Housing risk just begun?

From Inman News:

Commentary: ‘Housing risk ain’t over’

Long-term rates are clinging to their highs (6.25 percent for mortgages, 4.77 percent for the 10-year T-note), but the bond market looks lousy, poised for another rise.

The straight-line, quarter-percent rise in rates began in the second week of December, as data began to arrive too strong to support sweet dreams of a Fed rate cut, especially strength in the job market. Unemployment is a dead-low 4.5 percent, and a sustained decline in new claims for unemployment insurance says that conditions are, if anything, improving.

The Fed’s January “beige book” describes the labor market as “tight,” competition developing for scarce types of training and talent, and in the stage historically leading to wage pressure in excess of productivity. Wage-induced inflation is the worst form, quenchable only by racking up the unemployment rate — which is not difficult to do, except that politicians will then filet and fricassee the perpetrator at the Fed.

Down another road, the housing bubble is no more hazard than Y2K, and the economy has rapidly adjusted to 5.25 percent — after all, about the same Fed funds rate prevailing from 1995 to 1999, one of the hottest, most productive and inflation-free intervals ever.

At this instant the bond market is leaning to road two, but my hunch is that there is no single fork ahead, but successive bouts of indecision. Reasons as follows:

1. Any big rise in mortgage rates from here is going to be self-correcting. Adjustable-mortgage rate re-sets could be doing real harm (they’re all headed for 7.5 percent or more right now), but cheap fixed-rate loans are an easy and attractive escape hatch. There is no question that the drop in fixed rates from 7 percent to 6 percent from July to December softened the housing blow, and a re-trace upward would hit hard.

2. I do not now, nor have I ever believed in a housing bubble — not in the sense of a widespread collapse in prices by 20 percent or more. However, announcements that the corner has been turned are unfounded optimism. The worst is not over when the market reaches a flat-price bottom, the worst begins then: flat prices over time expose more and more mistakes and bad luck, numbers often rising for years. The corner is restored appreciation of prices, and many coastal areas and the Desert Southwest are many years away.

3. PMI publishes its estimate of risk of falling prices, and is a serious and skilled observer (note that mortgage insurance providers have chosen to lose market share rather than join in the piggyback and subprime foolishness). Of 50 MSAs, PMI forecasts a 50 percent-plus probability of falling prices in 18, and a 30 percent-plus probability in another eight. Housing risk ain’t over; it’s hardly begun.

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121 Responses to Housing risk just begun?

  1. James Bednar says:

    From MarketWatch:

    Citigroup to buy ABN Amro’s mortgage unit

    Citigroup on Monday agreed to buy ABN Amro’s Mortgage Group for an estimated $3 billion, a deal that will give the world’s largest bank another 1.5 million customers.

    “The acquisition of ABN AMRO Mortgage Group demonstrates our commitment to grow our consumer lending business in the U.S.,” said Carl Levinson, chief executive of Citigroup’s consumer lending group.

    The combined firm will move Citi one notch up the mortgage loan services standings, to number four, and make it the third largest originator of loans.

  2. pesche22 says:

    they need to feed the beast.

  3. R Patrick says:

    This was argued that they are doing this for one of 2 reasons

    1. Buy the place they sell the loans to so that they do what the brokers say ( by more loans )
    2. When the bailout happens they have the most to benefit ( this is my why if you think there will be a bailout buy a 1 mill house with a 0 down I/O )

  4. Clotpoll says:

    8:22 AM- Sallie Krawchek just demoted to janitor at Citi.

  5. BC Bob says:

    “The worst is not over when the market reaches a flat-price bottom, the worst begins then:”

    I don’t want to be part of any market that is consolidating at its low.Bottom pickers, tend to buy way too early. Lower prices tend to bring
    lower prices, but not a straight line decline. It becomes self perpetuating. Any good news is ignored and negative reports are magnified. Remember, no bubble in history has ever achieved a “soft landing”. Now you can argue that this was not a bubble. Just argue that point,don’t bet your money though. As I have stated repeatedly, when these trends turn the corresponding reaction goes much longer and the declines are much bigger than anybody can imagine. Did anybody really think that when the fed began to loosen, after the recession of 2000 and 9/11, that it would result in 80-100% RE gains??? Well, the same will occur on the downside. Nobody is really expecting/anticipating how bad/long this will be, and it’s only in its initial stages.

  6. RentinginNJ says:

    Lower prices tend to bring lower prices, but not a straight line decline

    Just look at the NASDAQ after the 2000 crash or the Dow after the 1929 crash. The fall from top to bottom was a multi-year event with many bull runs and false recoveries along the way. Over time, however, each min-recovery resulted in a lower peak than the previous recovery and the fall after the peak resulted in a new low. These weren’t linear events and I don’t expect the housing correction will be either.

    Another commonality between today’s housing market and the post-crash stock markets is the chorus of pundits “calling” the bottom and making prognostications of a quick recovery.

  7. AntiTrump says:

    I heard on Bloomberg Radio on my way into work this am that Oil dollars are moving out of treasuries. The report mentioned that over the last 3 months, about 35 Billion worth of treasuries have been sold by oil nations. This is about 10% of their treasury holdings. Also in the news this morning was that China said they will use their forex reserves to buy “Strategic Assets”. Nothing was said about what these strategic assets are, but I would guess oil fields to start with add on a few mines in africa, etc etc.

    Anyway, I do beleive this will result in higher lending costs for most americans. That housing slow down hasn’t spread to the larger economy so far. The recession stays confined to housing and manufacturing. Services continue to add jobs at a healthy clip and inflation remains above feds comfort zone. This rules out a rate cut in the near future.

    I think it is too early to call the bottom of housing.

    BC Bob, this move of petro dollars may explain the 10 years flirtation with the 4.8% yield.

  8. AntiTrump says:

    On a sperate note, some new construction townhomes in Berkeley Heights that were listed last year in the upper $800Ks has been relisted with a new realtor in $750K range. I suspect these will sell in the upper $600K if they sell this year.

  9. bergenbubbleburst says:

    Some of the same people that are calling this the bottom for housing,are the same people who insisted there was no bubble in housing to begin with.

  10. UnRealtor says:


    $730,000 – Oct 31, 2005

    $565,000 – Jan 19, 2007

    This bagholder took a $205K loss in just over one year.

  11. Lindsey says:

    This is one of those weird cases where someone gets a lot of the facts right but comes to ludicrous conclusions.

    Let’s just take my favorite:

    Down another road, the housing bubble is no more hazard than Y2K, and the economy has rapidly adjusted to 5.25 percent

    He seems to think that somehow a 5.25 percent fed funds rate isn’t accomodative. A rate of 5.25% is accomodative, (as long as the spread holds around 100 basis points) it’s just not ridiculously, insanely accomodative as a 1% rate is.

    Actually, accomodative is the wrong term for a 1% rate, encouraging would be a better euphemism. At anything below 4% we’re throwing gas on the fire, at 5.25, we’re mostly standing around watching the fire, but we’re throwing a long on every now and again. We probably don’t get neutral until at least 6.25.

    Historically, when people/businesses can borrow at less than 7% the economy heats up.

    Note that even Inman’s columnist understands this, a few graphs below the quote above he says:

    Adjustable-mortgage rate re-sets could be doing real harm (they’re all headed for 7.5 percent or more right now),

    7.5% rates do discourage economic activity, but just barely.

  12. Lindsey says:

    In post 12 long is supposed to be log

  13. Better lower your prices fast or else your home equity (if u have any now) will just go POOOOOOOFFF says:

    UnRealtor Says:
    January 22nd, 2007 at 10:06 am

    $730,000 – Oct 31, 2005

    $565,000 – Jan 19, 2007

    This bagholder took a $205K loss in just over one year.


    2003 here we are…………..

    Can anyone say 2002 yet?

    Can u feel it?

    Bob – Very very home(s)owner eventhough housing DeBloating


  14. Better lower your prices fast or else your home equity (if u have any now) will just go POOOOOOOFFF says:

    Bob-Very very “HAPPY” home(s)owner eventhough prices are slow painful decline.


    Gotta work for a living…..

  15. lowball says:

    Inflated comps scam from AZ:

    ‘The Republic found one new neighborhood where a group of buyers has been selling and reselling homes to one another. According to public records, members of this group paid higher than asking prices using high-interest and adjustable-rate mortgages. They own almost 25 percent of the houses in that neighborhood.
    Honest home buyers who later purchase in neighborhoods invaded by cash-back speculators pay higher prices based on those inflated comps.
    “The scams have created false appreciation for the Valley’s real estate market,” said Diane Drain, a Phoenix real estate attorney”‘ (lowball: boy, doesn’t she have the best last name in the trade)

  16. James Bednar says:

    From the Boston Globe:

    Mass. home sales slump continues

    Massachusetts single-family housing sales had their worst December since 1991, and the median sale price for a single family home fell 8.1 percent to $310,000 in December 2006.

    The December median sale price is the lowest monthly figure since March 2004.

    Those are among the conclusions of a report issued today by the Warren Group, a Boston provider of real estate data and the publisher of Banker & Tradesman.

    On a volume basis, December single-family home sales fell 8.4 percent from December 2005 to 4,037, the lowest level for December since 1991, the report said.

    “We’re still in the midst of a market correction which began in the latter stages of 2005,” Timothy Warren Jr., chief executive of the Warren Group, said in a statement.

    He added, “We still see this as more of a soft landing than a crash, though, and we’ll be watching closely the next few months for signs of stabilization.”

    For the full year of 2006, single-family home sales dropped 14.4 percent to 54,203, the lowest number of homes sold since 1995, and down 20 percent from the peak year of 2004, the Warren Group said.

    The median sales price for a single-family home dropped 5.8 percent to $325,000 in 2006; the first annual drop since 1993, the Warren Group said.

  17. gary says:

    Why do they still talk about this as being a “soft landing”? A year ago, I had two realtors tell me the bubble was a bunch of BS. If that’s the case, why do they talk about a landing at all? When the crash is in full swing a year from now, what will they say then?

  18. AntiTrump says:


    It’s called “Living in Denial”.

  19. James Bednar says:

    That criticism has been voiced here before. Those who were most outspoken against the existence of a bubble are now calling for a soft landing.

    If the increase in prices was firmly rooted in the fundamentals, the plane never got off the ground, so to speak.

    So why are we now in the process of landing?


  20. thatbigwindow says:

    “So why are we now in the process of landing?”

    Blame it on the media and bloggers

  21. njrebear says:

    Pfizer to eliminate 10,000 jobs by end of 2008 as part of $2B cost-cutting effort. Details to come.


  22. njrebear says:


    Pfizer said it plans to close the two manufacturing sites in Brooklyn, N.Y., and Omaha, Neb., and three research sites in the United States. The company said it expects a net reduction in the pretax total expense component of adjusted income of between $1.5 billion and $2 billion by the end of 2008.

  23. BC Bob says:

    “I heard on Bloomberg Radio on my way into work this am that Oil dollars are moving out of treasuries.”


    I saw this article on Bloomberg last night, posted it on one of the threads here.

  24. James Bednar says:


    I thought this piece was interesting as well..

    China Plans to Shift Use of Foreign Exchange Reserves

    — China, the world’s biggest consumer of coal and metals, will use its foreign exchange reserves to buy “strategic” resources, Vice Premier Zeng Peiyan said.

    The government will increase the nation’s purchases of resources for strategic stockpiling when there are “plentiful” reserves, Zeng said in a speech carried on the Ministry of Land and Resources Web site today.

    China is seeking to boost returns on its $1 trillion of reserves by buying higher yielding assets and diversifying its investment. Premier Wen Jiabao said last week that regulators will consider more ways of using the cash pile. The nation is building an emergency supply of crude oil and plans to expand that to metals to shield the world’s fastest-growing major economy from supply disruptions.

  25. 2008 Buyer says:

    Don’t quote me on this one….but I recall seeing where China is increasing their ties with Venzueala and Iran, countries that are not US allies, to increase their oil reserves.

  26. 2008 Buyer says:

    Comic Relief:

    Judge: Jerry Seinfeld Must Pay Realtor Fee

    NEW YORK – A New York judge has ruled against comedian Jerry Seinfeld in a dispute over a commission on a real estate transaction.

    Seinfeld was ordered to pay real estate broker Tamara Cohen $98,000 after allegedly trying to avoid giving her a sales commission by buying directly from the owner of an Upper West Side townhouse, the New York Post reported Sunday. Seinfeld tried to avoid paying the commission because Cohen, a Jew who observes the Sabbath, was not available when Seinfeld wanted to view the house, the Post said.

    In accordance with Jewish law, Cohen’s phone was turned off on the particular Saturday when Seinfeld and his wife wanted to view the house.

    The only real issue here … is whether the broker’s fee was 5 or 6 percent, the judge said in the ruling. Cohen could get as much as $118,500 if the fee is found to be 6 percent.

  27. njrebear says:

    The chinese are on a buying spree in Africa and and east Asia ( the ‘stans’ [Uzbrek, Turkmeni, Kyrgyz] ).

  28. SG says:

    Can someone with MLS access post SP for MLS: 2308259

    Thx. in advance.

  29. lowball says:

    Talking about trategic stockpiling when there are “plentiful’’ reserves, now is a good time to buy:

    ’Buffalo’s vacancy rate stands at 17 percent, with more than 20,000 homes empty.’

  30. Al says:

    Any Info on the last sale/amount owed on
    MLS #: 2364764 ??

  31. BC Bob says:


    China has been saying this for a bit. Watch it start to accelerate with the recent Democratic wins [elections]. They seem to have had it with the verbal barrage from Pelosi and Schumer regarding protectionism/yuan. Can you imagine, we want to dictate our bankers terms??? China is diversifying and will continue to.They know the dollar is toast and they don’t see any substantive/structural changes coming from Washington. It will be a slow unwinding process. The last thing they want to do is disrupt world markets. Unfortunately, sometimes the best intentions fail.

    Strategic reserves???


  32. nnjrerisk says:

    MLS: 2308259 ( 10 O’keefe rd)
    SP: 525,000; Closed date: 01/10/2007; DOM:121

  33. dreamtheaterr says:

    “Can you imagine, we want to dictate our bankers terms??? China is diversifying and will continue to.They know the dollar is toast and they don’t see any substantive/structural changes coming from Washington.”

    BCBob, perfectly said. I am tired of repeating what you jest mentioned to some of my work colleagues, who insist having a flat-screen TV was their birthright and live way beyond their means.

  34. bergenbubbleburst says:

    Ah the Chinese, and then when you try to have an intelligent ocnversation with people about this topic or others, you are accused of being an elitist (know it all), or a crybaby wnnabe homeowner/renter loser.

  35. SG says:

    Thanks NNJRERISK.

    Just to update everyone on this house sale. Here is last purchase on this house.

    10 O Keefe Rd Oct 05 $579,900

    This house was sold for 525,000. Assuming 4% realtor fee, the Owner would have got $504,000.

    So Loss on this sale = $75,000

    This loss is barring the fact that house was on market for almost 121 days. Not sure whether owner was paying 2 mortgages on some of that time.

  36. Al says:

    BTW why are the stocks dropping?

  37. nnjrerisk says:

    Add 1% realty transfer fee. Another 5k. Am assuming the seller finished the basement after he bought in ’05. I do not have previous listing info to confirm this. If that is true it is a loss of 100k on a 579,000 home within 2 years. I am scared to imagine myself in the seller’s shoes.

  38. SG says:


    I believe the house was vacant few months prior to that. Assuming 3000 per month for mortgage & taxes, and about 4 month timeframe, you are talking another 12K less.

    I fail to understand that even in today’s Internet age people fail to understand they should not have bought in 2005.

  39. BC Bob says:

    “BTW why are the stocks dropping?”

    More selling than buying.

  40. nnjrerisk says:

    Inspite of this kind of losses that we are seeing, still the homes in the Bridgewater area are way overpriced than in ’05. List prices are still unrealistic. It seems sellers don’t care the recent comps. Instead of buying a lottery ticket they just list at dream prices and waiting for the jackpot.

  41. Seneca says:


    – Pricing chaos: Asking prices range from 3.5x assessed value to 5.5x times assessed value on the same block. Older homes that haven’t seen updates in decades are frequently asking for the higher price multiples with no justification.

    – Relistings on Under Contracts: Multiple homes taken off MLS only to be placed back on a few weeks or months later when buyers can’t offload their homes and there are contingencies on the contract.

    – Uneducated buyers: There is still a sucker born every minute and the few homes that are selling at 2005+ prices are going to the uneducated consumer. If I was selling, I suppose I would still price high in hopes of bagging a sucker… why not. A few sellers continue to get lucky.

    – DOM counts approaching 365 days: If I add up all the days since I first saw some of the homes I follow, I am approaching a full year on the market through FSBO, realtors or some combination of the two.

    – Sellers holding out: Stubborn folks out there, especially the ones who have lived in their home for a decade or more.

    – Buyers holding out: Affordability reigns supreme in the minds of buyers. Few are willing to settle or accept the New Order of the Northeast NJ housing market. Suddenly, renting or waiting out the slowly deflating airbag we call the housing bubble from one’s existing abode doesn’t seem so difficult.

    Time for the bulls to turn down the volume on the baby monitors… the crybabywannabehomeowners are snug as a bug in a rug watching this all play out.

  42. AntiTrump says:

    #41 nnjrerisk:

    Why not? Plenty of uninformed buyers out there. Sellers may snag one of them. Remember not every buyer or seller does their research.

    It is this pool of uninformed buyers/sellers that make the smarter people richer. It could be the seller or the buyer.

  43. Jay says:

    “Seinfeld was ordered to pay real estate broker Tamara Cohen $98,000 after allegedly trying to avoid giving her a sales commission by buying directly from the owner of an Upper West Side townhouse”

    Since when does a buyer pay commission?

  44. Jay says:

    Instead of buying a lottery ticket they just list at dream prices and waiting for the jackpot.


    njrerisk, a perfect analogy.

  45. nnjrerisk says:

    45# Jay:
    I have another quote, which my friend tells me. “Buying a home in today’s market means taking care of seller’s family than one’s own family”

  46. RentLord says:

    Jay, the soup nazi must have been pretty mad that Seinfeld wanted to see the house on a jewish holiday. Seinfeld’s a disgrace to the jewish community… he needs to pay.. he needs to pay

    [/comedy off]

  47. Richard says:

    seneca, your observations are nothing but spin facts. please don’t present them as an unbiased, non-impacted source.

  48. SG says:

    comment on a property

    Anyone can comment about any address in the US!

    Your chance to say something the landlord or seller won’t say!


  49. RentinginNJ says:


    I have two:

    – I have noticed an increasing number of open houses over the past few weeks. Typically January isn’t open house season.

    – I have noticed more SFH’s for rent in nice neigborhoods. It seems like SFH rentals in good neigborhoods are typically not very common in NNJ.

  50. syncmaster says:

    Final Push on Property Taxes?

    TRENTON, N.J. (AP) – January 22, 2007 – Senate Democrats hope Monday to finally shove forward proposals designed to reform New Jersey’s property tax system.

    The Senate … will vote Monday on measures to bring more oversight to government spending, reduce taxpayer-funded benefits for elected officials, strip pensions and require jail time for corrupt government workers and create a special commission to ask voters to merge towns.

    Senate President Richard J. Codey and Senate Majority Leader Bernard F. Kenny were both hopeful late last week that disagreements over the bills among Democrats, who control the Senate 22-18, had been resolved.

    “I’m confident that we’ll all be united,” said Kenny, D-Hudson.

    However, minority Republicans contend that the bills slated for Senate consideration are weakened versions of ideas unveiled in mid-November.

    A plan to create a state comptroller to investigate spending by all governments in New Jersey has been changed to limit the office from initiating probes into local governments and reviewing municipal agreements with land developers. And another to revise benefits for elected officials no longer bars newly elected officials from holding more than one elected office.

    “The whole process has been a sham and a sick joke on our taxpayers,” said Assemblywoman Jennifer Beck, R-Monmouth. Even some Democrats are uncertain about the changes.

    Among them is Assembly Majority Leader Bonnie Watson Coleman is concerned changes to the comptroller legislation approved by the Assembly on Jan. 8 will turn it into “Trenton’s latest 98-pound weakling.”

    The Legislature formed four special committees in July that spent months debating ways to cut property taxes that average $6,000 per homeowner in New Jersey.

    The most notable reform – cutting property taxes by 20 percent for most homeowners and capping annual property tax increases at 4 percent – hasn’t been introduced yet, but Codey last week said it would be introduced soon.

    “We’re 90 percent of the way there,” he said.

    The Assembly has approved the plan to create a commission to ask voters to merge towns, but Codey said the Senate may amend it to require the panel include members from all regions of the state.

    The Senate is also scheduled to vote on the Assembly-approved bill to create county school chiefs with authority over local schools, but that vote is expected to be delayed. Its sponsor, Sen. Bob Smith, D-Middlesex, said it will be revised to allow schools to appeal to the state spending cuts ordered by the county superintendents.

  51. Richard says:

    been tracking 154 properties in the $500-$900k range in maplewood, millburn, madison, chatham and westfield since early december. here’s the latest breakdowns.

    maplewood 32 total, 8A, 5A*, 4UC, 4W, 2TX
    millburn 23 total, 9A, 1A*, 7UC, 2W, 4TX
    madison 17 total, 12A, 1A*, 2UC, 1W, 1TX
    chatham 35 total, 20A, 2A*, 6UC, 5W, 2TX
    westfield 46 total, 23A, 7A*, 13UC, 9W, 4TX

    overall total to A*/UC is 31.6%
    best total to A*/UC is westfield at 43.4%

    there’s definitely been a good uptick in sales but inventory is still high, much of it crap IMO. if inventory rises sharply over the next 2 months prices should adjust further downward.

  52. Pat says:

    Richard..you work research for fee? You project the “I’m a convert to home-owner anti-bear image,” but you pretty obviously and repetitively challenge people’s personal observations here for backup (Seneca specifically labeled his comments as “Observations”.)

    Why don’t you try doing your own fact maintenance and data checking? Yeah, I know.. (with whining voice- IT’S TOO TIME CONSUMING).
    Keep your own sales history. It’s pretty sleazy not too, anyway, especially when you come here and bait people to give to data points.

  53. eagle says:

    Re: Richard- post 52– please excuse my ignorance, but what are the abbreviations in your post-A, A*, etc. (I assume UC is under contract, but I could not understand the others)?


  54. Zac says:

    …what he said.

  55. Seneca says:


    Strike 1.

    Here’s a quarter, buy yourself a clue:

  56. James Bednar says:

    Here are the typical status codes.

    A – Active
    A* – Pending/Attorney Review
    UC – Under Contract
    S – Sold
    T – Temporarily Withdrawn
    W – Withdrawn
    X – Expired

  57. Zac says:

    Thanks James *Zac scrolls back to 52*

  58. syncmaster says:

    Will someone please tell me what MLS # 2310126 sold for? The buyers have moved in so I assume it can’t be under Attorney Review anymore?

  59. Richard says:

    seneca, keep the quarter and buy yourself a clue. i won’t waste my time sparring with you. you’re too biased to recognize your own bias (now that’s catchy)


  60. syncmaster says:

    Here is an interesting blog entry on KB Homes new CEO Jeffrey Mezger…

    Mezger’s already putting his own stamp on KB… Last month, for example, Mezger canceled a planned high rise residential tower the company was going to build from scratch in downtown Los Angeles. It’s not a knock against his hometown or the long term trend of folks moving back to and even retiring in urban settings. Mezger, ever practical, says such projects take too long and are hard to replicate. He’d rather focus on urban infill projects in cities such as Anaheim and Woodland Hills where old single family homes and apartment buildings are giving way to modern three and four story townhomes.


    For KB that means fewer luxury projects and renewed focus on first time home buyers. Mezger says condos and townhomes at 25% of sales will still be an important part of the company’s mix. Much of that will be in urban areas where land shortages and high prices make new home construction difficult. “It’s the only way to keep housing affordable,” he says.

  61. Zac says:

    You both need to google: Theory of Mind

  62. Richard says:

    even if one bought 1 year ago in London when the bubble talk was raging at a fever pitch, you’d still be up 22.4% today. sometimes you can be so smart you’re stupid.


  63. Richard says:

    um, no i don’t zac. i know perfectly well what that means and my response was to a post that clearly showed bias masked as observations. an example from seneca’s ‘observations’.

    >>There is still a sucker born every minute and the few homes that are selling at 2005+ prices are going to the uneducated consumer.

    who says they’re suckers or uneducated? that’s an opinion, not an observation. caustic repartee shouldn’t be masked as anything but.

  64. BC Bob says:

    “even if one bought 1 year ago in London when the bubble talk was raging at a fever pitch, you’d still be up 22.4% today”

    You could also have put up a tent in Iowa and put all your money in corn and be up 100%. So what’s your point???

  65. ADA says:

    bc bob,

    Well, at the risk of pointing out the obvious:

    living in a tent in Iowa is less appealing to most people than living in an apartment in one of the world’s most cosmopolitan cities.

  66. ADA says:

    even if you had alot of corn in your tent.

  67. BC Bob says:


    Missed my point totally.

  68. Clotpoll says:

    Another anecdotal report that might be indicative of something:

    Today, a seller of mine received a contingent offer on his home (a listing of mine). The contingent buyer’s price turned out to be pretty much what my seller and I expected we’d get when offers came (on the market 88 days as of today).

    Rather than proceeding with this buyer and dealing w/the uncertainty of a contingent offer, my seller directed me to reduce the asking 5K BELOW the contingent offer and encourage only non-contingent offers from this point forward.

    Lesson: not all sellers out there are tone-deaf morons.

  69. SAS says:


    I lost my shirt on a flat in London.
    Don’t believe the blow from yahoo.

    RE prices do go down and your pal, sas, admits…he lost some jack in RE.


  70. profuscious says:

    now if you could live in a tent in London, that would be a coup de gras…

    I prefer yurts though

  71. Zac says:

    Clotpoll, what was the contingency?

  72. SAS says:

    I happen to prefer Lisbon, Portugal.

    Now, thats a fun town.


  73. SAS says:

    Speaking of Lisbon, the women there are beautiful. Nothing like watching the sunset with one of those fine ladies.

    Perhaps, some of you gentlemen blokes need to spend less time on the internet worrying about RE, and meet one of these fine women.

    Trust me. You won’t regret it. I never did.


  74. SAS says:

    “US productivity growth lowest for a decade”



  75. It's Crashing says:

    Smart buyers waiting for the seller to throw in towel come May.
    Anyone notice the interest rates have been tranding upward in recent weeks. This addede cost is coming out of the sellers cut.

  76. It's Crashing says:

    “my seller directed me to reduce the asking 5K BELOW the contingent offer”

    HELLO! $5k LOL! Obvious the contingent fool needs to get a greater fool to buy his house in order to buy this pricey house.

  77. Zac says:

    he’ll regret it 6 months from now when his house is still for sale and probably reduced another fifty grand.

  78. Clotpoll says:

    I’m glad I went and watched “24” and let “I’m Crashing” fill in the blank on Zac’s “what’s the contingency” question with a typical LOD “greater fool”-type retort.

    Zac, to answer your question: it’s a house sale contingency.

    I’m Crashing: try applying your x-ray vision to seeing thru walls. You don’t have enough background on this deal to offer a rational comment.

    Now, to give a few pertinent details: my seller was priced well enough to draw an offer. That’s no mean feat, as there are 57 homes within a close radius of our listing that are priced within 40K of our asking, both to the high and low side. The offer that was tabled was within 5% of our asking price…not exactly a lowball.

    So, if we drop our ASKING 5K below the contingent buyer’s offer, it’s reasonable to expect we can draw a higher-quality offer within a short period of time. We’ll essentially be priced significantly below all our competitors. That’s a formula for making a sale in this environment.

    BTW, our contingent buyer’s home is on the market…and offered at a reasonable price. The only problem is, it will take at least a little time for it to sell; my seller simply doesn’t want to wait at all for it to sell. He’s ready to be done with his sale, then use his good negotiating position to get a townhome at a great price.

  79. Zac says:

    and where will he live in the meantime?

  80. Pat says:

    Clotpoll, good luck. It sounds like you have convinced someone of a possible strategy in a tough situation.

  81. Clotpoll says:

    I just heard on Bloomberg that the world is going to end tomorrow.

    It is flat out amazing how the LOD contingent here can take any piece of news or data and spin it into a prophecy of absolute and eternal doom for anyone attempting to buy or sell a house.

  82. Zac says:

    It amazes me how you daily forget the premise of this blog: Keeping a watchful eye on the New Jersey Real Estate Market, the Housing Bubble, Politics, and Economics. Keyword; bubble.

  83. listentothecrybabywannabehomeowners says:


    I like your postings.

    Too many crybabywannabes here have RE tunnelvision; only datapoints that support their biased viewpoints are welcome, otherwise you get shouted down. Too bad, because that stifles what might be more lively debate.

    Funny, these folks even poke fun at the sales data gleaned from somewhere that indicate the owner may have taken a financial bath. Maybe we should refer such vindictiveness as “crybabywannabe syndrome.”

    That’s okay. I suggest crybabywannabes look at the latest lowball! editions, property overall is selling at 95% of list price, and half within 60 days of listing. (Put the data in a spreadsheet and run the basic statistics, looking at averages and medians. It’s all there.) Consider that one indication that real estate is selling. I will conjecture that most of what sells is in good condition and priced right I look forward to the next edition of lowball!, arguably the best data jb publishes, and a dataset of a nice slice of the NJ marketplace.


  84. Clotpoll says:

    Zac (81)-

    He’ll live at his second home at the shore (paid off in full) in the interim. I should take a lesson from this guy…just a smart dude who made 3 or 4 good, solid RE decisions over the last 25 years and has ended up with $1.3M of fully paid-off homes.

    Pat (82)-

    I can’t take credit for his strategy. He came up with it. I provide him with info and a second opinion, but he calls the shots. Every step of the way, this guy just keeps doing the right thing.

  85. Pat says:

    Look, here, young man.

    You want to know what people really think, but don’t say to your face? Come here. Remember, perception is everything.

    You want kisses, go to Hersheypark. ~

  86. listentothecrybabywannabehomeowners says:


    Sounds like you are doing a nice job representing your client. If I ever sell a property, I might come calling.


  87. Pat says:


  88. Zac says:

    where’s the ignore button on this site ???

  89. listentothecrybabywannabehomeowners says:

    Check this out:


    If a duplicate posting, I apologize.


  90. Clotpoll says:

    Zac (84)-

    I don’t forget that for a second. However, keeping my eye on a “bubble” that has either burst, is bursting, is deflating or is re-inflating is to focus on what’s already happened.

    I can watch the news, look at MLS stats and read magazines to find out what’s already happened. I come here to get a feel for what’s GOING to happen, by checking the opinions of people who can do more than barf out “Booyah” or repeatedly offer tunnel-visioned partisan spin and tired, old bromides in unison with “data” carefully selected to match the message. The outrageous confirmation bias exhibited by the LOD/permabear camp is so overwhelming at times that it threatens to drown out the less-spectacular- but much more reasoned- bearish opinons of people like BC Bob, Chicagofinance, Mr. Moderator himself, Pat, Seneca and others of their ilk. They’re connecting the dots of yesterday and today’s news and presenting an idea of what may come to pass as more than a recitation of old facts.

    If a long-term downward slide in prices is in the cards (and they may well be), my feeling is that it will play out along the lines of the scenarios presented these quieter, more thoughtful posters. Their ideas here are also, no surprise, much more future-oriented than those of the all-caps rabble.

  91. njrebear says:

    divide and conquer, eh?

  92. Home Seller says:


    Richard, I think Seneca actually makes some valid points in #42. (I’m actually a seller, not a buyer in the NJ market right now, so please do not think that I’m in the majority).

    Couple things…

    There will ALWAYS be uneducated buyers (or sellers) for any type of product! If people do not due their Due diligence when shopping (or selling) for a house, car, etc., then SHAME ON THEM!

    I know a guy in my town who’s house has been on the market for over a year. Asking price is over 20% higher than other similar houses, and he still won’t drop. There are cases like that but the smart sellers are doing their homework and selling their house fast. I can speak from personal experience.

  93. Clotpoll says:

    Home Seller (94)-

    In every market, there are exceptions to the rule…and exceptions that prove the rule.

    And, a house sold at an inflated price to an “idiot” is still a sale.

    As the permabears say, “caveat emptor”.

  94. still_looking says:

    For those blessed with access–
    any info on gsmls# 2364894 ??

    (as usual) Thx in advance–


  95. Pat says:


    Uh, to set the record straight, I’m a reformed prime instigator. You could say I stood up a bit for the losing team on the way up. (Reinvestor101 -bless his soul for putting up with me- will vouch for this.) I think I even took a swing at him last summer with a baseball bat.

    Anyway, now that the tide has turned, there’s no reason to beat that dead horse. There’s an opportunity to smooth the transition through data exchange and education.

    But cheerleaders, for both sides, have a role. You can always gauge the game by the cheerleaders.

  96. still_looking says:

    and yet another….


    tx (in adv.)


  97. still_looking says:

    and finally…. 2365201….

    last one – (promise!)


  98. att says:


    Regarding your post about your seller client who has 4 properties worth 1.3 million – I’d say he’s smart investor only if he is either offloading them periodically or generating positive cash flow from them.

    Otherwise I cannot fathom having 4 properties (however low I bought them) and paying on average 7k property tax on each. Along with repairs (say 3k pa each), insurance and utilities the bill is 12k per property per annum. He would be spending 48k just like that every year.

    So unless he is generating positive cash flow, I dont think he can be termed as a smart investor.

  99. listentothecrybabywannabehomeowners says:


    If we accept your math, and presume the landlord receives $2k per month rent for each property, is cash flow is $4K per month or $48k per year. Not too bad in terms of cash flow.

    Looking at return on $1.3M worth of assets, $48K (if we presume this his he landlord’s net) is paltry, and that does not include depreciation and other expenese. The landlord could do better putting his $1.3M in a 5% CD. On the plus side he has generated $1.3M in net worth by getting other people – renters – to pay for it.

    Saddest part of all is the tenants pay, as much as Mr. Landlord can pass on, the cost of taxes, high insurance, etc. So do all those on this blog who rent.

    Anyone who generates $1.3M in assets, primarily by getting other people to pay the way, is a smart investor in my book.


  100. thatbigwindow says:

    What about the “new” landlords (aka people who read Rich Dad Poor Dad) who took out an exotic mortgage to finance their rental property? I imagine they are saying WAAAAAAH too!

  101. att says:

    Actually my bad.

    Clot mentioned 3-4 real estate “decisions” that the smart investor made, not that he had 3-4 properties.

    So it maybe that this guy owned just one primary residence and one secondary home.

    This guy has a clever strategy of getting the max. out of his house, by dropping the price 5k below the contingent bid price. But at the same time it can backfire too (scenario: the contingent bid did not go through and the smart guy would receive 3-10% off offers on the ‘new’ lower price).

  102. att says:

    Listen (post #102).

    You seem to have just read the rich dad poor dad’s book on getting rich via real estate.

    Let’s talk the math of buying and then rent it. If you buy a townhome, normally it would cost you 400K. The monthly mortgage would be 2.4K (30 year fixed), townhome associateion fee about 150$ per month, property tax 500$, insurance 100$. So the guy would pay about 3100$ per month for that townhome.

    How much you think that the guy could rent it for. I’ve seen townhomes going from 1400$ per month to 2000$ per month. So even in best case scenario there is a negative cash flow of 1100$ per month or 12K pa. If you compaund that loss you are looking at a staggering figure over the course of time.

    BTW that Rich dad poor dad author ‘Robert kiyoski’ is a total fake and used made up examples in his book. google Jon T reed and read his rebuttal of Robert kiyoski.

  103. Clotpoll says:

    Att (105)-

    I cannot believe I’m agreeing with you, but Robber Kiyosaki is a scammer and his advice should be avoided at all costs. That a dropout from the Amway/multi-level marketing world who has concocted a fantasy of a life story can gain this much traction in the US is an indictment of how financially illiterate we are as a nation.

    If you haven’t caught his multi-part PBS series, tune in. It makes an excellent substitute for Ipecac.

  104. Clotpoll says:

    Att (104)-

    Oh…and I have no doubt we’ll get a couple of wisenheimers slicling even more off a substantially-reduced price.

    However, water finds its own level. Our new price represents a substantial discount that’s well below other already-discounted properties. It’s more house for less money…and that dog will hunt.

  105. listentothecrybabywannabehomeowners says:


    Any rational investor, including yours truly, would never buy and lease a property on a cash flow loss basis. Anyone who does is foolish; it appears a number of people have been.

    I wish clot’s client well in his strategy.

    Have you read Rich Dad? I have not and don’t plan to. Nothing in life is free.


  106. thatbigwindow says:

    I actually know one of these psudo investors. Guy is a friend of a friend. He is 30 yrs old, and has a well paying job. He has interest only loans on 2 condos which he rents one for negative cash flow and the other he can not find a tenant, so he is trying to sell but he can’t. Then on top of that, he has a house in a prestigious town with an interest only loan as well. He also is paying for his wife to go back to school and is leasing 2 cars and is financing a motorcycle. He mentioned that things are tight with him now financially, but his payments haven’t gone up…yet that is.

    This guy has never seen real estate go down…but he is about to and dispite his high paying job, he is severly in the negatives.

  107. thatbigwindow says:

    also, that seems to be the trend with people ages 21-30. Not making enough money?? Go back to school and put yourself in more debt. Talk about being afraid of life!

  108. att says:

    listen (#108).

    At least you agree with some basic fundamentals that buying (& subsequently leasing) on basis of negative cash flow is a bad idea.

    But that is the point that most of the people here are arguing for. It makes sense to rent in current envrionment/prices as compared to buying. Esp. given the high property taxes.

  109. att says:

    clot (post 107)

    Good luck with new venture of the smart investor.

    I think your deep discounts would inspire other sellers too, to even undercut your price. That way the race to bottom scenario (as predicted by many bloggers here) would turn out to be true.

  110. listentothecrybabywannabehomeowners says:

    I have to chuckle, the people on this blog, most of whom have never bought/owned real estate, talking about the fundamentals of buying and owning. I bet most of these folks couldn’t and wouldn’t buy if RE was 50% lower. Too many other factors in play – risk aversion, consumer debt, risk aversion, living beyond means, risk aversion… The rationale for remaining a crybabywannabe is simply a cover for other issues.



  111. thatbigwindow says:

    listentothecrybabywannabehomeowners : why do you care what people do so much? Could it be that you have a vested interest in promoting the home “ownership” propaganda?

  112. James Bednar says:

    There is a “hidden” variable when it comes to analysing cash-flow, it’s anticipated appreciation. Once you factor in what the buyer anticipates the property to be worth in the future, I guarantee the decision will make sense.

    These buyers might be cash-flow negative at purchase time, but they may also have very high expectations for future appreciation. Thus, the negative cash-flow scenario is a necessary part of the investment and future apprecation will cover the short-term losses.

    A local bear would look at the cash flow together with low expectations of future appreciation and would come to the conclusion that the investment isn’t a good one as appreciation will not make up for the carrying cost.

    I think it’s a pretty safe assumption that folks buying negative-cash flow properties expect future appreciation rates to be on par with what we’ve seen over the past 4-5 years.


  113. thatbigwindow says:

    Another question for you: do you think that someone making 40k a year should take out an exotic mortgage simply to get into the real estate game?

  114. att says:

    JB (#115)

    What if the future appreciation is -4% for next three years :) lol.

    I bet none of the current investors played or even saw a buy vs rent calculator which accounts for negative appreciation.

    The excel file calculator that I have tells me to rent even at positive appreciation of 5% of an owned property.

  115. listentothecrybabywannabehomeowners says:

    #114 & #116

    No, and no.

    jb – I agree, people are looking for appreciation to cover short term losses. Even in a good market that is a stupid strategy.

    Best approach is be cash flow positive from the start, unless you have deep, deep pockets. Then you don’t need appreciation bail you out.


  116. BC Bob says:

    “Best approach is be cash flow positive from the start, unless you have deep, deep pockets”


    Even if you have deep, deep pockets it is not prudent to continue to feed a hungry dying beast. Why not follow what “real” investors are doing. Putting their money in vehicles that are appreciating not in markets that need to be fed/coddled continually. Of course, if you are not naked long, that’s another strategy.

  117. chicagofinance says:

    listentothecrybabywannabehomeowners Says:
    January 23rd, 2007 at 7:47 am
    I have to chuckle, the people on this blog, most of whom have never bought/owned real estate, talking about the fundamentals of buying and owning. I bet most of these folks couldn’t and wouldn’t buy if RE was 50% lower. The rationale for remaining a crybabywannabe is simply a cover for other issues.

    Chucklehead…..my wife and me….

  118. still_looking says:

    ….in case it got missed….

    for those with mls access–
    any help with info on mls #s


    would be appreciated
    as always, thanks in advance…


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