From Newsday:
Signs of the times
BY ELLEN YAN
Winter is coming, and Long Island builder Steven Klar feels the chill from the buying market.
He doesn’t relish safeguarding unsold homes over the winter, paying for snow removal and heating the big, empty insides so the pipes don’t freeze and burst.
That’s why he’s offering a new $52,000 Mercedes to buyers of his model homes in his Huntington, Manorville and Locust Valley developments.
“Does that sound desperate? No, it’s making the sale,” says Klar, whose models run $697,000 to almost $1.5 million. “It’s definitely generated a lot more traffic and interest than … if we just said … ‘Take $50,000 off the price.'”
Sellers are gussying up homes with freebies to make their properties stand out, a national phenomenon as the market softens. Like companies enticing new customers with giveaways, Long Island sellers have proffered everything from free vacations to making mortgage payments.
…
Sellers’ concessions were not unknown before boom years – help on closing costs, the down payment, paying points to lower loan rates – but the perks nowadays are breaking out of the box.Even open house parties must stand out. In May, one agent threw a party at one of his listings in Oyster Bay Cove, complete with DJ, champagne and models in the pool, though he still has no contract.
…
Some sellers are looking for ideas that won’t cost them. Reluctant to cut prices further, they’re resorting to pain-free appeals, including arranging lower-than-current rates with mortgage brokers for the buyers, an unusual private deal.
…
As of August, there were 13,999 homes for sale in Suffolk, up 59.3 percent from 8,790 the same time in 2005, says to Mohsen Zandieh, vice president of the Multiple Listing Service of Long Island and treasurer of the Long Island Board of Realtors. In Nassau, the number was 10,041 in August, 66.8 percent higher than 6,018 last year; and Queens’ was 10,005, up 76.2 percent from 5,677 a year ago.“Sellers are living in last year’s market,” Zandieh says. “Buyers are living in the future.”
…
But most of all, agents consider the bottom-line price to be the best draw. “What’s the pressure point when the buyers are going to buy?” Martin says. “When you’ve hit the pressure point, you’re going to see it pop.”
If u want to sekk at last years prices u shoulda sold last year
These jidiots neerd to suck it up and stop thinking there are still stupid buyers out there
And realtors need a nee pitch it haseasy access to trransportation to nyc
well I lwork in NJ how does that help me. the realto always reverts to it has nice rooms. WOW like I cant see that . Realtors and sellers need to come down to earth from cloud LaLa Land
From the AP:
NBC cutting 700 jobs in overhaul
NBC Universal announced yesterday that it will cut 700 jobs, abandon MSNBC’s New Jersey headquarters and shift spending from traditional broadcast TV to digital entertainment, reflecting both hard times at the network and changing times in the media world.
…
In what’s partly a real-estate move, NBC said it would close MSNBC’s headquarters in Secaucus, N.J., splitting studios and office space between NBC’s headquarters in Manhattan’s Rockefeller Center and another NBC facility in Englewood Cliffs, N.J. Similarly out West, NBC will consolidate network, Telemundo and local news facilities in Burbank, Calif.
Anyone likes a free lunch, if they can get it. This is just the beginning, wait until sellers feel the pain of being underwater…..
-Sapiens
Hey,
Last night my fiancee and I found a great house in Bergen Cty. We are thinking of bidding full price on it ($355,000) It is an older bank owned 2 bath colonial with front porch and has a new furnace, new water heater, new roof, new windows, 2 car garage, etc. We have looked at many houses, and this is the first one for under 400k in move in condition…I can’t find any reason to not buy this house…can you??
“Sellers are living in last year’s market,” Zandieh says. “Buyers are living in the future.”
The future is not 6 months- 1 year. This is unprecendented, it will be one for the history books.
Can’t believe buyers are falling for these gimmicks. Be patient, the price you will pay in the future will be worth a lot more than a 50K mercedes. Remember, as you see more and more gimmicks, some buyers will appear, thinking they are geting a deal. It may even show up as a gain in new home sales, month on month. Don’t be fooled by this. It’s will be the ultimate dead cat bounce. The botton line, if you want to move inventory cut the damn price, drastically at that. Remember builders would rather give you 200k in options then drop the price 100k, they are desperately trying to keep the comps up.
“Maybe it’ll work, rather than coming down another $100,000,” says Scarpino, 67, who already had reduced the house $400,000. “These days, these agents expect you to come down in big numbers.”
I’m surprised we dont see more of these stories… those retired and liquidating now seeing problems (despite $400K haircuts). demographics have to kick in sooner or later to this market.
Bc bob
I plan on making offers on townhouses listed at 270-300k
But since I know they went for 130K before the buble I think 150k is a fair offer I have seen some listed at 250k so the priced are comming down.
Homebuilders can still sell homes they just need to build normal sized homes and charge normal prices, wow what a concept
But since they still only want to build McMansions they will continue to lose money. They have tapped out the large house; luxury market now they need to follow the market and there is small demand for 800k dollar homes.
http://biz.yahoo.com/weekend/costscam_1.html
Closing Cost Scams
Grim,
It would be a great if you can start listing banks and agents with thier closing price. It would generate some advertising revenue for the site and also help us get the best rate available in the market.
Regards,
follow-up on comment #6:
I’m wondering if this real estate market bust might be related to leading edge of the boomers retiring and looking to sell. Just about most of us with a pulse should own by now, no? Is there a big enough credit-worthy population cohort behind us to absorb all the existing inventory, plus tons of new construction?
When boomers entered home formative years in the 80s, the market rocked. When they setttled down and nested in the early 90s it tanked. Now we’re pushing 60 and heading for the exits. Is this too simplistic?
ts
TS,
It is not too simplistic. What % of the population does the baby boomers represent??? I think about this all the time. If/when I do buy, what’s in the pipeline 20 years down the road if I want to sell??? Will the lights still be on in Jersey??
JB,
By the way, unbelievable articles today. Great work!! I can’t keep up, gotta get back to work.
I agree nice group of articles today… will make for some good weekend discussions.
Don’t think boomer’s retirement affecting housing is a simplistic assumption. It’ll just take some time to play out the leading edge of the boomers were born in 1945, so they are only about 60 years old. Some I’m sure still have young kids and will be staying where they are. However the new wave of boomers are probably going to want housing that reflects their needs. I think this is why we are seeing developments closer to cities and tighter more dense townhome style housing. McMansions are typically for growing families and the boomer’s needs are probably already filled. The era of McMansions are probably on the decline as demand should wane. I can easily see getting the demographic data to support this, but I’m thinking where would I find data to support the type of housing currently being used.
Hard place,
You bring up an interesting point.. I never factored in having kids. Right now a 300k house will be consuming my paycheck (along with car payment,insurance, bills,food,gas) while I planned to have my wife put her paycheck into savings. With kids in the equation the savings will be exhausted too.. I’m starting to see the light… LEAVE NJ. The crooks get richer and poor hard workers get exploited.
How can people fall for these damn gimmicks?
Use your noodle. These realtors are fighting and screaming anyway they can to keep comps up even if it means cheating.
Do not fall for these short sighted gimmicks demand real price cuts. Let them beg for a sale and then give them one at substantial price cuts. 10% is not a substantial price cut.
I think this is a good topic to post the results of my low offers made on wednesday.
1. Stick it!
2. No way we’ve turned down 90,000 more. We’ve gone up on that one by 30,000 with an expiration of today at 5pm. Not even an acknowledgement from the agent yet.
Yes sellers are living in different world, house 2 has been for sale for a YEAR!
KL
I imagine realtors to be like the little boy putting their finger in the hole of the dike to prevent the dam from breaking. The hole being a dropping house price. They may be able to prop up one or two houses from getting a lower price, but eventually once another hole forms (price drops) they won’t have enough fingers to plug up the dam and the flood will begin (housing correction). From more recent sales we are seeing the holes start to form. Comps are starting to go lower for new sales and the pendulum starts swinging in the opposite direction.
http://www.philly.com/mld/philly/15802024.htm
Not sure, but the kids getting up and leaving these seminars might be on to something, or know more about suicide loans and not being able to make mortgage payments than she does.
The last of the fool buyers were sucked in already. Now only a few rational buyers hanging out wondering if it is worth it to live in NJ. So sellers you better get mighty nice to those remaining buyers cuz they are moving out and you will be stuck holding the bag.
Start dropping prices by 40% off 2005 prices or else.
Prices are tanking as per grim’s lowball spreadsheet. And it’s only the beginning of the process. The cleansing is going to take a few years.
Bid 30-40% less off of 2005 prices.
If i hear well my neighbor got x and i will not take less than x again im going to puke
ride that market down to the bottom greedy bastards
KL,
Thanks for the update!
It’s great to read practical experience in comparison to all of the opinion on this board.
I’d appreciate it if you could continue to share your experiences with the board. I’m interested in any dealings or info you have, high sales, low sales, no sales, comments from the field, etc.
Thanks again, Rich
It is bigger than that guys!
What’s really the bottom line? Think about it.
If you placed a big down payment and then maxed out on your equity, then what? What have you lost if you spent the money and got the benefits, what’s the worst that can happen?
How about if you got a 100% financed mortgage and then default, what have you lost? What’s the worst that can happen to you…?
The botton line so far as it currently stands is you file for bankruptcy… lose your credit, but what happens when there are hundreds of thousands that are in the same boat…Mmmm, think about it.
This is about control, do your own research and find out for yourself.
-Sapiens
“I can’t find any reason to not buy this house…can you?”
How would you feel if it was worth $255K in 24 months, you lost your job, had to sell, and had to write a check for $100,000 at closing (or face foreclose)?
Looked at homes Clark/Cranford area and sellers are still listing 15% over 2005 comps on the same street!. My wife and I were asked by two sellers why we didn’t make an offer. Our response was simple. The listing price was unreasonable considering the houses were purchased for 430k less in 1999 and the comps are 15% under their asking price. Their response was just make an offer. Sounds like the sellers are beginning to get nervous.
JS in NNJ,
There are a lot of factors to take into consideration other than price.
Location: What town is the house located in? Is it on a busy street or near railroad tracks?
Time: How long do you plan on staying in this home? 5, 7, 10 years or longer?
Downpayment: Minimum of 20%
Taxes/School: Example, Ramsey and Mahwah are next to each other but Ramsey taxes are higher (but better schools). Property taxes add a LOT to monthly payments!
Do you have more info you’re willing to share?
Rich
Rich in NNJ:
The house is in one of the towns we have researched. Decent schools, etc. It is located on a side street with other older homes. It is probably 5 walking minutes from the RR tracks. We intend to stay there for more than 10 years (maybe forever) and yes we have 20% and are going to go with a 30 year fixed if they accept our offer. They said they have had interest in the property (but I assume our offer is the first)
One thing to note, I am not going to “play games” with the listing agent and seller. They get one offer from me, at full price. If they don’t accept ours or they get a higher bidder I walk. Not in that much of a rush to buy anyway, this house happens to be what we are looking for but I know that something always comes up…
How much will those “free” cars and other come-ons cost in mortgage interest and property tax in the long run?
And you don’t get to keep them in a bankrupcy IIRC…
JS, your target property is REO, so they won’t play games. They’ll tell you yes or no, based on the info and analysis for their carry cost.
Although, I have heard, with no link to back this up, that each bank has on-going relationships with RE investor groups, who will have lists of standing offers in place on properties as they hit the REO list, should bank not get a better number, like yours, within a timeframe. Anyone else have info here?
Thought I would share my email swap..
SAS:
Isn’t this house in attorney review?
47 Silver Spring Road, Short Hills
MLS 2326048
agent:
Yes it is. We are cancelling the open house if it is out of review by 5pm Friday afternoon.
Weichert Realtors
505 Millburn Ave
Short Hills, NJ 07078
SAS:
“Does this tactic follow the NAR rules of ethics?”
Agent:
“Absolutely! It is in the best interest of my seller who I represent. While a property is in attorney review it still can be shown and even sold. When a property is Under contract, then it is binding. We don’t plan to take anymore offers on this property but by law it remains on the market till attorney review is concluded. By the way who am I speaking to and why are you asking? Do you have interest in this property? Do you have a property you may want to sell and are interviewing realtors. If I can be of any help please let me know. ”
Weichert Realtors
input anyone?
The Realtor is correct and is looking out for the best interest of the seller. If it falls out of attorney review than they are ready to move forward with their marketing plan.
Nothing illegal or unethical there.
Rich
Sapiens,
A property under atty review can be sold?
Wow, how about having your cake and eating it too. I’m might want to incude a contigency on the sales agreement to prohibit that in a slow market.
tks for the info.
sorry, my previous post should be re: SAS.
SAS,
Rich is right. Another scam by NJ. When is a contract valid???? Not when it is signed by both parties, even if it’s notarized. It is binding when it comes out of attornety review. The standard time frame is 72 hours. The key is standard?? An attorney can conceivably have it for a few days before he/she even reviews it. Then they will ask for an extension. In the meantime the house you thought you had a contact on, for X price is still being marketed. In the last few years buyers ended up paying more than the original contract because it was “held up” in attorney review and not binding. Like I said, another scam. When I tell individuals in other states this policy, they can’t believe it. I don’t know if any other state is like this. Any input from out of towners??
By the way, when I say scam I mean ethical. I don’t feel it is right going to contract and then having some attorney drag his/her feet while the seller tries to get a better deal. However, it is legal.
“I don’t feel it is right going to contract and then having some attorney drag his/her feet while the seller tries to get a better deal. However, it is legal.”
yeah, I felt the same way.
SAS
Your self-righteous indignation about attorney review makes me laugh.
It is a simple legal tool devised by the Learned to persuade the Lay Masses in the pursuit of commerce. LOL
(Read, Learned=Astute and Shrewd; Lay Masses= Ignorant, Naïve, Fools)
-Sapiens
Nice work SAS.
What Weichert has done seems unethical to me.
“Your self-righteous indignation about attorney review makes me laugh”
I have talked to individuals in 5 other states regarding this same topic. It’s not the same there. The contract is binding when both parties sign, of course subject to inspection/mtg approval,etc… What states are like Jersey in this matter???
BC Bob,
Yes, the contract is binding, provided the covenants and conditions are met. Attorney review is a condition in NJ, so what? You as the buyer or seller can take advantage of it. How about as a buyer you find a better deal? Then what? How about if the seller in that case is in dire straights to sell….
The key is to know and understand what you are doing.
-Sapiens
“Sapiens Says:”
…
The botton line so far as it currently stands is you file for bankruptcy… lose your credit, but what happens when there are hundreds of thousands that are in the same boat…Mmmm, think about it.
This is about control, do your own research and find out for yourself.”
Are you referring to damage control?
Sapiens,
I totally understand the ramifications for both the buyer and seller, it works to the advantage of a seller in a hot market and to a buyer in a down market. Am aware that you better cya regarding this. That was not the point. I was just responding to a question brought up by SAS. Don’t need a lesson regarding the shrewd and ignorant. My question again, do you know any other states where this is prevelant?? Simple question, anybody???
BC Bob,
Illinois.
http://www.hklaw.com/Publications/Newsletters.asp?IssueID=405&Article=2327
Thanks!!
Jay,
If you are a law abiding citizen what controls you?…
-Sapiens
You can thank NJ lawyers for the attorney review process. The law establishment was upset when they learned how much money they were losing by allowing the real estate industry to write contracts. The real estate industry was initially against this due to the fact that it dragged out the sales process and could result in buyers or sellers backing out after the deal was “done”.
Learned this from an old salt in the business.
jb
It is not the car, it is not the vacation, it is not thr mortgage cost and not the free lunch. IT IS THE PRICE STUPID!
re: boomers retiring
interesting article in the WSJ a couple of days ago re: the aging of the population and migration patterns.
you hear a lot of chatter about the “new urbanism,” but the reality is that people are moving AWAY from urban areas.
The fastest growing areas are the ex-urbs. The population of cities such as NYC and Boston are flat; other older cities such as Detroit, Buffalo, etc continue to lose population.
The cities that are bucking this trend are in the South and West (Charlotte, Houston, Phoenix, Vegas).
I don’t see any reason why retiring baby boomers from the NYC region will buck this trend. If anything, I think these people will be more inclined to move south or west since they will not be tied down by a job and since they will want to maximize the value of their savings/pensions by moving to lower cost areas.
Some background on attorney review in NJ
http://www.advocate.org/pdf/spring_2003.pdf
-Sapiens
Part two of the attorney review above.
http://www.advocate.org/pdf/summer_2003.pdf
-Sapiens
we are really from two different worlds or agendas really. I have seen listings in my area (downtown Jersey City) where the property is one block from the projects. price tag is one million smackeroos. Yes my friends one million dollars to hear the thumping of the 1000W stereo, sirens and all of the pleasures that go along with the housing projects at your back door. On my planet this would be considered a highly undesirable home. A home where the valuation goes out the window because of the location location location. Yes the same location the RE agents want to cram down your throat is the same location they want to ignore when they try and pitch a beauty like this one.
Sellers are not getting “it” in the least. Already 3 I’ve dealt with in as many weeks have decided to sign w/other realtors based on list price which can’t be supported by comps. 1 HO in Hanover is basing the list price of her 1984 home on late 2005 NEW CONSTRUCTION SALES.
Another guy in NNJ states “I can’t afford to sell at that price,” then proceeds to list w/someone at just $20K more. I cringe and walk away every time I hear “But I NEED to get $_____ from the sale!!!” Hello, no one gives a damn what you need, K?
In Feb. 2006 before everything went to $#i+, I told an Oakland HO his 2 BR/1 BA should be listed at $425K highest. He blew me off. Last week I found it on the MLS…down to $424K, from $475K (or so). He’s lucky if he gets $380K at this point.
I had some guy walk in to my open house last week saying he’s in the middle of finishing renovations on his New Milford house, then he’ll put it on the market in the spring, WHILE THE MARKET IS STILL HOT!!! I handed him a bunch of articles (printed from this site BTW, T/Y) and tried to restrain myself from laughing too hard.
AMS
Grim,
Good point of view… thanks…
Sapiens,
not sure I understood you?
SAS
Allow me to inject a dose of reality into this herd mentality. In the decent towns in NNJ, prices right now seem to be anywhere between 5-10% less than the peaks set between mid 2005 to mid 2006 and many of them appear to be attracting interest at this level. maybe there are a few more suckers, but if you look in the top and second tier towns this is the case. a few examples. home in westfield listed at $629,900 in mar rejected an offer for $620k, rode the price down now under contract at $590k. another listed at $629k in feb, even high for this market, wrote the market down to $585k now under contract. house in summit listed at $635k in mar. a bit ambitious even for the bubble market, several price drops settled at $590k.
my point is there are still some buyers out there ready to buy on a 5-7% reduction from comps as recently as 4 months ago and who could blame them? sure the market could fall further but if you could predict the future you wouldn’t be on this blog.
Here is a point not mentioned….
So there are some buyers out there that are willing to buy at 5-7% off the obnoxious asking price.
So who are they? First time buyers who are idiots?
Could be, but there are probably buyers that have also sold real estate recently.
If you sell high you can buy high. Easy come easy spend.
Believe me, if these same “buyers” actually had to work hard and for a long time to generate the money for a down payment, you wouldn’t hear of this kind of loon icy. The market would actually be proportional to net house hold income.
This JSinNJ being is just a covert realtor trying to encourage us to buy. Don’t think we are as stupid as you are, rotten liars.
Dead-Walker,
All these trolls try to disguise themselves as recent buyers.
Spelunker post #51,
Your example reminded me of a development going up at the Jersey Shore. It’s marketed as the island’s first gated community. It’s a good thing because it’s across the street from the housing projects. Starts at 450k.
DD,
“So who are they? First time buyers who are idiots?
Could be, but there are probably buyers that have also sold real estate recently.”
There are a lot of recent sellers, last year or two on the sidelines. For me, and I think them, it’s about value, fundamental pricing rather than sell high buy high.
Bubble Shmubble:
Read these moronic statements from KARYN McCORMACK THE EXPERT
Wonder what her real agenda was….
http://www.businessweek.com/the_thread/wellspent/archives/2005/05/bubble_schmubbl.html
If you read the people’s comments back in MAY 05, they all seem to be more sensible on reality!
First of all, I do love the blog, and agree that we’re in the beggining of a MAJOR readjustment in the market…
On that, I wanted to leave a real case scenario to see what kind of opinions I can gather (did we do the right thing? should have waited? kind of a response)
NEW HOME PURCHASE – UPSCALE LI HAMLET
Listed since early 2006, this beautiful home decreased in listing price at regular intervals until mid-July as follows:
$1.495M (probably way too high)
$1.299
$1.269
$1.199
$1.100 Shown “one last time,” or it would be taken off the market kind of Real-Estate-ho talk
Offered a “non-contingent,” absolutely-close by August (30 days), $950k… which was taken (!?)
Financing as follows 20% cash (again non-dependent on sale of current home), 40% Fixed 30Y, 30% drawn from HELOC on excess Equity based on appraisal ($1.2M !!, the world is nuts!)
SALE OF OLD HOME – MIDDLE CLASS LI HAMLET
I had Equity in it of about 75%
Listed through RE proffesional (what a joke!) in mid-July.
$519k (probably too high, although things HAD sold at $505k 3 months before)
$499k (2 weeks later)
$479k (1 month later)
$449k (1 month later, fed up)
Sold at $449k (100 days in market)
Note: all comps still sitting there at $479-$499 range
Used my share of sale proceeds to pay-off (completely) HELOC balance on new home.
End result:
Living on new home with 60% Equity, and available HELOC piggy bank (untapped) of 50% purchase price more
Per Zillow — value of new home July-October down 25% (now it shows only slightly higher than what I paid for it, have sseen it show 10-15% higher)
Gave away $45k cash to RE “vampires” (assessments, commissions, fees, lawyers, title insurance)
Reduced “free cash” position by $200k (new home down payment)
But again truly happy with the step-up in home characteristics/ living.
Obviously, in terms of sound financing standing I think we are more than fine, but my question is whether in a downspiral we’ll be kicking ourselves in the nuts down the road….
Your opinion?
PS First post, be gentle.