From the New York Sun:
Housing Correction Just Getting Started
By Liz Peek
Don’t get relaxed about the housing industry, because it’s going to get much, much worse. That’s the message from Gary Gordon at Annaly Capital Management, a firm which invests in mortgage-backed securities. Mr. Gordon is looking for substantial further declines in housing starts and sales, which will result in a recession beginning in 2007.
He is on the pessimistic side of the Great Housing Debate, which will doubtless be reignited when the figure for September housing starts comes out tomorrow.
…
The real issue is: How much consumer spending has been funded by rising home prices and how vulnerable is the economy to a fall-off in home values? Bears argue that the consumer has used his home ownership as a piggybank that is now ominously empty. They point out that mortgage equity withdrawals have climbed almost without pause since the early 1990s. Today, these borrowings are plummeting, a development that the folks at economics consultancy ISI call “unprecedented.” Equally without precedent is that existing home prices may actually decline this year.Further gumming up the works is that confidence in rising home prices turned lenders into enthusiastic coconspirators. Mortgage lenders have required less information about borrowers and less regular payments on loans than ever before.
As an example, 62% of non-agency loans made last year had low or no income verification, up from 24% in 1998. Also,52% of such loans made in 2005 had zero or negative amortization requirements. In 1998 there were no such loans.
…
The August bounce should not be mistaken for the bottoming of the cycle, says Mr. Gordon in a piece sent out to clients last week.Mr. Gordon expects existing single family home sales to bottom at 25–30% from the mid-2005 peak level of 7.2 million. Currently, sales are off 12% from that level. New single family home starts should bottom at 40% below the peak level of 2.2 million reached in late 2005; currently starts are 20% down. He thinks prices for new single family homes will likely end up 5% to 10% off the $275,000 peak rate; today they are off about 2%. As we said, there’s more to come.
“Don`t catch a falling knife”. If home prices starts to go down, just like tech stocks, it will continnue to do so until it reach the bottom. It is scary to buy a house now. I rather buy stocks because the stock market (DOW ~12K ) is steadily rising to new highs.
Hope Homebuyers in Southern New Jersey realized this !!!
If Greenspan is right and this whole run started in 1980, do you really think it will end with 3-6 months of adjustment. We are headed for a long,serious decline. The RE industry would be thrilled if it was just a correction. It will be much more severe than that. It is only the beginning.
We may be seeing that bounce this month.
So far the number of homes undercontract in October is almost on par with last year in Bergen County (per the NJMLS stats).
But it was last year around September/October that we saw the inventory start to rise and the sales start to drop. So being on par with last October may not be that big of a deal.
October 1-16 UnderContract (Pending SFH in BC)
2005 300
2006 270
Rich
PS Current Median & Avg Price for the same period
2005 $570k $694k
2006 $505k $629k
FYI:
Avg List Price & Inventory for SFHs, Oct. 1-16 in Bergen County
2005 $722k 3,584
2006 $692k 4,406
in case you missed the krispy kremes and kool aid analogy, it’s a treat
http://tinyurl.com/yjd4qy
fyi KARA HOMES … created the biggest bubble in OCEAN COUNTY, New jersy ?????
Compare the home price appreciation versus Wage increases from 2000 ???
Real estate bubble in OCEAN County, NJ is unsustainable … !!!
Thanks to Asbury Park Press for the continued coverage of the biggest Real Estate Bankruptcy in Ocean County, NJ !!!
Want to buy my house guys ????
Think about what the percentages in this story imply. Existing home sales falling 30 percent would drop sales to around 5 million and the drop in new sales would be about equivalent to the entire commercial building sector. If this guy is right, and I’d say he’s at least close, I think the scope of the disaster is coming into focus.
BTW BC Bob, Greenspan gets no credit for making a correct statement on anything (and I’m not agreeing that this particular statement is correct) because every word from his mouth is a political statement designed to deflect blame. At this point he’s the same as any lazy school kid who comes up with endless and evermore elaborate excuses as to why his homework isn’t done. There is no news value in anything he says.
hello from germany,
As an example, 62% of non-agency loans made last year had low or no income verification, up from 24% in 1998. Also,52% of such loans made in 2005 had zero or negative amortization requirements. In 1998 there were no such loans.
trouble ahead!
i think you can see some of this already in the spiking foreclosures.
here is some good stuff von rodger rafter
http://rebalancing.blogspot.com/2006/10/squeezed-to-breaking-point.html
Rich,
Keep in mind that pending sales are falling through at ever increasing rates and that year-over-year declines speak to momentum. I very much doubt that the “bounce” Lereah and the other cheerleaders are trying to talk into existence is going to amount to much.
For the foreseeable future the direction is down, I have no idea how far or how fast, but I’m sure of the direction. Sometimes the laws of physics apply in the business world, and as Math like Gravity is Law could tell you, inertia can be a very powerful force.
Inflation report waves red flags
Biggest drop ever in gas prices takes wholesale prices down, but key reading that excludes food, energy up more than forecasts.
October 17 2006: 8:52 AM EDT
NEW YORK (CNNMoney.com) — Prices paid by businesses fell in September on the biggest drop in energy prices in more than 20 years, but a more closely watched inflation reading came in well above Wall Street forecasts.
The Producer Price Index, which measures prices on the wholesale level, fell 1.3 percent in September, according to the Labor Department Report, compared to the 0.1 percent rise in prices seen in August.
Economists surveyed by Briefing.com had forecast a 0.7 percent decline.
Energy prices fell 8.4 percent in the month, the biggest decline since July 1986, as gasoline prices fell 22.2 percent, a record percentage decline.
But the so-called core PPI, which strips out often volatile food and energy prices, rose 0.6 percent in September, compared to a 0.4 percent decline in August. Economists had forecast only a 0.2 percent rise in the core PPI.
And the core PPI is more closely watched by economists, especially those at the Federal Reserve, when they weigh the inflationary pressures in the economy. With the Fed set to meet Oct. 24 and 25 to weigh what it needs to do to interest rates to keep prices stable, the core PPI raised new concerns in the markets.
I believe according to Greenspan, home prices will go up again when the Berlin Wall goes up again.
I believe that price drops will continue for at least 3-4 years more as there is no way they can hit bottom before that and that is being conservative. Those who are thinking of buying now, good luck to you, its your money you will be throwing away and making mortgage payments on dwindling equities in your house.
while the market is exhibiting signs of exhaustion, the key to it’s future health will depends on job growth/quality, interest rates and lending standards. if we move along avg. 125k jobs/month, interest rates remain under 7% for 30-year fixed and lending standards don’t tighten much, there’s a chance the decline won’t be shocking to the system, however the overbuilt areas like AZ, FL and the like are going to get crushed no matter what happens due to investment purchases and just not enough people to occupy the homes.
Man i’m in the wrong field. 125k a year? I have BSEE and MSCS and nowhere near 125k. I think doctors and lawyers are buying homes and maybe few others. I’m just waiting to move out of NJ (lived here since 89).
“Man i’m in the wrong field. 125k a year?”
hey dumb-dumd: They mean job creation=125k. Not 125k salary jobs! LOL!
SS: Richard was referring to growth of 125,000 additional jobs/month, not salary of 125K.
Everyone is so keen on NOT buying right now.
But, if the market is as depressed as these reports are saying, and a buyer can negotiate a good price on a house they are planning on staying in for 7-10 years, I don’t see why it doesn’t make sense to buy now?
If there’s a 3/4 bedroom listed for $399K and you low-ball them down to $300-$310K (25%-ish off), what’s the problem?
Let me know your thoughts!
lina,
if you can afford the house, and are happy with it then I would buy. I think if you are patient you may be able to get more for your money.
The Bottom will be at this time when the income catch up with the price. It will take many years.
Think about: who can afford the current price with fixed loan?
If you can negotiate a ‘good price’ right now, there is no problem, I say BUY!
Good price = Comp. home value during ’96 / ’97 / ’98 time period grossed up at 5% a year (maximum) to today’s dollars. Add in any adjustments for possible renovation/expansion/extension work done on the home.
The reason it most likely doesn’t make sense right now is you will have a hard time finding a seller who will agree with your math. They are using a growth rate closer to 10% a year than 5%, and if they bought their home post 2001, they are using a number even greater than 10%. Majority of sellers are still not getting the picture. They will sit on their homes month after month and watch values decline further until they are forced to sell.
Look for sellers who have inherited the home or are in a must-move (e.g. job transfer) situation. They are more likely to negotiate. Avoid the sellers who are floating their homes to see what they can get and maybe retire early.
I am following at least a dozen homes that have been on the market for 6 months or longer with minimal or NO price reduction. These people are either in no hurry or simply clueless about the state of the market. Many are pricing their 40-50 year old homes at the same levels as brand new construction in the same area.
RYAN HOMES !!!! http://www.nvrinc.com/
NVR Inc. 3Q Profit Declines 32 Percent
Tuesday October 17, 9:53 am ET
NVR Inc. 3Q Profit Declines 32 Percent, Company Reduces Full-Year Earnings Outlook
RESTON, Va. (AP) — NVR Inc. said third-quarter income slid 32 percent, as higher mortgage banking income was offset by weaker homebuilding results, and the company lowered its full-year earnings outlook.
Net income fell to $129.3 million, or $19.63 per share, from $189.4 million, or $24.33 per share.
Consolidated revenue rose 13 percent to $1.55 billion from $1.37 billion for the comparable 2005 quarter.
On average, analysts surveyed by Thomson Financial forecast earnings per share of $23.31 and revenue of $1.43 billion.
The company said operating income from its homebuilding operations was $194.8 million, down 33 percent from last year.
New orders in the third quarter decreased 18 percent to 2,378 units from 2,897 units last year. Meanwhile, the cancellation rate jumped to 27 percent from 15 percent last year and 13 percent in the second quarter of 2006.
Mortgage banking operating income climbed 6.4 percent to $17.3 million on the back of 14 percent growth in loan production.
NVR warned that pricing pressure in many of its markets — which include Washington and Baltimore — will weigh on profits. The company now expects to earn $600 million to $620 million for the year, excluding a charge, compared with a prior estimate of roughly $690 million. The company didn’t provide a per-share estimate. Analysts peg the company’s full-year income at $94.75 per share.
In early trading on the American Stock Exchange, shares of the company fell $17, or 3 percent, to $543.80.
If something sold in 2004 for $295K, what would be a fair price for it today, assuming no MAJOR renovations (ie, just painting, etc)?
They have it listed for $399K
ther is only a really small sement of the population that can afford right now with a 20 down 30yf fixed loan.
i have been saving for years and if you would have told me years ago i would have as much saved as i do now i would have been very happy
but in reality it is chump change in this housing market
it is very frustrating as well
there and segment
sorry for the spelling errors
>>there is only a really small segment of the population that can afford right now with a 20 down 30yf fixed loan.
you are right and that’s unfortunate for would be buyers since the home ownership rate even 5 years ago before prices skyrocketed was in the mid 60%. that means 6 out of 10 people were already in on the fun and have enjoyed the run-up. it’s the “new players” that happen to be born at the wrong time or did other crazy things like saved up for a 20% downpayment are on the losing end. this is why i’m not sure sure how much the market will drop even though prices are set on the margin and bad comps are driven down via death, divorce or job relocation pressures.
Richard: Looking at just job growth is a fallacy,and soemthing the realtors etc. use to convince people that housing will not crash.
You have to look at the types of jobs created. Such as high paying jobs with benefits. Since 2003 the number one job category being created in NJ, is restaurant worker, behnid that, home health care attendant. These are not the type of jobs that can justify high house prices.
Housing in NJ requires a dual income household, at the present time only couples with dual income can afford the present pricing. Wages are stagnant, industry is leaving the state due to the high costs of operating and the politicos only think of raising taxes and not cutting spending.
Think about it, if you make $60K what could you afford in NJ and at what quality of life?
-Sapiens
“Man i’m in the wrong field. 125k a year? I have BSEE and MSCS and nowhere near 125k.”
Wrong field, or wrong job — with your education you could easily be at $125K, if you wanted.
lina
From ofheo.gov website, Newark-Union MSA Home Price Index for year-over-year 4Q since 2000:
2000 – 10.14
2001 – 9.88
2002 – 12.08
2003 – 11.24
2004 – 14.43
2005 – 15.01
Not sure where the home is you are referring to, but most likely, the 2004 price was about 25% too high to begin with. The sellers are asking for 15% return per year on their investment since 2004. Good for them. This house is not for you. The right price is probably significantly less than they paid. If you absolutely love the house and don’t mind that you will lose paper money on it for a few years before you see any gains, I would offer them the 295 they paid for it and negotiate up to not a penny more than $313k. (Basically giving them a CPI return of 3% since thats how my income has increased over the past few years.)
I suspect 90% of the readers of this blog will tell you to offer them 20% less than what they paid.
You guys are great. We are in a good position in that we are in no rush to buy, and are playing the waiting game.
So, you’re suggesting offering $236K, assuming they paid too much in 2004, and giving them about 3-5% yearly appreciation?
What will my realtor say?!
lina,
who cares what your realtor will say?
-Sapiens
I know, I know! I just feel so CHEAP going in so low-ball! But, it is my hard earned money!
Lina,
Seneca’s above analysis is fine. If the house is special and you will stay put at least five years, $300 to $313K is a decent price. There are few sellers that will bite today, however, on an essentially break-even price after holding two years. But you could get lucky. My guess is they’re looking to flip for a profit now that their capital “gain” is free and clear.
They probably want more like $375k, and I suspect there are a few folks out there who don’t follow this blog who might offer it, even in this market.
lol
ts
Why does it matter what your realtor says if you are in no rush?
I once slept on the steps of a train station in Eskilstuna, Sweden in early May. In the evening, I saw a blanket that cost, at the time, $15, but didn’t buy it.
By 2 in the morning, I would have paid five hundred.
Human beings have skewed perceptions of reality, but a little suffering really focuses things.
Don’t take advantage of human suffering, but you should also not be the one doing all the suffering. There is a balance.
Well, that’s the problem. There won’t be a housing bubble burst until there is NOONE that will pay asking (or close to asking) prices.
That’s why, in my opinion, even making offers is a waste of time. Offers that are financially prudent right now are not being considered. Don’t let that goad you into doing something foolish. Unless you can afford to overpay, I think it’s a mistake to buy before early Summer ’07 at the earliest.
But, if the market is as depressed as these reports are saying, and a buyer can negotiate a good price on a house they are planning on staying in for 7-10 years, I don’t see why it doesn’t make sense to buy now?
Because sellers aren’t selling right now either; at least not a prices that reflect the underlying fundamentals. After all, many sellers think the current downturn is temporary. The NAR tells us that in the spring everything will be just fine.
As Seneca says, you would be hard pressed to find a seller today willing to accept a fair price (IMHO, about 35% less that 2005 peak, which works out to 2000 prices plus 4% per year).
Lina, if you are not embarrassed to present your offer, you are offering too much. If you really feel the need to buy now, I would put in a bunch of “fair-ball” offers and see if anything sticks.
… and one great thing is that in this market, the houses you like might still be on the market in June 2007.
From the Philly Burbs:
Area housing prices in decline
rea home prices dropped in September on a year-to-year basis, only the second time this year that has happened and just the latest sign of a cooling housing market.
At the same time, there are a number of indications the housing market slowdown may itself be leveling off. While few industry insiders expect a return to the boom of recent years, prices and market activity should stabilize over the next six months, experts say.
But there could be more bumps ahead.
“Until the sellers who don’t understand it’s a longer market are off the market, they’ll keep dropping their prices,” says Jeri Gutner, a Realtor with Keller Williams in Doylestown.
“I think there will be spotty declines just as we’ll see spotty increases,” says Sue Thompson, vice president and sales manager at Prudential, Fox & Roach Realtors’ Doylestown office.
According to multiple listing service sales data for the 43 municipalities of central and upper Bucks County and eastern Montgomery County provided by Prudential, Fox, the area’s median home price dropped 1 percent in September, to $297,000, when compared to September 2005.
The amount of time it took to sell a house skyrocketed 168 percent to 51 days from 19 days a year ago. The number of home sales fell 24 percent from 564 last September to 428 this year. And the local inventory of unsold homes was up 46 percent, to 3,848.
That data reflects a market that has slowed considerably.
What makes me laugh are agents who still put the rising trend on their market conditions report.
We have one guy telling the truth [and I have a feeling he’s not the popular guy in the class] about prices dropping. The rest are silly putty.
Check this listing:
MLS#: 2301643
OLP:$779,000
LD: 07/21/2006
LP: $759,900
DOM: 84
Withdrawn: 10/13/2006
__________________
MLS#: 2330624
Relisted on 10/13/2006
LP: $745,000
DOM: 4 ???
Days on Market is off by about 80 days. Can’t people be honest with their listings??
The days
Sorry guys i read too fast! Long day!
To Lina, and all
I am putting in an offer today on behalf of my client in the amount of $300,000 cash. The home was originally listed for 565 it is now 435 it is in bergen county and was probaly very nice in its day. Needs a ton or work but my client loves the style. I will let you know how it goes. This is an empty home probaly an estate.
KL
RentininNJ, you had mentioned awhile back that there’s a very good relocation realtor in North Carolina, does he/she have a website?
Good luck, KL.
“one great thing is that in this market, the houses you like might still be on the market in June 2007.”
Heh, true. And even if it’s not, there will be a dozen other houses as nice or nicer. There’s always another “great house” coming on the market.
KL, drop the offer on the table, and say “Boooya!”
LOL
here is what i do not understand, why is 300k cash better than a 300k mortgage for the seller? either way, doesn’t 300k end up in the bank account? why should they care where the money comes from?
My Story:
I bought a single family 3/1 starter home in Bayonne, NJ for 260K in 2001 and sold for 425K in 2005 Jan. I owned two lots with my house. An investor paid me cash to tear down my house and put up two separate homes. They are now on the market for 600K each if anyone is interested in making him rich ;-).
I am renting a 3/2.5 townhome with finished basement in for 1750 a month. I keep looking at listings but haven’t been to find value worth buying so I continue to rent.
Sellers still have unrealistic expectations. They will try every trick in the book to sell the house except adjust the price to reflect the current market. I plan to lowball start low-balling next year. I do beleive that the demand for homes will always be there in places like the NY Metro area, but median prices have to factor in median incomes. In the long run price increases off all assets will revert to the mean.
We could end up with stagnant prices until incomes catch up in how many ever years or more likely prices drop to meet incomes.
I have worked in Finance for about 9 years now. My advice to Lina and anyone else looking to buy. You really can’t time the market. You need to look at the current real-estate situation, your income and potential income growth, comparable rents and make a decision. The overpriced house you see for 800K maynot be that over priced in year 2015. But there will be many years when you are paying for an 800K mortgage on a house that is worth far less. Good for the bank and shareholders but definitely not good for you !
To: njresident286 Says:
The benefit I see in a cash buyer is less concern about the deal falling through due to mortgage or appraisal problems and faster closing.
In my particular case, they also offered to buy as-is with no inspection.
Days on Market is off by about 80 days. Can’t people be honest with their listings??
The days
Antitrump, this has been covered recently by the Star Ledger I believe and on this website. Seems like a very common practice nowadays that is not going to change anytime soon. Looks kind of bad for the sellers/realtors if a home has been on the market 180 days or so.
anti-trump, great piece of advice for people considering the rent versus buy decision. due to the nature of this blog sometimes the perception gets too skewed to the wait it out approach (which i think still makes sense until we get well into spring and see where things fall).
Richard,
That true, comparing mortgage payment vs. rent payment is always a good indication of whether to buy or rent. However a couple of things to note. First it should be assuming a fixed rate is used to purchase the property. I believe just too many people were lured in the past few years by the enticing low payment made possible with the use of ARM’s and IO loans (which obviously drove prices up). And one other thing to take into consideration is, even if the rent/mortgage payment were equal, shouldn’t you factor in the possibility of loosing $30k-$70k within the first year or two of homeownership in today’s market?
*You need to look at the current real-estate situation, your income and potential income growth, comparable rents and make a decision.*
I really think it comes down to comparable rents. If you are single and don’t plan on having a family and only want a 1 BR condo, your cost of owning may be less than your cost of renting very soon. In this case, will it really matter whether the value of the condo drops, since you’re not planning on trading up?
the rent vs buy disparity is still far apart when it comes to SFHs and condos suitable for families, however
See, the problem I have with that, Richard, is it’s always gonna be somethin’. Wait til Spring. Wait until end of 2007.
Go back and read comments on this blog or Ben’s blog from last Spring. You yourself (?) may have been one of the “Just wait until November 06” people.
I want an index…an indicator…a financial tool, and I have it. It’s called rent v. buy analysis.
If someone like Lina doesn’t know when to buy, why not just buy when her ten-year cost to own is in line with ten-year rental cost, or a little lower? Now that housing is declining in price, and it’s an expense again, wouldn’t a cost/benefit analysis suffice to determine purchase date?
Geez. Groupthink. Icky.
Realtos these days are like forrest gump ya never know what u r gonna get.
I am amongst the many aspiring lowballers out here. I am going to check out 3 idential townhouses this weekend listed at 270k + if i like any of them, I know the units well all they get from me is a 150k offer. Like i tell realtors at open house the market is crashing and will gety worse, I can out wait any seller because da da da da I am low ball man able too lowball any greedy person in a single swoop
Pat i did say nov ’07. i think that will be a great time to find a deal however none of us has a crystal ball and irrational markets (income to house price disparities) can take longer than anyone thinks possible. with that said all you can look at is your own personal situation and whether you can afford to buy using a low risk loan. so if you overpaid and the house drops in value according to comps but recovers and surpasses what you paid before you sell, then the gyrations means nothing. like the stock market, it’s what you bought it for and what you sold it for that matters. now i would only apply this logic to a house i live in, not as an investment approach.
>>shouldn’t you factor in the possibility of loosing $30k-$70k within the first year or two of homeownership in today’s market?
no, unles you’re buying as an investment or there’s a real possibility you’ll have to sell within a couple of years. then the closing costs alone aren’t worth it.
I just got done looking at Grim’s Excel sales data and almost got sick to my stomach seeing what some people paid for their 1-2 bedroom condos in the area that I am looking. My fiance and I are currently renting in Madison and plan on buying in the next 1-2 years. However, as long as there are suckers willing to pay 400-450k for a 1-2 bedroom, 900 SQFT condo with $400 monthly fees the sellers in this area are going to continue to be greedy and I don’t blame them. We still have a LONG WAY to go people.
Yes, you should factor in the possibility of losing 30 to 70K, once you have over paid, you will have alwasy over paid.Even if 10 years out or more, you are ahead of the game price wise, you will still always have lost that 30 to 70k, plus all the addditional interest you paid on that 30 to 70k that you lost.
From MarketWatch:
Home-builder sentiment snaps losing streak
WASHINGTON (MarketWatch) — U.S. home-builders’ sentiment improved marginally in October, a sign the market may be “stabilizing,” the National Association of Home Builders said Tuesday.
The NAHB/Wells Fargo housing market index rose 1 point to 31 in October, indicating that about a third of builders are optimistic. The index had fallen for eight months in a row to a 15-year low of 30 in September.
Wow, one WHOLE point. Woohoo! It’s over!!
;-)
Some sellers are capitulating. Several weeks ago I put in a bid for a multi-family property to live in and rent out. The OLP was $950k. They changed the LP to $875k and the property sat close to 6 months. I lowballed at $700k. The property was breakeven at $800k. The seller came down after two rounds of negotiating to close to $800k, but some bonehead came in and offered them near asking. I would’ve done the deal at $775k. Value is in the eye of the beholder, but some are still walking around with blinders on.
For those who are thinking of buying now in the short term thinking they have a sweet deal my suggestion is to think very carefully
(a) whether or not it is really worth buying now and paying the mortgage based on a declining value asset as the equity will be diminshing over the next two to four years . Paying interest on inflated amount which is dwindling is it worth that?
(b) Do you honestly feel there will be a shortage of dream homes with abundant choices and sweet deals for the picking after two to three years? If you think there will be no dream homes then, we go ahead and buy now and throw your money away.
HI All I have a question – does anybody in the whole country building starter homes anymore?????
It seems like all new condos starts in low 400’s, new homes in 600’s.
With huge amount of Starter Homes being torn down in the last years and replaced with the Bigger ones – there is real shortage of the low end properties… It seems like new young families not making over 150K a year are doomed to either buying converted condo/apartments (eeewwww – they are ugly and crappy) or living in rentals forever??
I believe, a lot of existing families who lives in cheap low end housing will never sell it due to huge taxes and maintnance on bigger places. They will just pass it on to their heirs, or the competition for the starter homes will be so high that they will be priced the same as bigger houses (thats what we see now – starter homes priced the same as new ones and the new ones x2 bigger. The moment starter home lowering it’s price by mere 5K it gets sold.)
So are we going from the nation of the homeowners to the nation of RICH and VERY??? EVEN IF I WE BUY A BIGGER HOUSE NOW WE WILL BE SUFFERING FROM TAXES.
SO WHY IS IT SO, THAT NOBODY BUILDING STARTER HOMES??? STARTER HOME=30% cheaper than average home price (or come up with your own definition).
(BTW, why would I want to pay double my rent to live in the same apartment?? COME ON, YOU EVEN DO NOT EVEN OWN THE WALLS OF YOUR CONDO – JUST The PAINT ON THEM – that is the question. I will rent forever before buying a condo. I might consider buying a duplex, but I will want to own both units. I just do not believe ion communal property.)
Home Builders Regional Sentiment:
“The index fell in two regions and rose in the other two. Sentiment bounced back to 33 from 28 in the Northeast and to 20 from 16 in the Midwest, but it fell by 1 point in the South to 37 and plunged by 5 points to 32 in the West.”
See post #63 for link
HI All I have a question – does anybody in the whole country building starter homes anymore?????
Yes, but not in New Jersey. I just came back from an exploratory trip to Raleigh. I looked at a boatload of brand new 2,500 – 3,200 square foot homes in the upper $200’s to lower $300’s. There also tons of true starter homes (nicer than your average NJ starter cape & new construction) in the upper $100’s.
SO WHY IS IT SO, THAT NOBODY BUILDING STARTER HOMES??? STARTER HOME =30% cheaper than average home price
If you’re a builder, as long as there is a market for McMansions & luxury condos, why would you want to build something worth 30% less? The challenge in NJ is finding the land and securing the building permits. Once you do that, you want to squeeze every dime of value out of the project.
Of course the market is now saturated with McMansions, so who knows what happens next.
“All I have a question – does anybody in the whole country building starter homes anymore?”
Yes, there are numerous starter homes in Chatham — tiny Cape Cods on tiny lots. They cost $500,000.
The problem with “starter homes” isn’t necessarily the building, it’s the price.
That a $500K crapbox is a “starter home” these days, is absurd. I’d rather rent.
RentininNJ, you had mentioned that there’s a very good relocation realtor in North Carolina, do they have a website?
Opportunity cost is huge in the rent vs buy decision. I’d much rather put $50k into a CD earning 5% than to put it into a house that is highly likely to go down 10-15%. That alone obliterates any tax benefit to buying right now, nevermind the increased interest payments spread over the next 30 years.
I wanted to give some of you my experience with making lowball offers over the summer since it seems like there are a few of you out there about to do some lowballing. My offers were either laughed at by the ones fishing for a high price but not really ready to sell; or the ones truly looking to sell countered and then lowered their list price to the counter offer they just made when I countered back with my original offer.
Two houses that I bid on in June just went under contract and sold. The first house I bid 27% off OLP and 15% off the then current LP. They said it’s too early and then began to lower their price. Every few weeks, they’d call back and see if I’d be interested in making another offer. When I stayed pat, they lowered their list again. This occurred several times. Finally they called and wanted to accept my offer of 27% off OLP. I thought the market changed (which it did) and I thought my original offer was too high, I replied with an offer 36% off OLP and they replied with a counter of 32% off OLP. We were still a decent amount apart and I was in no rush. I see that the house just went under contract and I don’t know what the agreed price is. Considering the current LP was 29% off OLP, I bet someone paid close to that even though the seller was willing to offer me 32% off OLP.
The second house I made an offer on was 20% off OLP. Again, they countered and began to lower their price when I stayed pat. They got stubborn and wouldn’t drop anymore, but kept calling me. I calculated what I thought they paid for repairs and renovations since they had bought in 2002 and came to realize they were basically at breakeven after realtor’s fees and that’s why they became so stubborn, pretty sad consdiering this was after owning the home from 2002 until 2006 which I believe is the 4 greatest years of appreciation ever, or at least up there. Proof that you can lose money on your house.
I then dropped my price another $40K to force their hand and they said no, but they did lower it again and they got some other offers around my old offer and told me if my old offer was still on the table, I would be considered. I bit and reoffered my original offer. They jerked me around continually trying to get me to come up more and more. I eventually said, it’s my final offer and they went with another bidder.
They went UCD and just closed about 20 days after UCD. They closed $1K less than what I offered back in June and reoffered last month.
The first house I could’ve had for less than what it probably is UCD for, but I wasn’t 100% in love with that house, so I’m not too disappointed. The second house befuddles me as I was right there and I guess they didn’t like me or something. I liked that house and was willing to pay a little higher than what I think prices are going to drop to in order to buy it.
The moral of the story is that in both cases I facilitated and convinced the sellers to come to realistic prices, but I didn’t get either house. However, the end result are two houses that sold for 20-30% less than OLP and this is possible on any house where the sellers need/want to move now and not wait.
Also, in both cases I was very cordial and explained that I wasn’t just some jerk making lowball offers for fun, but that I was truly interested and I was ready to buy if they were willing to come down to earth.
To: Hard Place
You are right. There are still people who are still very bullish on the real-estate. It’s a zero sum game. One of us will win the bet.
To: skep-tic:
YOu are correct. I should have added period of ownership as one of the factors to consider.
*Also, in both cases I was very cordial and explained that I wasn’t just some jerk making lowball offers for fun, but that I was truly interested and I was ready to buy if they were willing to come down to earth.*
do you think they took it personally?
if you were going to bid today, would you do anything differently?
Barry over at Big Picture has some info about the NAHB index..
http://bigpicture.typepad.com/comments/2006/10/why_bother_with.html
Worth the click.
jb
Calculated Risk also takes a shot..
http://calculatedrisk.blogspot.com/2006/10/nahb-october-builder-confidence.html
jb
skep-tic,
I think everyone takes it personally that’s why people have trouble lowering their price. People always view their house as being worth more than a comparable because of their tastes, “why should I lower my price when neighbor XYZ’s house is higher than mine and mine’s better!”
Would I do anything differently? No. Thankfully I didn’t get house #1 the first time or the second time and as much as I wanted the #2 house, I did everything I could, it wasn’t meant to be.
In the past month since I lost out on the house about 5 similar houses have come on the market at more realistic prices only lsightly hgiher than what #2 sold for. They may not be willing to come down right away, but in a few months they’ll be lower and I could probably buy one then. But I probably won’t as I think we still got a ways to go before the bottom.
The market is diff, the past 5 years saw the good houses disappear quickly so if you didn’t overbid, you lost out and the backup houses were crap. Now you can wait as long as you want and pick from 5 houses that are all the “good” ones. Don’t worry, there may be 1 or 2 other potential buyers, but not 5, you’ll eventually find one for the right price.
In the meantime, I’m a happy renter with the interest from my down payment paying my rent.
>>shouldn’t you factor in the possibility of loosing $30k-$70k within the first year or two of homeownership in today’s market?
Richard,
“no, unles you’re buying as an investment or there’s a real possibility you’ll have to sell within a couple of years. then the closing costs alone aren’t worth it.”
Within a couple of years??? If you bought in 1988 you were not even until 1997. We didn’t have the same mania/toxic loans back then. SFH’s declined approx 20% and condo’s approx 40% back then. Of course you should factor in the possibility of these losses. If you are buying you better be content to sit for 10-15 years, not a couple as was suggested.
Is this a good deal?
How much would you pay for this house ? The property was bought in 2002 for 400k, was completely demolished and re-bulit into a realy top of line colonial.
Any inputs is appriciated.
How much it would cost to build 3600 sf house in labor and material (minus land)nothing was spared, evertything is top of the line)?
Here is the alert received from the listing agent who is the owner too.
MLS # 2637536
REDUCTION ALERT FROM M REALTY FOR 53 Lake St., Westwood, NJ:
*3552 .S.F. NEW CONSTRUCTION FOR $749,253*- OPEN HOUSE 1-4 SUNDAY
10/15/06-BROKER TOUR-WED. 11-3, 10/11/06
53 Lake St., Westwood
Once In A Lifetime
Come see this unique custom built colonial that is priced $TO SELL!! So
bring your buyers now! This home features a modern eat-in kitchen with
granite counter tops, center island which also serves as a breakfast bar,
family room with gas fireplace, master bath with Jacuzzi® 2-person whirlpool
tub, 2-person shower, 12 foot vaulted ceilings, and double vanities. Oak
hardwood floors are throughout the house, private 6-foot vinyl fence in
backyard, full basement with separate entrance that could be used for a
professional home office. Hardiplank® siding with a 50 year warranty, and
much more.
The links below will take you to the listing with pictures on my website and
NJMLS’ website. Please call or email me if you would like to view the
property. Thank you
bergenbuyer, great story. So close, yet so far. There will be other houses.
If you think the stock market is only going up… see this in relation to housing:
http://www.gold-eagle.com/editorials_05/vaneeden101406pv.html
-Sapiens
Sapiens,
I’m sure we’ll see this tomorrow on cnbc.
Market declines are cyclical and we are on the way down. That being said if you can afford a 30 year fixed with >20% you can still buy and be fine in the long run.
Even after the market bottoms, I’m sure folks on this blog will be forecasting doom and gloom and will miss the best time to buy. You will always find people yelling that the sky is falling. Although prices are still clearly declining it is impossible to know when they have bottomed. Wait too long and you’ll be waiting for the next bubble to burst.
My advice, find a house you can comfortably afford, a house you and your family love, lowball an offer and treat the house as an expense instead of an investment where you are entitled to a 10% annual return.
Unrealtor,
Here is a website for Ann Abraham.
http://www.anneabraham.com/
Can someone give me advice on this listing?
MLS#: 2295717
LD: 07/04/2006
OLP: $799,000
DOM: 105
LP: $760,000
This is a Town Home in Chatham, NJ. The town has the following appraised values for the townhome:
Land Assessment: $413,100
Building Assessment: $208,400
Total Assessment: $621,500
Does anyone know if the land assessment for the townhome is the shared land or land considered as part of this particular unit?
Can 620K be considered a resonable value for the property as the town appraised value is 620?
I have a question unrelated to price, but more to condition of houses.
I just saw a place that was priced somewhat reasonable for what it is – a fixer upper. If I decide to place an offer, I would probably still go in 15% lower than list price.
However, being a new homeowner, and new to homes in NJ, I saw water in the basement. To me, that TOTALLY scares me and makes me think “no way”, but my realtor said it’s very common in NJ, and that it can be fixed by putting in a french drain and sump pump.
Any thoughts? Sorry this is non-related. Just thought some Jersey folks might understand if water in the basement is really not an issue in NJ.
RentinginNJ, thanks!
Max914,
“That being said if you can afford a 30 year fixed with >20% you can still buy and be fine in the long run.”
If the herd couldn’t follow this advice the last 3 years, what makes you think they will follow now?? You are right, market declines are cylical. However, this one will be historic. You state that market prices are “still” declining. Still?? We are just in the beginning stages of the biggest bust in RE history. Just treat the house as an expense??? Yeah, if I can utilize it as an off balance sheet expense!! What about the biggest investment you’ll probably ever make?? Just expense it??
“That being said if you can afford a 30 year fixed with >20% you can still buy and be fine in the long run.”
So there’s no concern that $600K could be earning 5% for the next 10 years, vs earning 0% for the next 10 years?
Lina,
Run away!!! Don’t accept that sh*t. There are plenty of places out there that don’t have a water problem. Why should you worry about putting in a french drain or a sump pump?? Is water coming from ground level or is it seepage from high water tables?? Is this in a flood zone?? If there is water in the basement, you may also have a mold problem. Look elsewhere.
anyone who buys property at this unrealistic market can’t call the part above his/her shoulder brain. Anyone who places any credibility on “realtor” is infantile. Whenever realtors talk, I instantly switch off my ears from inside. The whole market has been corrupted by the self claimed “professionals” and want-to-get-rich greedy flippers.
Advice for buyers, If you want to present any offer, start from 25% of the listing price and don’t go beyond 35%.
The top cheater and professional misleader, who sometimes also called himself chief “economist” of corrupt realtors, David Lereah, should be put into jail, for business fraud.
“Can someone give me advice on this listing?”
$700K+ for a condo? Plus $300 a month in HOA fees?
Sounds nuts to me. No yard. No privacy. May as well rent.
lina,
Where is the location? You don’t want to buy house around Bound Brook (287 exit 12), which is subject to flooding. I would say that the water would be a big problem. The french drain and sump pump should be already installed if needed. There is always better choice. No rush.
007
antitrump, $760k for a 3 bedroom townhouse? you can get a 7-9 room colonial in a desirable part of chatham (off lafaytette say) for $705k plus a yard, garage and no HOA taxes. there is no reason why you should consider a townhouse at this price range. if you want a smallish starter home with no work involved and a quarter acre for $600k take a look at MLS #2317929.
Unrealtor,
So there’s no concern that $600K could be earning 5% for the next 10 years, vs earning 0% for the next 10 years?
I dont necessarily disagree with you.
I know this may get me chased out of dodge but I dont think it is that simple. I mean who has $600K sitting around to earn 5% on? I certainly dont. I know if you dont buy you wont pay 6-7% interest on your mortgage but you’ll be paying rent instead, and my rent keeps going up. And dont forget you get the deductions for interest and taxes which in of themselves are not enough reason to buy, they can add up to decent savings.
I think if you can stay put for 5-10 years can sell at what you paid (which I think is reasonable) even after closing cost you will recoup your money and you will have lived without paying rent for 5-10 years. So not paying rent is your return.
So….surprise surprise suprise, we are in a correction. Housing prices are cyclical folks. Anyone with the slightest knowledge of historical housing cycles has been expecting this since 2002 or 2003. Big yawn.
The only wild card is interest rates. In terms of prices and market activity, expect a repeat of the early to mid 90’s. Bad if you bought in 2004 or 2005 and paid “market price” AND have to sell, otherwise ho-hum.
I’m looking to buy so I’ve been follwing this blog but everything has been talked to death. My question for some of you; if you are so safely out of the market, why follow every blip with a magnifying glass?
100 POINTS for RE Bears
wooo-whooo!
” if you are so safely out of the market, why follow every blip with a magnifying glass?”
Two reasons: 1) it gives you an idea of what is going on in “general” terms of the economic health of this area, which effects everyone, wether we want to admit it or not.
2) I also get great joy out of people getting the carpet pulled from underneath them. Because for too long people have been fooled thinking that RE was a can’t go wrong investment.
SAS
Why follow every blip?
Some people talk about football until exhaustion. How many inches deep is the grass? What will happen in Week 10 if Smith sprains his toe in Game 6? Fans.
For me, housing and the economy is much more interesting. Don’t know why. Wish I could start a Lowball pool at work.
Pat,
Great point!!! By the way how will the weather affect this weekend’s games. Who has the advantage in the rain??
High Schooll lesson 5 years from now:
Teacher: “Lets repeat all together”
HOUSE IS NOT AN INVESTMENT.
HOUSE IS THE PLACE TO LIVE.
HOUSE DOES NOT PRODUCE ANYTHING.
HOUSE IS THE PLACE TO LIVE.
IF YOU WANT AN INVESTMENT – GO TO THE STOCK MARKET OR START YOUR OWN BUISNESS.
HOUSE IS THE PLACE TO LIVE.
Cliffy,
You didn’t include a link and the MLS didn’t work, however, by the description you gave I think I know the house you’re talking about. It seemed really nice last I looked, however, be aware that houses in Westwood are priced less than comparable houses in some of the surrounding towns (WCL, Wshtn Twp, Rdgwd).
I don’t know the street, but definitely check on that and check the lot size too, you can always redo a kitchen or add on a family rm, but you can’t pick up your house and move it to a new town or a better street.
i hope this comment is not too late for you Lina. Water in a basement is common anywhere they build a house where the water table is too high. Seek higher ground.
Water in the basement leads to mold and structural deterioration. the former in some cases can lead to a big health problem and the later is just plain costly. There are many many homes in NJ where the basement remains dry as the desert. sections around bound brook or red bank are quite wet in the basement and houses in this area probably have no buisness even having a basement. at best it should just have a crawl space with a lot of drainage. seek higher ground and avoid the headache of constant flooding.
my two cents.
Do not buy in Westwood.
Watch the schools in Westwood. Ketler is the better one and Goodwin Park will retain its value better than other areas.
RMB: it does not really matter,a s they all end up in the same middle and high school.
Alot of people in Westwood would disagree with you there.. Ketler and Brookside have smaller classes and better programs then Berkley and George..And we are talking about prime development years K-6. I guess ita a matter of preference
We decided against the house with the water in the basement. Too much of a headache altogether.
I just put an offer in on a new listing: listed at $399.9; I went in 17% lower at $330K, but am willing to go as high at $340K (15% of OLP).
Fingers crossed!
Bergen Buyer
Here is the link to the Westwood house
http://mr-homes.com:80/listing.php?lid=26
The property is 75X125.
What about the Westwood regional High School? Their test scores are little bit lower than the sourrounding districts, is that the only differene or there is more to it?
http://WWW.greatschools.net.. is the website…
Pingback: Anonymous
Pingback: Anonymous