From the Boston Herald:
Housing market ‘upside down’ : More homes selling below purchase price
By Scott Van Voorhis
A small but growing number of Boston area condo and homeowners are finding themselves “upside down.”
That’s real estate parlance that describes what happens when home owners owe the bank more money than their houses are worth.
And in a real estate market where home values are declining, it’s leaving some people who are trying to sell their homes facing a jam. Home owners whose mortgage covers most of the original purchase may walk away from a sale owing the bank a big chunk of change.
And for some, the trend is creating business opportunities.
…
Meisler doesn’t buy suggestions from the real estate industry that prices and sales may have finally hit bottom.“The brokers are saying the market is turning when we have hit bottom. I don’t think so,” Meisler said.“We predict that short sales are going to become very popular.”
A “short sale” is a process in which the lender agrees to accept less than the full amount of the loan.
…
Real estate brokers say the math just doesn’t add up for those unlucky enough to have bought condos at the height of the boom market.The first-time buyers Snedecker is working with now have a much different price limit – below $300,000.
But would-be condo sellers stuck trying to unload units in a difficult market may be looking to get as much as they can, even if it’s far less than what they paid.
One downtown broker describes a North End condo owner who bought his one bedroom at the market’s height for $330,000. He is now “in pieces” after having to sell for $320,000.
And then there’s the Back Bay condo owner who bought her one bedroom for $359,000 back in 2003. She put it on the market earlier this year for $369,000, just as prices and sales began to collapse.
The price now: $339,000.
In the world of short sales, you buy high and sell painfully low.
Mmmm, that’s what happens when you “think” you must buy just to get into the market and don’t know what you are doing.
-Sapiens
A new installment of Lowball! will be posted at noon. I’m going to include an XLS of all North Jersey GSMLS sales from Oct 16-31.
jb
From Calculated Risk:
MBA: Mortgage Rates and Applications Decline
The MBA Purchase Index is at the lowest level since 2003.
Weekly Mortgate Application tumble 3% this week.
only 10K difference.
The buyer is still a dumb ass!
From Marketwatch:
Weekly mortgage applications fall
Applications for mortgage loans dropped last week by 3% compared to the prior week, as consumers shrugged at lower interest rates, the Mortgage Bankers Association reported Wednesday.
Mortgage applications are down 11.2% in the past year, roughly in line with the decline in other housing indicators, such as sales and new-home construction starts.
Applications for loans to buy a home declined 1.8% on a week-to-week basis, to the lowest level in nearly three years. Purchase applications are down 29% from their peak in the summer of 2005.
In pieces after losing 10K???? He should be thrilled. Sometimes your losing trades are the best trades you can make. He will look back on this and be relieved that he only lost 10K.
Get used to it. many buyers in recent years are underwater now. If they have to sell or can;t afford the payments they are in deep doodoo.
“In pieces after losing 10K???? He should be thrilled. Sometimes your losing trades are the best trades you can make. He will look back on this and be relieved that he only lost 10K.”
Your right a new bagholder just bought and will lose even more.
James Bednar Says:
November 1st, 2006 at 6:34 am
A new installment of Lowball! will be posted at noon. I’m going to include an XLS of all North Jersey GSMLS sales from Oct 16-31.
jb
Three cheers for ya.
A new installment of Lowball! will be posted at noon. I’m going to include an XLS of all North Jersey GSMLS sales from Oct 16-31.
I’d Love it- but I dont have Excell )-:
KL
Opps didnt close italics hope this does it
KL
You never got the cd? I’m just going drop it by, I want to meet you anyway.
jb
Ha Ha…to bad the principals of short selling in the stock market doesn’t apply to homes. There is credence to “a fool and his moeny shall soon depart”.
FYI for anyone interested in listening:
Diane Rehm show at 10:00 a.m. EST is on housing, predictions and effects on the economy.
npr.org njn.net
Sorry first 10 am segment is Muslims..11 am is Housing.
James,
What do you make of the discrepancy between what the REIC continues to spout about NYC:
http://tinyurl.com/y4oh3v
and what the numbers are saying:
http://tinyurl.com/y8ghbr.
Is Housingwatch.com accurate? If so, looks like 16% decline in asking prices in NYC in 10months.
I have a lot of friends/family in Boston and when I’d talk to them about the out of control RE market, they’d always trot out a list of reasons why prices would never go down. What is interesting is that a lot of them are similar to those used in the NYC-area.
First, people said that Boston is much nicer now than it was 10-15 yrs ago. This is true. There used to be an elevated highway that ran right through the middle of downtown. The Big Dig, for all of its faults, put that underground and revived downtown Boston. Now it is beautiful.
The Big Dig also made it sensible to start redeveloping the waterfront. Now you’ve got luxury waterview condos that are in walking distance to most of the high paying jobs.
After more rich people started moving back into the city, crime went down. You started to see wealthy people moving into areas that used to be considered unsafe. First there was the South End. Then Charlestown. The transformation of these neighborhoods kind of made sense (despite all of the gov’t housing projects that were in them) since they were close to really nice areas.
But then you started to see yuppies moving to Southie, East Boston, Jamaica Plain, Roxbury, and Dorchester. There were luxury condos everywhere. People would tell you that every single neighborhood in Boston would be wealthy within a few years.
When you’d ask them how this could be possible they’d say there’s a ton of old money in Boston, people who work in finance/private equity/VC, etc are making a killing, we’ve got all of these universities which will never lay people off, we’ve got a highly skilled, knowledge based economy, there’s tons of international money coming to Boston because of its intellectual culture, etc.
Anyway, you can see that a lot of the same arguments have been used to say why NYC-area won’t go down. I believe Boston is just 6 months ahead of the curve.
I wonder how one can make money when the Real Estate market is down. Buy foreclosed homes?
James, any ideas? Do you remember we talked about precious metals last year? I did quite well with Gold, silver and paladium.
skep-tic:
Don’t you love how so many housing bears predicate their “it’s different here” analysis on the magical disappearance of all poor people and low income workers from an impossibly large geographical area.
Love the idea of an $8 an hour day care worker commuting 4 hours in each direction and spending an entire paycheck on transportation just for the priveledge of ensuring someone else can live in a perfect upper middle class world where the lawns mow themselves.
Bring it, JB.
lisoosh,
it’s not only predicated on the disappearance of the poor– also the middle class.
The thing is the story backfires once most people start to believe. Young people are fleeing Mass in droves. They accept the fact that Mass is only for the rich now and figure they better make their way in NC or TX.
The same thing is happening here. Where I live in Westchester, about a quarter of the people between age 22-35 have left in the past 10 yrs.
Once you start losing large portions of your young people, your economy is screwed long term.
The MBA Purchase Index is at the lowest level since 2003.
Interesting. The 10 year note is at 4.6% and has been trending down. So, I guess lower interest rates won’t save the day.
Realtor – FYI you can use the free Google spreadsheet program if you don’t have Excel. It can accept and Excel file upload or cut and paste from Excel.
From Bloomberg:
U.S. Construction Spending Fell 0.3% in September
Construction spending in the U.S. fell unexpectedly in September as home building declined for the sixth straight month, a government report showed.
Spending fell 0.3 percent following no change in August, the Commerce Department said today in Washington. Spending on private residential construction hadn’t fallen for six straight months since the first half of 1995.
Builders such as Pulte Homes Inc. are scaling back projects as sales slow and customers cancel orders. New office buildings and factories aren’t going up fast enough to make up for the slide in home construction that’s curbing economic growth.
“I don’t think we’re going to see residential building really starting up again until the inventories of unsold homes get cleared out a bit,” said Tim Rogers, chief economist at Briefing.com in Boston. “We probably won’t see that for a while.”
I have a seperate bagholder file, and regularly add new ones. People who bought about 2 years ago and sold for a loss are the norm.
If you want a real sampling of what the locals are saying about the Boston housing market, check out this forum at boston.com:
http://boards.boston.com/n/pfx/forum.aspx?msg=46.41&nav=messages&webtag=bc-re_mainboard
This chart shows home builders confidence VS. S&P 500.
http://i.cnn.net/money/magazines/fortune/fortune_archive/2006/11/13/8393160/just_a_coincidence.gif
it comes from this great article which talks about the economy possibly being affected by housing.
http://money.cnn.com/magazines/fortune/fortune_archive/2006/11/13/8393160/index.htm?postversion=2006110110
UnRealtor,
Any possibility that you can share with us the bagholder file?
007
http://money.cnn.com/magazines/fortune/fortune_archive/2006/11/13/8393160/index.htm?postversion=2006110110
Can the economy survive the housing bust?
(Fortune Magazine) — “Tucked away in the briefcase of Liz Ann Sonders, chief investment strategist at Charles Schwab & Co., is a chart so scary she’s hesitant to show it to investors. It plots the National Association of Home Builders’ Housing Market index – a monthly measure of builder confidence – against the Standard & Poor’s 500 stock market index, with a one-year lag…
And as PNC chief investment strategist Jeff Kleintop points out, there have been only two midterm election years since World War II when the stock market did not stage a fourth-quarter rally. The bulls’ bottom line: Housing may be a risk factor, but there’s too much other good news for it to be the catalyst for a recession or stock market meltdown.”
realtor and clayton:
you can also download “Excel viewer” from Microsoft – allows you to open, view and print Excel files – it’s free.
skep-tic:
Quite right. And of course as the economy drops the areas worsen, NJ is full of old once beautiful communities that fell apart. A good balance between old and new, rich and poor, urban and suburban is key to keeping an area healthy.
Off topic post – is anyone familiar with Bloomfield, NJ? Any thoughts on purchasing property in this town?
“Five-times-salary mortgage offer”
http://news.bbc.co.uk/2/hi/business/6104522.stm
Abbey, Britain’s second largest home loan provider, is offering borrowers five times their salary in order to help them get onto the property ladder.
The bank is making the offer available to individuals or couples with a deposit of about 25% and an annual income of £60,000 or more.
Abbey said it was reacting to surging house prices.
But a leading credit counsellor warned that borrowing on this scale meant buyers could be “very stretched”.
An interest rate rise is also expected in the near future.
Encourage
A couple borrowing £250,000 would face repayments of about £1,400 a month – £17,000 a year.
However, only borrowers with good credit ratings and low debt levels would qualify, Abbey said.
“Our customers are continually asking for more money to purchase the house they want and subsequently we looked into the affordability ratings of certain people,” said Abbey spokesman Dave Stewart.
“We found that people could afford to pay out for bigger mortgages but there just wasn’t anything on the market at the moment offering them what they needed.”
The current industry standard is for homebuyers to be offered mortgages of up to three-and-a-half times their salary.
Analysts say Abbey’s move is likely to encourage other lenders to follow suit, as they fight for the business of would-be homeowners.
Last week, Bank of Ireland Mortgages and Bristol & West increased their standard salary multiple allowances from 4 to 4.5.
Lina
Bloomfield is tough, very good areas and some not so nice. High Taxes ! High school is tough.
KL
Thanks – if you were to compare Bloomfield and Maplewood in terms of quality of life (ie, safety walking your dog at night, the downtown area, access to parks, etc), what would your verdict be as a place to live?
Thanks for the download for the viewer. I have used/use google spreadsheets but wouldnt know how to copy and paste if I couldnt open.
I await patiently the file.
KL
That makes sense, since the average joe cannot afford the house on the tradional 2.5x income we will just lend them 5x income
fook u mr. banker
rhymingrealtor
Google has a free app that can read excel files.
dos.google.com
Lina,
I’m pretty familiar with Bloomfield. As a single person with no kids, it’s on my radar screen.
I would not consider buying anything south of Belleville Ave. I wouldn’t consider renting anything south of Bloomfield Ave.
Hope this helps.
Well this story merits a big, fat “BOOYA!” from me!
Anyone who bought a condo for its investment value is nerts! And one who considers investing in a condo at or near the peak of a market has to be aware that many others are thinking of doing the same thing.
Word of advice: Stocks go down, too. Why not houses and condos?
Grim: this site (meaning denizens of) should organize a meet-and-greet. I’d love to meet our fellow posters–in a well-lit, public place, that is.
Concealed permit holders will have to check their pieces at the door.
Thank you for the insight to bloomfield.
Is it me, or are the taxes in Montclair ridiculous?? I was looking at some places listed online, and the taxes are outrageous!
Posted this question on another thread…Hoping for some help.
Anyone familiar with the K Hovnanian townhome development in Hawthorne?
Is Hawthorne a nice place to live? Any drawbacks, like congestion, crowded schools or tough areas?
Does K Hovnanian ever discount its properties? Several other homebuilders have recently, but do they? And noticed the listings for this development on public realty sites as well as in ads on the NY Times. All posted by various realtors, not K Hovnanian.
Does this mean the developer sold those units to realtors, or just that they hired the various realtors to provide services? Just curious because it was not one single realtor, but at least two or more (recall seeing both Weichert and Coldwell Banker).
I’ve been lurking for a while, and now hoping for some good advice :)
Is it me, or are the taxes in Montclair ridiculous?? I was looking at some places listed online, and the taxes are outrageous!
Montclair’s taxes have always been much higher than those of the surrounding towns; lately they’ve gone into the stratosphere. Glen Ridge isn’t far behind.
If the schools aren’t a deal breaker for you, I think you might be okay in Bloomfield.
Can someone tell me if it’s safe to buy/live in Montclair’s South End? Is this truly a community on the rise, i.e. a transitional community?