From the Wall Street Journal:
Renters gloat over housing slump
The housing slump has been painful for millions of people who work in real estate or recently bought a house.
For Patrick Killelea, however, this year has been one long victory lap. Mr. Killelea, a 41-year-old software engineer, has long preached that it makes more economic sense to rent than buy homes. He recalls shouting “Wow!” when he heard about September’s 9.7% drop in prices of new homes.
“I didn’t want to gloat,” he says. “But then again, maybe I did.”
For years, Americans who refused to buy real estate at what they considered excessive prices were ribbed for failing to profit from one of the greatest booms in history. “Are You Missing the Real Estate Boom?” needled the title of a 2005 book by David Lereah, chief economist of the National Association of Realtors.
Dean Baker, an economist, sold his condo during the housing boom and now is renting an apartment for about $2,300 a month.
Now, with the housing market in a slump, renters who sat out the boom are finally getting some satisfaction.
Dean Baker, an economist, believes that the slump validates his decision to sell a two-bedroom condo in Washington’s Adams Morgan neighborhood two years ago. Mr. Baker says he received $450,000 for the unit, which he had bought for just $160,000 in 1997. Since unloading the condo, he and his wife, Helene Jorgensen, also an economist, have been renting an apartment nearby for about $2,300 a month.
…
Rich Toscano did get some razzing from friends in early 2003 when he moved back to San Diego after a spell in Austin, Texas, and decided renting made more sense than buying. At that time, “it was universally agreed upon that real estate would always go up,” Mr. Toscano says.“I thought he was insane,” says Mike Mannion, a friend who had met Mr. Toscano in the 1990s when they both worked for an information-technology consulting firm. The two friends spent hours debating over meals and coffee whether San Diego real estate was a good buy. In the end, Mr. Mannion rejected Mr. Toscano’s warnings. Even though Mr. Mannion’s wife, Christina, an architect, was nervous about the possibility of house prices falling, the couple plunged ahead and bought a three-bedroom house for about $580,000 in late 2003.
That proved a good buy. Home prices continued to soar in San Diego through 2004 and early 2005. But Mr. Mannion says he gradually began to be persuaded by Mr. Toscano’s arguments about home prices soaring beyond many buyers’ ability to pay. Last spring, Mr. Mannion and his wife put their house on the market and wound up selling it for $830,000. Now they rent and don’t plan to buy until they’re convinced the housing market has bottomed out. Before buying again, Mr. Mannion says, he will consult Mr. Toscano.
Of course, as even many hard-core renters acknowledge, homeownership has some big advantages, including tax deductions on mortgage interest, the possibility of gaining value over the long term and the security of knowing you won’t be evicted by a capricious landlord. But some of today’s renters say it has been a bad time to buy in the past few years, when speculators helped drive up prices at an unusually rapid clip.
…
Even though prices have come down a bit in parts of California, Mr. Killelea vows to resist the pressure to buy. Recently he mused on his Web site about why more people don’t follow his example. “I get the feeling many wives are pressuring the husbands to buy,” he wrote. “I know it’s not politically correct to say so, but I think a lot of irrational purchases are driven by female nesting instincts.”Mr. Killelea says his wife has been “very understanding” about his refusal to buy at today’s prices: “She can do the math, too.”
But Ms. Killelea seems more open to the idea of homeownership. “We haven’t really talked yet about when we’d want to start looking again,” she says. “I think we’re going to need to discuss that.”
From the NY Times via theledger.com:
An Economy of Extremes
Economists have long waxed lyrical about a “Goldilocks economy”— one that is not too hot, not too cold.
In this ideal world, the economy is running so smoothly that there is little risk of it overheating and pushing inflation higher — forcing the Federal Reserve to raise interest rates. Nor is the job market weakening, threatening to plunge the economy into the icy bath of a recession.
The “just right” economy is not often achieved, of course, but lately this bedtime story has taken a particularly tricky turn: it is both too hot and too cold.
The housing market has fallen into a deep freeze; so has the auto industry. Yet on several other fronts, including commercial construction and high-end consumer spending, economic activity appears to be sizzling.
Lombard Street Research, a British economic forecasting firm, recently dubbed the American economy the “anti-Goldilocks economy.”
…
The economy looks very different depending on whether you are inside or outside the housing market.
Consider Andrew Palau, who runs Premier Homes and Additions of River Edge, N.J. Business has dried up as the collapse of the housing market has slashed demand for new master bathrooms and refurbished kitchens across Bergen County in the northeast corner of the state.
He managed to hold on to his staff of 10 this year, but thinks he is probably going to have to let people go next year. “Everything is telling me that next year will be worse,” he said. “I don’t see how I can keep everyone.”
From CNN/Money:
Trump mortgage chief inflated resume
Donald Trump may have hired one more apprentice than he thinks. When the real estate mogul launched Trump Mortgage in April, he said it would inject integrity into an industry that has the reputation for giving customers a raw deal.
To head the mortgage broker, Trump hired E.J. Ridings, who the company’s Web site touts as a seasoned pro. “Trump Mortgage is going to take better care of people than anyone in the mortgage industry ever has,” Trump said at the time.
Ridings, of course, agrees. “The housing boom has attracted a variety of people into this business, not all of them honest,” he told Money Magazine in September. “I really believe that the public needs and wants a safe place to get a mortgage.”
…
In interviews with Money and on his company’s Web site, Ridings has made a number of false or misleading claims about his professional experience. Last week, following inquiries by Money into Ridings’ background, Trump Mortgage altered its Web site, removing some of the claims it contained about Ridings’ past employment.
First, Ridings’ initial bio stated that before joining the company he was “a top executive at one of Wall Street’s most prestigious investment banks.”
Second, the bio had said that Ridings was an “established leader” at one of New York’s leading mortgage boutiques.
Third, the bio said he had 15 years of experience in the financial industry.
All three claims appear to be false, according to regulatory documents obtained by Money and interviews with former colleagues of Ridings.
Ridings, 43, has never been a top professional on Wall Street. Ridings, in an interview with Money in September, said the “top-executive” reference in his bio refers to an 18-month period in which he was a retail stock broker at Morgan Stanley.
But even that is a significant stretching of the truth. According to documents from the New York State Attorney General’s office, Ridings worked at Morgan Stanley’s brokerage subsidiary Dean Witter Reynolds in the fall of 1998 for less than three months. During that time, he was a registered broker for six days before leaving the firm.
…
Ridings is also inflating his position in the mortgage industry. According to former colleagues, Ridings was a relatively minor player at the mortgage boutique GuardHill Financial, where he worked from June 2003 to April 2005.
Jan Scheck, who Ridings listed as his supervisor on documents he filed with the New York State Banking Department, said Ridings held an entry-level position at the firm, and was one of 40 loan originators. Scheck ended up being hired by Ridings at Trump Mortgage as national sales manager, but left the firm this year after his one-year contract was up.
From the AP via the Trentonian:
Gov gives himself ‘incomplete’ for 2006
Of The TRENTON — Gov. Jon Corzine describes himself as even-keeled, which explains how he balances the highs and lows of his first year as New Jersey governor.
The former Goldman Sachs chairman hails his first state budget and his proposals to cut the nation’s highest property taxes, yet regrets a summer budget fight that closed state government and that a self-imposed Jan. 1 deadline to approve tax reform will be missed.
So, what kind of a grade would he give himself for his first year as governor?
“I’d give ourselves an incomplete at this stage, but that doesn’t mean I think we haven’t made real progress,’’ Corzine said in an interview with The Associated Press.
Tsunami aims at Philippines after quake
http://news.yahoo.com/s/ap/20061226/ap_on_re_as/taiwan_earthquake
The bureau said the 3-foot-high tsunami was expected to hit Basco in the Philippines.
The initial tremor was centered at sea about 13 miles southwest of Hengchun on the southern tip of Taiwan.
>>Recently he mused on his Web site about why more people don’t follow his example
um, that’s easy. notice the folks in this artcile are either married no kids or empty nesters? try pulling this stunt with a wife and a couple of kids in tow while already being established in a community. fat chance. this is why these types of stories will always be a miniscule portion of the population and more akin to a voice in the wilderness than common practice.
NO SPRING REBOUND!
SPRING 2007 HOUSING BUST!
BOOOOOOOOOOYAAAAAAAAA
Bob
Affordability is near record lows still!
Another 15-20% to go on downside on top of the negative 10-15% already.
It’s payback time baby!
Make’em starve go direct with bids 25% lower than peak 2005 prices.
BOOOOOOOOOYAAAAA
Bob
GAME IS OVER…..NOONE LISTENS TO STARVING BUNCH.
BABABABABABA
This blog needs a ‘bull’ version of Booyah Bob.
But then again, “No more than 5% off 2005 peak prices” doesn’t quite have the same ring to it :)
This blog needs a ‘bull’ version of Booyah Bob.
We do, he is bullish,and speaks eloquently, quite the opposite of of booya bob.
It is Clotpoll
KL
Actually Richard, single people with no kids recently became the majority in the USA. Just about 1 or 2 months ago. Look it up. So it is not a miniscule group as you try to portray.
angrynj, if you can find the stats look at the breakdown of family structures and homeownership. i think you’ll change your tune.
the backlash begins against financial institutions.
http://video.google.com/videoplay?docid=2076501893662501756&q=bbc+duration%3Along
READ MY LIPS”
NO SPRING REBOUND.
AFFORDABILITY AT OR NEAR ALL TIME LOWS
SPRING 2007 HOUSING MASSACRE INEVITABLE..
TAKE THAT TO THE BANK!
Alot of mouths to feed and alot of lifestyles at risk as this Bubble (credit) implodes!
Sorry charlie…
Watch the desperation grow as spring progresses.
And yes it will be fun to watch as the greedy smirks are removed……
Take at least 25% off 2005 peak prices
Sellers and realtors better drop prices or their home equity (if they have any) will just go POOOOOOOFFFFFFFFF!
How’s it feel?
Hang in there young home buyers you will get better prices in next 6-18 months. You will never get a bargain unless you are related to seller but prices will get much more fairer.
25-30% off of peak 2005 prices is fair based on realistic sequential trend appreciation!
Avoid the ponzi loans. Put some real money down and expect to live in house for a while.
Now lets watch, learn and retain!
Lesson 1:
whenever you see a market go parabolic be skeptical.
http://photos1.blogger.com/x/blogger/6089/1833/1600/518299/a.gif
what has changed if anything to justify such a parabolic move?
1: Phoney lax liar loans have gone parabolic.
Seen a number of sub-prime lenders go bust.
So have fundamentals changed to justify parabolic home prices?
Incomes?
Interest rates?
Affordability?
Taxes?
Think…..
“The trouble is, some cities made financial commitments during boom times that they may be hard-pressed to keep when times get tough.”
“‘You can’t ignore the fact that the real estate market is tanking,’ Hollywood Commissioner Peter Bober said. ‘And this is going to have implications for businesses, residents and municipalities. The way to react to that is to try to be more efficient.’”
something to consider when researching towns to live.
Much agreed. Hoboken is spending money like drunken sailors. Now they are taking over a hospital. If they run the Hospital like their schools watchout!
KL-
Thanks, but please don’t appoint me the resident bull. As I’ve stated many times here, I don’t have a vested interest in prices going up or down. All I want to see is a market with plenty of available transactions. In the long run, I’ll always believe homeowership should be the first priority of anyone’s financial plan, and I think homeownership is essential to building personal wealth…but the attention of this blog seems to be on the Thunderdome of 2007-08. I hope whatever is going to happen comes to pass quickly so that the current volatile situation resolves itself. Volatility- positive OR negative- is the enemy of RE. Slow and steady wins the race.
Frankly, I believe we’re looking at another across-the-board price drop in Q1/2007. If that spurs the current core of heels-dug-in sellers to finally get real and meet the market, everybody wins.
>housing bubble video
http://www.paperdinero.com/BNN.aspx?id=78
http://davidlereahwatch.blogspot.com/
How not to sell a house:
http://new.gsmls.com/public/getMediaReport.do?mlsNum=2352731&imageCount=2
“I get the feeling many wives are pressuring the husbands to buy,” Mr. Killelea wrote. “I know it’s not politically correct to say so, but I think a lot of irrational purchases are driven by female nesting instincts.”
Mr. Killelea hit the nail on the head. I have friends who bought homes, at the height of the boom in New Jersey, after caving in to their wives’ persuasion. Heck I was in the same boat too! This blog helped a lot in convincing my wife that it is not the right time to buy a home here in central New Jersey. The current state of the housing market has been an eye-opener to a lot of colleagues at work. Thanks JB and other valued contributors for this excellent blogsite.
I second that BamBam. It really helps me that my wife is less bullish than me on prices keeping up with inflation in the near term and she has her own reasons….hence wait and watch for us till 2008.
Politically incorrect…but so true.
Have a friend who got married last December. they both owned 1 BD condos..in JC and Brooklyn. Sold them, made a decent profit bought a 2 BD in JC. Fast forward to today…wife is pregnant with twins, 2 BD is too small for a family. Wife wants a house……selling the condo and purchasing a house in Central / Western NJ. All of this happened within 2006. The thought of renting never crossed their minds.
This is the kicker…. he’s in the in real estate industry and knows all that’s happening out there but caved in.
I guess my wife is part of the rare minority whose financial instincts are stronger than their nesting instincts.
jb
HEHEHE, are you still blocked from kannekt?
Yo’ dreamtheaterr / Mr. Index Man:
From today’s WSJ – how manipulation takes place, and gets imbedded transparently into the system.
NOTE: This information is not an endorsement of any investment strategy, nor is it a solicitation to buy or sell securities. You should not rely on this information to make investment decisions.
A similar approach is to buy stocks that have been removed from the S&P 500. Those that suffered that indignity this year are up 27% on average since removal, while those that were added to the index are up only 1% since joining, notes Paul Hickey of Birinyi Associates. (Of course, there is the risk that a stock removed from the S&P 500 will fall into bankruptcy, although that hasn’t happened to this year’s crop, Mr. Hickey says.)
Similar trends can be seen among stocks that are added to and removed from the Dow Jones Industrial Average.
The idea is that, by the time a stock is removed, it probably has been heavily sold, while those that are added generally are at the peak of popularity and overdue for a pullback. (In the short run, those that are removed normally fall farther as index funds sell them, while those that are added do the opposite. But that process ends after a few days.)
There was just a report on the severity of the housing BUST.
They state it will be much worse than predicted{ I guess they don’t read this blog}. Worse than 1990 to 1991 drop.
In fact the word they used to describe it was … GRIM. [ironic]
Hold on people, there will be many bargains by the end of 2008, I think it will go well past 2008.
Good Luck to all,
JIM
http://bubblemeter.blogspot.com/
“extremist” No Lereah a realist!!!
Bring on the bust!
Spring 2007 Housing Massacre…Can you see it?
hehehehehehe
Take at least 25% off 2005 peak prices
Court: Execute Saddam within 30 days
http://news.yahoo.com/s/ap/20061226/ap_on_re_mi_ea/saddam_s_sentence
>>This is the kicker…. he’s in the in real estate industry and knows all that’s happening out there but caved in.
yes and your point is? why does one have to ‘cave in’ if they’ve made a RE transaction anytime in the last couple of years? i guess everyone is stupid and a bagholder for doing such? quite a pompous and arrogant statement considering i haven’t seen any of the armageddon predictions on this board come to pass. it is entertaining though especially booyah boob.
HOUSING SLAUGHTER…
COUNT ON IT….
SHAKING YET?
PREPARE FOR REAL LEAN TIMES IN RE LAND.
BABABABABA
“… armageddon predictions on this board come to pass..”
Take at least 25% off 2005 peak prices
“armageddon”??
typical bitter bagholder.
Boooooooooooyaaaaaaa
Bob
Want a sale?
Then Take’em down at least 25% off 2005 peak prices
This is going to be fun…
Humbled yet?
yeah that’s me, bag of money holder.
babababababababa
boobhead
” i’m of the opinion we won’t see a similar move to the negative”
if any, what is the reasoning behind your opinion?
“those who will be hurt are the ones that always get hurt, the stupid ones”
You mean bag holders?
“chicagofinance Says:
December 26th, 2006 at 2:39 pm
Yo’ dreamtheaterr / Mr. Index Man:”
Thanks chifi; your thoughts are always appreciated. Interesting indeed, and among the many reasons why I prefer to own the market via an index fund for taxable accounts, rather than have turnover/tax implications because of active managers, or committee reshuffling stocks in the S&P or Russell indexes.
As a main street mutual fund investor, I prefer to ignore the short-term tempests in the markets, and instead sail along with a global portfolio. Investors now have products to tilt towards large value, small value, micro cap as they wish to capture whatever little premium there is/might be.
If I may pick your brains…what are your thoughts on the nerdy DFA folks?
The Denver Post reports from Colorado. “With more than 18,000 foreclosures expected this year, a record for the metro area, Colorado has had the highest foreclosure rate in the country. The current foreclosure epidemic traces more to overbuilding and aggressive lending than to fundamental economic problems.”
“Fidelity Solutions sells about 1,000 foreclosed properties a month, a pace about 40 percent ahead of last year, president Chad Neel said. ‘I am turning away business,’ Neel said. ‘Every client we have says there is a tsunami coming.’”
The Tsunami is coming eastward…….
Bagholders, the starving bunch and grubbers beware…
Those with strong conservative finances are going to benefit massively. Stay patient and make’em pay dearly when the time comes. You will be rewarded for your time patience and sacrifice. Hang in there.
I can feel the desperation and worry growing by the day…..
PapapapapaPANIC!
It’s a coming….
Many young “Bitter”/elated renters who used their noodle have a smirk on their face…I can see it!…..i expect that smirk is going to get smirkier just like the Grinch’s as spring progresses into summer then fall.
The bitterness is being passed on to the “bitter” bagholders, the starving bunch and johnny come lately grubbers.
How’zzz it feel?
hehehhehehehhe
Richard,
What is your advice in the following hypothetical situation?
Current renter looking to live in NJ. 50/50 chance that in the next 4 years, job relocation will send renter overseas for 5 years minimum. Relocation package does not include guaranteed purchase price for home should the renter decide to buy now. Renting out home also not an option as there will be no way to oversee the property from abroad.
Do you recommend buying now and selling without worry in 4 years, or renting for 4 years and buying in 2010 once long-term situation is known.
hobokenite Says:
December 26th, 2006 at 2:32 pm
HEHEHE, are you still blocked from kannekt?
Actually, I don’t know if it was Christmas gift but I could post over the weekend.
If I may pick your brains…what are your thoughts on the nerdy DFA folks?
Dream: not sure if I have the right groups, but if you are referring to the Insurance risk consultants, I would say the shocking thing to consider is that companies would have a difficult time generating value for two very troubling reasons: (1) inability to corral the necessary data at a central source to identify risk for dynamic hedging [i.e. very few companies with intergrated gloabl data sharing] (2) hacks in charge of risk management and financing at the firms requiring such assistance
A great example of a implosion of a firm that you would think would be better run:
check out the impact of Katrina on PXRE: ticker PXT
Richard writes:
“I’m of the opinion we won’t see a similar move to the negative but a stagnant to slightly down market for a while.”
How do you square that against the complete insanity we’ve witnessed these past 5 years?
http://graphics10.nytimes.com/images/2006/08/26/weekinreview/27leon_graph2.large.gif
There is no historical precedent for a “permanently high plateau.”
Boom -> Bust -> Boom -> Bust -> etc…
Gigantic Boom -> Gigantic Bust.
i love this. Newtons Third Law.
2006 holiday shopping update –
U.S. Holiday Sales Increase 3%, Less Than in 2005
http://www.bloomberg.com/apps/news?pid=20601087&sid=acHWnwerU.EQ&refer=home
“In terms of real dollar spending, I think that we’ve got some problems,” said Richard Hastings, New York-based analyst with Smyth-Bernard Sands. “This year, unfortunately, I think Q4 earnings are going to be a problem.”
>>
How much of the above decrease can be attributed to housing declines?
Sales this time involved huge discounts. Wonder what the real profits are going to look like.
from 54]
3% increase is better than 2002 sesason but less than 2001 season.
http://money.cnn.com/2006/12/26/news/economy/retail_sales/index.htm?postversion=2006122613
Grim, is it possible to limit how many times
“Take at least 25% off 2005 peak prices” posts?
He keeps saying the same thing, is rude, adds nothing of value and is seriously detracting from the quality of this blog.
In fact, nearly half the posts on this thread are his inane rants.
Quiet ADA
Booya Bob Rules
What I see are a bunch of “BITTER” bagholders, starving bunch and grubbers NOT liking what’s happening.
Sorry But I predicted this harassment would happen.It happened in the early 1990’s when the re market soured.
And for those young folks waiting patiently for sanity, HOLD OUT.PLAY HARDBALL! Your time is coming.
Remember that BS “Priced out forever” junk…well it’s Now “Lower your price bigtime or watch your homeequity (if you have any now) go POOOOOOOFFFFF”
Not FUN is it!
BOOOOOOOOOOOOYAAAAAAAAAAA
Bob
BOOOOOOOOOYAAAAAAAAA
Bob
Zac,
What exactly does Booya bob rule?
your emotions right about now
He keeps saying the same thing, is rude, adds nothing of value and is seriously detracting from the quality of this blog.
ADA,
I don’t want to go down the slippery slope of trying to determine the relative value or worth of replies. Very few comments are moderated and/or deleted here, everyone gets their say. I will admit, however, that I’ve deleted a handful of Booyah Bob’s posts in the past. I’d prefer to keep the comments open, and let readers sort the wheat from the chaff.
jb
Creating a liquid secondary market for giftcards was always something I wanted to do. One of those projects that sits in the back of your mind until someone else beats you to it (and you kick yourself for). I didn’t think it would be possible to compete with eBay, so I never went forward with it..
Gift card study: The secondary market
jb
>>Do you recommend buying now and selling without worry in 4 years, or renting for 4 years and buying in 2010 once long-term situation is known.
seneca, you said there’s a 50/50 chance your job would be moving overseas in 4 years. 4 years is a long time. in the past i’ve made too many mistakes of ‘waiting for something to happen’ with no guarantee it would. i missed out on opportunities more than not. if you do buy and your job does move overseas and the market isn’t palatable you can always rent your place out. remember to consider the scenario of renting when choosing where to live as that would help in such a scenario.
>>Those with strong conservative finances are going to benefit massively.
um, that would be me and i’ve already benefited massively from the run-up so i win twice?
>>There is no historical precedent for a “permanently high plateau.”
unrealtor, you can’t entirely equate the past structural trappings with today’s environment and try to use the same measuring stick. things ‘are different’ right now in terms of credit availability, financial instruments greatly expanding the choices for risk/cost of capital, the home no longer being seen as pay off the mortgage but use the equity in other ways, the capital gains exclusion if you stay 2+ years, the global financing mechanisms. true there’s no historical precedent but there doesn’t have to be. my point has been since we don’t have a precedent no one knows for sure what we’re in store for. things could collapse or we could do just fine. i feel the latter is more likely.
things could collapse or we could do just fine. i feel the latter is more likely.
Given those two possible outcomes, why do you feel the latter is likelier than the former? Just instinct or is there more to it?
“if you do buy and your job does move overseas and the market isn’t palatable you can always rent your place out.”
Simply,the most asinine advice that has been rendered on this blog since I have been here!!
I saw a house last week asking 650K, also available for rent at $2,500 per month. Go ahead and buy, with nothing down,[apples to apples comparison] it will cost you approx 4k per month for the mortgage and 800 per month taxes and ins.. You are paying $4,800 per month and receiving $2,500 per month, real life example. When properties cost 25X the annual rent flow, Richard’s advice will lead to financial ruin. In conjunction with this, try be a landlord from across the pond. I was a local landlord, I would never want to be an absentee landlord.
If you are not planning to get your *ss comfortable for at least 10 years, don’t do it!!
Listen to his foolhardy advice??? I would rather pay $500 and listen to Bill Clinton give a seminar on ethics!!
“things ‘are different’ right now in terms of credit availability,”
Richard,
You’re on fire tonight!!!
http://www.idorfman.com/Charts/housedebtservice.png
“um, that would be me and i’ve already benefited massively from the run-up so i win twice?”
Only when your chips are off the table!!
“true there’s no historical precedent but there doesn’t have to be.”
Same was said about nasdaq 5000!!!!
#65 and other somehwat postive posts. I have a very hard time understanding the posts which dictate anything but a pullback in the housing market.
Remove the graphs the charts etc. and think about very basicaly who are the new buyers in the market? Where is the demand for housing coming from?
Richard you do not count since you are in your mid 40s or whatever age and have accumalted significnat wealth, your personal scenario is not relevant since you are not the average buyer at this point in time. Congrats on your accomplishments.
I consider myself a strong potential first time homebuyer. I have saved over 20% needed make a very good salary have no debt, and my future wife is in the same boat. But I question the portion of my income it takes to own a home. I think it can be assumed most indivudals however have debt, and would have to take signifcant notes to buy even the smallest of properties in most good areas. Consequently, I believ other buyers are in worst spots then me what do they think?
Additonally, I find it hard to imagine why I would plunge signifcant resources into buying a house when I can rent for less money, and bear sigificantly less risk.
Back to topic, Lets say the market is entirely flat which I think is fair, I still am screwed by a asset that is just devaluing due to inflation. Additonally, beyond the demand going away for first time homebuyers, NJ job growth basically flat this year. Will this help the demand for housing? Lets assume a constant supply of housing what happens, the price has to drop.
Simply put the market has outpriced most in NJ. Yes, you couple of positive indivduals have made money or have found this to be good over time. This is postive but remeber the question is will I make money if I buy now? I think most on this blog have a number of reasons as to why you will be hammered unless you can protect yourself by buying the home at a steep discount.
Richard,
I think I clearly stated that in the hypothetical situation:
“Renting out home also not an option as there will be no way to oversee the property from abroad.”
This potential expat is going to Japan, 14 hour flight. Has no family or friends who can oversee renting out of property. What are the options if the house needs to be rerented? Needs repairs? Is a property management company going to be another expense to consider?
Sounds like you are saying buy now but leaning on the option to rent out if need be. What is there that might be missed out on by waiting four years to buy? If you think prices are going to be flat, why not just buy upon returning to country? Why the rush?
“Renters gloat over housing slump”
Finally!
Not confirmed: at Toll’s Hoboken 700 Grove property, the newest seller’s incentive is 6 months of mortgage payments, on top of two years of maintenance. Obviously stipulations…
Well, I have been on vacation back to my home town, Bombay, India, for last 2 weeks. Its so funny here as well.
RE is up 100% in last 2 years in most wanted areas, 50% in medium areas, 25% in lower quality areas. Story is same. Our area is different, people are making lot of money now, houses never go down etc…
Just to give one point, 1 year ago one builder I met had some condos available. This year same condos were still available only the prices went up by 50%. If people were truly making that much money why the houses are not selling?? The speculation is so rampant, that in some areas prices are now touching Manhatten prices. I guess the story is same all over world for Real Estate.
From BusinessWeek online:
“The market was in a frenzy in 2005,” says Lawrence Yun, senior economist at the National Association of Realtors (NAR). “The current transition is just cleansing away the speculators.”
Yun expects existing home sales to slip just 0.6 percent in 2007, with a pickup in the fourth quarter continuing into 2008.
Home price trends tend to lag 9 to 12 months behind sales trends, according to Stiff (chief economist at Fiserv Lending Solutions), who predicts prices will be weakest in 2008 and rebound in 2009.
ADA Says:
December 26th, 2006 at 7:14 pm
Grim, is it possible to limit how many times
“Take at least 25% off 2005 peak prices” posts?
He keeps saying the same thing, is rude, adds nothing of value and is seriously detracting from the quality of this blog.
In fact, nearly half the posts on this thread are his inane rants.
Amen. Amen Amen.
Booya Bob is the most hatefilled poster here. I’ve never ever seen anyone stoop as low as he has to denegrate homeowners and real estate investors. He’s the poster child for those hateful souls who wish to see financial tragedy befall their fellow Americans. I would hope that all fair minded people here would join me in repudiating him and asking that he voluntarily remove himself by discontinuing to post here
get a grip
things ‘are different’ right now in terms of credit availability, financial instruments greatly expanding the choices for risk/cost of capital, the home no longer being seen as pay off the mortgage but use the equity in other ways, the capital gains exclusion if you stay 2+ years, the global financing mechanisms.
The “Economist” (Dark Side of Debt, 9/06) summed it up poignantly, “Lending is a sober business punctuated by odd moments of lunacy”. The article goes on to describe a history of lending disasters starting with the world’s first sovereign bankruptcy in 1557.
The point is that loose credit is cyclical. The world has seen it come and go many times. The May 2006 issue of Harpers magazine had a really nice illustrated explanation of the credit cycle. (I don’t believe it’s available online)
true there’s no historical precedent
Actually there has. The last time interest only loans were this popularly was 1929.
From MSN Money:
Interest-only loans were popular in the 1920s, when borrowers wanted to free up money for stock investments. The 1929 crash and subsequent foreclosures ended that particular party, but in the decades since then, private banks made interest-only loans available to their rich clients.
RentinginNJ,
http://www.oftwominds.com/blog.html has a “summary” of the Harper’s story I believe you are referring to. It can be found at http://www.oftwominds.com/blogmay06/serfdom.html.
Here is an excerpt:
…millions of indebted households paying interest on mortgages which are greater than the value of their homes. The interest will be collected by a new “rentier” class of mortgage holders who are not even capitalists, in the sense that they are not creating value or wealth with their capital and knowledge, but living off the “new serfs” who will struggle for decades to pay off their massive mortgages.
“who wish to see financial tragedy befall their fellow Americans”
RE bubble is a global phenomenon [refer post 74]. Do you really think Boya bob is behind the current RE spiral? If you are in the mood to lecture, go do it front of your favorite subprime lender. Remember to hurry up, subprime lenders will soon be on endangered species list.
regarding post 56]
We should enforce a ‘minimum’ limit on ‘25% off bob’.
How about 25%? :)
>>“Renting out home also not an option as there will be no way to oversee the property from abroad.”
seneca, incorrect. you can hire a property management company to oversee the maintenance and collection of rent on the place. many have done it just ask around. typical fees are 15% of rent though you can do 10% if you hunt around.
bc bob doling out the biased bs as usual. where did anyone say buy a place for $650k with no money down with an assumption on taxes and what you could rent it for? that’s right in your little fantasy world.
how’s this for a real world example. a condo complex near me places are selling for $375k with $6k taxes and $150 a month maint. with NO MONEY DOWN @5.75% 30-year fixed your mortgage is $2188 a month + $500 taxes + $150 maint = $2838 a month. average the first 7 years @25% federal tax bracket your deductions are $552 = total cost of $2286 a month. i know of 2 units that are rented today for between $2100-$2250. wow what a bloodbath! you have to know where to pick em.
>>“things ‘are different’ right now in terms of credit availability,” Richard, You’re on fire tonight!!!
and your point if there is one is??? as long as there’s cheap credit the party can continue on, probably far longer than most give it credit for. 2007 will probably end up looking a lot like 2006.
>>The point is that loose credit is cyclical.
how long is the cycle? don’t bother predicting it’s just a guess. could be 5 years, could be 25 years. you going to sit around tapping your heels together praying for an end so you can buy a house or are you going to recognize the phenomenon for what it is and profit from it? you see that’s where some religious zealots on this blog have gone wrong. even if you’re right, it means nothing unless you’ve somehow used it to your advantage. laughing at all those idiots who bought 3 years ago? they bought starter homes for $350k that can now sell for $500k. boy what morons following the herd! don’t they know better that RE is overvalued?
timing is just as important as calling a direction.
Ha
great idea njbear;
Boyaa Bob can you reduce your posts by at least 25% off their peak?
Richard,
I’ve been reading your posts lately and you seem stressed man, relax;
Enjoy your house(s). If you were smart with what you could afford and plan on staying as you claim you’ll be fine even if the market tanks in the short term.
I’m in a similiar situation as I bought recently too; (pregnant wife did not want to hear anymore bubble talk). Our compromise was that we just bought a house well well under our budget.
BC Bob isnt out to get you personally; he’s just calling the market like he see’s it (just like you are) and although I hope he is wrong, he is probably right.
Richard,
We are not laughing at the people who paid $350k 3 years ago. We are laughing at idiots like you and reinvestor who probably paid close to 700k for that same house withint the last year or so.
I *heart* Booya Bob! At least he’s having fun!
>>We are laughing at idiots like you and reinvestor who probably paid close to 700k for that same house withint the last year or so.
keep telling yourself that if it helps you sleep better at night. reality can be a bitter pill for you.
stressed? LOL! not an ounce. i own multiple properties and i’m way in the black on all of them plus generating rental income. it’s bcbob and other self-appointed pundits who religiously defend their opinion with no room for alternative viewpoints. it lacks credibility.
91] Are you way in the black on the one you bought earlier this year?? LOL
Richard,
What made you change your tune?
Richard Says:
June 26th, 2006 at 4:36 pm
seriously folks, in a stalemate does anyone really think the seller with ridiculous asking prices will wait out the buyers? it’s so easy to get turned off when wanting to buy something at today’s prices. the I HAVE TO GET IN NOW BEFORE PRICES GO UP!!! mentality is dead dead dead except for the few stragglers who are uninformed or very late to the party.
In any case, congratulations, sounds like you bought a home. I’m sure you made the decision based on your personal financials.
But having purchased you now sound like Booyaa Bob, only you want others to buy. I’ve had the impression Bob feels he can sway people not to buy and in doing so he feels the market will drop more. (Just a guess as I usually skip over his posts at this point.)
Rich
Big question is will those who feel vindicated in their rentals now really “catch the bottom” and get back in owning or will they miss it?
I think I’ll just sit it out. ;-)
The “chicken littles” are in every market that has the potential to “crash”. One just has to learn to ignore them as in the long run they are ALWAYS DEAD WRONG. ALWAYS!
Its easy to be bearish. “Its easy to take the hard road and hard to take the easy road.”
Why all the censorship talk? I agree that Booyah Bob is one of the more wretched bags of blood to come down the pike, but the extreme comments here only bookend what is- mostly- civil conversation.
If the sharp tool of censorship starts getting used around here, it’ll be very easy and tempting to cut muscle and bone after cutting fat.
I also daresay that people like me- in the “bull” or agent camp- would never have gotten a foothold were this blog censored. Kudos to Grim!
I took a look at kannekt the other day. Barf. If that’s what you get when heavy censorship is applied, no thanks! What a load of drivel.
Are we sure that the Richard from June 26th, 2006 at 4:36 pm
is the same Richard posting today?
From the 40’s through 70’s, Richard has been on the Top Ten Boys Name list put out by the Social Security Administration.
http://www.ssa.gov/OACT/babynames/
Rich NNJ- Post #93
Same one???
Seneca,
As BC Bob pointed out, there ARE a lot born with that name, myself included. But I’m pretty confident it’s the same Richard. How many can use the SAME log in name?
Also, the inconsistent lack of capitalization is a pretty good indicator as well.
Rich
Rich in NNJ – OK, then maybe Richard is bi-polar when it comes to NNJ Real Estate?
Or he purchased a home and feels he needs to justify the choice for himself or others?
But one thing is for sure, his posts of late have been quite a change from this:
1. Richard Says:
January 23rd, 2006 at 10:28 pm
everyone, inventory is building up rapidly. there are decent houses on the market at still high but not outrageous asking prices just sitting. this market is coming to a crawl. i expect this week’s home data to show further weakening and this will only continue. as inventory continues to build next stop is lowered prices. sellers haven’t seen a more normalized market in at least 5 years so give it some time to let the reality sink in. if you’re in the market to buy a house, wait until 2007. i’d stake my down payment prices and selection will be better than 2006.
Rich