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Re: China
My new favorite article – look out….
ECONOMIC SCENE; In the New China, Banks Still Cling to Old Ways By AUSTAN GOOLSBEE
Austan Goolsbee is a professor of economics at the University of Chicago Graduate School of Business and a research fellow at the American Bar Foundation.
Perhaps nothing seems to represent new China more than the gleaming, ultramodern headquarters of the Industrial and Commercial Bank of China. Its laminated glass exterior was intended to showcase the modern, transparent face of China’s largest bank. Inside the building, though, many elements hark back to more traditional forms. Wave patterns in the lobby floor and the circular interior space recall a traditional courtyard garden.
The announcement this week of details of the planned initial public offering of the bank — potentially the largest offering in financial history, topping $21 billion — has foreign investors in a frenzied clamor to get a toehold in the booming Chinese financial market. Apparently, Chinese banking, like Chinese manufacturing before it, has arrived.
But according to the work of the economists Anil Kashyap at the University of Chicago Graduate School of Business and Wendy Dobson at the University of Toronto, banks in the new China may look modern on the outside, but they are not so far from their traditional roots. Their behavior seems closer to the 1990’s crony capitalism of neighbors like Indonesia and Thailand, which engendered financial panics, than to that of international financial centers like London and New York.
The study of Chinese banks by Professors Kashyap and Dobson, titled ”The Contradiction in China’s Gradualist Banking Reforms” (which is available at http://faculty.chicagogsb.edu/anil.kashyap/research/chinabanksoctfullpaper.pdf), raises some troubling issues about the four big government-owned Chinese banks and, by implication, their initial public offerings.
The basic problem, they say, is that the Chinese government owns the banks and will continue to control them after the public offerings. The government has always exercised ultimate authority over the banks’ lending decisions and, historically, has forced them to lend to corrupt and inefficient state-owned enterprises. That leaves the banks with a large share of loans that, effectively, default. Despite the recent reforms, that basic interference continues.
Because the government now badly wants to modernize its financial sector and bring it up to Western standards, it has made a clear attempt to clean up the balance sheets of the big banks in preparation for their public offerings. The Industrial and Commercial Bank received a direct infusion of something like $30 billion from the Ministry of Finance and the Chinese central bank. The government also reduced Industrial and Commercial’s ratio of ”nonperforming loans” to less than 5 percent from 34 percent in 2000 by taking $35 billion in failed loans off its books and giving them to specially created ”asset management companies” (which, suffice it to say, will probably not be having public offerings anytime soon).
At the same time, however, the government desperately wants to prevent a breakdown of regional stability and an overwhelming mass migration of workers out of rural areas (especially before it stages the Olympics in 2008). One major way it does that is by using bank loans to keep afloat the major employers in those remote areas: state-owned enterprises. Those are the same employers that failed to pay back the previous loans. Lending them money another time will, of course, mean that a large fraction of the bank’s loans will again go sour. By that point, though, the bank’s initial public offering will be long completed.
As Professor Kashyap put it in an interview: ”They can move the toxic stuff off the bank’s balance sheet but the key issue going forward is whether the same people are in charge of credit evaluation. The government owns them. If someone from the party calls up and says, ‘Give money to State Store No. 6,’ are they going to say no? If not, then the bad loans will pile up again.”
He cites the case of a detailed examination by the consulting firm McKinsey & Company of the loans by one Chinese bank to companies in a particular region. For some 60 percent of the loans, the bank had no record of what collateral the borrower had given, what industry the borrower was in or even which bank official had made the decision to lend the money.
The Dobson-Kashyap study suggests that despite a laminate of reform pasted onto the banks in preparation for their public offerings, loan behavior looks quite familiar. The government-run banks continue to lend intensively in regions that have high shares of state-owned enterprises. Some of the highest lending rates are to remote regions like those bordering on Tibet, where the government wants people to stay.
The authors do admit that so long as China maintains the torrid growth rates of the last 10 years, the problems of the banking system will largely go unnoticed. Only with a slowdown may these flaws ignite a crisis.
But they are wary about China’s ability to sustain its growth rates. They point out that astounding rates of industrial investment — on the order of 43 percent of gross domestic product — have largely driven the current boom and that these investments have been artificially stimulated by cheap government loans. They point out that in the steel industry, for example, China has 120 million tons of unused capacity and yet is investing in another 70 million tons.
According to Professor Kashyap: ”If there is a slowdown, there will be a day of reckoning. It might be in a long, long time or it might be the day after the Olympics.”
Back in Beijing, optimists turn to the Industrial and Commercial Bank building as a symbol of the bank’s future. It looks transparent and feels decidedly of new China. Yet one cannot help noticing that it is situated only a few blocks from the seat of government in Beijing and the huge painting of Mao in Tiananmen Square. The real estate agent’s refrain hangs over the bustling air of the bank’s interior courtyard. No matter where you are these days, it’s still about three things: di dian, di dian, di dian (location, location, location).
the first decline for an entire year in U.S. home prices since the Great Depression of the 1930s.
This is a “NORMAL” housing market???
hehehehe
I’d like to nominate Goolsbee for: Economist I’d most like to have a drink with.
jb
2007 SPRING HOUSING MASSACRE COMING TO A HOOD NEAR YOU.
“GOT IT.”
“GOT IT!”
BOOOOOOOOOOYAAAAAAAAA
Bob
i’m seeing 5.636 % mortgages for 1st time
buyers. 30yr fixed. 0 points.
1 yr arms 5.125% 0 points
30 yr fixed 6.125%
http://www.cbsnews.com/stories/2006/12/14/ap/
business/mainD8M0P1F80.shtml
Peter Morici, business professor at the University of Maryland, said artificially low interest rates over the past half-decade encouraged China and other exporting nations to purchase 10-year bonds, which kept U.S. mortgage rates low and fueled the housing bubble _ despite a gaping trade deficit that should have sapped investor confidence years ago.
“In order to play this ponzi scheme, the value of the homes had to go up faster than the economy grew and faster than people could service their debt. We’ve reached that limit,” Morci said. “The housing market sustained the economy at a time of very large trade deficits. It’s been a false prosperity.”
Yes indeed a PHONEY “credit bubble” economy.
hehehehehee
You pay anywhere near asking…you better expect to lose money on the bloated shack if you have to sell within 5-10 years.
Black & Decker Lowers Profit Forecasts on Sales Drop (Update3)
By Mary Jane Credeur
Dec. 15 (Bloomberg) — Black & Decker Corp., the biggest U.S. maker of power tools, cut its annual profit forecast for the third time after a U.S. housing slump “significantly” reduced sales.
BABABABABA
IT’S REAL AND IT AIN’T GOING TO GET BETTER SOON.
ANYONE THAT BUYS NEAR ASKING DESERVES A GOOD POUNDING.
ANY GRUBBING SELLERS THAT CATCH A FOOL PLEASE REPORT BACK!
BOOOOOOOOOOYAAAAAAAA
Bob
SO I CAN CONGRATULATE YOU ON BAGGING A FOOL!
BOOOOOOOOOOOOYAAAAAAAAA
Bob
“‘The time has come‘ for an end to easy credit, said Bob Moulton, president of Americana Mortgage Group Inc., a mortgage broker in Manhasset, New York. Moulton, who deals with prime and subprime loans, said lenders who were once aggressive in vying for high interest rate loans have suddenly made themselves scarce.”
“The pullback may affect the fifth of the 300 million U.S. population that would qualify as subprime borrowers, according to estimates of Fair Isaac Corp.”
“‘There’s still too much capacity in the market today,’ said Jim Konrath, CEO of Accredited Home Lenders in San Diego, California. The drop in home price appreciation has become a poison pill to the industry, Konrath said.”
‘POISON Pill” hehehe
The rocket fuel fueing this Phoney House appreciation is coming to an end.
READ MY LIPS….HOUSING MASSACRE COMING SPRIONG 2007…DO NOT COUNT ON A SPRING BAILOUT…IT IS A SPRING MUTINY!
BOOOOOOOOOOOOYAAAAAAAAA
Bob
From Reuters:
Housing, car markets may spark credit crunch
For U.S. consumers and companies, the era of easy access to cash may be ending.
While innovation in corporate credit has helped home buyers with checkered debt records buy houses and kept company default rates at historic lows, the first signs of a coming credit crunch are emerging in the housing market.
“A weak housing market can tighten credit constraints and raise the overall costs of consumer finance,” said Suzanne Mistretta, an analyst with Derivative Fitch. “The housing market and financial health of the consumer will be the focus” in 2007.
Photo
The top news, photos, and videos of 2006. Full Coverage
Subprime mortgage loan borrowers stand to be the most significantly strained by a housing slowdown, which may mean higher delinquencies and more rating downgrades next year for subprime residential mortgage-backed securities, or RMBS, and structured products known as collateralized debt obligations, or CDOs.
…
Lenders such as New Century Financial Corp. (NEW.N: Quote, Profile , Research) and Accredited Home Lenders Holding Co. (LEND.O: Quote, Profile , Research) already are tightening lending practices. New Century, for example, is making fewer loans to first-time home buyers with risky attributes such as high loan-to-value ratios and undocumented income.
…
“You are starting to see signs of deterioration and evidence that you will see tougher lending standards in the future,” said Mark Kiesel, a portfolio manager for Pacific Investment Management Co., the world’s biggest bondholder. “The credit profile of Ford has deteriorated to such a degree that their options are being limited.”
Investors such as Kiesel, who sold his home and moved into a rental apartment this year, are increasingly worried that individual and corporate defaults will begin to climb, consumer spending will drop and corporate profits wane.
…
“After years of enjoying an ideal environment, the environment for RMBS has turned increasingly challenging,” Fitch analyst Grant Bailey said on Thursday. “On the subprime side, we expect asset performance to continue to deteriorate.”
pesche22 Says:
December 15th, 2006 at 2:57 pm
i’m seeing 5.636 % mortgages for 1st time
buyers. 30yr fixed. 0 points.
1 yr arms 5.125% 0 points
30 yr fixed 6.125%
Could you send me the link?? or contact info -if it is really 5.36% it might be interesting
http://www.cepr.net/index.php?option=com_content&task=view&id=644
How much do you want to be spoonfed?
Do your homework.
“i’m seeing 5.636 % mortgages for 1st time”
pesche,
In early 2004, 5.125-5.25%, 0 points. Amazing how many went with I/O’s because they could not afford fixed rates. They needed teaser rates to make it work for them. Now the mess is unraveling.
From Reuters:
Moody’s may cut KB Home’s debt on report delays
Moody’s Investors Service on Friday said it may cut its ratings on KB Home (KBH.N: Quote, Profile , Research), citing the homebuilder’s announcement that it will restate results from 2005 and 2006 because of options expensing errors.
KB Home said on Dec. 8 that it expects to take noncash charges in its fiscal fourth quarter ended Nov. 30 that range from $235 million to $285 million due to oversupply of inventory and $90 million for land option contract abandonments.
(Note: What happened to builders “learning their lesson” and not overbuilding “this time”?)
jb
bc:
thats my point , they have to keep it going.
what a fraud.
“China will make its currency more flexible and the U.S. will boost its national savings rate to address global trade imbalances, Paulson said.”
What eclectic crack is he smoking? The US is on a $2 billion a day crack trip (deficit) and he expects the savings rate to increase??!! Mr. Paulson, savings comes from values inculcated from childhood; it doesn’t appear overnight. When you are a multi-millionaire at Goldman, you live in a different world. But the poor/middle class in the US is getting screwed coz they watch too much TV and want to keep up with the Joneses. It’s a self-perpetuating path to destruction.
What eclectic crack is he smoking? The US is on a $2 billion a day crack trip (deficit) and he expects the savings rate to increase??!! Mr. Paulson, savings comes from values inculcated from childhood; it doesn’t appear overnight. When you are a multi-millionaire at Goldman, you live in a different world. But the poor/middle class in the US is getting screwed coz they watch too much TV and want to keep up with the Joneses. It’s a self-perpetuating path to destruction.
What do you expect him to say?
he knows china can stop buying our bonds. This whole PHONEY economy is built on a sea of debt. So many dummies been snuckered. Now it’s time to suck it up.
Don’t be fooled now by any of these ponzi slime.
It’s time to hunker down, save and be prudent. You have strong financials do not let anyone talk you in to anything stupid. Walk away take a deep breath.
“Erick Eschker, Humboldt State University economics professor, said that for the first time in a long time, renting may be the wiser option. ‘I don’t think we’ve ever seen it this bad here. Not since the Great Depression has there been such a difference between (rents and mortgages),’ Eschker said. ‘I would be a fool to purchase a house right now, unless I could find a house at the pre-boom prices. I think we are in trouble and I’m not going to lie about it.’”
hehhehehe
Use your damn noodle. The grimster has been spoonfeeding ya for a while.
Looking forward to the obliteration of the RE machine.
What a sewer!
pesche,
Sorry, no adverts allowed.
jb
“KB Home said on Dec. 8 that it expects to take noncash charges in its fiscal fourth quarter ended Nov. 30 that range from $235 million to $285 million due to oversupply of inventory and $90 million for land option contract abandonments”
….and a small dispute, only smoke now, with Deutsche Bank regarding land options and private ventures.
dreamtheaterr,
Post #20,
That’s what went thru my head. I thought I was delusional reading this. I guess the question was, “Mr Secretary, we understand the need for more flexible exchange rates, however what does your govt plan to implement to to bring down your astronomical deficits and control your insatible appetite for spending/printing”????
Paulson must have been stumped/cornered. It’s the only reasonable explanation that I can surmise.
Fortune magazine:
6 strategies to survive the real estate bust
http://money.cnn.com/magazines/fortune/fortune_archive/2006/12/25/8396764/index.htm
>>i’m seeing 5.636 % mortgages for 1st time
buyers. 30yr fixed. 0 points.
try calling them. i’ll bet you on the tea in china if you could even get that rate it would cost you money effectively bringing it up to 6% or higher in NJ. i know the rates well and you can’t find that rate without paying something right now.
Agreed. That’s a teaser rate for sure. Lots of junk fees and points sure to be attached.
Booya:
“…What do you expect him to say?…”
Dead-on – the whole point is that Paulson is from the private sector and knows EXACTLY how to kiss posterior when required. The whole reason that he got the job is for what he is doing right now.
I’ll give a 4% 30-year fixed. Wait until you see your principle amount…..;)!
Better sell now, or you will be stuck with it forever!
how does it feel?
hehehe
Ok, question, since I know little of NJ outside of Hudson, Essex and Bergen. Better half has a chance for a job in E. Hanover. I work in NYC. If he takes it, we’re NJ people (even though we’d rather be back in NY). What are some good towns that would allow me a decent commute and put him close to work?
chicagofinance Says:
December 15th, 2006 at 4:46 pm
Booya:
“…What do you expect him to say?…”
Dead-on – the whole point is that Paulson is from the private sector and knows EXACTLY how to kiss posterior when required. The whole reason that he got the job is for what he is doing right now.
You saw him skying over the migit chinese woman but he carefull walked hunched over and bowed everytime. This guy knows exactly the trouble we face. Dummies think they are well off. I hate to tell most of them you are piss poor.
Lean times are a coming for many.
I sure wouldn’t want to depend on cashflow from a RE related business right now with little or no savings in the bank for emergency backup. Realtors, builders, electricians, mtg brokers lanscapers….are in for a heaping of pain. It will be nice to see. The greed and arrogance of this bunch was just spilling over.
What are some good towns that would allow me a decent commute and put him close to work?
Train?
jb
The Northeast: Slowdown on the way
http://tinyurl.com/yflodq
I’d love to hear those proposals on how to raise the U.S. savings rate..
jb
Have we seen the low point for mortgages?
“Dec. 15 (Bloomberg) — U.S. Treasuries fell for a second straight week as economic reports showed enough strength in the economy to allow the Federal Reserve to keep interest rates steady longer than expected.”
“Futures traders see a 12 percent chance Fed policy makers will cut the benchmark interest rate by a quarter-percentage point by April, compared with 28 percent odds on Dec. 8.”
Credit is the key to this RE market. As long as lending standards are loose, credit is cheap, and employment is good, RE will avoid total meltdown. Inventory is not enough. Fools will buy if you let them borrow!
Nice to see Booyah Bob has expanded his hate list (in #35) to include electricians and landscapers.
All I want for Hannukah is for him to get hit by a bus.
Always thinking about yourself Clot.
jb,
simple proposal to encourage savings: consumption tax. Coming to an electorate near you: 2008
I agree, and make it substantial. And where is all that casino revenue going?
please correct me if im wrong but if the chineese currency is aloud to float freely or at the very least becomes more flexible it should appreciate against the $. following that all imports from china ( all of walmart) will become much more expensive and maybe consumers will think twice before buying everything they dont need. or they’ll atleast have to save to buy things.
i forgot about unrealistic credit card limits and of course neverending home appreciation to extract from..
nevermind
but would it not cause inflation?
So, a free-floating yuan appreciates against the dollar. Then, the Chinese, still the biggest purchasers of long-term US treasuries, take a whipping on their biggest fixed income investment. Yeah, that’ll fix everything.
The US/China talks this week were less interesting than two crack dealers divvying up their territory.
2004 2005 2006
664 669 523 Jan
531 552 496 Feb
707 702 644 Mar
761 810 610 Apr
807 873 806 May
1,181 1,186 927 Jun
1,282 1,083 904 July
1,066 1,304 911 Aug
952 952 679 Sept
887 830 719 Oct
852 761 609 Nov
994 898 350 Dec Through the 15th.
10,684 10,620 8,178 Total
Bergen residential plus condo sales.
Yes, preferably on a train…the bus stinks!
The only way to raise the savings rate would be to raise interest rates.
If people can make more money by parking their cash in the bank , they are more apt to save.
The effect on real estate would be more than devastating, maybe even a depression. It would also hurt the high flying stock market.
NJGal.
This link may be useful if you have not already browsed it.
http://www.njtransit.com/sf_tr_schedules.shtml#
for me i like rutherford, a bit of a pain to get to nyc because you have to switch at secaucus or hoboken. still not a bad commute time. a Bus to NYC is also available.
going directly into new york penn station is montclair and that has some nice sections to it.
NJGal,
Yes I am agree with Spelunker, Rutherford is a nice town with a easy commute to NYC. There is a municipal shuttle bus which picks up people in the morning and drops them off at the train station near the Park Ave. (Main street). Also by bus it usually takes 20-25 minutes to get to NYC Bus terminal. Also Oradell is a very nice town, which has a train station too. It is just from my experience. Hope it will help.
Consider renting
If you got out of the market when prices were high, bank those proceeds.
FORTUNE Magazine
By Ellen Florian Kratz, Fortune writer
December 13 2006: 9:24 AM EST
NEW YORK (Fortune) — Stephen Levy knows how lucky he was to sell when he did. He put his San Diego penthouse on the market in August 2005 for $2.65 million, more than double what he had paid for it in 1998. That October he got an offer for $2.25 million but turned it down. It would be months before he got his next offer. Luckily for him, he was finally able to sell, closing for $2.1 million.
100 markets, from best to worst
“It was a gift,” he says. “Is the property still worth $2.1 million? I’m not so sure about that.” Like any precious gift, Levy, who is 58, is holding it dear. So dear that he decided not to roll it into another house right now. He deposited the proceeds into accounts that earn about 4 percent after taxes. The interest just about covers the $3,700-a-month oceanview home he is currently inhabiting. “I’ve never been a renter in my life,” he says. “It’s not bad.”
#44: China and Inflation.
Short answer to your question: “Yes”, If chinese yuan/remimbi appreciates against the doller it will result inflation.
The US is between a rock and a hard place. The only way for us to decrease the trade deficit with china is to let the dollar depreciate agaist the remimbi. This will most likely result in higher interest rates and higher inflation.
Right now the chinese have us by the b___. Thankfuly they aren’t holding too tight lest we stop shopping.
NJGal,
If you work in midtown then look at Weehawken. Buses every 1-5 minutes during the morning arrive at Port Authority bus terminal in 10-15 minutes. Nowhere in Weehawken is more than a 3 block walk to a bus stop. The trip back in the evening is faster.
Getting on the highway is easy as 495 goes straight thru the town. NJ Turnpike is a 5-10 minutes drive.
Weehawken is a safe town which is cheaper than Hoboken and downtown Jersey City. Probably the only place you could live and have both commutes be 45 minutes or less.
I used to live in the NJ suburbs and hated it. Nothing wrong with suburbs in NJ compared to other states, but I guess I just don’t like the suburbs. Besides the only reason to live in this state today is access to New York City. And Hudson County is one of the best real estate arbitrages out there – conveniently make New York $ while paying New Jersey home prices.
I found the analysis in #1 very interesting. The analyst accounts I have been reading up to now have consistently reported the frustration expressed by Chinese officials over their inability to prevent local banks from making questionable loans and further unbalancing the economy.
This local control paradox has been described as resulting from long tradition. Only recently have any efforts begun to take hold. It seems somewhat like what banking was here before the Fed.
The Chinese consistently expressed their understanding that maintaining their current export based economy is unsustainable at recent growth rates and that a more consumer oriented structure is essential to avoid very serious difficulties should the West’s import appetites slacken.
I find the oft-expressed fears that the Chinese will start to ‘turn the screws’ amusing in the light of their apparent inablility to exert control at home and the obvious dire consequences to their economy that would result from any such action.
While they are certainly hard-nosed and authoritarian, even ruthless, on what evidence are so many convinced that they are insane?
#53-
“The only reason to live in this state today is access to NYC.”
Sorry, haven’t been to NYC in over 8 years and have no desire to go. Maybe not to you, but to me there is plenty to do in this state.
If you work in Mid-town consider Westchester over Jersey; metro north is much nice/reliable than jersey transit and gets you into GCT in
“I’ve never been a renter in my life,” he says. “It’s not bad.”
Ditto. Never even imagined the freedom that comes with renting. Haven’t been to Home Depot once in the last year!!
“The US/China talks this week were less interesting than two crack dealers divvying up their territory.”
Clot,
Biggest dog and pony show resulting in a bunch of nothing. By the way, who are we to push for a more flexible currency (yuan). It’s confusing to me; doesn’t the banker, not the borrower, usually dictate the terms???
“I’d love to hear those proposals on how to raise the U.S. savings rate..
jb”
My feeling is the Govt should provide an extra incentive to save. The (Retirement) Savers Credit should be extended to middle class folks also. The ordinary income tax on interest income from taxable bonds and CDs should go away or be reduced for people with AGI of $150K and below. At 5% current yields, 25 to 28% going in tax is ridiculous for middle class.
There is way too much disparity between the super rich in this country and the rest. The richie rich and corporations own most of the stock anyway in this country; reducing tax on dividends, etc does jackshit to alleviate the burden on the middle class folks since they don’t own much equities.
When there is an economic recession and folks have no money in the bank, people and govt will realize how much they have their priorities upside down. Stop wasting money on war and mowing grass along highways. Travel around the world (especially Asia) and see how hard working people are, and what a hard life they still have living on less than $2 a day….. you’ll get a perspective about life.
45 million folks in this country don’t have health insurance. Sorry, but the politicians in this country have their heads up their asses debating stem cell research or gay rights. Allow individuals paying their own health insurance premiums to deduct 100% off their taxes and funnel that into some sort of new IRA account. Less people are going to eat cat food or be a Walmart greeter during their golden years.
NJGal: hate to say it, but Maplewood, South Orange, Millburn, Montclair, West Orange
dream,
I agree 100%. However, Joe 6 pack has great incentives and is not taking full advantage of them. 1)How many actually max out their 401k?? It the public does not max this out, they are making a major mistake. If your firm matches, you could be automatically receiving up to 50% on your investment before you choose the vehicle to place it in. 2)How many max out their IRA’s??? I can’t even imagine the response when Paulson stated that the US will boost its savings rate. When our Chinese counterparts saw the chart,link below, they must have thought that Paulson was looking at it upside down, the way some bulls on this blog analyze Grim’s charts!!
http://bea.gov/briefrm/saving.htm
Some interesting reading from Paul Kasriel:
http://web-xp2a-pws.ntrs.com/content//media/attachment/data/econ_research/0612/document/ec121506.pdf
jb
NJGAl,
I would recommend also looking at the TMA’s http://www.transoptions.org website. Because much of the rail service in that part of NJ is far from job locations and the TMA provides ways to link up to them. As far as towns Madison is nearby and has midtown direct, good schools, restaurants and a nice little downtown as well as Drew University and all that offers.
Grim and NJrereport bloggers,
I was at a party last night where my neighbor the Cendant/Realogy exec was at. Also in attendance was a Weichert (a subsidiary of Realogy) RE agent. Well I did not even bring up RE or anything related to it but one woman just happened to bring up in conversation that they were squeezed for space now that they just moved into their 4 bed house. The two RE people just swooped in and I could not believe it but they both started with the “now is a wonderful time to buy, low historic rate high inventory” spiel.
I thought I was listening to a Lereah press release.
# 61
i dont think many people can afford to put the max in 401ks or have enough life insurance or contribute to college funds. but they’ll max out credit cards.
i think most have to spend over 30% income to afford to rent or own in this state ecspecialy middle class but fundamentals drove the re market
my hourly wage is $25 per hour. thats about 10,000 above what is considered the poverty level in nj and i have a good job. ( utility)
but it doesnt cut it.
njgal, i work right next to East Hanover. not sure where you live now, but you could live in NYC, say the west side and your husband could reverse commute out of penn station to south orange station. you can get a monthly reverse commute parking spot (you’d leave the car there at night and weekends) and you can drive to east hanover from there. i did it for 1 1/2 years and it’s about 1 hour 20 each way. not so bad if you have no other reason to move to the burbs. pricey though since you have the local train ($70 a month), nj transit ($105 a month) and parking spot ($70 a month).
“Sorry, haven’t been to NYC in over 8 years and have no desire to go. Maybe not to you, but to me there is plenty to do in this state”
Really. Like what? NJ has nothing to offer except jobs in nyc without having to live in the city to get the job. NYC money supports alot of NJ towns. Without nyc, NJ would dry up like a tumble weed.
I am not trying to be a jerk to you, but I just don’t really see what NJ offers. Besides, one can have a family in the burbs and still have a decent manhattan salary job.
Although, South Jersey is nice. But that area tends to feel like a different state to me.
SAS
http://biz.yahoo.com/ap/061216/china_energy_westinghouse.html?.v=11
U.S. Firm to Build China Nuke Reactors
“U.S. Firm to Build China Nuke Reactors”
wow.
If this was to happen 30 years ago, there would be riots in the streets. Now-a-days, its back burner to Lindsey Lohan and Britney Spears…
Looks like these so called “pop icons” have taken over.
SAS
Time to put the Wall Street Bonus savior to bed!!
The below is from a major wall st.online job site, no link. I know it’s a sampling but much more scientific than somebody who says they have 4 wall street friends who are buying.
Last Week’s Poll
When it comes to spending bonuses, eFinancialCareers users put their
money where their mouths are: Nearly a third say they’ll invest most of
their bonuses. About 22 percent plan to pay off their student loans,
while 14 percent are off to buy a house. (We hear real estate agents in
New York are very excited about bonus season this year.) Nearly 13
percent plan to splurge on their family, and more than 18 percent are
going to spend their money on “something else.”
14% is not even a drop in the bucket.There may be some activity for trophy properties in New York, the Hamptons, condos in Vail, condos in the islands or castles in Europe. The overpriced 500k cape in NJ???? Not even on the radar!!
“First-Timers Begin Looking At Houses Again”
By RUTH SIMON Wal Street Journal December 13, 2006
Sorry for the long post, but since many reader here are first time buyers, I thought it will be usefull information. But ofcourse NAR/Home builders claim that the wall street journal is biased (against real-estate) hence they provide more accurate information on the nar website ;-).
Some excerpts:
__________________
First-time buyers play a key role in the housing market. They provide a source of new demand for homes, and they also make it possible for owners of entry-level properties to trade up, creating a ripple effect that affects higher-priced sectors of the market. Declining affordability has made it difficult for first-time buyers to buy homes in many parts of the country, an important factor in the recent housing downturn.
http://tinyurl.com/yjp26f
But as more sellers begin to cut their asking prices and rates on fixed-rate mortgages have moved lower, some real-estate agents are reporting renewed interest from people shopping for their first home. Sam Schneiderman, broker-owner of the Greater Boston Home Team, says he has seen “a real surge in first-time buyer activity” in the last two to three weeks as lower prices draw buyers who think the market may be close to bottoming out. Kevin Freadhoff, an agent with Realty Executives of Southern Arizona in Tucson, says in the past 60 days he is seeing first-time buyers “start to warm back up again. They are seeing that houses have become more affordable.”
First-time buyers are particularly sensitive to rising housing costs, in part because they don’t have equity from an existing home they can tap as prices shoot higher. And lower incomes provide less of a cushion when monthly payments climb. In a sign of just how hard it is for first-time buyers to come up with the cash needed to buy a home, 45% of first-time buyers bought their home with no money down, according to the recent National Association of Realtors survey, up from 43% a year earlier.
Jason Colon, a bank analyst, bought a new three-bedroom, 2½-bath townhouse in Apollo Beach, Fla., last month after looking for his first home for roughly a year. Mr. Colon paid $163,000 for the property, which was originally priced at $242,000. The builder also picked up $5,000 of his closing costs. “It was crazy for me not to jump on it because it was brand-new and I’m buying the model unit, which has all the upgrades,” says Mr. Colon. Falling interest rates have made the purchase more affordable, he adds.
Yet affordability remains a problem for many would-be buyers. In the second quarter, buyers had to stretch more than ever before in 25 of the top 50 markets, according to Bank of America analyst Daniel Oppenheim. Even with the recent price declines, he estimates that it would take a further 7% fall in home prices, combined with a 4% annual increase in nominal incomes, to bring affordability back in line with average levels over the past decade by 2008 — if interest rates remain stable.
In recent years, many first-time buyers had been able to stretch their dollars by taking out adjustable-rate mortgages and so-called affordability mortgages, which allowed them to lower their monthly payments or buy a home with little, if any, down payment. But as short-term interest rates have climbed higher, the benefits of adjustables have declined.
At the same time, some first-time buyers have become more cautious. Sheila Doyle, an agent with Baird & Warner in Glenview, Ill., says that more of the first-time buyers she works with are getting their parents to help them with a down payment and fewer are financing 90% or 100% of the purchase price. “I don’t see them doing the crazy financing that was so frequent last year,” she says.
New guidelines for nontraditional mortgages, recently issued by federal banking regulators, could make it tougher for some first-time buyers to use these products. Some lenders are also beginning to tighten their standards as mortgage delinquencies rise.
Many would-be buyers are taking a wait-and-see approach. When home prices were soaring, many first-time buyers jumped to buy houses they could barely afford, believing they would be shut out of the market if they didn’t act quickly. Now, with prices falling in many areas, “there’s no immediate need to buy, and so they kick the tires more,” says Frank Borges LLosa, owner of FranklyRealty.com, a brokerage in Arlington, Va.
Arthur Orkisz, a speechwriter in the Washington, D.C., area, says he expects to hold off until at least next summer before buying his first home, “unless something so dramatic happens that it’s absolutely silly to pass it up.” Giveaways such as flat-screen TVs are “all nice and dandy, but at the end of the day anyone capable of doing the arithmetic realizes that’s a gimmick to get me in the door,” he says. “That’s not enough of an incentive” to buy.
Scott Steiner, managing broker of Help-U-Sell Lakeview Realty in Lake Elsinore, Calif., says he’s getting fewer calls and doing fewer showings for the properties he’s listing. But fliers describing the properties are being snapped up faster than ever before — a sign, he says, that many first-time buyers are taking their time and waiting for the market to stabilize before making a move.
In much of the country, renting remains a bargain compared with owning, according to an analysis prepared for The Wall Street Journal by Torto Wheaton Research, a unit of CB Richard Ellis Group Inc. In markets such as Las Vegas, San Diego and Washington, the monthly cost of renting the average apartment is roughly half what it would cost to own the median-price home in the third quarter. “Renting is only marginally less of a bargain” even with the latest decreases in home prices, says Torto Wheaton senior economist Gleb Nechayev.
The above talk about China reminded me of this article from some time ago. Its a little dated, but still interesting.
“US’s $5 billion nuclear gamble with China”
http://www.atimes.com/atimes/China/GC11Ad05.html
SAS
Another off-topic but interesting article:
Many Baby Boomers Face Retirement Trouble
ASSOCIATED PRESS
December 13, 2006; Page D3
One in four U.S. baby boomers probably won’t have enough money to retire on time, and likely will have to work at least two extra years, according to a study.
The Center for Retirement Research at Boston College asked some 400 employers to gauge the financial preparedness of workers 50 and older. Baby boomers were born between 1946 and 1964.
“Employers responded that half will not have the necessary resources” to retire on time, the center found. Of those, more than half will end up working at least two more years, the center said.
“Our employer survey indicates that a quarter of all boomers currently in their 50s will lack the resources needed to retire at the age similar workers have in the past and, in response, will want to stay on the job at least two years longer,” it said.
The issue is important because working longer is a key option for people who haven’t saved enough money to retire. It remains unclear whether employers will want to keep aging boomers or hire others.
The center, headed by Alicia H. Munnell, a professor of management sciences at Boston College’s Carroll School of Management, noted that retirement preparedness is harder to gauge now, because many workers don’t qualify for company pensions, which their parents may have received.
Hey Metro (from #64):
Weichert isn’t a subsidiary of Realogy. It is a privately-held company, owned by Jim Weichert.
Realogy’s subsidiaries are ERA, Century 21, Coldwell Banker, Christie’s, Cartus Corporation (relocation company) and NRT.
However, in practice, there is no discernible difference in their approaches (funny that you thought those guys at the party worked for the same company!), other than the color of signs in front of their offices.
“Many Baby Boomers Face Retirement Trouble”
yup, very true. Even boomers who think they have enough for retirement, you better hope you never get sick. Because high cost of health care will wipe you out. I know of alot of boomers whom have health insurance, and still get wiped out. I believe most of the country has the 80/20 insurance. 80% is paid by insurance, but 20% you are stuck with.
20% of say 50,000 (which is cheap is you need a surgery), thats alot of money out of pocket. If one has to have cancer treatment, forget it.
If the cancer doesn’t kill you, the medical bills will.
THat is why, when my time comes, I hope its in my sleep. Because I will be god damned if I am going to pay for some silly MD’s Mercedes Benz at the expense of my health.
SAS
Another interesting article from today’s NY times:
http://tinyurl.com/u9cqn
“They Bought but Never Built”
Some excerpts:
_____________________________________
IN 2002, when the St. Joe Company, one of Florida’s largest real estate developers, began selling parcels in a new neighborhood here, it was inundated by potential buyers.
With as many as 10 applicants for every lot, the company put numbered balls into a fishbowl, then had an agent draw the balls at random, to decide who would be allowed to buy the home sites.
Four years later, you can hear a pin drop at the gated community of WaterSound Beach. Most of the lots sit empty, and even Thanksgiving weekend brought only a handful of visitors.
Homeowners who did not meet the “build-out deadline” had two options: to begin paying a penalty, as much as $2,500 a month, or to sell the land back to St. Joe at the original price.
As it turns out, many of the landowners were speculators who had no intention of building. “They thought they’d sell after six months, and make a killing,” said Lew Belote, an executive of Move Inc., which provides online services to buyers and sellers, and the owner of a house in WaterColor.
Some did manage to sell. Chris Martin, a local builder, bought a lot in WaterColor in 2003 for $215,000. He sold it in early 2005, he said, for $750,000. In WaterSound, several lots have sold for more than $2 million apiece.
But after Hurricane Dennis hit the Panhandle in July 2005, most of the planned flips turned to flops.
“People got caught day-trading lots,” said Marc Levy, who operates a flooring company in New Orleans and owns a house in Rosemary Beach, a community near WaterColor. Those who did not want to sell their lots at a loss, but had no plans to build, were stuck. After years of double-digit appreciation, the market was so bad that “some of them would have been happy to sell back to St. Joe at the original price,” Mr. Belote observed.
But St. Joe “wasn’t interested in buying back people’s lots,” said Jerry Ray, the company’s vice president for corporate communications. “Our goal is to build towns.”
December 16th, 2006 at 9:40 am
“How Not to Scare Off Buyers”
From today’s NY Times.
http://tinyurl.com/yxp6aq
Thanks all – should have been more clear – no more urban areas. We’re in Hoboken – no Weehawken, eew. Hoboken is eew too – I am tired of it, although the commute is good. And no NYC – my hubby hates urban life. HATES it. Sadly, I want very badly NOT to move to NJ permanently – we wanted to live in Northern Westchester – we like the horse country lifestyle, and it’s where he grew up and closer to family, all of whom are in NY.
I will check out Rutherford, Oradell and Madison. I was wondering about Chatham and Mendham?
ChiFi – I know, Maplewood. It kills me. I don’t know if I could get the hubby to consider Millburn or Short Hills, since they have better schools. Or maybe Montclair even. The commute is great for me, but ugh. Just too many people and the taxes are insane.
Re: US FIRM TO BUILD CHINA NUKE REACTORS–#68-#69
Amazing, isn’t it ? Westinghouse Corp. can’t seem to build these plants here where we desperately need INEXPENSIVE energy to power what is left of our NATION’S INDUSTRY——–All because of those screaming evironmental ‘mental-wakkos’ who wrongly equate nuclear bombs with nuclear power generation!!!
France generates approx. 80% of their energy needs with nuclear power generation and ‘we’ allowed these screaming jerks to close down Shorham,long island’s brand new power plant before it was put on line 15 years ago—-THUS effecting the overall economy of Long Island and the tri-state area; Not to mention the downfall of LILCO (the electric Co.)…AND the transfering of the billions of dollars of costs of building this complex and TEARING IT DOWN to ALL the citizens of New York State !!!!
Here in NJ,even off-shore electric wind-powered generation was put ‘on-hold’ by corzine earlier this year because of “the possible effect of the tourist industry” on southern-shore new jersey–Here we have totally ‘clean’ electrical generation, able to power hundreds if not thousands of homes and/or new commercial/lite industrial businesses creating new jobs, and ‘we’ have a so-called governer who is ‘holding-up-the-works’ !
IMHO, it doesn’t look too good for our state or our nation’s future when we have the wrong people in control………..I have been around a lot of years and have seen a gradual decline of wealth (and good-paying jobs) that was generated by our Industry—–It is very sad to see a lot of it transferred to china—-
Bob Reiss
“The Center for Retirement Research at Boston College”
Now we’re talking!!!!
I don’t understand how economists continue to predict future “job growth” when you look at these numbers. Look at the difference between Nov/Dec 2005 and Nov/Dec 2006.
http://www.jobbankusa.com/news/Layoffs/index.html
#82:
There is a huge disparity in the kind of jobs created/lost.
US used to be a very farming/agricultural economy many years back. Now the percentage of employees in the farm/agri sector is so miniscule that it is even left out of the numbers and wall-street and economist harp on “Non-Farm employment number”.
Now in the “Non-farm employment numbers” manufacturing especially auto’s and construction is being sledge hammered. The growth you see is mostly services.
http://newjersey.craigslist.org/rfs/241229816.html
Forget professor theories, optimistic self serving realtors, pseudo economists:
NEW YORK, Dec 13 (Reuters) – Washington Mutual Inc.’s (WM.N: Quote, Profile , Research) chief executive said on Wednesday that he expects 2007 to be another tough year for the U.S. mortgage industry, which faces overcapacity and unsustainably low margins.
Kerry Killinger, CEO of the largest U.S. savings and loan, acknowledged that a sweeping correction in U.S. housing prices would lead to higher delinquencies and loan losses, but that they would stay within forecasts, thanks to previous cautionary moves at the bank.
NJGal,
I also think that Madison would be perfect because of the train along with an easy commute to East Hanover. Chatham is another nice town. Some of the other towns people have mentioned (Rutherford, Weehawkin) are just too far from East Hanover and the commute would be horrible. Morris Township is close to the train but they go to Morristown High School (many who live there send their children to private high school). Montclair, while very convenient to NYC, is way too expensive. The taxes are very high and they’re going through a tax reval now.
Has anyone noticed a new Toll Brothers development on their site?
Its in Budd Lake and they even have a model that is under 3000 sq ft.
I wonder if they will keep that one atleast reasonable (550 – 600).
Anyone have more info on these houses?
“The growth you see is mostly services.”
Anti,
Bingo!! Look at last months’s employment report. Construction and manufacturing shed jobs[close to 40k], while retail and govt led the advance.
In addition to this, we continually hear how the economy will provide for a soft landing for RE.[by the way, if you charted the # of times you heard soft landing, it would probably look like a RE chart from 2001-2005]. Nominal wages are rising in a neighborhood of 3.9 percent to 4.0 percent, while the underlying rate of inflation is in the range of 2.5 percent to 3.0 percent[if we believe our govt’s #’s], translating into real wage growth of between 0.9 percent and 1.5 percent. If real wages continue to grow at this rate and RE doesn’t decline, it will take approx 70-80 years for real incomes to catch up to 2005 RE prices. Another spring bust coming to a neighborhood near you!!
Clotpoll, you know I got confused by the yellow signs of Century 21 and Weichert? My bad, Realogy owns many of the RE firms, but Weichert is not one of them. Also I drank a bit last night just adding to the confusion.
Hi all. I am originally from NJ but interested
in living in Westchester due to the location of my husband’s family. Does anyone know of a good blog like this for westchester? Thanks!
To respond to NJgal – mendham is nice if you like horse country living.
“Despite the hawkish public tone coming from Washington, the private dialogue was likely to have been far meeker. My guess is that Bernanke and Paulson kowtowed to America’s biggest supplier and largest lender, and pleaded for them to keep the goods and credit flowing. Although it didn’t take place in Macy’s window, the affair may qualify as the “mother of all butt kissings.””
“The biggest factor boosting retail sales was the 6.5% gain in consumer electronics. Does anyone want to guess where most of that stuff was made, or how it was paid for? How many big screen TVs could Americans “afford” to buy on credit if both prices and interest rates went up by 25% or more? As usual, the media interpreted the recent retail sales figures as evidence of a strengthening U.S. economy. Nothing could be further from the truth. Such sales merely reflect the strength of the economies that produced the goods in the first place, not the economy of the nation that went deeper into debt to consume them.”
http://www.financialsense.com/fsu/editorials/schiff/2006/1215.html
http://news.yahoo.com/s/ap/20061216/ap_on_re_mi_ea/iran_nuclear
Iran offers to transfer nuke technology
“The Islamic Republic of Iran is prepared to transfer to regional states its valuable experience and achievements in the field of peaceful nuclear technology as a clean energy source and as a replacement for oil,” the state quoted Ahmadinejad as telling Mohammed Zefollah Shirar, a top adviser to Kuwaiti Emir Sheikh Sabah al-Ahmad al-Sabah.
Sorry if this was already posted on this thread. It was posted by a fellow blogger on one of the Saturday threads. thought it was worth repeating.
*** BREAKING NEWS ***
CHINA TO DUMP ONE TRILLION IN U.S. RESERVES!!!!
Tells visiting Bush administration officials they will not sit back and lose their shirts as U.S. Dollar collapses; they are getting out fast and large!!!!!!
http://www.halturnershow.com/ChinaToDumpUSDollars.html
MichelleNYC Says:
December 16th, 2006 at 11:39 am
To respond to NJgal – mendham is nice if you like horse country living.
Can’t commute to NYC from there…NJ Transit isn’t Metro North – if you go further west than Summit, you will regret it
a follow up to the previous post.
*** BREAKING NEWS ***
BANKS “CAPPING” WITHDRAWALS AT $1,000 MAX!!
REPORTS COMING IN THAT PEOPLE ON LINE FOR AN HOUR; TOLD THEY COULD ONLY WITHDRAW ONE THOUSAND DOLLARS!
Word of a possible collapse of the U.S. Dollar has apparently spread far enough and fast enough that the banking industry is reportedly LIMITING the amount a person can withdraw! More details as they become available.
http://www.halturnershow.com/index.html
can anybody tell me if this stuff is true or is this turner site just off the hook?
halturnershow site is indeed over the top. there may be some truth to some of the reports but if you read most of their stories make sure the coffee is well past the shot-out-of-your-nose state.
sorry 8^)
Post #37:
From Wicked Quiver,
I hate to spoil the fun for the fortune tellers at Fortune/CNN, but that horse is long out of the barn. New home sales for October were halve what they were in 05 and down sharply from September. If you take a lot at the report from Census, there are 18 months worth of new home inventory in the northeast. A slowdown isn’t coming, it’s here.
HELP …
I am inviting over 10 guests for Christmas Dinner and I need to order a special Platter (Whole Duck,Goose or beef platter) that serves 10. Does anybody know where I can get this in NJ, preferably central NJ.
Thanks
Whole Foods
Also if you are near Bridgewater – Wegman’s
All the way back to post #1
Chifi,
I’m not sure what people looking to invest in China expect from the banks, but as long as the Chinese government holds all the cards, and they will for the foreseeable future, investing there comes with both special risks and special benefits.
Whatever kinds of accounting standards the government chooses for the banks to follow, I don’t see how those regulations wouldn’t get bent to the government’s ends. At the same time, if they really do want to see the bank taking part in the global economy on equal footing with others, there’s no reason at all that they can’t find other outlets for their GSE “Lending.”
BTW, base on the performance of our own GSE’s and many government connected companies we need to be careful of who we accuse of crony capitalism.
#67-
I’m an outdoorsman and theirs plenty of hunting/fishing to do in this state. That keeps me and my kids (outdoor stuff) very busy. We goto Island beach state park alot in the summer. Very clean and peaceful. I do also hit AC and or foxwoods once in awhile.
These are just some of the things off the top of my head.
You and I have different tastes. For me and my family we are perfectly happy in the suburbs and love it!
Chinese banking is akin to letting alcoholics tend bar. Most of the “bad loans” on their books are either government-mandated or were made to officials and their cronies. Now, they’re gearing up for another round of this nonsense.
However, there may be a handful of legitimate survivors this time around. You may want to take a look a China Life, an enormous insurer who shook off their own checkered beginning to become mainland China’s biggest financial powerhouse (most individuals in China don’t trust banks at all & put their money into insurance…hence China Life’s preeminent position). A change in Chinese law now allows insurers to invest in banks, and China Life (NYSE symbol: LCF) is plowing in big yuan. If you follow their investments, it may lead you to some trustworthy institutions.
It’s also encouraging to see NASDAQ and NYSE will be opening offices in China…
>>14% is not even a drop in the bucket.
nice try bob. you start with something ‘more empirical’ then my peter lynch style of looking at those around me and what they’re doing and then you state a conclusion which is opinion based. sorry you fail logic 101. wall street money will impact the real estate market in varying degrees depending on where you live, but that’s not what you and the other permabear RE folks want to hear.
i wonder if spring ’07 isn’t a complete bust like everyone around here is saying, what will you say then? i’m sure excuses would abound as they always do.
njgal if you want to live in chatham, madison or summit, if you’re going to buy you’d better be ready to drop at least $550k for a 3 bedroom, 1.5 bath house on a small plot that needs some work due to the fact it’s on the midtown direct. ease of commute to nyc = premium
i hope all the permbear RE folks on this site weren’t so arrogant as to be in 100% cash and metals this year thinking the RE bubble was going to cause a 1929-style depression. if you did, you missed out on some nice gains in 2006. my point is unless you’re even close to predicting like nostradamus you should diversify yourself to profit from multiple outcomes.
“if you’re going to buy you’d better be ready to drop at least $550k for a 3 bedroom, 1.5 bath house on a small plot that needs some work due to the fact it’s on the midtown direct. ease of commute to nyc = premium”
Yes, I am well aware of that – I grew up in LI on a town just like that. I will probably be spending more than that, if I buy – after all, I am not running out and buying a house just for a new job – we will have to see how he likes it if he gets it first. Frankly, I think Summit is gross, as my sister in law lived there (she has since moved). I won’t consider it. The others I might – they seem nicer.
PS – thanks Willow – I had heard about the Montclair tax thing, so I will avoid that area – I am interested in public schools, so that’s another reason to avoid it.
Michelle, it’s not as good as this, but try westchesterny.blogspot.com – they post the info for the area when it comes in. Also sign up for updates on the houlihan lawrence site – great features. I am jealous. I am secretly hoping he either keeps his current job or takes another one he is applying for so we can stick to the Westchester plan – unfortunately, the NJ job would be amazing, so I guess I have to stop secretly hoping!
Us bears on RE are not that stupid, but thank you for your concern.
Although, the YTD in silver is doing me well.
So is some foreign currency.
As for RE, yawn…
RE is so 2003. yawn…
SAS
Richard,
your point is valid– some people here may look for the negative a little too much. In some areas, RE did ridiculously well this year– my REIT index fund is up almost 32% YTD.
But locally, there are still very few positive signs on the residential RE front. Things may not be as bad as some here would hope, but they are certainly not great either.
Regarding China banks: if the faculty of the Chicago GSB says something smells bad, that is enough of an affirmation for me.
regarding post #92(China dumping Treasuries)
Have looked but not been able to find any other independent verification of this news and wondering if anyone else has?
sl
If this is true, we’re in big big trouble.
http://photos1.blogger.com/x/blogger/2825/754/1600/742997/BOFA3.jpg
Another nice one from Calculated Risk. Graph shows the amount of equity available on houses that still have a mortgage!
Data does not include 2006 which i bet will make this whole thing look even worse.
Percentage of equity in homes with mortgage in –
1985 – 53%
2005 – 37%
Percentage of homes with mortgage in
1985 – 57%
2005 – 66%
Combine above data with Mortgage equity withdrawal (MEW) again posted on CR-
http://calculatedrisk.blogspot.com/2006/12/greenspan-kennedy-mew-graph.html
Q3 2006 MEW withdrawal is down more than 50% from Q3 2005!!! I guess many ‘home ATMers’ are hitting thier withdrawal limits.
113] correction – some of the graphs include 2006 data.
the RE market and the economy overall will do well proportionate to the barriers to credit, plain and simple. the easier it is to get credit/go into debt, the longer this party can continue. this is a debt fueled phenomenon, not a fundamental one. some here have pointed that out. what’s unclear is what’s going to happen given this situation in the future. we have what are called imbalances in the global economy with export driven countries providing cheap goods while we pay for them using more and more debt. the export driven countries are taking IOUs for their stuff and also selling it cheaper than it’s really worth by keeping their currency pegged to the US dollar. how long this relationship can last is anyone’s guess but my guess is far longer than most have the stomach for if waiting to buy a house.
Did anyone look at the cnn finance’s projected price declines??
It shows most of the NY region is up for some decent price correction in next 2 years (5 -10%).
On a 500K home, that is 50K. I think I’m better off renting in this declining home price times:
Here’s the url:
http://money.cnn.com/popups/2006/fortune/invguide_realestate/index.html
Mr. Bednar,
You have been name Time’s “Person of the year”
Its You, It’s about the many wresting power from the few and helping one another for nothing and how that will not only change the world, but also change the way the world changes.
For working for nothing and beating the pros at their own game, TIME’s Person of the Year for 2006 is you.
Congrats
KL
Richard:
Just because I am bearish on the single family housing and condo’s doesn’t mean that I am hoarding cash. I have other investments that are doing fine, thank you
I think you understimate the investment savy of some people on this board. You can keep trying to convince people to get out there and buy a house now, but hopefully most people are aware of what is going on with housing now.
I do agree that this is a debt fueled phenomenon, but I think we are reaching the end of the line for some of these folks who took on more debt than they should have.
NJGal – Madison and Chatham are very nice areas, but a bit snobby (especially Chatham). I know you don’t like the bus to NYC, but you could live in Montville or Fairfield, which both have excellent public schools, and take the bus. I take the bus from Parsippany and it is faster than taking the train from Morristown. Fairfield is even closer.
“i wonder if spring ‘07 isn’t a complete bust like everyone around here is saying, what will you say then?”
Richard,Richard!!
If you are right, I will simply say, I am wrong and let the interest from my principal[liquidation in 2005] pay my rent!! However, if I’m right and you’re wrong, what then?? What do you say??? Risk/Reward?? I, and many others, don’t need 2007 for a confirmation. Do you think 2006 was an aberration??? The bear trend will continue in 2007, maybe until 2013,or later??? There will be flurries of buying along the way, the NAR/realtors will say the bottom is in, the bobbleheads will utter soft landing for the zillionith time. I/many others will counteract and say beware of the biggest bear trap of our lifetime!!
Correct me if I’m wrong, but I thought 101 pertained to supply and demand???
Also, as per your post in #105, you’re dead b*lls wrong.I would not even think to bring this up but you stated “those of you that were arrogant to be in metals in 2006”. Who the hell are you to talk about someone else’s position, especially when they are making a windfall?? I actually don’t like to mention it, however you brought it on. I was in metals in 2003,a little late as compared to China,Rusia,Japan,Wi Lu and SAS, but before Richard,[also short the dollar], in gold at $349.20, now at $620 and hedged at $650. While you are up a miniscule 30 %[on paper] in RE, since 2003, I won’t even mention what $300 in gold futures[13-1] represents, locked in gains. Hint?? Put some 0’s onto your “paper” gain. During this time frame, you tout that you are up 30%.Does this qualify you to carry the torch in Bejing in 2008?? Before this occurs,can you name who on thig blog was negative towards RE in 2003???
Richard, you go figure it out. Talk to your 4 Wall Street friends and ask them what buying $350 in gold futures[not cash],2003, represents today??? If you did, you would not be so feeble minded accusing those who are long for 3 years, in these vehicles, as being arrogant!!
In conjunction with this, you may have the urge to pat yourself on the back, but many on this blog also had large gains in RE since 2003. Not a big deal, I was lucky, you were a genius!! In the big picture, some were smart, monetizing those gains, in one swell swoop creating a lifetime of savings. Unfortunately, others will watch those paper profits[lifetime of savings] evaporate,[or like BOOOOYAAAAH says puff].
By the way, what gains have I/others missed since 2006?? If some are long the large cap multi nationals, long metals/minerals,[and hedged] for 3 years and short the dollar since 2002, what the hell have they missed??? A bidding war in 2006 for an overbought, POS, 500K cape in NNJ??? I would rather be arrogant and be long other vehicles, that are producing enormous profits, than stuck in a bottomless pit.
To conclude,don’t EVER talk about another person’s position. Who really cares??? I/others don’t give a damn what positions/trades anybody has on. Just worry about your own P/L, that is all that matters!!
“the easier it is to get credit/go into debt, the longer this party can continue.”
Richard, #116.
Doesn’t that just say it all??? Debt,Debt,Debt, the foundation of this market!! Kind of like the 1920’s??? What happens when somebody blows the whistle stating that the party/keg is dry is done??
“the export driven countries are taking IOUs for their stuff and also selling it cheaper than it’s really worth by keeping their currency pegged to the US dollar”
Oh really??? Go tell that to our partners in yen,bp,cd,mark,francs, rupees,etc… Can you please explain to me how these currencies are pegged to the dollar?? Maybe like our *ss pegged to our foreign bankers???
http://www.cnn.com/
“You are Time magazine’s “Person of the Year” for the explosive growth and influence of user-generated Internet sites such as YouTube, Facebook and MySpace. You were chosen over Iranian President Mahmoud Ahmadinejad, North Korea’s Kim Jong Il and former Secretary of Defense Donald Rumsfeld. Congratulations.”
Should i take this as a compliment?
2007 Spring Housing Massacre coming to hood near you
The Internet–Blogs have weakened the NAR propaganda strategies.
Use some commone sense. If it looks like a Bloated overpriced POS Shack
then it is a Bloated overpriced POS shack.
BOOOOOOOOOOOYAAAAAAAAAAAAA
Bob
$300 + a sq ft for a POS shack is absolutely insane. Tell’em to keep the shack.
NO MAAS TO RIPOFF INSULTING PRICES….
take 25% right off the top then tell’em shove it You ain’t no lap doggy!
BOOOOOOOOOOYAAAAAAA
Bob
Sub-prime market imploding….Dummy money drying up.
Any grubber who bags a fool deserves a pat on the back.
BOOOOOOOOYAAAAAAAAAA
Bob
Look at this
http://sacramento.craigslist.org/apa/249873929.html
A bunch of RE genuises
http://sacramento.craigslist.org/apa/249148749.html
http://sacramento.craigslist.org/apa/246517262.html
http://sacramento.craigslist.org/apa/247746301.html
http://sacramento.craigslist.org/apa/249451041.html
http://sacramento.craigslist.org/apa/249090695.html
http://sacramento.craigslist.org/apa/249338525.html
HAHAHAHAHA
WHO THE HELL SAID WE ARE NEAR A BOTTOM AND A REBOUND IS COMING?
THINK ABOUT IT……..NO REBOUND SPRING 2007 HOUSING MASSACRE COMING TO A HOOD NEAR YOU
BABABAB
BUST!
BOOOOOOOOOOOOYAAAAAAAAAA
Bob
Hey Skep-tic (from #110):
Watch those REITs. We had a great run up this year, but I think the prices on even the top-shelf stuff like Vornado and Boston Properties have gotten way ahead of NAV. Also, their capital appreciation has made the yields (remember, not taxable at the dividend rate) a lot less tasty. A lot of the less-savory outfits also have a way of fudging vacancy factors, too. I am an unapologetic bull on commercial RE, but I think any REIT other than apartment-based is probably a played-out game for now.
Usual disclaimers apply.
JB,
You had asked bloggers to define contents for a ‘fact sheet’ on NJ real estate. I put together a document based on my understanding. You are free to copy and alter it however you want.
Link to document should be in your inbox nnjbubble@gmail.com.
My post to JB is up for moderation :(
This web page has some interesting data.
Data geeks may like it.
http://www.nlihc.org/oor/oor2006/
SAS
NJ Gal, you said “I know, Maplewood. It kills me,”
what do you mean by that? I’m looking in Maplewood, and just trying to better understand what you’re getting at.
Subprime subsidence
from the Economist:
Dec. 13, 2006
MORTGAGE lending is hardly the raciest business, but it has its moments. “It’s a bit like the definition of combat: 59 minutes of boredom followed by a minute of sheer terror,” says Michael Youngblood, an analyst at Friedman, Billings, Ramsey, an investment bank. “And we seem to be going through another one of those minutes now.”
What has set pulses racing is subprime lending—mortgages extended at higher than normal rates to those with weak credit histories. In America, where it is most advanced, this market is under a lot of strain, and so, by extension, is the giant asset-backed securities market that is linked to it. The market for prime mortgages (those extended to higher-quality borrowers) is faring better, though it, too, is showing signs of weakness, exacerbated by cooling house prices. Might these troubles, some wonder, be the canary in the mine, warning of a looming credit crunch as investors, for years free with their money, recoil from risk?
Once a backwater, subprime is now very much in the mainstream. Annual loan originations grew fivefold between 2001 and 2005, to $625 billion, according to Inside Mortgage Finance, a newsletter.
But with rapid growth has come fragility. According to UBS, the rate of subprime-loan delinquencies of 60 days or more stood at around 8% in October, nearly double the rate of a year before. Foreclosures are also around twice as high as they were. Worse, loans are decaying remarkably quickly: the number of borrowers falling behind on payments in the first few months has leapt, to around 4% of the total. This has taken some analysts by surprise. But Anthony Sanders, finance professor at Ohio State University’s Fisher College of Business, thinks they should have seen it coming: “With the traditional mortgage market flat, the growth has been in the one area nobody wanted to go into.”
This is already producing casualties. A number of mid-sized mortgage firms have failed in recent weeks. The latest, on December 7th, was Ownit Mortgage Solutions, the 17th-largest subprime lender. Others—such as H&R Block’s Option One Mortgage—are for sale, their owners keen to leave the business. Earlier this month, in another bad sign, KeyCorp sold its subprime arm, Champion, for an undisclosed sum thought to be well below the $200m-250m tag analysts had put on it.
These troubles did not come out of the blue. Their origins lie in 2004, when some of the big subprime lenders began to compete hard for market share. By late 2005, this battle had pushed rates for ropy borrowers down to a little over 7%. This led to a boom in new business as thousands scrambled onto the housing ladder.
But the Federal Reserve had already started raising short-term interest rates, flattening the yield curve, the difference between short and long rates. (Since banks borrow short and lend long, their margins are higher when the curve is steep.) When this began eating into lenders’ profits, they reacted by pushing subprime rates back up. This time, though, they could not attract the same quality of borrower as before: with the housing market looking vulnerable, only the desperate were willing to borrow at interest rates of over 8%.
The lenders compounded their problems greatly by loosening their underwriting standards in a further attempt to keep business chugging along. Sometimes these were waived altogether. Adding insult to imprudence, they lured borrowers with “alternative” mortgage products, such as “negative amortisation” deals (where payments are so low that the overall debt gets bigger, not smaller) and adjustable-rate products (where teaser rates jump after a couple of years). Mark DiRienz of Moody’s, a rating agency, says the “payment shock” was made worse by rules that allowed lenders to go from a low introductory rate straight to one much higher than the prevailing rate.
New subprime lending has tailed off this year as mortgage firms have, belatedly, become fussier about whom they will serve. They say they will plough more resources into vetting applications but, as Mr Youngblood points out, this would raise their costs. There is no easy way out.
Moody’s and other debt-raters have cast a worried eye over the market, placing subprime deals on watch for a possible downgrade. Regulators are also twitchy. They have stepped up warnings about slack lending standards.
Nerves are also jangling in the capital markets. These days large numbers of housing loans are moved off banks’ books, bundled together as so-called mortgage-backed securities (MBSs) and sold to investors. In theory, this helps the banks to reduce risk, makes money for intermediaries who trade the securities, and allows the investors to pick tranches of debt that match their risk appetite. Thanks to financial alchemy, an MBS made up of low-quality loans can still enjoy a good credit rating.
If too many of the home loans backing the security are toxic, however, investors will feel pain. That is happening now. The ABX Home Equity 06-2 index, whose price reflects the market’s view of bonds rated BBB-minus backed by subprime loans made earlier this year, has fallen sharply since mid-November (see chart). Hedge funds and others have been using derivatives to short bonds backed by subprime mortgages.
Dubious mortgages are now a growing share of the mortgage-backed market, so there is scope for more trouble. Of the $1.02 trillion of MBSs issued in the first half of this year, over 40% was linked to subprime loans, up from 6-8% in 2000-03, says CreditSights, a research boutique.
In a sign of how important the MBS market has become to Wall Street’s big securities firms, they are playing a lead role in consolidating the subprime business. Since the summer, Morgan Stanley, Merrill Lynch and Bear Stearns have all bought mortgage lenders; Lehman Brothers has acquired several in the past three years.
The point of this “vertical integration” is to feed the banks’ securitisation desks, which are hungry for assets that can be profitably turned into fancy instruments: not only MBSs but also so-called collateralised debt obligations, pools of derivatives much loved by hedge funds. Owning your own mortgage originator also means not having to bid against other broker-dealers when housing loans come to market, thus saving money, says Art Frank, a mortgage strategist at Barclays Capital.
Although Wall Street has been taking some subprime lenders under its wing, it has been helping to push others towards bankruptcy. As the market has turned in the past year, the big banks have started scrutinising loans offered up for securitisation far more closely—and are throwing far more than they used to back at the subprime lenders. Moreover, they can force the lenders to repurchase securitised loans if they turn sour in their first few months of life. Merrill Lynch has been on both sides of this tussle: it had a 15% stake in Ownit, the firm that went bust last week.
Subprime’s woes do not—yet—amount to a financial crisis. However, there could be more pain ahead, for instance when some $475 billion-worth of adjustable-rate mortgages switch to higher rates next year. And the better-quality bits of the market are also running out of steam. HSBC, the world’s third-largest bank, has seen a deterioration across its American mortgage operations. Combined third-quarter profits for the country’s nine largest mortgage lenders were $991m, less than half the level for the same period last year.
After years of loose money in financial markets, some observers think the mortgage morass could cause investors to rethink their attitude to other forms of credit risk, such as high-yield bonds. Housing loans are not the only area that has seen a weakening of underwriting standards. Where subprime goes, other businesses may follow.
Rent: typical good article – typical Street
Find something and bleed it dry. All business is toll taking. Stuff everyone full of everything you can, and when they start to feel queasy, help them barf it all back up, and soak them in the process.
The worst thing in the world is for everything to stop moving. Stagnation means no tolls to take.
The queasiness is starting.
Sorry for babbling in post # 122. However, I has just returned home from a X-Mas party. One attended by numerous metals traders, who have made a ton of $ in 2006. I then read a ludicrous post,Richard, regarding how individuals are arrogant being in cash and the metals. HMMMNNN??? Arrogant/foolish being in cash not in debt????
Makes me wonder,who is more foolish, the child afraid of the dark or the man afraid of the light?
Hey Chifi (#136):
Very right. The “hate Realtor” crowd here would do well to understand that the agent’s only real enemy is decreased sales VOLUME, not prices. If everybody thinking of selling just sits pat in ’07, that’s when the agents get crushed. An inventory surge- fueled by ARM resets and lis pendens filings- would actually save many agents in Spring ’07. Agents are not leaving the business because prices are dropping…it’s because deal volume is down.
Given adequate available transactions, agents make the same, whether prices go up or down. Dry up the potential transaction pool, and pfft!
Of course, most of the agent-haters here probably think the guys running around the NYSE floor set stock prices, too.
Clot,
I see your point re: REITs. I only raised them as an issue to say that while I am overall bearish on local residential RE prices, I am not out of RE completely, nor will I ever be, if only for diversification reasons.
I am also looking forward to the ARM resets in ’07. I am beginning to feel as if 07 is the make-or-break point for these Armagheddon predictions. Either this massive wave of resets will bring about massive distressed selling or it won’t. Either the turmoil in the subprime market is just the tip of the iceberg, or it isn’t.
It just seems to me that the longer this unwinding of speculation takes to play out, the lower the odds are that there will be a sudden collapse. Inflation does the job, not panic. And if inflation ends up being the main thing that erodes the recent huge gains, then it is time to lever up.
Clot (post #140)
Agreed. It is the volume that is a killer for your business, if it goes down, not prices. In fact I think it would be beneficial for your business, if we have a sudden collapse of prices and then soon after that a huge improvement in buyer’s sentiment. But actually it seems to be going through a slower slope down in prices.
Can you be candid enough to let this blog know how much % volume is down for you? 0%, 0-20% or 20-40% or more?
Fellow bloggers?
I was thinking of how to maximize my returns on the downpayment that I’m collection towards buying in 2008. I know I can get 5% in CD, but I think I should be able to do better than that.
I was thinking about buying the mutual fund FEXPX (Fidelity export & multinational). Thinking is that this fund would be well positioned to benefit from the dollar decline. I could put in Intl funds, but with dollar’s decline, I would think their stock market would stay flat at best, if not climb down.
It has been giving good consistent returns (had just one down year in 2002). Any alternatives?
Also I was curious where is everybody stashing away their cash that they’ve been collecting for the downpayment 1-3 years down the road. It would be nice to see everybody’s thoughts on this.
If you are targeting 2008, the move is to invest in money markets and one year and in……be careful that you do not over-engineer this exercise and out think yourself.
Don’t mess around with with international. The dollar should decline, but this scenario is too short a time frame, and you could be caught short.
Be careful with international mutual funds. You have to discern which ones hedge currency exposure. Here you go look for non-USD exposure only to find out (1) the portfolio manager has eliminated it and (2) they have increased the expenses of the fund 10 bps or more to pay for it. Kind of a punch in the face and knee to the scallions…..
ChiFi.
I am targetting late 2008 , but at the same time I am flexible to make it early to mid 2009.
I have around 50K sitting in CDs collecting 5%. Money market probably wont yield more than that. What else can I do – balanced fund??
Sounds as if you are knocking the cover off the ball.
att, amboydirect is offering 5.35% savings. Forget about any 5% cd
I put my chunk in mutual funds offered by ING (strategic allocation moderate fund).
I also put some in JAOSX hoping it would be some hedge against a falling dollar.
We are looking at a newly listed home in one of the nicest neighborhoods of Livingston (chestnut hill). It was pruchased years ago by the current owner (getting divorced) for 1,050,000 and is now being listed for 1,695,000 after cosmetic renovations. Its its own comp. Any guess on the fair market value of such a home?
“If you are targeting 2008, the move is to invest in money markets and one year and in……be careful that you do not over-engineer this exercise and out think yourself.”
Chi,
Refreshing to read such a balanced, unbiased, professional opinion. I guess you’re not in the camp which calls those who are hoarding cash as being arrogant.
I encountered something new this week regarding MLS #235 1629 (Maplewood, NJ).
Listed on 12/8 for $325K, now is listed for $335K (10K HIGHER!).
Went to see the property today, and the MLS sheet states that best and final offers must be made by 5pm on Wed, 12/20. My realtor thinks this is because there has been interest in the property, so the selling agent probably increased the price, and set a deadline so that anyone interested has a fair chance to bid.
Looked the property up on Zillow; it had sold in 1999 for $135K.
The house is on a street I like, and I really like the layout, but it needs a TON of work (new ceilings, carpet pulled and floors done, entire inside needs painting, AND it needs a new kitchen and bath – the kitchen and bath are pretty trashed).
Thoughts on why (1) they would have increased the price, (2) there would be a deadline of Wed., and (3) what a fair market price would be for this house given the sale price in 99?
Lina,
Maybe that’s when it’s out of attorney review, set to close, the listing agent’s contract is up. Who knows? Maybe it makes us all think we need to get on the bandwagon with this. I think the rule of thumb around here is what? 5% per year after 2000 or 2001? What does that make? Close to $183? I’d love to see the look on their faces if the offer was presented.
att:
But what if in that two years you pay >50K in rent?
In fact you’ll probably pay way more than that in rent if you live in NYC. So even if you save 50K in house savings you’ll pay the difference in rent waiting for the decline.
att Says:
December 16th, 2006 at 9:51 pm
Did anyone look at the cnn finance’s projected price declines??
It shows most of the NY region is up for some decent price correction in next 2 years (5 -10%).
On a 500K home, that is 50K. I think I’m better off renting in this declining home price times:
Here’s the url:
http://money.cnn.com/popups/2006/fortune/invguide_realestate/index.html
Let’s say that it’s in attorney review until Wed night/Thursday morning. If someone bid $325 (original price), seller accepted, and are now in attorney review, and trying to list it at a higher price to see if they can get something higher before the end of attorney review, is that LEGAL?? Seems pretty sneaky.
Do you think there could be a chance that it is going to foreclosure, so they’re putting a deadline on it?
ADA,
“But what if in that two years you pay >50K in rent?”
Is owning going to be free?
Sorry I’ve been out of the loop the past few days. I’ve been feverishly working on finishing up a paper on good ol’ Fannie and Freddie.
Just wanted to throw in a quick comment about Amboy bank. Realize that Amboy is involved in both the Dwek and Kara Homes fiascos. When a bank offers a higher CD or MM rate than what you see in the market, it’s typically because they are trying to attract depositor funds. I don’t know if the two are in any way linked, but sometimes you just have to wonder..
jb
sorry about that,
try the following link. The graphs are more recent.
http://calculatedrisk.blogspot.com/2006/11/housing-starts-and-completions.html
ADA.
My rent is 18K per annum.
If you calculate, The interest on a 500K loan would be around 30K per annum. On top of it add 12K for property taxes, repairs, increased utilities, insurance. So you would just give away 40K of your hard earned money, while seeing your house decline by 25K in value (65K thown away per annum), when you could have rented at 18K.
When I look at the numbers they are mind boggling. It took me 2 years to save my first 50K (including roth IRA, 401K and everything). How can I give away 65K just because everyone else is giving away. I’ve decided to stay away from this mad race of home ownership for now.
ADA – are you a home owner?
Jim, about Amboy in #161..
Looks like Amboy is the parent of AmboyDirect – not sure what that means if their investments tank. Also, if the funds are FDIC insured, aren’t we protected?
What’s the worst that can happen?
you can buy CDs from scottrade. The best part about these CDs is that they don’t automatically get renewed. However, scottrade takes a cut (~.05%) off the APY. They offer CDs from an array of banks.
att-post # 163,
Many like you have come to the same conclusion.
Post 150
Ron,
Who told you this house is it’s own comp? I’d have an issue w/that statement regardless of who it came from. That’s exceptionally rare unless town neighborhoods are undergoing an EXTREME facelift relative to all other factors, in which case the comps have to be retrieved from a neighboring town w/similar to equal amenities. The comps don’t all have to be in the exact same n’hood to be considered viable & Livingston appears to have several attractive areas.
Even if the owners put 600K+ of improvements into the house, 100% value is NEVER recouped or should be expected. There are a number of comps available based on BRs/BA/lot size/condition.
Did you see mls# 2350493 listed at 1099000?
Are JP Morgan and Oppenheimer arrogant???
JPMorgan Chase & Co. increased its “long-term” price forecast for gold by 9.5 percent last week on expectations for “robust” demand.
“Gold’s going to be the phenomenon of 2007,” said Michael Metz, chief investment strategist at New York-based Oppenheimer & Co., which has about $10 billion in assets. “If I had to choose one commodity, I’d stick with gold.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=aZHUgHf094_U&refer=home
“If we perform the same calculations for the US, however, we find that the official debt stands at $8.507 trillion or 65% of (nominal) GDP but when we add in our “off balance sheet” items the national debt stands at $53 trillion or 403% of GDP.”
“In summary, I am wondering how long we can pretend this problem does not exist. How long can we continue to buy stocks and flip houses, forget to save, pile up debt, import Chinese made goods, and export debt? Are these useful activities to perform while there’s an economic avalanche bearing down upon us?”
http://www.financialsense.com/fsu/editorials/martenson/2006/1217.html
The Treasury said… What?
http://fms.treas.gov/fr/06frusg/06frusg.pdf
Given these and other factors, it seems clear that the nation’s current fiscal path is unsustainable and that tough choices by the President and the Congress are necessary in order to address the nation’s large and growing long-term fiscal imbalance.
JB,
What struck me, this is the Comptroller of the US, not a gold bug nor a dollar bear.
att,
I know this is going to bring out the bears but yes I am a homeowner.
I used to pay about 40K a year in rent in NYC. Now my mortgage/taxes/homeowners insurance in the burbs (not including tax deductions) is 48K per year.
I guess this whole point we are discussing hinges on how much one pays in rent; the higher the rent the more it makes sense to buy.
njbear; owning is not free, but you do build equity, unlike renting, and if one can stay long enough (7-10 years in my case) you should be able to recoup at least what you paid when you sell. Not paying >40k in rent, which was increasing every year, is the return on my money/downpayment etc.
The solution? Older homes are more desirable than newer homes when they can better address buyers desires for good neighborhoods near jobs that are designed to foster community and family life.”
I’d say about better neighbourhoods – not necessary true in NJ, mostly not true, and also old homes are in need of repairs…….
And do not even start with commuunity life – how many of homeowners are even know anything beyong name about their neighbour???
And you know I do not need any encouragement – I want to uy home, it is just I cxan not afforn anything right now – and I mean afford with fixed 30 years mortage. Since homes are not going to appreciate anything in the next few yeaars, neg IO or arm is out of the question.
I think Realtors need to work on bringing the priced down not on convincing people to buy – homebuyers are priced out of the market.
So start working on bringing it back to fundamentals. the faster this will happen, the faster you will get commissions.
ADA,
when did you buy?
My rent is
ADA]
from post #136 by SAS
check out affordability in my county.
80% cannot afford a 400K mortgage + property tax + maintainence.
50% cannot afford a 2br rent at fair market value.
…and you think rents are going to go up just like house prices did in the past few years? Nobody gives out interest only loans to pay rent.
A decent townhouse near where i stay costs 425K. We live an hour an 20 min from midtown (door to door).
http://www.nlihc.org/oor/oor2006/data.cfm?getstate=on&getcounty=on&county=1757&state=NJ
ADA.
Actually buying makes sense, but only when home prices are appreciating.
In my e.g. of 500K house, you lose 42K p/a in interest/tax/repairs etc. But if the price was increasing at 5% rate, so 25K increase in price really makes the cost 17K per annum. In that case buying actually makes sense.
The only problem is we are in a bear market, where prices are decreasing. It serves as double whammy, since you pay more in interest/tax etc. while the property depreciates. That is why currently it is bad time to buy and good time to rent.
Unless the rents start increasing really fast, or prices fall drastically, it should continue to be better for renting.
njbear,
Well, I used to live in manhattan and the vacancy rate for apt is less than 1% the last time I checked. No, I didnt want to go rent in southern NJ.
My rent before I bought was continously being raised:
2003 $2150
2004 $2750
2005 $3000
2006 $3400
and almost everyone I knew was in similiar situations. So yes, in Manhattan rents were going up like house prices.
The house I bought in Westchester is a 30 minute commute to GCT and as I stated my new fixed 30 mortgage/taxes/HI is 4K.
And did I mention, my house is so much nicer than my rental?
ADA.
Your rent was really increasing like crazy. 3400$ a month – wow.
But you have to compare apples to apples. You’d have to compare what a home that you own now would have costed if you rented it. If it costed much lesser (say 50%) and hope prices are depreciating in Westchester, then it would have made economic sense to rent for 1-2 years.
bc bob you should lay off the schnapps. it’s clear you have some anger issues when people don’t agree with your opinion and it really comes out when you’ve had a few. your posts are a disservice to readers in that you sound so sure of yourself and you attack those you disagree with. hopefully people are smart enough to recognize that zealousness shouldn’t be equated with correctness.
by the way savvy bob, i’m up far more than 30% annually since 2000 and that involves a lot of RE investments. enough said.
att,
I could be wrong but it seems to that my rent was increasing faster than houses in westhchester are depreciating (which they are).
But at the end of the day, buying a house for me was more than an economic decision. We needed the space for a new baby and our sanity. The house we bought is hopefully an investment; but I can live with it being an expense (much like renting) that needs to minimized and I think over the long run this expense is less than paying rent in this area.
To ATT (from #142)-
My office volume is down about 10% off ’05, but I think we’re a big exception, as I don’t hire people with no experience. We average over 12 yrs in the biz, which helps a lot in times like these.
I do, however, keep an eye on rosters at the big companies. There’s serious agent attrition, so their numbers more closely reflect year-to-date MLS stats (down 15-25%).
Hey Al (from #175)-
Repeat after me:
Realtors…don’t…determine…selling…prices.
No serious agent out there is encouraging his buyer to make an offer at a price that is so stupid that the home won’t appraise. Good agents also started walking away six months ago from listing the homes of sellers demanding ’05 prices.
RE markets (like most) are self-correcting. That’s why we have such a standoff now.
Hey Grim (from #161)-
Amboy National has a checkered history of getting burned by scuzball developers. 5-6 years ago, they were one of three banks caught in what turned out to be the biggest check-kiting scheme in Hunterdon Co. history…Mike Reddington, then a local developer, hung about 1 MIL before getting caught.
Amboy dodged a bullet then, as the check finally bounced on Unity Bank…nearly driving them under.
ADA,
Are you the one who makes like 250K and bought 4 months back? Have you checked the latest comps? How much are you down by?
#137:
“In a sign of how important the MBS market has become to Wall Street’s big securities firms, they are playing a lead role in consolidating the subprime business. Since the summer, Morgan Stanley, Merrill Lynch and Bear Stearns have all bought mortgage lenders; Lehman Brothers has acquired several in the past three years.”
Goldmans Sachs hasn’t jumped in the fray yet. I take this as a sign.
#150 Ron Says:
Ron look at the comparables offered for sale in that neighbourhood. Any farily priced home goes into contract in under 60 days even in the current market. Any comparable that is on the market for more than 90 days is overpriced and you should offer about 20% less than any comparable that is stagnating on the market.
I haven’t looked at livingston(No train station). I dislike essex county in general except for Short Hills/Millburn. I have been mostly focussing in union county. Summit, New Providence, Berkeley Heighs. I have noticed that many homes priced in the $1.1 ~ $1.2 range have gone into contract in the 900Ks after sitting on the market for about a year. I think these sellers are lucky as they would probably have gotten in the 800Ks next year.
Richard,
Wrong, had 2 lite beers, had to drive 45 minutes. No, not anger, it wasn’t pertaining to an opinion. It was a response to your ludicrous post regarding the arrogance of those in cash and gold. Go look at a gold chart since 2003. Utter nonsense!!
#172 ADA Says:
If you were paying 40K in rent, it may make sense to have a pretax mortgage cost of 48K. You may do okay if you hold for 7~10 years.
However, you will see the value of your property decline signifantly in the next couple of years and if you have to sell for whatever reason, you would have been better of renting.
#186
Another point, I would add is that you need to compare rents and prices in the same town. Rent in manhattan is != own in manhattan. You need to compare rent/own in manhattan and rent/own in westchester.
A number of properties in New Providence are listed at asking prices near their 4% appreciation trendline (prior sales in the mid/late 90’s). Unfortunately, the bulk of properties listed are still in the double digits. Most certainly encouraging, but I’m content to sit back and see how ’07 will play out.
jb
NJ Gal: be careful with oradell, very high taxes,a nd now th town has voted to start the process to withdraw from the regional middle and high school that they share with River Edge.
Oradell pay much more in taxes to teh school than R.iver Edge.
Njgal, sorry for all the typos, have not had the second cup yet.
Well, I used to live in manhattan and the vacancy rate for apt is less than 1% the last time I checked. No, I didnt want to go rent in southern NJ.
My rent before I bought was continously being raised:
2003 $2150
2004 $2750
2005 $3000
2006 $3400
and almost everyone I knew was in similiar situations. So yes, in Manhattan rents were going up like house prices.
Frankly rents are going up in manhattan – because people on the wall-street are routinelly making 150K++++…
There is no free cheese…
IN NJ average household income is at 64K right now…… Obviosly people can not pay 4K rent with such salaries. After tax they are getting only 3.5K cash….. that’s why average rent in NJ is at 1100$/month.
bergenbubbleburst: true, River Edge pays less for the schools, but the overall taxes in Oradell are less. What does that mean for River Edge? Higher taxes. Who would want to live in River Edge with their over the top taxes?
Actually taxes in Oradell are higher now, one of the reason Oradell wants the funding changed. River Edge sends 250 more kids to the regional school system, than Oradell. The way it breaks down tax wise, is River Edge spends around 12k a year to educate a kid in the district, and Oradell pays over 18k.
River Edge refused to discuss the matter with Oradell,so Oradell wants out. Should be interesting.
ADA: Your arguments are plausible, but twisted. Allow me to politely disagree with your opinion. I don’t think you realize how much you are supporting the bear case with your fact pattern.
NJ Gal,
I have family in Westchester,MA, CT and LI.. I like Chatham and Livingston.. Even parts of New Providence. Too far from family. So we narrowed it down to North Jersey. Towns below. It takes me 45 min to get to my family in LI,CT and Westchester tops. Ma is a different story.
1.Harrington Park
2.Closter
3.Haworth
4.Rivervale
5.Montvale
6.Woodcliff lake
Liked the Saddle Rivers but too isolated for kids. (I grew up in a isolated neighboorhood I look back at it and I am thankful but at the time I envied my friends who lived close to each other)
Liked but a little to West. (and trust me its not too west but my family has no navigation skills)
1.Allendale
2.Wycoff
3.Ho Ho Kus
The taxes are Cheapest probably in the Saddle rivers.. You have to watch out for Septic in wycoff and the rivers.. Everywhere else they are probably close 10K+
Thatbigwindow: the funny thing is, people in River Edge, said Oradell would never do it, but they have. Now whether Oradell actually breaks up the district is another story, but at the end of the day, Oradell is going to be allowed to shift much more of the burden on to River Edge in paying for the regional middle and high school. T
The scary thing is River Edge is building 15 new class rooms on their grammar school., and that has not even been factored in yet. It is amazing, scary, but true.
Thatbigwindow: the funny thing is, people in River Edge, said Oradell would never do it, but they have. Now whether Oradell actually breaks up the district is another story, but at the end of the day, Oradell is going to be allowed to shift much more of the burden on to River Edge in paying for the regional middle and high school. T
The scary thing is River Edge is building 15 new class rooms on their grammar school., and that has not even been factored in yet. It is amazing, scary, but true.
thatbigwindow: The sad thing is the people in River Edge said Oradell would never go this far.
Now wheter or not Oradell actually breaks up the district, time will tell, however they will shift more of the burden of paying for the middle and high school onto River Edge, so you will see River Edge’s really high taxes get even higher.
Sorry for the double post.
Thanks RMB. Funny you should say that – my husband grew up kind of isolated and loved it! He tells me he doesn’t want to see his neighbors – I grew up in a typical suburb on a 75×125 lot. I could watch the neighbors cooking. It never bugged me, but perhaps I just had a very considerate block of folk. That’s the reason he likes a more rural setting (or should I say, suburb disguised as rural setting?:)
I can relate to that..This Halloween was so exciting for me. Where I grew up the driveways were too long to trick or treat and no one ever answered the door anyway. We had to drive to my aunts and that was everyother year. In the place we live now there where so many kids out I dreamed of that as a kid. I struck a deal with my husband..18 years here .. After that I want to move by the water preferably Rhode Island ..
CF:
Hi,
The reason I maybe supporting the bear case is that I dont necessarily disagree with it. The market is clearly depreciating.
My point is that renting does not make sense in each and every situation. It did not make sense in mine, so I bought.
njbear: I make more than 250K. I’m not sure what my house is worth at present nor do I necessarily care (aside from curiosity) as I’m not selling anytime soon; but the house across the street sold for 70K more than I paid.
chicagofinance Says:
December 18th, 2006 at 11:54 am
ADA: Your arguments are plausible, but twisted. Allow me to politely disagree with your opinion. I don’t think you realize how much you are supporting the bear case with your fact pattern.
njrebear Says:
ADA,
Are you the one who makes like 250K and bought 4 months back? Have you checked the latest comps? How much are you down by?
ADA: If you bought 4 months agao, I can gurantee you there is no way, the exact same house across the stree sold for 70K more, no way.
Who said it was the exact same house?
It’s bigger/fancier and has a alot bigger yard (I knew the sellers);
So its not exactly the best comp but it is across the street.
ADA,
You ran the #’s, it works for you, that’s all that matters. I think anybody who was paying 4k in rent can justify buying in NNJ, if they plan to be there 10-15 years, without putting much down. Congrats, hope you enjoy the house/community.
ADA,
“Who said it was the exact same house?
It’s bigger/fancier and has a alot bigger yard (I knew the sellers);
”
…and of course you were not trying to twist facts earlier.
Renting is great if you want have no roots I have 3 kids I want to keep them in the same school at the shore Buying is the ONLY option for family’s with kids
This blog is great!
This is great!
This is a great blog!