From Newsday:
As housing bubble collapses, developers and sellers cut prices, await deals and pray for a rally in ’07
BY RANDI F. MARSHALL
Two months ago, Chuck Davis finished building a new three-bedroom, two-bath ranch in Shirley, and he put it on the market for $315,000. He considered it a rare find for potential first-time home buyers and hoped it would sell quickly.
So far, however, Davis hasn’t had any calls on the house, which, although new, is competing with 1,000 existing-home listings in Mastic and Shirley.
Davis and his father, Bob, partners in Davis Homes in Shirley, are planning new advertising and incentives.
But buyers are holding out for better prices and, in some cases, are worried about selling the home they already own. So, even with limited new housing inventory, builders like Davis are feeling the downturn – and are, in turn, slowing their production.
“I’m maxed out right now until I unload some of these homes,” Chuck Davis said.
…
But for many would-be new home buyers, it’s not that simple, said Centereach resident Phyllis Lombardi.Last spring, Lombardi and her husband, Louis, were to close on a new $612,000 home in Mount Sinai built by Pulte Homes. The couple and their five children had watched the home being built, taking pictures of its progress.
But after putting their home up for sale last November, the Lombardis found that they had hit the market with exactly the wrong timing. May approached, their new house was ready for closing, and they still hadn’t sold their existing one, even after dropping the price twice.
So they pulled out of their deal with Pulte, which refunded all but $20,000 of their deposit. (Pulte sales vice president Bruce Orr said the money was retained to pay for reselling the home.)
“I essentially feel like I paid $20,000 for the fun of picking out my colors and watching the house being built,” said Phyllis Lombardi, 36.
..
Experts said they’re hoping builders and bankers remember lessons of the early 1990s to prevent severe losses. And they’re hoping for a spring 2007 comeback. Added longtime builder Don Eversoll: “Demand always comes back.”
Hello James,
I’m trying to find that list of NY Times articles you aggregated. It was under the following site: http://www.youdovodoo.com/80sbubble.htm
I can’t seem to find it. Can you help?
Thanks.
Anthony,
http://www.youdovoodoo.com/80sbubble.htm . You misspelled voodoo no biggie, I hope my link works.
Anthony,
It was moved to the following site:
https://njrereport.com/80sbubble.htm
You can also find it in the “Tools” links on the main page.
jb
Metro,
I didn’t realize that the voodoo link was still active, I sold that domain name a few weeks ago.
It was my best internet real estate deal yet, just about a 1000% return.
jb
Thanks everybody. Really appreciate it.
You know those articles has rich lessons in history for those who are curious enough to read some of them. What was once old can be made new again. I’ll share more experiences at a later date.
By the way, magnificent blog!
Housing Starts, Building Permits, and CPI data out at 8:30 this morning.
jb
Don Eversoll: “Demand always comes back.”
That’s just half the truth. More spin i guess. Historically demand takes 5-6 years to come back.
“Demand always comes back.”
Next month, 5 years??? It will come back when prices are in line with the underlying fundamentals. Until then, “always” can be a very long time’ if you are trying to sell.
Eversoll’s right, demand always does come back. And there’s always supply. It’s where they meet that is the question.
Wonder who is buying all the houses at sky high prices??
http://today.reuters.com/news/articleinvesting.aspx?type=marketsNews&storyID=2006-10-17T180828Z_01_N17238870_RTRIDST_0_FINANCIAL-WALLSTREET-PAY.XML
The bubble wont burst here… there are to many lawyers/doctors in NJ plus guys like this
http://today.reuters.com/news/articleinvesting.aspx?type=marketsNews&storyID=2006-10-17T180828Z_01_N17238870_RTRIDST_0_FINANCIAL-WALLSTREET-PAY.XML
There might be a small lull but it isn’t going to crash the demand is to much.. yes that cruddy cape cod in edison will never sell for 500 again but any new good homes will always be pricey
Ah NJ residents and theri bizzare fascination with Wall Street.
“The bubble wont burst here… there are to many lawyers/doctors in NJ plus guys like this”
So, you are telling me, only doctors, lawyers, and Wall types are going to keep RE from sinking?
Didn’t know all of them were all looking for housing at the same time and their are that many to move all this inventory? News to me…
SAS
to: lina and all
Lina, you should only take advice on how to take care of a leaking basement from someone who knows how… realtor doesnt fit that description.
As to my lowball offer of yesterday we actually decided to put in 2 one for 300 on a 435 house and one for 450 on a 539 house.
539 called us back with a 535 counter at which point i laughed.. seller’s agent said well they laughed when i presented your offer.. okay said I but we’ll see who laugh’s last. ( we will go higher .. but not yet.
300 hasnt called, one of those no cell phone realtors, can’t be reached during non-business hours, you know a professional. ( sarcasm )
I’ll let you know how these go. I don’t have high hopes, but he’s buying something, we’ll keep plugging.
KL
shirley and mastic are complete white trash holes. believe me i used to live near there so not the best example but the patterns of selling one house before buying another is all too true.
The bubble will not burst here? But it is already birsting.
It’s an argument that we hear a lot; “Wall Street jobs will keep the NJ housing market afloat”. While the salaries are impressive, they must be taken in context:
– Only 4.7% (according to your article) of NYC jobs are in the securities industry. This equates to 170,800 jobs.
– Roughly 25% of these people live in New Jersey. Most of the rest are from NY & CT. This equates to about 47,200 NJ residents with Wall Street jobs.
– There are 1.5 million households in Northern NJ (Census 2005 estimate)
– This means that NJ residents will Wall Street jobs occupy about 2.8% of the households in New Jersey (assuming 1 per home)
– I just don’t see how 2.8% of the households are going to prevent a crash. There just aren’t enough of them.
– Wall Street employment is down versus 2000 (about 1/3 of the jobs lost since 2000 have been recovered). If Wall Street employment played such an important factor in the NJ RE market, then housing prices should have fallen since 2000. However, housing prices in NNJ have about doubled since 2000. This seems to indicate that Wall Street employment doesn’t have much of an impact on the NNJ housing market.
Housing Starts, Building Permits, and CPI data out at 8:30 this morning.
Yup, they’re out…not newsworthy, though, as far as this blog is concerned?
Oh, and the Dow hit 12,000.
This house search process is stressful!
I have decided water in the basement is just too much of an issue to take on. There’s got to be better out there.
I have 2 places I’m looking at:
1. $389K, on the market for about 5 months (they were at $449K originally)
2. $399.9K, on the market for only 2 weeks.
I think both would be fairly priced between $315-$330.
My preference is #2 b/c it’s in a better neighborhood, but clearly there’s more negotiating room with #1.
Don’t know what to do….
Can anyone here post a sample lowball offer letter?
Can the same template be used through realtor or for a “for sale by owner”?
One other question – can someone look up this MLS and confirm that the original listing date is 10/9/06? (They always mess with these dates and it’s so frustrating!)
I’m having a day…
MLS 2328520
A interesting http://www.forsalebyowner.com listing #20497664.
The tax records indicate this house bought on 05/22/06 at 600K. Currently it on sale for 599K and the seller is willing to negotiate. But the previous year tax records also show the same person as the owner of the house.
I don’t get the story.
Can any guru here throw light?
A new edition of Price Reduced! will be posted at noon, be sure to check back.
I’m also going to include an Excel spreadsheet of all price changes over that period.
jb
in regards to wall street jobs, you can’t apply the quantity across all of NJ. the better paying street jobs are largely concentrated in a couple of areas near NYC like summit, millburn, chatham, madison and westfield. these areas will see some influx of $$$’s due to record bonuses this year so that will provide some relief for these towns at least. still the market has shifted and houses are selling 5-10% less than the peak.
re: wall st jobs:
people usually fail to ask how many of these people don’t already own homes. are there really hordes of new buyers among them?
also, regarding compensation: most of the “record bonuses” go to the very top. junior level people aren’t hurting, but they also aren’t making so much that they can cavalierly throw their money away on an overpriced condo in hoboken
Think about it people who is going to complain here… doctors?lawyers? no way
the only people you hear whining here are poor folk that can’t buy a house.. the ones that can are out enjoying the good life.. crash?!? yeah right NY/nj is full of executives, crooked gov’t workers, business owners, doctors, lawyers, investment bankers, accountants… you will never hear them whine here.
Its the same crew post over and over … whining and jealous that they can’t buy a house and missed the boom and now demand the prices come down 50%.
Face it move out of nj or be stuck communting 2 hours from nj or enjoy a cape cod for 400k as each passing day more wealthy immigrants come to an already overcroweded area with dreams of opening their own business.
Lina – you sound really stressed.
Why are you in such a rush to buy, especially if, as you say, you are new to NJ and don’t know the area well at all?
Why not rent a house for a year or so (glut of rentals out there), get to know the area better and take your time.
A house is the biggest purchase you are ever likely to make, even IF prices don’t drop, they certainly aren’t going up and you should take your time and be really sure that the house you do buy is one you won’t regret a year or two later.
“UnRealtor”
Were you serious about the letter. Is a simple justification of offer not needed?
Lina,
I’m sure you’ve noticed there are plenty of houses to choose from. Take your time, make an offer you think is right given the direction the market is heading. If it’s not accepted, move on to the next one. There is no shortage of inventory.
hello from germany,
i think one bank is also hoping that the concominiom market will be doing well.
4.3 b$ in condoloans and only 1% loss reserve / corus
http://immobilienblasen.blogspot.com/
they better pray……
averages are very misleading. while the average wall street bonus is 300K, this number does not really paint an accurate picture of what the average wall street employee took in. When you consider that the top guys (very small single digit percentage of the wall street employee base) are getting bonuses to the tune of millions and the lowly guys is getting a bonus of say 5 – 10K you can quickly see that bonus time on wall street isnt going to unleash a flood of buyers into the market. the guys making the millions as one poster put it will not rush out to buy the overpriced condo. They are perfectly fine in their million dollar princeton home. the guys that made a few grand will use it to pay down credit cards and start a fresh new year of debt accumulation.
block911 Oh grass hopper you ahvs so much to learn, yoru belied that north Jersey is inhabited by all doctors and lawyers,and as such they will pay for your over priced cape.
So young so silly, so ignorant, but you will learn, they all do.
As I sit backa nd watch this market collapse in on itself, I cans ssy to so many I told you so.
vj,
while you can add a justification i dont know that it really makes a difference on the seller’s opinion to accept, counter or refuse. If you feel “bad” about the offer don’t. Seller’s do not feel bad about inflated asking prices. If they get offended it is natural. These transactions always seem to bring in people’s emotions and understandably so. Regardless, at the end of the day this is a business transaction. Although on a larger scale no different than offering the guy in chinatown $8 for his $20 rolex knock off. He may raise his hands in disbelief but then again he just might sell it to you too.
“Were you serious about the letter. Is a simple justification of offer not needed?”
Everything but the “Booya.” :-)
No need to justify your offer. They don’t care what your justification is anyway.
“Here’s my offer, take it or leave it.”
And be prepared to walk away without remorse.
infodiva: you come on this site, presenting yourself as a reaosnable person who looks at both sides of an issue, amidst a sea of what you consider to be jealous wanna be home owners waiting for a crash.
So what is you take on the Dow at 12,000, and CPI, and housing starts, why is it iportnat and what hasit to do with the real estate amrket.
Dow at 12,000, since back down 11,982, what does that mean for housing.
Housing starts up, but future permits are at theri lowest level in 5 years, looks like builders are going to finish what they started, prices be damned, but then thats it.
Consumer prices down, but the core rate now you ahev to understand Infodiva that is what the Fed and the amrket looks at the core roses at its fastest pace in 10 years, not good gor interest rates, as inflation as the Fed has repeatedly warned is still a major concern.
They are not lowering rates any time soon,a nd they may still tighten.
So Info there you have it, a bried primer for you.
infodiva: you come on this site, presenting yourself as a reasonable person who looks at both sides of an issue, amidst a sea of what you consider to be jealous wanna be home owners waiting for a crash.
So what is you take on the Dow at 12,000, and CPI, and housing starts, why is it importants and what has it to do with the real estate amrket.
Dow at 12,000, since back down 11,982, what does that mean for housing.
Housing starts up, but future permits are at their lowest level in 5 years, looks like builders are going to finish what they started, prices be damned, but then thats it.
Consumer prices down, but the core rate now you have to understand Infodiva that is what the Fed and the market looks at; the core rose at its fastest pace in 10 years, not good for interest rates, and inflation as the Fed has repeatedly warned is still a major concern.
They are not lowering rates any time soon,and they may still tighten.
So Info there you have it, a brief primer for you.
sorry for the double post, had to fix all my typos, doing too much at once.
block 911 i needed a good laugh
well im off to the welfare off thanks
I Love this line by block911 “as each passing day more wealthy immigrants come to an already overcroweded area with dreams of opening their own business”
– they put it in every time along with “They re not making anymore land, you know”
-right after “Housing never goes down”
BTW i th=ink I know how we will get rid of excess of money -dow will go to 20000, everybody will put all theyb haev into the stock, including foreighn investors – who whats to miss 80% gain in month, and after that backto 11000’s number – vuala – all excess money are gone now.
Demand is back, Bubbleheads are now talking about Bottoms. I guess they know there is no real bubble
Grim, sell your site and domain name get out before your bubble bursts LOL
block911.
You are right, I was at the airport the other day and I saw a whole bunch of immigrants get out of the plane with suitcases stuffed with 1000 dollar bills to buy crudy 500K capes.
But it is possible that there is a long lien for cabs outside the airport as the inventory of homes for sale is significantly higher than last year. Once they get to the open house from the airport the inventory should clear up and we will be back in paradise with 25% year over year home price gains as far as the eye can see.
“NY/nj is full of executives, crooked gov’t workers, business owners, doctors, lawyers, investment bankers, accountants… you will never hear them whine here.”
there are a lot of high income people around here relative to other places. No one denies this. the question is what changed in the past 5-10 yrs? there were plenty of high income people in the area before the recent run up. Just because there are good jobs does not mean that prices should double every 5 yrs.
Also, I think if you talk to young doctors, lawyers, executives, ibankers, etc, you will find that they are concerned about the cost of living in this area. Sure, the ones that have owned their houses for 20 yrs (or even 5) love it, but people who are starting out — even in high income jobs — have sticker shock. Some of them will bite the bullet and overpay (which is a luxury most don’t have), but many more are refusing to do so. Most people who look at the fundamentals understand that prices must go significantly down and there is no hurry to buy, even if you are financially able to do so.
if you present any facts to suggest otherwise, I would love to see them
on average this title is an oxymoron: “wealthy immigrants”. With that said the very small number of immigrants with wealth are quite small compared to the immigrant masses that struggle.
InfoDiva. As for the Dow hitting 12K…
what did the tech bubble do to the precious Dow in the late 90s when it reached a record high?
pop. goes the weasel.
The “Wall Street jobs will save housing” argument makes it sound like everybody on Wall Street makes a huge salary. It’s only certain types of positions, naturally. I have a couple of friends in IT that work on Wall Street that make just under $100K.
PS- the Dow rose 18% during the spring of 2001. it was a poor indicator then and is so today
Everybody’s an expert.
Unfortunately most of you seem to be off subject here so I will help refocus you all.
The original blog question was:
“WHEN WILL DEMAND COME BACK”?
My opinion is the following:
1) It will take a few years of flat or declining home prices.
2) Improvements in price to income gap.
3) More job expansion.
4) More equilibrium in housing expenses.
Next!
unfortunatley Anthony these speak to how and now to when the demand will come back
oops type reissue…
unfortunatley Anthony these speak to how and not to when the demand will come back
You lost me.
“The bubble wont burst here… there are to many lawyers/doctors in NJ plus guys like this”
I know many that are underwater with recent purchases (investments??) in Fla and Nevada. You think they’re looking now?? What does someone’s income (other than they can afford it) have to do with their propensity to buy this market.I know a lot of individual’s who can easily afford but realize that we are in the beginning stages of a bust. Don’t equate someone’s ability to buy
with them pulling the trigger.
JB
You may have to form another topic so you can get these so called stock experts out of this conversation. They’re clogging up progress here.
And the backend IT stuff is going to be gone from the area in 5 years, with folks either relocating or changing careers.
It will move to where power is cheap, taxes are low, and costs of living are even lower. Check taxfoundation.org and cross-reference their biz-friendly rankings with utility rates to learn where those jobs are going to be.
From research published on various blogsites, I have formed an opinion that real prices will not drop below 2002-03 levels.
We are already 18 months into a nominal price decline of 5-10% in the tri-state area, which means that real prices are already 10-15% lower than 2005 levels. At this point, we are already at 2004 price levels in real terms. Another 5% nominal price drop in the next 12 months, will bring real prices to about 2003 levels. So therefore, by fall of 2007, nominal prices would have dropped about 15% from 2005 levels which would bring real prices back to 2003 levels. After that, I opine that nominal prices will hold steady, and real prices will keep declining for as long as it takes for demand to push nominal prices up.
This could take years to happen, as there are no magic bullets left for the Fed to engineer another RE boom.
I also feel that NJ and LI are the 2 areas most vulnerable to a steeper correction in the tri-state area, as compared to Manhattan/Westchester. This is solely due to the larger supply/demand ratios currently available in NJ/LI.
Infodiva,
For the umpteenth time. Stop the nonsense!! The Dow is a play on multinational’s (China and the dollar are fueling them). What does this have to do with an overpriced/overbought declining RE market??? Remember, in 2001 $ left the stock market for RE. Do you think there is a chance that RE $ has gravitated to the stock market. Forget about the Dow, it has no bearing on the RE market, in its present stage. What about our declining dollar and the possible inflation consequences regarding this??? Inflation/Interest rates??? Make your own conclusions.
Anthony i mean that the points that you raised speak to HOW the demand will come back and not WHEN the market will come back. Do you have any thoughts on the when?
Econ,
could you elaborate on 2002-03 prices being the floor? thanks
Uh if you don’t think wealthy immigrants aren’t coming here take a look at where all the IT jobs are… India. Ride the train from New brunswick to New york on the north east coridor… and what do you see Indians.. they took all the high paying IT jobs away and are buying up houses in NJ now. Go peak around edison and see who owns all the nice homes. Get your head out of the sand.
factsrule
Thats why at 10pm on a work day you are online posting instead of working..
Lol no wonder you can’t buy a house
EconRealist,
Your FY predictions are a little suspect but most of your points seem valid. Especially your 5-10% price decline estimations.
Keep it coming. :)
Yes I do Spelunker.
My predictions are 5-8 years. That’s enough space to fit a lot of meat and potatoes in between.
Do you agree? :)
skeptic:
From all the research Ive read, in 2002, real and nominal prices were in equilibrium, ie, nominal prices had finally caught up with real prices since the early 90s bust. So, at any given point now, one has to compare the nominal price of the house with the real price taking 2002 as the base..ie you take 2002 price and add 5% per year. Based on that, nominal prices today should not be more than 20% higher than 2002 prices.
I also use 5% as real rate of appreciation, as that rate is truely more representative of the inflation since 2002.
Some of you sound like protectionists.
Will some of you leave the immigrants alone for a change. They’re gladly doing the work some of you are refusing to do.
About right to me Anthony. Looking at the previous cycles it took about that long to recover. I say the higher range of your estimate: 8 years to begin a bounce back.
Infodiva,
Why doesn’t everybody run to their boss, explain to him/her that that the Dow is at 12,000 and then ask for a 50-100% pay raise. If everybody is successful then I will change my tune about the RE market.
“From all the research Ive read, in 2002, real and nominal prices were in equilibrium”
thanks– I’m wondering why you think this was the point of equilibrium.
You seem to be saying that RE was undervalued in the mid- to late-90s. Based on what? Prices relative to income, rents?
block911,
I know many of those indians who travel by train and most of them already own. In the current market conditions, I highly doubt they are going buy investment properties to make some greedy seller happy. They probably will invest excess cash in India where recent stock market gains have been mind blowing.
EconRealist,
How does your numbers explain when demand will come back? However, I must say that the question is extremely vague.
JB,
You may have to refine your questions a little more.
I am an immigrant myself, and I can tell you that I live in an apt complex with several other processional immigrant families who work in IT, Finance, Healthcare, etc. making in excess of 200k annually.
First of all, none of us believe that there is NO bubble. People have to realize, we come from countries where the only way to buy a house is to pay 100% DOWN. Period.
So it takes a little getting used to seeing people buy houses with 0% down. We value money very differently.
Unfortunately, its the current state of economics that dictates how assets are valued. Our thinking is no longer valid, money is but just paper, with the Fed unleashing its M3 spigot. One has to just find a balance point at which to enter an asset class, keeping into consideration various criteria like length of time for owning the asset, expected inflation, price entry, cost of closing, etc. etc.
How many college graduates have student loan debt, credit card debt, no savings, and a car payment/lease?
How many are financially able to buy a 500k house with 20% down and annual property taxes of 7k??
Spelunker
You mean to tell me we’re the only two smart ones posting?
I take that back. EconRealist sounds pretty straight laced himself.
block911-
Nice theory on jobs, however, the jobs end up reverting BACK to India. These people DO NOT stay here, nor do their jobs. The reality is, between China and India, soon enough many IT jobs will be outsourced overseas.
Whatever doesnt float overseas surely will follow taxfoundation and head to cheaper parts of the country. Theres little reason to keep IT staff local. Furthermore, consider those effects on the economy.
v
Ok.. but a lot of them JUST came from india with a masters degree and doing java programming in NY.. Don’t tell my otherwise as we sold our home in west windor for 618k to a a guy from India that just got married and his wife doesn’t work.
LeeS
Like i said ride the North east corridor train in the morning from Princeton Junction to New york… you’ll be in for a nice surprise… as well as smell :X
LeeS and block911
Would’nt you expect this phenomena to happen especially when their graduating more IT professionals, more Engineers, more Mathematicians and more Scientist then America.
block911 i will share with you my favorite quip. The author is anonymous, at least to me. If you are correct about the NJ housing market then this is perfect.
It’s a new paradigm, and everybody who doesn’t buy, now, will be priced out forever. Anybody who does buy will be rewarded with a lifetime of riches, as their property will continue its 30% yearly price increase.
Renters, and anybody born in a future generation, will not be able to afford a 15,000,000 starter home in 15 years. They will live in tent cities, and Hondas.
This asset bubble is different than all of the others – it will never slow down, or pop. The gains are permanent.
saying that immigrants will buy out all of the real estate is a bit extreme. Unless of course you consider that the US is afterall a country filled almost entirely of immigrants. In that case i agree with you 100%.
Skeptic:
I will pull up those old articles and post them here. As far as I remember, the reason for RE to be undervalued in the mid to late 90s was based on various factors, but prices relative to rent was definitely one of the biggest reasons.
No. Its not buy now get rich later. Its “hey i’m new to this country.. i have cash and I need a home and renting is dumping money out the window.” People aren’t stupid.. they know the market is down in housing.. but a- they need a place to live and b- can afford it.
block911,
Single earner, java programmer, 618K house. That doesn’t add up. Good for you, you found an excellent bag holder.
I’m from India. Me and my wife both have masters degree and work. We have friends with the same background. We are not comfortable making a purchase as most of us can’t afford $500K – $600K homes.
Learn some more j2ee skillets then cuz complaining on the message board ain’t gonna get you a house or a gadi LOL :)
Econ,
Thanks. I would be interested in seeing those figures.
Here’s a follow up question:
if RE prices aren’t constrained by fundamentals such as equivalent rents either on the upside (last few years) or on the downside (mid-90s), what makes you think the downswing will be constrained by fundamentals this time around?
On an un-related topic but interesting.. Our 10 year old boiler gave out yesterday. We called the local sales rep for the company that made our boiler. Ater saying that to him that I find it crazy that I have to replace a boiler after only 10 years when my Mother is going on 40+ with hers he said “They do not make things like they used to in the US anymore. If they did we would all be out of business like Singer” If I hear on more person from My parents generation tell me that they don’t understand why we didn’t buy this dump or that dump . When all of them had new houses and new boilers that they didn’t have to replace after 10 friggen years. I am going to scream.. That felt good.
Re IT jobs: I’m not quite as pessimistic about backend job flight to India or China, at least when it comes to stuff like running servers. Between the competence/creativity differences due to underlying cultural differences, relative instability of the governments or neighbors, and data security concerns, there’s room for managing data services in the US. Just not at $100/sqft and $0.30/kwh.
IMHO the companies that will keep backend IT here will be the small-to-midsize that are too small to handle the logistics of establishing their infrastructure in low-cost countries, don’t have the scale that would make outsourcing math work, or have technical requirements that exceed the bog-standard stuff that you can get from backend outsourcers.
(Luckily, I now work for such a company in one of the taxfoundation’s top-10 states, as opposed to conslutting for another company that was located in one of the bottom-10, and had its datacenter in another of the bottom-10 and $0.25/kwh…)
block911,
How much does your imaginary friend with j2ee skills make? :)
if you want to buy a home, have 20% down, can afford to according to your budget and plan on staying for 7-10 years you have a long time horizon so go ahead and find the best deal you can and buy. seasonally it’s a great time to buy as prices are most depressed with winter approaching. or you can roll the dice and see what happens in the spring. if you’re wrong and prices don’t drop you lose else you make a bit back cause you won’t see 20% declines from today. hey it’s your money.
Since this is the topic of the day and some of us are discussing how to know when demand will come back, I am reposting this from another topic:
I would like to put this market in context using months of supply as the indicator. The Union County towns I am following currently have 6 to 8 months of supply of homes for sale as of 2Q 2006. This compares to 2 months of supply in 2Q 2003. My question is, what is a “normal” # of months of supply in a stable market. What would the number likely be if this was 2Q of 1997 or 1998? Is 8 months supply really a lot or is that just the “normal” running average when markets are stable?
IT jobs are not the only ones moving to India, that’s old news. I know some financial institutions who are moving financial analysts jobs out to India. It’s a matter of purchasing power. You can get four Indians to crunch the numbers of one graduate here in the US.
Skeptic:
The core fundamentals have changed from the 90s to now. What happened in the 90s was a reaction to the fundamentals of the 90s. The fundamentals are different this time, here are some of the reasons, we can go into a lengthy discussion on each of these points:
No China/India in WTO or Oil rich Russia/MidEast in the 90s. There was no international debtor to the US of such gargantuan proportions in the 90s.
No CLO/CDO market worth talking about in the 90s. Financial sophistication has resulted in very efficient spreading of risks at much higher levels.
No M3 supply worth Greenspanseque proportions in the 90s. Take a look at how the M3 took off from around 1996. Where did all that money go? It feels like the $s that you and I hold have reduced to worthless pieces of paper.
All these things hinge on just one thing: Global Finance will remain loyal to the greenback for a long long time. If that one little fact gets unhinged, everything comes unravelling.
v: usko phekne de, apun tere saath hai.
As for the attachment to the greenback, its there for now. The question is, will it switch to the Euro? The greenback was great prior to the seventies, it held its value against gold. Now, its attached to nothing, and the government can keep printing more. Hell, Ireland is trying to hire Americans and having a convention in NY to do it. I never thought I would see it. Maybe it really is time to start thinking about buying products “Made in the U.S.A.”. Does anyone know where these can be found anymore?
http://wcbstv.com/topstories/local_story_291132634.html
No currency is tied to the Gold anymore. And no currency ever will be. As far as switching to the Euro, will the Europeans back their currency with the same kind of musclepower employed by the US? A reserve currency requires the might of its country to back it up. I think we demonstrated it by going to Iraq. Will the Europeans ever do what we did?
The danger is not in some other currency switching to be the global reserve, but rather several currencies estabilishing their own dominions and thus reducing the relevance of the $. Putin is trying to set it into motion, but the Russians lack a consumer population, also have a negative population growthrate. The Chinese are stuck with huge problems in trying to bring their 700M rural poor to the mainstream. India has similar issues. China/India will be dealing with huge deficits for the next several decades in trying to alleviate the plight of their poor.
Which just leaves one country for the global currency: the good old USD.
vj,
Your question on how to compose a lowball offer letter was a question I faced a few weeks ago and I would like to provide a different response than you have received so far.
I do not believe you have anything to gain by writing an irreverent offer letter. Your offer, if it is in excess of 5% below asking, will likely be rejected by any seller at this point. However, 6 months from now, when the seller realizes yours is the only offer s/he has so far, he may want to contact you to see if you are still interested. Therefore, I advise taking the “catch more flies with honey than vinegar” approach.
The offer should be very basic, and certainly don’t give away too many details on why you love the home. (Great schools, river view, etc.) State your offer price and ensure the seller that you can secure financing and have excellent credit (if in fact you do). Ask that they provide additional information that may inform your decision if they have not already done so. Keep it short and sweet.
If they don’t get back to you, who cares. If they do with the typical “we will lower our price by 2%” or “we have already rejected offers that are 50k more than yours” type of answer, then they are in fact interested. They just want to wait it out some more to see if a sucker comes along. Don’t be that sucker.
If you do manage to start some sort of negotiations, remember to focus on the negative to explain why your offer is as low as it is. (located on a main street, age of A/C will require immediate repair, etc.) Don’t say things like your carpeting is ugly. Focus on elements that they really have no control over, or, elements that involve replacement or restoration efforts that they likely don’t want to pay for prior to selling the home.
Good luck.
I’m a lawyer (just starting out) working in NYC, and frankly I cannot afford a decent condo in either Hoboken or Jersey City. And even if I could, I wouldn’t buy because the prices in both towns are out of whack — not to mention that I have no intention of staying in either town a second longer than I must (if/when I have children, I wouldn’t send them to Hoboken or JC public schools). So while I agree that lots of lawyers are crappy businesspeople, at least SOME of us aren’t dumb enough to make some greedy SOB trying to make a windfall off of a sucker for a coldwater walk-up in an old tenement.
Amen to that Eisbar – also a lawyer, with a lawyer spouse, both in NYC, large salaries, and yet not retarded. I would not buy a condo in JC or Hoboken either – overpriced, and we’d grow out of it in a year or two. Glad to know that there are others out there like me.
But people feel entitled to 100% appreciation in 5 years. House growth is like stock market growth except you never lose (unless you were born too late)
Aren’t they outsourcing medical care and surgeries to India?
Guess that will limit the number of rich doctors in NJ who can keep the bubble going.
The new NJ housing district!!
http://www.varley.net/Pages/images/VarleyYarns/W!/Homeless%20in%20SF%2002.jpg
Lina,
FYI the Maplewood house was purchased by its present owner on 7/10/2006 for $269,000. If you want more info, let me know.
A
“You can get four Indians to crunch the numbers of one graduate here in the US.”
Funny how all the privacy whiners in the US have no issue with sensitive data and information dumped into countries with absolutely no privacy laws.
Sad to see US companies selling out their country. Most things could have been made in China and India decades ago, but there was national allegience and pride. Today, companies will sell out anything for the bottom line. Sad.
UnRealtor:
Sevice Job Outsourcing to India would not have taken place had it not been for the Internet Explosion, so this phenomenon is less than a decade old. Manufacturing Job Outsourcing to China started only in the 80s after China opened itself to the world.
The US is are exporting jobs to India/China and importing financing in return.
If it were not for the purchases of USTs in return by those countries, we would be dealing with 10% long term rates and a cratered economy in the US. The global economy is about give and take, its a true two way street. Had we persevered with Detroit style worker privileges, we would definitely not enjoy the gains of higher productivity. lower costs and lower inflation.
Thanks Seneca, that is really decent advice.
VJ,
I agree with Seneca. I would add one thing, if you can connect with the seller, it might be good to see the owner in person and tell them you’ll be making an offer. I’ve had older couples look at my wife and I with our baby when we’re looking at the house and be like “you remind me of us when we bought this house in 1960 with our first son Johnny…”, etc. You have to look at the offer as a business decision but realize that some people that have owned their home for 40 years want a suitable buyer who will treat teh home properly.
I would caution as to what the connection is. If you’re of a diff nationality or of a diff race and the seller is in their 70’s, they might still have a diff feeling towards others left over from 50 years ago.
One more thing, I’ve made about 20 lowball offers (15-40% off OLP) over the past 6 months, expect every reaction possible and don’t feel bad about the offer, it’s probably the only one they’ve had. If they laugh, tell them fine, don’t take my offer, take one of the others you’ve rec’d…
“The global economy is about give and take, its a true two way street.”
Nice, so when Americans are earning what people in India and China earn, we’ll have “perfect equilibrium.”
UnRealtor,
It used to take at least a decade for those two countries to learn new technologies introduced in the US. Now it takes them couple of years! US was able to use the 10 year delay to learn new skills and thus keep ahead. Couple of years is too small to make up something completely new.
Is there still a market for flipping houses? I’m finding out that a couple homes I’ve been looking at (one of which I put an offer on), are actually being flipped. They were bought in the first half of the year (in what seems like somewhat dilapatated condition), and are now being sold for approximately $100K more than the price sold for 6 months ago.
Huh? Everyone’s talking a burst, but people are still thinking they can flip.
A house on the block over is in the process of being flipped. They’ve had open houses during construction.
They tore off the brick fascia on the front of the house and replaced it with EIFS. Replaced real brick with stuccofoam.
Do people actually think that stuff looks good? Am I behind the times?
jb
I am with you jb, hate the whole stucco look with those endblocks in offsetting colors, not even sure what its called, I call it ugly but beauty is in the eye of the beholder.
Most homes I see, I think I might want to replace some ugly painted siding with brickface. What are your thoughts on brickface? Is it a good substitute for real brick construction or can everyone tell its fake?
block911,
You’re a real sh*t stirring troll but that’s OK because the people on this board love a good laugh. But don’t kid yourself son, the people on this forum are real keen when it comes to planning, investing and pulling the trigger. I won’t dwell because I don’t want to embarass you and I don’t feel taking advantage of the meek such as yourself is a nice thing to do.
You remind me of the guy who says he knows someone who is “connected” but anyone with two brain cells knows that preaching about something probably means it’s a lie.
I know, you’re lonely or starving for something but please, don’t come in here and think you’re gonna one up somebody because this crowd is much too sharp.
BTW, I’m a homeowner.
Peace out, cuz.
Unrealtor:
“Nice, so when Americans are earning what people in India and China earn, we’ll have
“perfect equilibrium”
V: Great Point regarding the decreasing learning curve between the US and India/China.
Yes, there will be equilibrium, but it wont happen by US salaries going down to India/China
levels, it will happen by India/China coming up to US levels. US salaries may stagnate at
these levels as long as there are people in those countries willing to do the same job for
less. But this job growth will rev up their local economies, and make them less dependent
on the US for their work. They dont have any social
security nets, when they start building those systems, they too will start having wage
inflation to account for all the premiums that are associated with Social Security,
Medicare, etc.
Think about it, they have potential 2Billion consumers to our 300 million. Global Growth
in the coming century will truely depend on those countries. The US will have an advantage
with its open democracy and vibrant market system. Those advantages are not easily replaceable or “offshorable”. We just have to find a way to leverage those competitive advantages in order to grow our economy and keep wage growth positive. But we just cannot be Protectionist, and talk about stopping the two-way flow. We ourselves will suffer with the loss of reverse financing from those countries.
Seneca,
Look into fiber cement siding, specifically some of the James Hardie products (Hardishingle, Hardiplank).
jb
jb,
You really hate that stuccofoam – I have worked in the sign installation industry where we needed to arrange repairs in foam building facades – and it requires special “technicians” to properly patch (mix and color) or it is not guaranteed.
Naturally, they charge ridiculous $.
The foam will be the residential equivilant of aluminum siding of the future – where you cannot change the color, or clean without a big ordeal.
“Replaced real brick with stuccofoam.”
Insane. Stuccofoam is an eyesore.
People are putting that crap on $1M+ houses too.
When I travelled down South to look at propertes, and the realtor pulled up to a house with stuccofoam, I told her “I’ll never buy a house with that, so let’s move on.” Never even got out of the car.
EconRealist, I hope you’re right. But even if you are, the shortr term will get ugly in the US.
The US can’t save the world, there must be a middle ground to prevent exporting top US jobs.
gary
Nice class you nobody.
uh “Peace out, cuz.” to you to homie g
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