyer is willing to pay. Based on all the facts, I don’t see many buyers. Please prove me wrong, I’ll rush back to own!! Just my .02, I can’t buy any of your points.
BC Bob
anon@7:19
You still don’t get it … you know what it is better for me that you don’t get it.
“If you keep on waiting for the big crash to happen, you are unfortunately missing out on home ownership (which is what I suspect you all desire) and could be at risk of being further priced out.”
Spoken like a true realtor.
Which part of this chart indicates to you that now (or even the next year or two) is the ‘right time to buy’?
http://tinyurl.com/e4so5
No, this time is different and the underlying economy is much more favorable than in 1989.
In 1990 interest rates were substantially higher, mortgage rates around 10%, crime was rampant, the middle class was fleeing NYC and heading out to Long Island & Bergen County (the opposite of what is happening today)
Manhattan & Hudson counties are completely different and going thru an unprecedented wave of ‘reverse white flight’ & ‘reverse immigration’. You have many wealthy transplants who want to be here, who don’t want to live in their home region of middle america, New England or California, and business conditions are still very much positive.
The fed have seemed to have acheived a perfect ‘soft landing’ with falling interest rates & gas prices while housing prices are moderating but not falling by any material amount.
Unemployment is around 5% in the entire NY metro area. In the early 1990’s, unemployment climbed to over 9% and their were massive job losses in 1990-1992. None of that seems to be happening now. Job growth especially high paying jobs in Manhattan & Northern NJ are much more plentiful than this time in the early 1990’s.
Real household income DID rise in 2005 & likely by an even grater amount in 2006. Not to mention that interest rates are falling along with oil prices.
The 10 year note can be between 4.25% – 4.50% by year end substantially below the feds overnight lending rate of 5.25%..
Many people are just sitting it out and waiting to get into the market. You can see it by rents & vacancies. Rents have been soaring for the past year all across the board and especially outside of Manhattan.
Vacancy levels have dropped to 40 year lows across the NYC metro area, Long Island & Bergen County as well.
Rising pay buys less
The median household income in the Garden State remained the highest in the nation in 2005, according to Census Bureau data released Tuesday. But the income of $61,700 was down 2.8 percent from the inflation-adjusted 2004 number of $63,400. That decline was one of the biggest drops in the nation.
Even over the long term, the picture is discouraging: Adjusted for inflation, the state’s residents had lower median incomes last year than they did in 1989.
The fed have seemed to have acheived a perfect ‘soft landing’ with falling interest rates & gas prices while housing prices are moderating but not falling by any material amount.
It will take years before we know whether or not this was a ‘soft landing’.
grim
It’s hard to know who is more greedy the sellers or the buyers. It’s easy to say the sellers when you look at the prices…….. However, if you are a buyer with good gredit and cash at hand to put down I, as buyer feel that I should not have to pay these astronomical prices.
PS I’m glad I found this place -it’s like a homebuyers “support-group”
-cs
CS
How do we understand the realtors here, though?
They are tough cookies, I think.
Pat
The 10 year note can be between 4.25% – 4.50% by year end substantially below the feds overnight lending rate of 5.25%..
i don’t know much but that sounds bearish to me.
Anonymous said…
No, this time is different and the underlying economy is much more favorable than in 1989.
Anonymous said…
No, this time is different and the underlying economy is much more favorable than in 1989.
This bears watching [no pun intended]………
hmmmmm….
3:45 PM ET 08/30/06
CORRECTED – Goldman, Lehman had worst 3rd-qtr banking drops
Corrects paragraph 10 to show that Lehman’s quarterly M&A deal volume fell to $77.5 billion (not $161 billion). Corrects paragraph 12 to show Merrill’s quarterly M&A deal volume was fifth at $156.8 billion (not third at $141 billion).
By Joseph A. Giannone
NEW YORK, Aug 30 (Reuters) – Investment banks Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc. suffered the biggest declines in equities underwriting and announced mergers and acquisitions activity during the fiscal third quarter, according to Dealogic data.
Next month Goldman, Lehman, Morgan Stanley and Bear Stearns Cos. Inc. will report results for the three months ending Thursday. Analysts have been slashing their earnings forecasts, citing a bigger-than-expected slump in stock offerings and M&A, two of the most lucrative businesses for Wall Street firms.
Goldman arranged 35 equity offerings with combined value of $10.5 billion, making it No. 2 among Wall Street firms in the third quarter to end Aug. 31. That’s a decline of two-thirds from the second quarter and 29 percent from a year earlier.
Lehman, meanwhile, saw its equity volumes fall 31 percent from last year to $5.1 billion on 33 deals, giving it a No. 9 ranking. Its volumes fell 24 percent against the second quarter.
By comparison, overall equities market volume in the period fell 15 percent from last year and 41 percent from the second quarter. Choppy markets and growing uncertainty since May have triggered a five-year high in the number of withdrawn initial public offerings.
Lehman and Goldman declined comment.
Goldman remains the top arranger of mergers and equities this year.
For some investment banks, the third quarter was an opportunity to gain market share. Citigroup equities transaction volume rose 9 percent to $14.7 billion, making it the top underwriter of the period. Merrill Lynch & Co. Inc. volume rose 13 percent to $10.1 billion, good enough for No. 3 in the quarter.
MERGERS
Goldman and Lehman also had the biggest drops in announced M&A during the quarter, a period when overall activity rose 30 percent from the year-earlier period.
Goldman’s announced merger deal volume fell 7 percent from last year to $138 billion, making it the No. 6 adviser for the quarter. Meanwhile Lehman’s deal volume fell 14 percent from last year to $77.5 billion, ranking eighth.
Sequentially, Goldman M&A volume dropped 58 percent from the second quarter, the biggest decline among the top investment banks, against a 17 percent decline in the overall market. Lehman’s business fell 52 percent, the second biggest decline.
Merrill Lynch by contrast saw its M&A deal volume double to $156.8 billion, making it No. 5 for the period, and Credit Suisse Group , which was not in the top 10 in last year’s third quarter, came in fourth with $159 billion in deal volume.
Merrill’s ranking got a jolt from its role in advising a group of investors buying HCA Inc. in a $21 billion buyout, excluding debt, the second-largest buyout ever.
Underwriting and M&A tends to be lumpy, and quarterly rankings only offer a snap-shot. Industry rankings also don’t capture all business done and don’t always provide an accurate reflection of actual revenue trends.
Anonymous said…
8/30/2006 09:14:27 PM
It’s different this time because of the economy???? You are damn right, it is different this time. My point of view is not based on the economy. Back in 1990 we did not have bidding wars, where houses sold for 100-150k over asking, invividuals were not “buying” multiple properties and flipping like pizzas. Lenders were qualifying based on the 28/36% income/exp ratio, there were no IO,negative amortization, piggyback financing. You are damn right, it’s different this time. Bob Toll says he has never seen a market turn like this one, in a good economy. Bob, it’s simple, it’s a bubble. The market implodes on the back of its own weak foundation. There is no one to ring a bell to tell Bob that it is over. That is the function of the market, not the economy!!!! The market stops on a dime for no discernable reason. The corresponding counter move has the potential to be huge. You are damn right it is different this time. The flippers are trapped and the $2 trillion in adjustables coming due are at risk of being trapped.
How can you describe this as a soft landing?? We are only in the first inning of a nine inning game. It has only just begun. Just my .02, you are damn right it is different this time.
BC Bob
Just my .02, you are damn right it is different this time.
BC Bob
8/30/2006 11:13:52 PM
Bergs:
Go get ’em!
“No, this time is different”
I have been hearing this line ever since Kennedy ran against Nixon.
anytime someone says this line, you know somethin ain’t right.
These are the type of people who blow the ballon up.
SAS
In 1990 interest rates were substantially higher, mortgage rates around 10%
That actually worked in favor real estate in the early 1990’s. As RE started to decline, interest rates also fell to cushion the fall. In a world where most people only care about their monthly payment, falling interest rates have the effect of reducing the price. This time around, rates really can’t go much lower. People are stretched to the max even at historically low rates. Price declines will need to come exclusively from real prices this time.
Manhattan & Hudson counties are completely different and going thru an unprecedented wave of ‘reverse white flight’ & ‘reverse immigration’
Manhattan and Hudson counties both lost population in the most recent census survey. Also, the white (non Hispanic) population of Hudson County actually decreased very slightly from 34.6% in 2000 to 33.8% in 2005. Since Hudson county lost population from 2000 – 2005, this would indicate that on a net basis, Hudson county is losing white people.
The FED is prepping us for antoher rate hike !!!
Economy to weather housing storm: Fed officials
By Tim Ahmann
Wed Aug 30, 5:33 PM ET
1989 radical loan: 90% LTV 30-yr. ARM, 10% down w/PMI
2003 not-so-radical loan: 100%+ financing (inc. closing costs) through i/o option ARM and HELOC 2nd.
Thanks BC Bob.
I am starting to think that these 2 bubbles(80s + 9-s) has les to do with interest rates and more to do with “irational exuberance” and the human condition gone awry. How many correlations can we draw between certain “linked” events. Last time it was the Stock market. This time maybe the law of gravity or too many episones of “flip that shithole”. If anyone ever read Asomov -Foundation, Hari Seldon would be better at predictiong this scenario.
Sure, there will be people who will try to catch falling stones, and there will be more to pick the stones off the ground when the frefall is over.
I think it was one of Warren Buffets 3 rules: “Learn from your mistakes”. I hope I hve and all I’ll say is NORTEL. Pleople couldn’t have enough of these. and it’s the same with Real Estate, there’s people that still think it’s gonna make them rich at these prices.
Last, the tech bubble had to do with fundaments and it was all about projected growth and greed. Maybe there are finacial formulas to figure this out but what caused this boom was people people people, and will end with people too.
cs
cs,
This time maybe the law of gravity or too many episones of “flip that shithole”
Just love that quote, laughing my ass off!!!!!!!
BC Bob
Too many people read “Rich Dad, Poor Dad”
See, the problem is that book is so easy to read, you feel smart at the end of it. Then you go out and do whatever it takes to begin flipping or renting out houses. Then you wait for your sucker tenants who didn’t read the book to pour their hard earned money at you. Then you can pat yourself on the back for having the financial insight to read the book your co-worker told you about!
I liked Rich Dad Poor Dad but the book is very vague and is more of a motivational book than anything. I however will be investing in Real Estate in a few years after the market hits bottom. My best guess estimate is 2 to 5 years out.
There’s just no way I’m going to hand over my cash to some disillusioned seller who made a bad decision anytime soon. And if you’re holding onto real estate that you recently purchased as a short term investment (less than 10 years) sorry to tell you that you lost. I also find it disgraceful how all these real estate agents are out trying to ruin so many lives by making statements such as, “This is the best time to buy, real estate is always a good investment” or “You’ll be priced out of the market.” The second reminds me of when I buy a new car and the car salesperson says, “That price is only good for today.”
Use common sense. If you want to ruin your life and future go ahead and buy a house that is selling for 100% more than it was just 5 years ago even though nothing else has changed. If you really want to see how much money you will be wasting go to http://www.myfico.com and run an amortization calculator and see how much money in interest you will be paying. Yes, I know tax savings blah, blah, blah, blah.
Also, the comments made by ANON 7:19 are lies. That person is somehow in trouble and that person needs to pass the buck on to you. ANON 7:19 doesn’t care about you, that person only cares about them self, period.
“I saw the absurdity/frenzy and decided I did not want any part of what I saw unfolding, I sold in 8/05.”
Just curious BC Bob, why did you sell exactly and how much did you make on that sale over how long a period of ownership?
been there…done that
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