Great piece this morning from the Wall Street Journal:
Recently she’s seen reasons for hope: Far more homes were showing up in their price range, and others she’d seen a year ago were being relisted at reduced asking prices. Melissa decided it was time to look around again, and last weekend she asked me to come along on a tour of open houses in her price range. My sister had a list of homes she’d found online, but I suggested we tour as many open houses as we could to get a feel for the market.
What we saw was bleak news for sellers in our region, but good news for buyers like Melissa and Joe: block after block of open-house signs. In fact, we were hard-pressed to find a street that didn’t have at least one home for sale — and many had more than one. What’s more, most of the 20 or so homes we visited were vacant — a sign that homeowners have moved on and are motivated to sell, or that speculators are looking to unload properties before prices go any lower. (Asked why one home was vacant, one agent said frankly: “This was a ‘flip’ that flopped.”)
Though some of the agents we encountered continued to promote their “charming” homes as “a steal,” a surprising number were more candid. “The owner way overpriced this home,” said one. “I bet if you offered $30,000 less they’d jump at it.” We believed her, because she was running the open house as a favor for another agent.
Another sign of a turning market: We saw very similar houses with prices all over the map — ranging from the low $200,000s to $270,000. That’s evidence that sellers aren’t sure what houses are worth these days, with some reluctant to accept that market dynamics have changed.
“They look at home-price comparisons from a year ago when there was far more demand than supply,” says Pat Lashinsky, senior vice president of Emeryville, Calif., real-estate firm ZipRealty. Now that there’s excess supply, he says, sellers need to be more willing to negotiate.
…
After our exhausting open-house blitz, Melissa asked for my thoughts. Though I’m too young to have experienced the 1980s real-estate market implosion, something told me that things are going to get a lot worse for sellers before they get better. To get an expert’s take, I asked Robert J. Shiller, a Yale economics professor, for his insight on where the East Coast real-estate market may be headed.“We don’t know exactly what’s going to happen because we’ve just experienced the biggest housing boom this country has ever seen,” he says. In addition to homeowners struggling to sell existing homes, construction is at near-record levels: The last time this much inventory entered the market was 1950, when builders were building suburban homes for soldiers returning from war, he says.
Oh my look at this invenotry glut….Welcome to the new home of Garden State MLS’ public search engine. Currently, there are 32,111 properties advertised for sale in NJ on our site.
When on oh when can we get rid of the need for a real estate agent and do everything we need with a lawyer and online resources!!!!
Very interesting that the article states that similar houses had a very wide range in prices. The seller has no idea what the house is worth, the re agent has no idea. The only price that matters is what a buyer is willing to pay.The buyers are now speaking.
BC Bob
prices are still at near peak levels, so the fact that there’s more inventory and a bit more bargaining room shouldn’t give buyers much comfort. if you have no immeidate reasons to move, you’re really better off waiting for another 6 months and see what happens in the interim. while it’s possible the spring market could bring some bouyancy to the supply/demand ratio, i just don’t see how there’s enough people out there to cause prices to increase from today. that means a better deal for you later on.
From Marketwatch:
Countrywide Financial Aug. mortgage fundings down 24%
Countrywide Financial said Thursday that August mortgage fundings fell 24% to $40 billion. Monthly purchase volume in August fell to $19 billion from $25 billion in August. Adjustable-rate loan fundings for the month of August were $18 billion, down from $27 billion last year. Home equity loan fundings for August were flat at $4.1 billion. “Total mortgage loan fundings were up 12 percent sequentially, but declined year over year as a result of the expected industry slowdown,” CEO Angelo R. Mozilo said in a statement.
From the NY Times:
Foreclosures Are Up on Some Mortgages
Foreclosures on prime adjustable-rate mortgages rose to a four-year high in the second quarter, a sign that more homeowners with good credit ratings are having trouble paying their bills.
The share of the loans entering foreclosure, which occurs when a lender tries to seize property, climbed to 0.27 percent at the end of June, from 0.21 percent three months earlier, according to a report yesterday by the Mortgage Bankers Association in Washington.
A spike in home prices last year spurred borrowers to choose riskier adjustable loans, which feature initially lower “teaser” rates, said Diane C. Swonk, chief economist at Mesirow Financial in Chicago. The average rate for a 30-year mortgage that adjusts annually has risen more than one percentage point since 2005.
“Homeowners with adjustable-rate mortgages are getting squeezed on all sides,” Ms. Swonk said. Real estate taxes and energy and insurance costs have also increased, she noted.
Last month someone overpaid by $600K for an ordinary, boring house that should have sold for $900K (at bubble prices). Listed @ $1.4M, they kindly paid $1.5M. The sellers must have been high-fiving for days.
This month, a breathtakingly magnificent home, on a better street, is listed @ $995K. I don’t think you could even spend $50K to make it nicer if you tried.
A tale of two houses, and one Greater Fool who is $600K underwater to buy a boring house, in a so-so location.
Unrealtor,
Do you have links to the 2 listings?
Or pictures?
CC
That article is good reading for anyone’s sister or brother.
“prices are still at near peak levels, so the fact that there’s more inventory and a bit more bargaining room shouldn’t give buyers much comfort.”
Exactly. I’ve had several people tell me that it’s a great time for me to buy… it’s not. After 10 years of seller’s market it’s going to take more than 6 months of buyers market to get prices back to reasonable.
Richard said…
prices are still at near peak levels, so the fact that there’s more inventory and a bit more bargaining room shouldn’t give buyers much comfort
Richard where have you been the last few months?
leaders in the real estate industry are using terms Burnt, highest inventory ever seen and complete halt in describing the housing market.
Prices are going down big time ACCEPT it!
many sellers still dont
get it.
they are saying oh well
its NNJ prices will
hold up. close to NYC.
Bergen County, etc.
In the mean time the
taxes would give a horse
a hairball.
These people in Norwood,
demarest,closter,harrington park.
being killed with property taxes,but
its ok. lovely area,close to nyc.
unrealtor,
That is what I was talking about: I want to buy 1.5M listed house for 900k around price – which is what it should be!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Panicking sellers set the prices.
Buyers just wait for them to either panick or go bankrupt. It’s the Bank’s choice soon.
Chaotic, below is the listing info.
23 Ferncliff Terrace
Short Hills
MLS 2277945
Listed: May 14, 2006
Under Contract: May 29, 2006
Closed: July 20, 2006
Assessed Value: $740,400
Asking Price: $ 1,425,000
Sold Price: $ 1,490,000
It’s surrounded by $800K (“market value”) houses just steps from a busy street. On the market only 15 days. Sucker paid $1.5M!
Here’s a house that was on the market at the same time:
MLS 2251238
Assessed value: $787,600
Sold for $999K in June.
Bigger lot, better location, better house, sold for $500K less!
Now last week this beauty came on the market:
MLS 2318033
Assessed Value: $759,600
Asking Price: $995,000
http://www.realtor.com/Prop/1067747176
The “owner” of 23 Ferncliff @ $1.5M is completely insane.
…or inane
Anonymous said:
“These people in Norwood,
demarest,closter,harrington park.
being killed with property taxes,but
its ok. lovely area,close to nyc.
9/14/2006 10:47:24 AM”
I live in one of those towns. My tax went from $6000 to $14,000 in 6 years. It’s a lovely area but tax is killing everyone.
But I thought everybody worked in NYC and has $10,000 monthly disposable income??
How do you guys think the town of Ridgefield will hold up in the bubble? Don’t know this town very well.
I tried to talk a young couple out of buying a house there (friends of my daughters), but….no one listeins to me. They paid like 550,000 for a one step up from a POS house.
They just think I am a crazy guy. I really feel bad for them because they had the mind set of.. “if we don’t buy now, we will just be priced out and never be able to buy a home”
There RE agent really played on this too. I am really tempted to give this RE place a piece of my mind.
oh well. Like I always say ..cover your own ass first.
SAS
I live in one of those areas as well my taxes actually went down by 2K this year.. w/ a re-assesment.
“These people in Norwood,
demarest,closter,harrington park.
being killed with property taxes,but
its ok. lovely area,close to nyc”
I would hate them to go up again.. I do love the area
right now people are pricing high knowing that they will have to discount to make the sale. they are just trying to anchor the price by starting out high. the listing price is more like an opening bid.
the problem with this strategy is that if you are not even in the ballpark (as many of these sellers aren’t), you won’t even get a counter bid.
the smarter strategy is to price well below all comparable homes (i.e., 10-20%). If you do this, you will get bids. If they are too low for your liking you do not have to accept any of them. But at least you will get a sense of what people are willing to pay for your place.
SAS,
Don’t know too much about the town;
go to njmls.com
listing reference #- 2632884
Looks very nice, 4 bdrms,2 baths, asking 499.9K.
BC Bob
BC Bob: It is a cape. I wouldnt think that house should be priced at 500k
I think $369,000 is more like it
Ridgefield Park isnt Park Ridge
thatbigwindow,
No argument here. I wouldn’t pay more than 350k for that. I was just trying to give SAS a comparison.
BC Bob
BCB, He may be speaking but if he ain’t bidding or buying it doesn’t matter much… it’s just a lot of noise. There are a lot of folks on this board but relatively few of them appear to be actively putting in offers. Until the lowballers represent a significant market force, as opposed to a vocal message board presence, they will not affect prices. If you want to move the market, you need to be in the market. Their own hesitancy is helping keep prices up.
CJ Sell-out
CJ:
You are right, which makes this quite a standoff. If there are no offers, the market can not trend down. Who wants to be the first seller to jump into the market when they are triggering a mudslide?
So we will wait.
D2B- homeowner
D2B
If there are no offers, the market can not trend down.
Right, but it can fall of a cliff. No offers means “Way too high”. If you read a story in the WSJ a few weeks back, a Northern Virginia seller priced above $1MM, ended up dropping to $800K range over time, still no offers, had to put house on an auction block with a secret reserve price of IIRC, something in the $600K-$700K range. Highest bid came in at $400K range, rejected it in the morning, accepted it after it was sweened to low to mid $500K in the afternoon. That is a new Comp right there
That is what happens to the market if no offers.
South Jersey Observer
“Until the lowballers represent a significant market force, as opposed to a vocal message board presence, they will not affect prices. If you want to move the market, you need to be in the market. Their own hesitancy is helping keep prices up.”
I’d disagree. If a seller gets no offers, and really wants to sell the house (as opposed to just trying to ‘hook a fish’ with a ridiculous price), they will lower the price until the market responds.
It’s a simple formula:
No action = price too high.
Don’t blame potential buyers for not playing “Hooray, we got 20% off a 100-year-peak price!”
Every house will sell, at the right price.
We started looking for a 1st house 6 mo ago (are in the high 200K to low 300K range)with minimal down payment available….not much available in NNJ our range. However, in the past 2 months there is significantly more available at those prices. I’ve seen a lot of asking price drops around $20K…some at $40K from original list price…. we’ve been putting in some low offers but nothing stuck yet…another offer stronger than ours has come in on 3 places…..we will continue to wait…but would like to have a house of our own instead of renting w/o washer-dryer. Seriously considering moving down to N.C. if prices don’t drop further soon…actually if my wife would agree to go I wouldn’t even pack. Our realtor keeps telling us we can get an interest only and flip the house in 2 years, maybe she doesn’t watch the news?? Also, is NJ that great to go through all this trouble just to get a POS house? What happened to the American dream?
“Every house will sell at the right price.” I could reduce my house 30% and it would sell immediately. Would that be the right price or only the impatient price? Do you want the first price or the best price?
Just as you all see sellers as fishing for ridiculous prices, sellers see only the occasional lowballer who is easily dismissed as not serious. On the other hand, multiple low offers would be hard to ignore.
“What happened to the American dream?”
That died on Nov 22, 1963.
SAS
I guess I was being a little melodramatic but from the perspective of a 1st time homebuyer, recently married, late 20’s couple, buying a house in this area seems daunting. I have a decent job so at least we stand a chance but it brings to mind questions like how could someone working at the grocery store or gas station ever afford to live and raise a family here? I believe at one time in this country that was possible. Does one need to make $250 K/year just to live in NJ? I for one check the tax records of any house that we bid on and will not pay for someone else’s ridiculous profit on a house just to stay here. Also tired of being treated like lower class citizens buy realtors because we don’t have $50K to put down and aren’t interested in anything over $300K.
“Does one need to make $250 K/year just to live iyn NJ?”
Yes, you do need that money to live the lifestyle that MAdison Ave and the mulinationals want you to have. Ever see a commercial during the Superbowl about putting 10% salary into a savings account.
Don’t play into it because thats what the system wants you to do.
Also, don’t even considering buying a house at these tops, hold and raise cash.
or move out of NJ, other places the RE market is not that out of control like it is here.
SAS
Good point. We don’t have anything to lose by waiting, our rent is at least 60% cheaper now anyway.My family is in NC, just sold a very nice house for $220, would be 500-600K here…salaries are not THAT much cheaper there.
anon 9/14/2006 08:14:06 PM,
I tell people all the time to move away from this area. On average, if you moved today, your cost of living would go down 50%. Yes, your salary would go down, but it won’t go down 50%. So, even with the salary decrease..net…you would still come out ahead.
This is just ballpark figure, but if you sit down and crunch the numbers you would see that I am not too far off.
Unless of course you have a job out here that you can’t move. But most people can relocate, if they really wanted to.
This whole area is going down the drain.
oh yeah, I didn’t even factor in income taxes into the mix. So, more savings yet. Why you wanna work for the man your whole life?
Buy less, save more money, and enjoy life.
SAS
“Would that be the right price or only the impatient price?”
A house on the market for 30-60 days with no offers is overpriced. Simple as that.
This house will sell within 2 weeks:
http://www.realtor.com/Prop/1067747176
This house will sell when the seller gets real:
http://www.realtor.com/Prop/1065267269
“multiple low offers would be hard to ignore”
As would no offers.
UnRealtor,
damn good posts.
SAS
I had no offers for 10 weeks. One reduction at 3 weeks. First offer was 96% OLP. Glad my agent counseled patience.
CJ Sellout
This house will sell within 2 weeks:
http://www.realtor.com/Prop/1067747176
This house will sell when the seller gets real:
http://www.realtor.com/Prop/106526726
Nice comparison, I agree.
grim
Real Estate Crash “quote of the day”:
“Those idiots who have bought new homes that are double and triple their real value have increased their debt level by taking out home equity loans against this mythical appreciation in value.” -Augustus Sutter
“This house will sell when the seller gets real:
http://www.realtor.com/Prop/106526726”
Does the agent for this house read this board? I can’t find this listing anymore? Was it pulled or has it sold!
missing a number 9 at the end