Weekend Open Discussion

This is the time and place to post observations about your local areas, comments on news stories or the New Jersey housing market, open house reports, etc. If you have any questions you wanted to ask earlier in the week but never posted them up, let’s have them. Also a good place to post suggestions, requests for information, criticism, and praise.

For readers that have never commented, there is a link at the top of each message that is typically labelled “[#] Comments“. Go ahead and give that a click, you might be missing out on a world of information you didn’t know about. While you are there, introduce yourselves to everyone.

For new readers that have only read the messages displayed on the main page, take a look through the archives, a substantial amount of information has been put online in the past year. The archives can be accessed by using the links found in the menus on the right hand side of the page.

This entry was posted in General. Bookmark the permalink.

325 Responses to Weekend Open Discussion

  1. James Bednar says:

    From the Record:

    N.J. takes lead on global warming war

    New Jersey’s lawmakers launched one of the nation’s most aggressive attacks on global warming Thursday, approving a crackdown on greenhouse gases that could force changes in everything from how we get power to the cars we drive.

    The Assembly and state Senate overwhelmingly passed a measure to cut the state’s heat-trapping emissions by 80 percent by mid-century, a target equaled by only one other state so far.

    The goal, if met, would make only a small dent in worldwide trends toward higher temperatures, but supporters said New Jersey’s move, along with other states, could be key in getting the federal government to follow their lead.

    “In the absence of leadership on the federal level, the burden of reducing greenhouse gases has now fallen upon the states,” said Lilo Stainton, a spokeswoman for Governor Corzine. “This legislation … will make New Jersey a national leader in combating global warming.”

    Assemblyman Michael Patrick Carroll, R-Morris, criticized the bill for not including “one single specific proposal” to decrease New Jersey’s reliance on non-renewable energy sources. A better bill, he said, would encourage the use of radiant heating, hydropower and wind farms.

    The bill follows a California law, approved last year, that mandates cuts in carbon dioxide and other greenhouse emissions to 1990 levels by 2020. But New Jersey’s effort goes further, requiring an 80 percent cut in emissions by 2050. Only Minnesota has adopted as ambitious a target.

  2. Jamey says:

    RE: Wave of Foreclosures Hits L.I.:

    Don’t worry, the next round of Wall Street bonuses will turn that sucker around. Right? Right?

  3. James Bednar says:

    From the Daily Freeman:

    Housing inflation outpaces local income growth, study shows

    Low interest rates, a hot real estate market and a migration northward from New York City have led to inflation in the Hudson Valley, and the income of local residents isn’t keeping up with rising home prices, a Marist College study shows.

    The findings are part of the 145-page “Economic Report of the Hudson Valley for 2006,” prepared by the Marist College School of Management’s Bureau of Economic Research. The report was released Thursday.

    Christy Huebner Caridi, an assistant professor of economics at Marist, said the real estate market traditionally is affected by population growth, but in the Hudson Valley, it also has been affected by higher-income buyers seeking to move away from the New York City area.

    Caridi said there is a direct correlation between post-9/11 property sales and people moving to the Hudson Valley.

    “What’s happened is, this area has been thrown off kilter in that the increase in housing values is not tied currently to population growth and not currently tied to income growth,” she said.

    “At the time of the dot-com bust, about ’98 and ’99, a lot of money, wealth started to shift away from financial assets towards real estate, and it was helped in part by accommodative (Federal Reserve) monetary policy,” Caridi said. “There was cheap money available. There was a huge pool of money, liquidity literally worldwide, that permitted people to borrow money to buy homes.”

    Caridi said housing values quickly outpaced income after the terrorist attacks of Sept. 11, 2001.

    “Five years ago, the person who could buy an average home in Dutchess County can no longer do it, given the change in income relative to the change in housing costs,” she said

  4. James Bednar says:

    From Bloomberg:

    Bear Stearns Plans $3.2 Billion Fund Rescue to Halt Fire Sale

    Bear Stearns Cos. plans to take on $3.2 billion of loans to stop creditors from seizing assets of one of its money-losing hedge funds in the biggest fund bailout since 1998, people with knowledge of the proposal said.

    Largest Since LTCM

    “The problem is not what we see happening, but what we don’t see,” said Joseph Mason, associate professor of finance at Drexel University in Philadelphia and co-author of an 84-page study this year on the CDO market. “We don’t know the price of these assets. We don’t know which banks are exposed to this sector. These conditions are the classic conditions for financial crises across history.”

    The bailout of the fund would be the largest since Long- Term Capital Management LP, which received $3.625 billion from 14 lenders in 1998. After Long-Term Capital, run by John Meriwether, lost $4.6 billion, lenders including Merrill and Bear Stearns agreed to take a stake in the Greenwich, Connecticut-based fund.

    They sold the assets over time to limit the impact of its collapse.

  5. James Bednar says:

    While it makes for some sensational reading, I don’t feel the comparison with LTCM is at all appropriate.


  6. chicagofinance says:

    Donald Says:
    June 21st, 2007 at 9:09 pm
    “#177 Please Donald they will,just give it time, it happened before it will happen again. Watch it all play out over the next 18 months”

    No, prices are not coming down in Manhattan. You do not realize that Manhattan has safeguards to prevent massive foreclosures. Co-op boards screen the credit of buyers very thoroughly and they require at least 25% down so you do not have that many owners who took out risky mortgagaes.

    Mr.Duck: Don’t you know that most mortgage brokers in Manhattan specialize in “doctored” apps to co-op boards, with shadow books and trumped up credit profiles?

    This was profiled over 2 years ago.

  7. njrebear says:

    from cr


    Hammered by exposure to a risky type of mortgage-backed security, Brookstreet Securities Corp. of Irvine, Calif., yesterday told its 500 or so affiliated reps and advisers that “disaster” had struck, and that the firm could close if it doesn’t come up with at least $5 million.

    The e-mail continued, “It would take a capital infusion of at least $5,000,000 to keep the company in compliance with no additional guarantee that additional markdowns will no be forthcoming.”

  8. pesche22 says:

    So let me understand this. They blamed
    the State tropper driving corzine.

    Cop out. Reminds me of “The Maltese Falcon”

  9. James Bednar says:

    From the AP:

    Mortgage insurance makes gains

    Tales of ballooning mortgage payments are scaring home buyers straight.

    After taking on risky adjustable-rate loans or multiple mortgages to pay less upfront during the housing boom, borrowers with limited capital for down payments are increasingly opting for safer fixed-rate mortgages backed by private mortgage insurance.

    Applications for private mortgage insurance, or PMI, rose 56 percent to 191,525 in March from February, according to the Mortgage Insurance Cos. of America, an industry trade group. Volume fell in April, but remained well above rates from last year.

    “The consumer is getting more cautious and returning to the tried and true fixed-rate loan with insurance,” said Susan Wachter, a real estate professor at the Wharton School of Business.

  10. thatbigwindow says:

    Re: post # 1


  11. James Bednar says:

    I haven’t read the bill yet, but I’ve got a gut feeling it’s really just a show.

    I can’t believe that any legislation with real teeth would have been pushed through that quickly… At least I hope. With any legislation of this sort, the potential for negative economic impact is real, and can be damaging. Especially when our close neighbors don’t have the same policy.


  12. Salty Steve says:

    Here’s some off-the-wall thinking for a friday morning:

    I wonder if someone has the data to plot the ratio of average family income to average home sales price on a per county basis.
    I wonder if there is a ratio there that indicates normal house prices. The ratio might need to be enhanced to include say monthly mortgage payment on a 30yr fixed loan at that dates rate. (This would help normalize the crazy high interest rates of the early 80s)

    This might help us see if there are long stretches where the ratio is constant and if times like 2005,2006, etc.. are way out of whack with the norm.

    anyways, just a thought….

  13. James Bednar says:

    I wonder if someone has the data to plot the ratio of average family income to average home sales price on a per county basis.

    We do, and I think we went through that exercise sometime in late ’05 or early ’06.

    I wonder if there is a ratio there that indicates normal house prices.

    Normal? No. Historic averages over certain time periods? Yes.


  14. njrebear says:


    Let’s say i own the riskiest slice of CDO’s and i want to buy insurance for my investment.

    Do i pay insurance at the current rates forever or will the insurance rates be adjusted periodically based on some index [abx?]? If the insurance premium is adjusted periodically, what does an average period look like [monthly, quarterly… ]

  15. JR says:

    I just had my offer on a home in Montclair accepted. I was wondering if anyone had a good recommendation for a law firm for attorney review. My agent has recommended some individuals but I’d be more comfortable with a firm – they would likely not be that reliant on referrals from my agent and carry a larger insurance policy. Need to make a decision soon so any help would be appreciated.

    Recommendations on inspectors also welcome. I hope this sort of request is not inappropriate on this forum – let me know if it is.

  16. BC Bob says:

    “Bear Stearns Cos. plans to take on $3.2 billion of loans”


    Their hand was forced. There was no alternative. The wholesale dumping of mortgage bonds would have forced the whole sector lower resulting in investor runs on other mortgage bond hedge funds and major write-downs for IB’s. Is this enough of a wake up call for investors, to start jumping out of this junk? Are the rating agencies asleep at the wheel or doing business with a wink?

  17. BC Bob says:

    bear [14],

    I would imagine ins is paid one time. However, I am not in this sector. Someone in CDO’s/CLO’s would have a better handle.

  18. JR says:

    Some quick comments on the market in Montclair from my recent home search. Definitely some inventory and every week there were some price reductions. However the best homes we looked at were priced below what they were likely to sell at in the current market and were drawing multiple offers.

  19. Willow says:


    We used Willy for a house we eventually backed out of because of all the repairs that needed to be made. The owners wouldn’t come down the $12,000 that was needed for the repairs. Eventually, they sold it for exactly $12,000 less.

    Anyway, this inspector was really good – could see that the realtor was getting aggravated with all that he found. He wasn’t available when we bought our present house and the inspector we had stunk. There was a leaking heat pipe that he didn’t even notice among other things.

  20. Willow says:


    Let me explain that when we needed an inspector, his company was just him. This was in 1995.

  21. R Patrick says:

    Salty and JB

    Average or Median? I think the super rich drag the median up. I read an article while waiting in an MD’s office ( I know, no reference ) that the state Average is 64K but the median is 34 K meaning that 1/2 the people are making less than 34K in this state.

    I think that’s very signifigant.

  22. James Bednar says:

    However the best homes we looked at were priced below what they were likely to sell at in the current market and were drawing multiple offers.

    Standard fare in Montclair, especially when dealing with Schweppe Burgdorff listings.

    They’ll usually list at a price that is significantly under market, let the listing sit for at least a week or two before accepting offers. They usually set a date on which the seller will accept offers. Most buyers are prepared to bid on that date.

    They’ve got their routine down pat, they can generate a bidding war in almost every case.

    This is the ideal situation for a seller.


  23. James Bednar says:

    Recommendations on inspectors also welcome. I hope this sort of request is not inappropriate on this forum – let me know if it is.

    I don’t typically allow that sort of thing, because it constitutes advertisement. I prefer if referrals go through me, via email.


  24. JR says:

    “I don’t typically allow that sort of thing, because it constitutes advertisement. I prefer if referrals go through me, via email.


    Sorry about that and understand. Please do not reply to the board on my request. I’ll send jb my e-mail.


  25. James Bednar says:

    Forwarded you the link posted.


  26. DebtVulture says:

    Njrebear said:
    “Let’s say i own the riskiest slice of CDO’s and i want to buy insurance for my investment.

    Do i pay insurance at the current rates forever or will the insurance rates be adjusted periodically based on some index [abx?]? If the insurance premium is adjusted periodically, what does an average period look like [monthly, quarterly… ]”

    You can buy CDS (insurance) protection on your investments. Typically CDS protection can be bought for 1 year, 3 year, 5 year 7 year and 10 years. You agree to a rate upfront, let’s say 500 basis points, and pay that rate every year. So if you want to buy $10 million of protection on your investment and you agree to a 5-year CDS costing 500 basis points, you pay $500,000 a year for 5 years. That market value of that CDS can change every day but you locked into that 500 level. Of course you can sell it the next day and put it back on at a different level, but there are costs associated with that.

    Hope that helps.

  27. Willow says:


    Sorry about that! Won’t happen again. I have no link to the company at all.

  28. James Bednar says:

    Some fun stats..

    njrereport.com – YTD

    100,000+ Unique Visitors
    500,000+ Visits
    1.5m+ Page Views
    Avg. Page Views/Visit: 3
    Avg Stay Per Visit: 7 minutes


  29. James Bednar says:

    Surprising that the 10y is sitting at just under 5.20% this morning.

  30. sas says:

    “Schweppe Burgdorff listings”

    You have to watch these guys, they like to play tricks, as JB pointed out.

    At this point in the RE game, I can’t see why anyone would get involoved in a bidding war. Bidding wars are just made to get you emotional, and your common sense goes out the door. There is a word for this scheme…I can’t remember it.


  31. BklynHawk says:


    Sort of OT, but I know you and some people on the board have a fondness for the Garbage Pail Kids and would like this…



  32. James Bednar says:

    Winner’s Curse – A tendency for the winning bid in an auction to exceed the intrinsic value of the item purchased. Because of incomplete information, emotions or any other number of factors regarding the item being auctioned, bidders can have a difficult time determining the item’s intrinsic value. As a result, the largest overestimation of an item’s value ends up winning the auction.


  33. BC Bob says:

    “There is a word for this scheme…I can’t remember it.”


    Not one word but appropriate. Sell the sizzle, not the steak.

  34. 2010 Buyer FKA 2008 says:

    #14 njrebear

    That’s a great question, wish I could answer that for you. I assume when you say insurance you are really talking about a hedge. It would be difficult to say without knowing what your entire portfolio looks like. The CDO’s you have might actually be your own hedge against another on of your investments. Depending on your strategy you might put on a hedge at the current value when they first purchased the assets and periodically adjust the amount of insurance they need. I would suspect, totally speculating here is that most of those buyers are using leverage to purchase a ton of the product and have no hedge positions. That’s why, IMHO….the situation with Bear is pretty big because it not only will affect those two funds.. but will also give a pt of reference for others in the market.

  35. SG says:

    Salty Steve:

    I wonder if someone has the data to plot the ratio of average family income to average home sales price on a per county basis.

    The Home sales price data is captured at MSA level by OFHEO since 1975. I have plotted this data against income, adjusting by Interest rates. See the charts at following link.


    Assuming one buys house worth 100 times of HPI index, there is plot for percentage of average income required to buy the house.

    Even though affordability has gotten lower in last few years, it is still better then 80’s. But late 90’s definitely seem to have the best affordability in last 25 years.

    The main question now is, are we heading into 80’s or in 90’s in next 5 years.

  36. 2010 Buyer FKA 2008 says:


    Who are your Top 10 posters? Although it would probably be a little difficult to lump Booya’s names together.

  37. James Bednar says:

    This came up yesterday, posting again here:

    Out of touch with realty reality

    Despite turmoil in the housing markets that includes record foreclosure numbers, mortgage rate increases and home price depreciation, homeowners don’t believe there’s a real estate slump, according to a new poll.

    Most – 55 percent – are confident that their homes continued to increase in value compared with a year ago, according to a nationwide telephone survey conducted this month by The Boston Consulting Group (BCG), a business and management strategy firm.

    The overconfidence of homeowners doesn’t jibe with the findings of most home-price indices, which point to lower median single-family house prices of about 2 percent nationwide.

    “Americans [are] positive about their homes’ value and believe in a bounce-back in residential real estate overall,” said BCG Senior Partner and consumer spending expert Michael Silverstein.

    74 percent of the survey respondents said they were confident that they could sell their home within six months at the price they think it’s worth.

    Looking long-term makes homeowners even more optimistic: 85 percent believe their home will rise in value during the next five years, and 63 percent believe a house is a good investment.

    A majority – 52 percent – said the current housing slump would end within two years. There, they seem to agree with housing industry insiders such as Lawrence Yun, economist with the National Association of Realtors and Doug Duncan of the Mortgage Bankers Association.

  38. gary says:

    “There is a word for this scheme…I can’t remember it.”

    Take your pick: fleece, swindle, con, bilk, dupe, rip-off… it’s what the used house cartel dealers do best.

  39. Read My Lips: NO REBOUND NO HOPE 2008 Misery -Real Estate Depression says:



    A serious attitude adjustment is in order.
    We are nowhere near the bottom yet.

    The masses always lose. hehehehe

  40. thatbigwindow says:

    Off Topic, but cool:

    Google has done it again…


    Free directory assistance from Google. Wow, this is really cool and it is free.

    Nice to see free things for a change!

  41. sas says:

    Today is the day for these guys:

    “Blackstone Shares Begin Trading on NYSE; $4.13 Billion IPO Among Largest in U.S.”

    These guys are a bunch of crooks.

  42. Read My Lips: NO REBOUND NO HOPE 2008 Misery -Real Estate Depression says:

    Buck the baaaaaaaaaaaaa’ers and one will do well over long periods of time.


  43. Read My Lips: NO REBOUND NO HOPE 2008 Misery -Real Estate Depression says:
  44. James Bednar says:

    I know we have a handful of folks here involved in politics. Can I ask a question?

    Why is it “bad” when energy prices go up?

    Why is it “good” when housing prices go up?

    When the price of oil and gas spikes, the politicos come out screaming market manipulation and price gouging.

    When the price of homes spike, the politicos seem like they go out of their way to defend and protect it.

    For example:

    Senate Passes Pro-Renewables Energy Bill

    Price gouging provisions that make it unlawful to charge an “unconscionably excessive” price for oil products, including gasoline. It also gives the federal government new authority to investigate oil industry market manipulation.

    Why isn’t anyone screaming about price gouging as it applies to housing? Surely there must be someone in Washington that thinks home prices are “unconscionably excessive”. I won’t even bother to start talking about “market manipulation”.

    Dare I draw a comparison to China, but surely their policies regarding house price increases seem well founded.

    Beijing pledges steps to cool home prices

    Or how about this one out of Korea, talk about a “jaw-dropper”. Can you imagine this coming out of a U.S. politicians mouth?

    Seoul strives to cool real estate market

    South Korea’s finance minister apologized Wednesday for the failure of the government’s real estate policy.

    In a press conference, Minister of Finance and Economy Kwon O-kyu unveiled another set of measures to cool down the real estate market.

    “I would like to take this opportunity to apologize to the public and the people who do not own houses for the recent surge in housing prices,” Kwon told the nationally televised news conference also joined by economy-related ministers. Kwon is in charge of the country’s economic policy as deputy prime minister.

    Under the new package, the government would toughen rules on home-backed lending and build more homes. “The government will focus policy capabilities on supplying quality homes at cheap prices, in large quantity and at a speedy pace,” Kwon said.

    He expressed confidence the new measures would cool down the hot real estate market, saying: “It is highly risky to buy a new home at present using borrowed money.”

  45. SG says:

    One more observation:

    I was looking the 25 year charts once again and seems like one can draw some easy thumb rules.

    1. Boom: Reduction in Interest rates results in Housing boom. Rates went from 16% to 10% from 81 to 89, resulting in significant gains. Similarly rates went from 7.5 to 5.5 from 99 to 05, causing the current boom.

    2. Every Boom period overshoots itself.

    3. Bust does not really require interest rates hike. From 89 to 93, rates went from 10% to 7%, but home prices still declined significantly.

    We are just getting down from peaks from current boom. I think one has to wait and see clear bottom to be sure.

  46. James Bednar says:

    I tip my hat to you Minister Kwon O-kyu.


  47. lisoosh says:


    Bernards could get soaked in backyard pool fight

    The owner of a pricey swimming pool in Somerset County built after a construction permit was issued in error — and next door to the township mayor’s home — said yesterday he was denied variances needed for keeping the pool, and was preparing a lawsuit to recoup the expense.

    … A construction permit allowed Pesot and his wife, Susan, to build the pool and a patio and add landscaping and a perimeter fence last year.

    … The township zoning officer, after issuing the construction permit on May 16, 2006, reported discovering two zoning violations a month afterward when the pool project was 90 percent completed.

    …Pavlini, while speaking at a board of adjustment meeting last month, said she disapproved of the fence, which combines three different materials, and is visible 100 feet from the front door of her home, which is also for sale for $2.1 million.

  48. SG says:

    JB: Its all about Votes.

    Percent of population affected by increasing home prices is only the folks who currently rent and are looking to own home. That population is at most 5% (may be even smaller). This population in all respect is minority.

    On the other hand, I think in most developing countries, China, South Korea, there is large percent of population that is migrating to cities and is looking to buy homes. Also the RE boom there is way much bigger. I am not very familiar with politics in that part of the world. It may be that people truley respect candid confession.

  49. James Bednar says:


    Good point.


  50. njrebear says:

    DebtVulture ( 26 )
    Thanks for the answer. That was very helpful.

    Going forward, we can expect insurance ‘rate reset’ on existing CDO’s.

  51. Clotpoll says:

    A little food for thought, from an industry publication. BTW…John Tuccillo was NAR’s Chief Economist before Lereah. He was as good as Lereah was a shill and an idiot:

    By Stefan Swanepoel, RISMEDIA, June 22, 2007-

    “With the expansion of the number of Realtors, the level of competence has fallen to its lowest point ever,” says former NAR Chief Economist and best-selling author Dr. John Tuccillo.

    According the 2007 Swanepoel TRENDS Report, the 2000-2005 real estate boom not only caused a huge surge in new agents but during the heyday many of those that left or will soon be leaving the industry contributed to weakening the reputation of the profession in general-especially in the eyes of the new online consumer. This is a regrettable situation and although it has been experienced before, this cycle is considerably more exaggerated.

    “Consumers have no guarantee that anyone calling themselves a Realtor actually knows what they are doing,” says industry consultant Jim Sherry.

    According to Shue, real estate is no longer a part-time, halfway station on the road to making a quick buck. The new online consumers are expecting a great deal more than their counterparts a decade ago. The area in which Shue feels real estate agents need improvement directly relate to their skill sets:

    – Buyer Agency and Seller Agency
    – Effective Marketing Online
    – In-depth Neighborhood Knowledge
    – Generational Selling
    – Selling of Unique and Luxury Properties
    – Staging of a Home

    “Today’s consumers are almost mercenary in their search for a good deal. Realtors that don’t have good negotiating skills might as well be going into a sword fight with a toothpick. You can never learn or be prepared enough,” says popular national instructor and speaker Terry Watson.

  52. James Bednar says:


    Was that in reference to my comment yesterday?

    James Bednar Says:
    June 21st, 2007 at 11:38 am
    The Realtor(tm) brand is being systematically destroyed by this kind of nonsense. If these antics continue, the brand will be worse than worthless, it’ll be a detriment.


  53. njrebear says:

    2010 Buyer FKA 2008 (34),
    Yes, i was talking about hedge. Your response is appreciated.

  54. James Bednar says:


    From the AP:

    Budget plan gives Corzine power to spend on asset sales

    The state budget approved Thursday by lawmakers gives Gov. Jon S. Corzine authority to spend whatever “may be necessary” to get ready to sell and lease state assets such as toll roads.

    The language, tucked into the third to last paragraph in the 291-page budget bill, was never revealed by Corzine nor discussed by lawmakers as the budget proposal was developed over recent weeks and adopted Thursday by the Assembly and the Senate.

    Republicans expressed shock, contending the language gives Corzine unlimited authority to freely spend taxpayer money on his hopes to make more money off state assets to ease state debt and free money for other needs.

    Corzine hasn’t unveiled his plan, but Democratic Sen. Raymond Lesniak, D-Union, has said it would involve regular Garden State Parkway and New Jersey Turnpike toll increases.

    Assemblywoman Jennifer Beck said the language “opens the door for a very risky fiscal gimmick.”

    “We have not had adequate time to study the idea of a state asset sale such as selling the Turnpike and we should not be giving the green light to such a plan with a barely noticed four-line paragraph in the budget,” said Beck, R-Monmouth.

    The language states, “There are appropriated such sums as may be necessary for legal and engineering fees, financial advisers and other consultants and services associated with, as well as any other costs determined necessary in preparation for, the monetization, sale, or lease of public assets, subject to the approval of the Director of the Division of Budget and Accounting.”

    The language is unusual in that most budget items come with a specific dollar figure.

  55. Clotpoll says:

    Grim (52)-

    Not exactly. RISMedia sends a daily e-newsletter to the industry, and I jumped on this article, because it featured comments from John Tuccillo, a guy I really respect. I can recommend any of his books, especially The Eight New Rules of Real Estate (published in 1997), in which he questions the relevance of MLS systems, local Realtor boards, and a variety of other sacred cows of RE.

    He’s been flying under the radar for a few years…I get the feeling he’s not thrilled about the direction NAR has taken.

  56. Richard says:

    i had a run in with the schweppe folks a couple of years ago. i put in a bid on a house being sold by the inventor of valium Leo Sternbach. he was like 96 and finally moving down south to fully retire. it was a ‘closed bid’ process and upon expiration the bids were opened up and my bid was accepted. couple of hours later we were called saying someone else entered a bid. i said i thought the bidding process expired. of course i got a BS reply. safe to say i got outbid and lost the house. i promised to never get involved with schweppe or a closed bid process again. it stinks of corruption.

  57. Richard says:

    >>These guys are a bunch of crooks.

    no they aren’t. they just want to keep their current status so they pay 15% capital gains tax instead of their real status of a corporation having to pay 33%. crooks indeed.

  58. SG says:

    JB: You got me interested in looking at Asian countries. I think they may have much worse crise in RE looming.


    Flip side of the boom: China could face Japan-style debt crisis, analysts warn

    “If the bubble bursts, then you will have a banking crisis like Japan in 1990,” he says. “The question is how China can manage after the bubble.”

  59. Donald says:

    The bidding wars in Montclair sound interesting. Is that something I should consider? Lower the price drastically with the idea of the buyers bidding up the price to an acceptable level? I could lower the price to $750,000, with the hopes of the bidding reaching $850,000, which is the least I will sell my house for.

    My main concern is that buyers will bid close to the asking price and will not want to raise their bids to what I will accept.

    Any thoughts???

  60. BC Bob says:

    Regarding BX,

    Would you buy anything they were selling?

  61. Lindsey says:

    Re Post 35:


    I appreciate your effort to track affordability, but there is definitely a problem with your numbers, at least toward the end of the graph.

    According to NJAR, the median price of an existing SFH sold in NJ was $360K, $115K more than the price you have.

    I would go so far as to say that, from Monmouth County northward a $245K house would not only be rare, it would in most cases be very undesirable due to location, condition or both.

    In Monmouth County (as JB has noted) the median price for an existing SFH was something like $450K. Median income in the county is about $82K.

    Using antiquated assumptions of 20% down a person of median income who obtained a 6% mortgage would pay closer to 45% of their income on housing (that includes not just the mortgage, but taxes, utilities and maintenance costs).

  62. PeaceNow says:

    re: politics and prices

    Incumbent pols applaud when home prices go up because the (presumed) voters living in those homes then feel prosperous and are more likely to vote for the incumbent. They moan when energy prices go up because voters might hold them responsible.

  63. pesche22 says:

    we have gangs in hillsdale,westwood,emerson
    suprise. will this effect the price of
    my home?

    and the word is caper

  64. nynjguy says:

    the montclair system only works when the market has a history of it.

    People bidding on montclair homes know that there are going to be 5-10 bidders on a property if its priced accordingly.

    idk where your house is but i doubt it wil work.

    One realtor tried that trick in verona and scared off myself and another bidder. they ended up taking asking.

  65. Thanks JB for all the great info here. I have lurked an exceptionally long time. This website was my comfort when I wanted to move several months ago.
    Here’s my dilemma. Purchased a house in a nice neighborhood spring 2003. New to the area thought prices were ridiculous, but thought that was just the way it was here. Knew we would need more space due to kids. Had the architect plans to add on done.
    We’re trying to decide if it would be wise to sell now and rent for a year then buy or if we should stay put for another year and move in 08.
    Not trying to time the market, just don’t want to lose to much $ in our current house.

  66. pesche22 says:

    they tried to stop the bx offering.
    what a pack of low lifes . only the pols
    would try it.


    even jackson wanted to dip his beak

  67. UnRealtor says:

    “There is a word for this scheme…I can’t remember it.”


  68. Rich In NNJ says:

    we have gangs in hillsdale,westwood,emerson

    Opinion or documented news articles?
    If you have a link to the articles I would love to read them.

  69. pesche22 says:

    front page todays bergen record section

  70. James Bednar says:

    Purchased a house in a nice neighborhood spring 2003.

    We’re trying to decide if it would be wise to sell now and rent for a year then buy or if we should stay put for another year and move in 08.
    Not trying to time the market, just don’t want to lose to much $ in our current house.

    Can I ask what the reason for moving is?


  71. pesche22 says:

    gangs in nj, nj’s biggest law enforcement
    problem. jails are loaded with them

  72. Rich In NNJ says:



  73. 2010 Buyer FKA 2008 says:

    Totally unrelated but I thought would be interesting, wish NJ Politicians would do the same…

    CIA to Air Decades of Its Dirty Laundry

    The CIA will declassify hundreds of pages of long-secret records detailing some of the intelligence agency’s worst illegal abuses — the so-called “family jewels” documenting a quarter-century of overseas assassination attempts, domestic spying, kidnapping and infiltration of leftist groups from the 1950s to the 1970s…


  74. Bloodbath in Winter 2007 says:

    Just wanted to thank Rich in NNJ for the Ridgewood #’s yesterday. I’ll closely be monitoring both homes for the next 6 months.

    Thanks, man.

  75. James Bednar says:

    Here is that link:

    18 reputed gang members arrested

    Federal immigration agents arrested 18 suspected gang members in Westwood, Hillsdale and Emerson on Wednesday, placing them in deportation proceedings.

  76. pesche22 says:

    on that BR article note the comments
    by the chief, no chestnuts to tell the
    truth. NJ gang problem, biggest problem
    law enforcement has in the state. and
    its by far.

  77. James Bednar says:

    Nice recap of the Harvard Joint Center report at the Mortgage News Daily blog:


  78. pesche22 says:

    most of the towns in Bergen county
    are sleeping at the switch when it
    comes to these gangs.

    BC property allways goes up. never down

  79. House Hunter says:

    Anyone hear about a new legislation quickly, and quietly put through the NJ Legislature regarding: Home owners selling to move out of the state of NJ will be slapped with 3% fee based on the home sale price??? Absolutely insane if it is true!

  80. 3b says:

    JB i know fro a fac it is a problem in Westwood, and it will impact on housing prices desireability,schools etc.

    There is a ceratin outdated ‘romanticism” that people haev abou the burbs that no longer exists, right or wrong.

    Its one thing to move into a town and find it might not be exactly what yout hought it would be, its quite another to move into a town with gang problems etc.

  81. James Bednar says:


    You worry too much…


    Targeting the most violent street gangs, a State Police-led coalition today arrested more members of the Bloods street gang set named Sex Money Murder (SMM). The arrests include the three-person state leadership committee of this well-established set, which has members in every county of New Jersey. The raids also resulted in the seizure of drugs and weapons.

    SMM has an estimated New Jersey membership of 3,000 people. They are considered one of the most violent sets, and have been involved in murders, weapons and drug distribution, money laundering, assaults and related crimes. This collaborative investigation targeted the gang’s presence in northern New Jersey, predominantly in Paterson, Passaic, Hackensack and Lincoln Park.

  82. SG says:

    Lindsey: Well, good points. I have updated the chart. See the new chart at,


    I have applied 2000 times HPI to calculate home price. The present value comes to be about $488K. I think that is close to decent SFH home values in NNJ/CNJ area.

    I haven’t found historical Median home income data. The only historical numbers I found were Personal Income.

    The point was to do relative comparision to various historical periods. The latest chart also shows the same results as the prior one.

    I also would like to believe that situation today is difficult for buying a house, but the reality seems that it was difficult to buy in early 80’s then today.

  83. gary says:


    People laugh at me when I attempt to tell them, subtlely, that things are not the same as when I was younger. I spent my whole life here; the attitudes, the mentality, the character, it’s all changed for the worse, IMO.

  84. James Bednar says:

    Anyone hear about a new legislation quickly, and quietly put through the NJ Legislature regarding: Home owners selling to move out of the state of NJ will be slapped with 3% fee based on the home sale price??? Absolutely insane if it is true!

    Need more info…


  85. pesche22 says:

    thank you JB. we have to educate them
    i guess BC is immune to the problem

  86. skep-tic says:


    not a politician, but as SG mentioned, rising house prices benefit the 2/3 of Americans who own homes– at least in the short term.

    one would think a greater number of American politicians would take a longer term view and realize that the extreme divergeance of house prices from incomes will destroy communities eventually.

  87. skep-tic says:

    not that politicians should directly regulate house prices. but they can enforce existing laws to prevent the sort of fraud that has contributed to extreme runups in some places

  88. James Bednar says:


    How do rising home prices benefit anyone?


  89. Richie says:

    Every NJ town has gangs. They are called politicians.

  90. pesche22 says:

    yes but at least the gangs tell us who they
    are. the pols pick our pockets and tell
    us its ok.

  91. BC Bob says:

    “but they can enforce existing laws”


    The last thing I would want; inept, corrupt, pay to play, cronyism and triple dipping officials enforcing anything. Their version would be constructed with loopholes, exemptions and special circumstances.

  92. 3b says:

    #83 gary Agreed.

  93. skep-tic says:

    Rising prices have allowed many homeowners to spend like crazy through MEW. It has ostensibly allowed many homeowners to get away with not saving enough for retirement (whether this holds is an interesting question). It has allowed some to cash out and move to cheaper parts of the world. All in all, I think it’s hard to argue that ridiculously high house prices have been anything but a win for most homeowners (notable exceptions being those who wish to trade up and those who never want to move and are dismayed by their increased taxes)

  94. 3b says:

    #93 It is IMHO a fleeting benefit at best. How many people haev made spending deceisions predicated on the real or perceived value of their house.

    I know quite a few, and some have done some absolutely scary things, but always explained away with but the value of my house…….

    I would have to believe that many may nor be feeling all that great now.

    Its like being at an all/ day all night party, and finally haveing to go home/wake up at some point.

    Lots of people just left with lots of bills, and HELOCS and all the rest.

    I knwo that is is over, becasue some of these same people no longer want to talk real esate

  95. make money says:

    Just out of curiosity and because I can’t seem to find anything out there.

    What are the Bulls on housing saying these days? What explanations do they have on ARM resetting?Foreclosures?records inventories?
    rate increases? etc.

    Are there any bulls out there at all?

  96. skep-tic says:


    the bulls mostly seem to be saying “it’s different here” (wherever “here” is), or the market is just “returning to normal.”

    There is a bit of truth in each of these. Many RE trends are local in nature, although it seems to me that RE has increasing become a nat’l or even global market during this run-up. Nonetheless, there are some places that are resisting the downturn more than others (e.g., NYC).

    As for “returning to normal,” while it’s true that it isn’t fair to judge todays sales based on the all time peak, it’s also fair to say that the market is very far from “normal” (whatever that means) in it’s current state.

  97. HEHEHE says:


    When you consider the way American consumers have used their homes as ATM’s the rising home prices benefit the financial/debt complex (credit card companies, IB’s, etc). Who in turn donate to the political campaigns of politicians in both parties. The oil companies primarily throw all their dough at the Republicans. You get a Democratic Congress all of a sudden the oil companies become an easy target.

    I just finished a book called American Theocracy. It’s quite a good look at Bush’s destruction of the Republican parties future.

  98. make money says:

    It’s funny..I rememebr reading this in 2002 and said to myself that 40yr low rates, speculation and greed is what’s moving these markets. And looked at the time in ’98 when greenspan called the nasdaq out and it kept going up like crazy for two more years. I remmember in 2002 when i said to myself ” don’t worry this wave is too strong and too high for it to stop on the dime keep riding for a few more yrs.”


  99. BC Bob says:

    “SEC Chairman Christopher Cox stated that “Our concern is with any potential systemic fallout.”


    This is only the tip. It takes time to flush all the crap out of the system. There are many more chapters about to be written. This unraveling will be painful and financial dreams will be ruined. Same story different market.

  100. James Bednar says:


    Rising prices have allowed many homeowners to spend like crazy through MEW.

    You are putting the cart before the house. Rising home prices have allowed them to take on a tremendous amount of debt. Equity isn’t found money and a HELOC is DEBT, first and foremost.

    It has ostensibly allowed many homeowners to get away with not saving enough for retirement (whether this holds is an interesting question).

    This only holds true if they can sell their home to fund their retirement. Where will they live after the home is sold? If they downsize, the smaller home would be more expensive post boom. If they chose to rent, rents might be higher as well.

    It has allowed some to cash out and move to cheaper parts of the world.

    Bingo, the only real benefit. The only way for a homeowner to “win” is to arb a high-price area with a low-price area. However, someone has got to buy this home. The new owner is likely saddled with significantly higher debt. Not to mention that the newfound wealth is likely to be spent elsewhere, not in the local economy. Win for the seller, loss for the rest.


  101. Richard says:

    found this tidbit on a NYC real estate agent blog. surprise surprise and we wonder why there’s such a sense of entitlement in this area.

    >>As far as interest rates, I think the verdict is still out on how much it will impact the first time buyer in NYC. I work with a LOT of first time buyers and you would be amazed at the amount of parental support people are getting. I rarely have first time buyers who pay for the entire apartment themselves. There is so much co-purchasing and gifting going on and a lot of parents don’t really care about an extra $100 a month on a 30 year fixed rate mortgage for a studio. Have to go show an apartment, more to follow! Thanks for the great comments!

  102. RentinginNJ says:

    MTV’s ‘Run’s House’ family puts New Jersey home up for sale again

    Who’s house? Run’s House! Perhaps not anymore.

    Joseph “Rev. Run” Simmons is selling his $5.5 million Saddle River, NJ mansion that served as the setting for his MTV reality series Run’s House, the New York Daily News reported Wednesday.

    The columned Colonial, which recently received a “top-to-bottom” renovation from Run’s wife Justine, according to the Daily News, sits on two acres of land and includes six bedrooms, five bathrooms, three fireplaces, a home theater, sound studio, lounge and hot tub.

    While the Simmons’ home might be “wonderful,” it also might be somewhat overpriced. The couple previously put the property up for sale in 2005. At the time, they were asking $5.3 million for the home, which also reportedly features an indoor basketball court.

    The couple purchased the home that serves as the backdrop for their MTV reality series in 2003 for $1.6 million, according to the Daily News, which added Run and Justine spent much of their four years living there in fix-up mode.

    “They completely renovated the home from the ground up and are looking for a new project,” Checkley told the Daily News.

    Run and Justine are reportedly undecided if they’ll remain in the Saddle Creek, NJ area, the Daily News reported.

  103. James Bednar says:

    The home price boom has done little for existing home owners except to trick them into believing they are wealthier than they really are.

    What good is a home price boom to a homeowner looking to move up?

    Absolute prices are meaningless in this situation, the only important number is the net difference.

    Say you were a real estate genious, and purchased a home in 1998 for $300,000. Fast forward till now, the market is up 100%. Fantastic, that house is worth $600,000! We’ve made $300,000 on our investment!

    So what can we do with that newfound equity? Let’s buy a bigger house?

    Well, that bigger house that was $500,000 in 1998 is now $1,000,000. The net difference in 1998 was $200,000. The net difference today is $400,000.

    Rising tide lifts all boats. In this case, what good are rising home prices? They’ve made it more difficult for first timers to buy, they’ve made it more difficult for move up purchases to take place.

    Hell, who cares, let’s go buy a Hummer!


  104. RentinginNJ says:

    Second-Home Market May Be Losing Air
    Posted Thursday, June 21, 2007 ; 06:00 AM

    Developer Samples sees opportunities for years to come in high-end building.
    Story by Beth Gorczyca Ryan Email | Bio

    LEWISBURG — The economic bubble that has brought substantial second home and resort home construction to Greenbrier County [West Virginia] may be losing a little bit of air, local developers say.

    In the past year, developers and county officials have noticed a slowdown in the number of building permits being issued in the southeastern county, as well as a slight slowdown in the number of homes and lots being sold.


    A significant amount of Eimors’ work has been focused in Greenbrier County in recent years, thanks in part to the rapid building of luxury homes in gated developments, such as The Greenbrier Sporting Club. And the company is betting its future, Samples said, on construction continuing for years to come.


    And, at least to Samples, the nationwide real estate bust has a lot to do with the slowing of development in Greenbrier County. Purses are tightening, and people are making decisions a little more slowly.

    “It’s not as robust as it was a few years ago, but the county is still attractive to people leaving New York and New Jersey,” said Brad Tuckwiller, a Greenbrier County commissioner who works part time as a real estate agent.


  105. Richard says:

    the housing boom has worked out well for retirees. i know many who bought for $100k 25-30 years ago, sold for $700k, went out and bought a 1 or 2 bedroom condo and pocketed a tidy sum for retirement that they never saved for.

  106. Richard says:

    was in michigan earlier in the week and avis didn’t have any cars left so i saw a couple of vans and a hummer h3 in the lot and said give me the h3 for the same price. they did. i have to tell you it handles like crap, has no engine pep and is generally all around a piece of garbage.

  107. pesche22 says:

    did it have the bling

  108. lurkerA says:

    102 – not surprising at all. almost all of my friends (in our 30’s by the way) who have bought in NYC are receiving significant help from their parents. the only two who haven’t are corporate attorneys and don’t need the help.

  109. lurkerA says:

    i should add, I’m not condoning it, i think it’s pretty shocking.

  110. 3b says:

    #100 BC: Do you have a link to that?

  111. Clotpoll says:

    make (96)-

    What does any contrarian say in any market that isn’t going his way?

    I’m a bull, but I’m also a realist. Right now, it’s a market of narrow opportunity, but if you’re a buyer with a good chunk of cash and a long occupancy horizon…or an investor disciplined enough not to pull the trigger on properties that won’t cash flow positive…or a seller with plenty of equity: there IS opportunity out there.

    Much of my bullishness also comes from the fact that the current nasty market conditions are wreaking havoc on my competitors. We’ve picked up several more good, experienced agents…which has led to better market share/penetration for the office. I’m also not having to “carry” scores of non-producing agents; therefore my costs have actually come down lately.

    Finally, as any good Realtor (like any other salesperson) will tell you: we’re not trading “the market”. All the market is, is a prevailing sales environment in which we all function. What we trade in are individual homes; and, individual homes that are attractive and well-priced still sell…whether the market is good, bad or sideways.

  112. BC Bob says:


    I was referencing Make’s post, #95. That contains the link.

  113. Read My Lips: NO REBOUND NO HOPE 2008 Misery -Real Estate Depression says:

    the best thing for NJ is much lower home prices.

  114. BC Bob says:

    “I’m also not having to “carry” scores of non-producing agents; therefore my costs have actually come down lately.”


    Who’s “carrying” you?

  115. Clotpoll says:

    skep (97)-

    Anyone in RE saying “it’s different here” or “new paradigm” should have his head split open with an ax.

  116. RentinginNJ says:


    The home price boom has done little for existing home owners except to trick them into believing they are wealthier than they really are.

    People have been fooled into this idea of “cashing out equity”. Even the concept of using a house as an ATM is a misnomer. Unless you sell that extra bathroom to the neighbor, how can you really be “cashing out” equity?

    In reality, people are simply taking loans from the bank and using their homes as collateral. Now they just have more collateral and can therefore qualify for a bigger loan.

    The only way to really cash out equity is to downsize, sell and rent or relocate to a lower cost area.

  117. BC Bob says:

    Talk about a mismatch [BX]. At one end of the table you have the world’s best insiders selling. At the other end of the table you have the gullible, unguarded investor buying. How does this play out.

  118. Clotpoll says:

    BC (115)-

    Nobody behind me. Wish there was sometimes. It’s either make this joint pay…or head for Tiera del Fuego.

  119. Clotpoll says:

    BC (118)-

    And all the BX insiders have already had their big payday. Today’s IPO is yesterday’s news/no big deal to them. You have to wonder how hungry they’re going to be, moving forward.

  120. James Bednar says:

    The only way to really cash out equity is to downsize, sell and rent or relocate to a lower cost area.

    Agree, but realize that relocation to a lower cost area was always an option, to some extent.

    Same goes for downsizing, there was always a benefit to selling a larger home and moving into a smaller one if you didn’t need the space anymore.

  121. Richard says:

    I hiked Tierra del Fuego a couple of years ago when doing a tour of Argentina. We ultimately ended up in Ushuaia which I believe is the southern most city in the world. Breathtaking scenery but not much else going on aside from the tourism aspect which is just starting to pick up.

  122. skep-tic says:

    “People have been fooled into this idea of “cashing out equity”.”

    Not 100% in agreement here. MEW is akin to taking on debt to pay yourself a dividend. There is a real advantage in due to the tax structure– in fact, even better than in the dividend example because the cash from an MEW isn’t taxed at all, while 100% of the interest remains deductible against ordinary income. Provided you have the cash to service the debt, it is a profitable move

  123. BC Bob says:


    Why would the world’s best want to share their profits? This may turn out to be the best arb play of all time.

  124. make money says:

    Clot #112

    I’m a disciplined investor and I’m sitting on a ton of cash. I’m always in the market for a multifamily home. I have a (too) many realtor friends who know that I’m a buyer only a phonecall away.

    My parameters of investing are as follows:

    20% down. Fixed rate 30yr mortg. assuming 80% occupancy rate. Add a 5% rent increase after closing. subtract expenses (taxes, ins. water, heat, etc) if the cash flow is positive then I’m a buyer. I used to get a dozen calls a week(sometimes for the same property) I haven’t got a call in a long time. Everything is overvalued.

    You say that the are narrow opportunities in this sector of real estate, then my friend I can’t wait to buy something. big or small. Call me and I’ll buy as much as you can sell.

  125. BC Bob says:

    “MEW is akin to taking on debt to pay yourself a dividend.”


    What happens when the dividend gets lowered/disappears while the debt is with you for a fixed period of time?

  126. James Bednar says:

    it is a profitable move

    It might have advantages over other forms of borrowing, but it’s one heck of a stretch to call it “profitable”.

    It’s really nothing more than debt with a tax advantage.


  127. Clotpoll says:

    Wonder what Ralph Cioffi’s bonus will be this year? D’ya think a 3.2 BIL bailout might put a crimp in it?


  128. James Bednar says:

    Now, realize that MEW, HEL, HELOCs all existed prior to the boom.

    So, in essense, the housing price boom was the equivalent of a credit line increase for homeowners.


  129. skep-tic says:


    BC– obviously, there’s a risk with doing this and it probably isn’t sensible for much of the HELOC crowd. I would think for most people, the best course would be to pay off your mortgage and reduce expenses as much as posssible as you grow older. But among those for whom paying off the mortgage isn’t a worry, reaping that tax reward may make sense

  130. Clotpoll says:

    make (126)-

    Don’t hold your breath. I will not do business with anyone I meet here.

    You also don’t fit my client profile.

  131. James Bednar says:


    From the WSJ:

    For Everquest,
    Dream Team
    Doomed an IPO
    June 22, 2007; Page C1

    When Everquest Financial Ltd. filed last month to offer stock to the public, the company touted the expertise of Ralph Cioffi and his employer, Bear Stearns Cos., in managing and investing in exotic financial instruments.

    Everquest specifically noted as “competitive advantages” in its prospectus filed with the Securities and Exchange Commission both Mr. Cioffi’s and Bear Stearns’s “expertise” and “strong track record” in dealing with funds that structure debt securities. It also pointed out that the market surveillance systems used by Bear would be available to Everquest and would help the company “quickly identify, and where possible, sell” out of securities before losses could mount.

    Now, the meltdown of Mr. Cioffi’s hedge funds on the back of losses tied to bets on the subprime-mortgage market have turned the fund manager and Bear Stearns into a big liability for Everquest. Everquest has decided it will no longer go ahead with the planned public offering, according to people familiar with the matter. Bear Stearns declined to comment.

  132. Greg says:

    SO what wil happen when the 10 yields 5.75? Can you say timerrrrr?

    BTW check out http://www.jerseylegalforums.com

  133. James Bednar says:

    From Bloomberg:

    Bank of America Report Sees Worse Mortgage Defaults

    Losses in the U.S. mortgage market may be the “tip of the iceberg” as borrowers fail to keep up with rising payments on billions worth of adjustable-rate loans in coming months, Bank of America Corp. analysts said.

    Homeowners with about $515 billion on adjustable-rate home loans will pay more this year, and another $680 billion worth of mortgages will reset next year, analysts led by Robert Lacoursiere wrote in a research note today. More than 70 percent of the total was granted to subprime borrowers, people with the riskiest credit records, they said.

    Surging defaults on subprime loans have pushed at least 60 mortgage companies to close or sell operations and forced Bear Stearns Cos. to offer a $3.2 billion bailout for one of two money-losing hedge funds. New foreclosures set a record in the first quarter, with subprime borrowers leading the way, the Mortgage Bankers Association reported.

    “The large volume of subprime ARMs scheduled to reset at higher rates in ’07 and ’08 will pressure already stretched borrowers,” forcing more loans into foreclosure, the Bank of America analysts wrote from New York. A collapse of the Bear Stearns funds “could be the tipping point of a broader fallout from subprime mortgage credit deterioration,” they said.

  134. jb,

    Can I ask what the reason for moving is?

    Yes, we need more space. Too many kids with another on the way, the house has one of those fake bedrooms (no closet). It would be nice to have a finished basement for the toys.

  135. Richard says:

    >>We’re trying to decide if it would be wise to sell now and rent for a year then buy or if we should stay put for another year and move in 08.

    you want to uproot yourself and all your kids with another on the way for a year in the hopes of what, looking for a substantial haircut in prices in that time? fat chance if you ask me (which you didn’t but i’m nosy). if you said 3-4 years and you believed the market was heading south then maybe but 1 year will go quicker than the blink of an eye and all that trouble to sell and rent doesn’t seem worth the trouble.

  136. Clotpoll says:

    Grim (133)-

    Looks like Everquest was drinking Everclear.

  137. Clotpoll says:

    Everclear and Kool-Aid, that is.

  138. 2010 Buyer FKA 2008 says:


    The amount of ARMs resetting later this year and next are truly the tip of the iceberg, it only gets worst in 09 and 10.

  139. James Bednar says:

    A few months too late with that IPO. They could have stuffed her full of that toxic waste and offloaded it onto the public…

    …Who would have gladly bid the IPO up 20% on it’s first day.


  140. RentinginNJ says:

    MEW is akin to taking on debt to pay yourself a dividend.

    I’m in agreement that you get a tax advantage, but I don’t really see this as paying a dividend to yourself. As you pay your loan, what you are really doing is reducing the amount of any claim the bank has on your property if you default.

    Once the loan has been repaid (aside from tax advantages & lower interest rate), your net position is essentially the same as if you took on unsecuritized debt. If you were paying a dividend to yourself, it would seem that you should somehow be better off.

  141. chicagotroll says:

    Clotpoll Says:
    June 22nd, 2007 at 1:27 pm
    Wonder what Ralph Cioffi’s bonus will be this year?

    clot: immunity from personal liability

  142. skep-tic says:

    JB– I agree that it’s nothing more than cheap debt. It would be profitable in limited circumstances (with accompanying risk) such as leveraging to make a safe, long term investment. Using a HELOC to buy a car, conversely, is dumb

  143. James Bednar says:

    I’m still having a hard time seeing what the real, tangible, benefit of a home price boom is to a homeowner.

    The only group that can really capitalize on a boom are those who own multiple properties (second homes, investment properties) and are willing to sell them.


  144. skep-tic says:

    In making my fumbling tax argument I’m reminded of the following scene from Seinfeld:

    Kramer: “Jerry, that’s all these big companies do– write stuff off.”

    Jerry: “You don’t even know what a write off is, do you?”

    Kramer: “No– do you?”

    Jerry: “No.”

    Kramer: “Well THEY do, and they are the ones who will be writing it off.”

  145. Clotpoll says:

    Grim (145)-

    It is a boon to “net worth”: a concept that might be as specious as “unrealized equity”.

    I guess that’s why so many institutions who ask people for personal financial statements divide assets into liquid and illiquid. With or without MEW, if you need cash fast, you can’t sell your house into the market at any precisely-given date or time.

  146. abamitphd says:


    It probably depends what causes the boom. In the usual case of lower interest rates, a homeowner can refinance in order to lower debt service (or pay down the mortgage faster).

  147. WaitingToBuy says:

    Re: #3 Low interest rates, a hot real estate market and a migration northward from New York City have led to inflation in the Hudson Valley, and the income of local residents isn’t keeping up with rising home prices.

    I live in the hudson valley, moved up here 4 years ago from what the locals call here “the scary city”. I work at home and go into the city once a week to work in the office. No jobs up here for professionals. It is “Bring you own job land”.

    Am renting a nice house in a nice village for just under $1000. Prices are around $220,000 for a nice house. Sounds good until you look at what a good house cost 5 years ago $80,000. All the locals who buy houses up here are all doing sub prime to be able to afford the houses. The mess is unraveling.

  148. thatbigwindow says:

    Lots of money, expensive cars, designer clothing, granite countertops…

    my internet superiority > *

  149. James Bednar says:

    From Bloomberg:

    Four CDOs With Subprime Loans May Have Ratings Cut

    Four collateralized debt obligations containing subprime mortgages from 2006 and valued at $3.1 billion may have their credit ratings cut by Fitch Ratings.

    The CDOs are the $288 million Trainer Wortham First Republic CBO III issued in 2003 and managed by Trainer Wortham & Co.; the $400 million ACA ABS 2003-1 and $725 million ACA ABS 2003-2, both issued in 2003 and managed by ACA Management LLC; and the $1.7 billion Ipswich Street CDO Ltd. issued last year and managed by MFS Investment Management, New York-based Fitch Ratings said in separate statements today.

    Ratings companies and investors are increasing their scrutiny of securitizations linked to subprime home loans amid a rise in borrower delinquencies, defaults and foreclosures. CDOs, which are backed by bonds, loans, derivatives and other CDOs, are at the center of this week’s near collapse of two money- losing hedge funds run by Bear Stearns Cos.

    Fitch in May singled out 35 U.S. CDOs that hold closed end, second-lien subprime mortgages from 2006, a class of loans “experiencing the greatest stress.” Subprime loans are made to borrowers with poor credit histories or high debt burdens.

  150. pretorius says:


    When the value of a home rises, capital is formed which can be harvested and allocated to new investments.

    Here is an example:

    I bought a condo several years ago when I was in my early 20s. A large majority of my modest savings was in my 401(k) retirement account; my checking account contained approximately $5,000. I borrowed from my 401(k) to pay the down payment and closing costs.

    The value of my condo increased, so I convinced a bank to extend a HELOC that was underwritten using the higher value of my condo. The HELOC enabled me to borrow up to 100% of this higher value.

    I wanted to invest in direct real estate while avoiding the hassles of construction and tenants. So I decided to invest in a preconstruction condo and noticed an opportunity to buy a condo from an experienced residential developer at a price that was significantly below market.

    In order to qualify for an appointment with the developer’s salesperson, a precondition to signing a contract, I needed to prove that I had ample liquid assets that I could use for the required 10% deposit. I transferred funds equating to the 10% deposit amount from my HELOC to my checking account, provided an account statement to the developer which was accepted, and paid down the HELOC the next day, costing me $20 in interest.

    I met with the developer’s salesperson and identified the condo that I estimated to be priced at the largest discount to market value. I signed the contract, wrote a check for the 10% deposit, and returned home where I transferred the deposit amount from my HELOC to my checking account.

    A month before I was scheduled to close, I arranged a mortgage and found a buyer who signed a contract to buy the condo for a price that was significantly higher than I agreed to pay the developer. A bought the condo, sold it a few weeks later, and paid down my HELOC.

    Leveraged internal rate of return on my investment in a new construction condo: 400%.
    Addition to my net worth: $90,000.

    The rising value of my home, along with my skill and willingness to accept risk, enabled me to make it happen.

  151. 3b says:

    #145 JB Simply there is none, until they sell it, and put the cash in their pockets.

    After of course considering the cost of owning for x amount of years.

  152. 3b says:

    #137 Richard; I agree with you, belive it or not, it is not worth it for 1 year. I do disagree however with your haircut comment.

    Ther will be substanial haircuts for those who a are renting now who may decide to buy next year.

    There is absolutely no compelling reason for most people to buy a house right here and now;none.

  153. RentinginNJ says:

    Out of touch with realty reality

    Despite turmoil in the housing markets that includes record foreclosure numbers, mortgage rate increases and home price depreciation, homeowners don’t believe there’s a real estate slump, according to a new poll.

    Unless you are actively buying or selling a home, most people are simply out of touch with reality.

    The problem is that houses aren’t marked to market like stocks are. You can turn on the 11 o’clock news and see how much the value of your house dropped.

    Also, the real estate industry has done a reasonably effective job of convincing people that “it’s different here”, wherever “here” might happen to be. The bubble is happening somewhere else.

    I see two implications for this:
    1 – RE is in bad shape now despite what most people think. What happens when the herd really changes their mind and decides RE is doing poorly?

    2 – Some pundits have already sounded the “all clear” for the economy. “The RE slowdown has not impacted consumer spending. Everything will be just fine. Looks like no recession…full steam ahead.

    Well, apparently, most people don’t know there is a problem, so they are continuing to spend their phantom wealth like there is no tomorrow. Again, what happens when the herd turns?

  154. JC Renter says:

    Re #103 and #110, the “paying with daddy’s money” crowd is pushing out the locals a la what’s going on with post #149. I know a lot of people in my age bracket who are working with middle-of-the-road white collar jobs, but are still living at home because they can’t compete financially with the “daddy’s money” set. I know what a lot of these people make, and even with their decent salaries, they can’t afford a $500k studio without some financial help. I think the NY Times and New York Magazine has done articles to this effect. Heck, it’s why I ended up in JC (and will probably end up getting pushed further out when it’s time to officially “settle down”, but that’s another story).

    To get back to the original point, that’s how all of these “hot” neighborhoods for young people got expensive. Their license might say 25, but the wallet that’s really paying the bills is closer to 55. No wonder people in NYC have so much trouble affording things.

  155. 3b says:

    #135 JB BOA says we are seeing the worst of it? It almost over? BOA it is just starting!!

    Job growth will stop this? Could we what assume that most of these people who are not paying, are not paying not because they do nto have jobs, but the jobs they have do not provide enough income?

    Is BOA suggesting then that all these people can go out and get these new jobs that are being created? Are the new jobs paying more than the old jobs? Or perhaps he is suggesting that people can get 2,3,4 jobs?

    Do not mean to belabor the point, but these gentlemen should think before they speak.

    Bu then again are these not some of the same people who were saying asll is well, no need to worry?

  156. Lindsey says:

    Re post 54:

    (with apologies to anyone who may have covered this ground).

    That move is disgusting, disingenuous and dangerous.

    I mentioned the other day that I was thinking of becoming a Democrat, but it is moves like this that ensure that won’t happen.

    If Corzine does anything to act on the sale of public roads or any other similar facilities I guarantee I will vote and work against any Democrat who supports such idiocy and I will support any candidate who opposes it.

    “Privatizing” government assets or functions is always a bad idea no matter who proposes it or tries to bring it about.

  157. James Bednar says:

    Ouch. From CR:

    Bear Hedge Funds Update

    Apparently this bailout is only for the less leveraged Bear Stearns Hedge fund: High-Grade Structured Credit Strategies Fund.

    Assets are apparently being sold from the other fund – High Grade Structured Credit Strategies Enhanced Leverage Fund. CNBC is reporting that Cantor Fitzgerald has circulated a bid list for $400 million in debt securities from the Leverage Fund, and some bids are 10 cents on the dollar.

  158. RentinginNJ says:

    When the value of a home rises, capital is formed which can be harvested and allocated to new investments.

    Your weren’t “harvesting capital” in your example. You were taking a loan from a bank and using it to gamble on a pre-construction condo. What you got was simply better access to credit.

    Had you lost your bet (i.e. prices stopped going up), you would have lost your 10% and would have been expected to repay your loan to the bank.

  159. BC Bob says:

    “U.S. high-yield debt investors, after snapping up a record $600 billion in new loans and bonds this year, are starting to push back.”

    “Thomson Learning, the textbook and educational testing unit of Thomson Corp., this week cut its bond offering to $1.6 billion from $2.14 billion, removed the riskiest portion of the deal and agreed to pay more interest on its planned loan.”

    “The concessions made by Thomson and US Foodservice may herald higher costs for U.S. companies seeking to finance a record amount of leveraged buyouts this year, investors said.”


  160. sas says:

    good post #105

  161. BC Bob says:

    Renting [155],

    Very bearish indeed. When the surveys flip, [no pun] citing extreme bearishness, it will be time to step up to the plate.

  162. Clotpoll says:

    Renting (160)-

    Gambling and investing are very similar pursuits.

    Those who do it best, however, understand the difference between the two.

  163. James Bednar says:


    Ultimately, you still fall into the group I mentioned in #145.

    The only group that can really capitalize on a boom are those who own multiple properties (second homes, investment properties) and are willing to sell them.


  164. pretorius says:


    If you believe the people who post here, then prices weren’t going up during the holding period for my preconstruction condo investment.

    I paid a price that was significantly below market, and sold at a price that was slightly below market.

    There are plenty of opportunities to make $ when prices are flat overall. Find an undervalued property, buy it, and flip it to a buyer willing to pay market price.

  165. pesche22 says:

    ulgy close ,,, oh my.

  166. BC Bob says:

    The new paradigm of excess liquidity, ultra low rates, benign conditions and tight spreads? Break open the champagne, excess liquidity allows everyone to join the party. The front door not only greets you with a friendly mat, it is wide open. Please enter at your own risk. Now you want to leave. Sorry, the front door is now locked. Unfortunately, there is no back door. See it is easy to get into this game, the rules change if you want to get out.

    If excess liquidity does not result in creating economic value, it has to park itself somewhere. When realistic opportunities are no longer viable, it gravitates to area where it does not belong. Asset prices get distorted, mania’s fester and overnight, idiots become geniuses.

    Rising tides should lift all boats, not just yachts. Private equity decides to go public? I get it, they realize that they have been very fortunate. It’s time to give back. They will now allow the non-professional to share in their profits. Be careful where you enter.

  167. Clotpoll says:

    BC (168)-

    You are the Freddie Krueger of finance.

  168. Bloodbath in Winter 2007 says:

    Super weird – so i posted inquired about MLS 2713215 yesterday. Rich NNJ posted a history of the house.
    Now, it seems to be gone from realtor.com

    Wonder if, when these numbers were posted, the owners took it off the market:
    7-06, 689k
    7-06, 649k
    10-06 599 k
    3-07, 559k
    5-07, 539k
    6-07, 529k

    The house is in Ridgewood, and it looks like they bought super low, for 242k in 1999. Can’t tell if they’ve done any upgrades or not.

    I called the agent and left a msg about the other house in Ridgewood .. one that has dropped from 539k to 509k in two months …

  169. Rich In NNJ says:


    My fault, I transposed the listing numbers. I corrected them below.

    2712210 – Glen Rock – Active (Available)
    SLD GOODVIET PL $242,000 10/15/1999

    ACT GOODVIET PL $689,000 7/4/2006
    (Owner updated: 5-YR old kitchen W/cherry cabinets & stainless appliances, newer cnrtl A/C & roof)
    PCH GOODVIET PL $649,900 7/31/2006

    ACT GOODVIET PL $599,900 10/26/2006 (Relisted with same agent)
    W-C GOODVIET PL $599,900 11/24/2006 (Withdrawn)

    ACT GOODVIET PL $559,900 3/29/2007 (New agent)
    PCH GOODVIET PL $539,900 5/9/2007
    PCH GOODVIET PL $529,900 6/13/2007

    Taxes: $10,173


    2713215 – Ridgewood – Under Contract (Not available)
    SLD S PLEASANT AVE $200,000 7/8/1997
    (This owner installed Cntrl A/C, updated baths, new windows, inground sprinklers)

    SLD S PLEASANT AVE $425,000 8/15/2002

    ACT S PLEASANT AVE $539,000 4/4/2007
    PCH S PLEASANT AVE $529,000 5/3/2007
    PCH S PLEASANT AVE $509,000 5/30/2007
    ACT* S PLEASANT AVE $509,000 6/11/2007 (Attorney review)
    ARR S PLEASANT AVE $509,000 6/13/2007 (Attn. review removed)
    ACT* S PLEASANT AVE $509,000 6/18/2007 (Attn. review)
    U/C S PLEASANT AVE $509,000 6/19/2007 (Under contract)

    Taxes: $7,449

  170. Bloodbath in Winter 2007 says:

    Rich – Interesting. Thanks for that. On the first one … that sure is a bunch of upgrades. Would have to see them to see the value … but sounds like he probably spent 50k on upgrades.

    Which is good for him … but I still can’t see paying over 450k for it. Which is 50k over what we want to spend.

    But what’s interesting is the CONSTANT lowering of the price. six changes in 11 months? He’s dropped it over 100k in less than a year. This leads me to believe he wants out. (Not to be confused with NEEDS out). Now the question becomes … how low will he go?

  171. James Bednar says:

    From the Star Ledger:

    Treasurer says toll hikes coming; GOP upset over budget language

    With Republicans alleging state budget language gives Gov. Jon S. Corzine unlimited authority to spend money getting ready to sell and lease state assets such as toll roads, the state treasurer Friday said toll increases are coming to New Jersey.

    “There will be toll increases,” Treasurer Bradley Abelow said.

    He declined to elaborate, but said increased tolls would be coming no matter how Corzine proposes making more money off assets such as the Garden State Parkway and New Jersey Turnpike.

    “If we’ve allowed ourselves to become convinced as citizens of the state of New Jersey that there will never be toll increases, we are mistaken,” Abelow said.

  172. sas says:

    another good post at #168.

    damn, you blokes are on a roll ;)

  173. Robert Troll (F.K.A. "Donald") says:

    “Yes, we need more space. Too many kids with another on the way, the house has one of those fake bedrooms (no closet). It would be nice to have a finished basement for the toys.”

    Let me get this straight. You need more space, so you are going to sell your house and rent a tiny apartment?

    My suggestion is to either (a) sell and buy another house right away or (b) add on to your house.

  174. Robert Troll (F.K.A. "Donald") says:

    “The home price boom has done little for existing home owners except to trick them into believing they are wealthier than they really are.”

    I would still rather see home prices go up than down. At least it is good for those who can’t afford their homes anymore and need to sell or for those lloking to move into cheaper homes or cheaper regions of the country.

  175. mkfinancial says:

    JB #5

    You’re right, given the increased size of the markets today relative to 1998 this is smaller. Also, LTCM was spread throughout global bond markets this is isolated to one market segment.

  176. RentinginNJ says:

    At least it is good for those who can’t afford their homes anymore and need to sell

    Sell to who?

    First time buyers are priced, leaving NJ or would rather npt buy at these prices. The food chain is broken.

  177. DebtVulture says:

    #177 said:

    “You’re right, given the increased size of the markets today relative to 1998 this is smaller. Also, LTCM was spread throughout global bond markets this is isolated to one market segment.”

    If by one sector you mean subprime mortgages or even mortgages in general, then you are wrong and I’ll explain why. The funds that are being liquidated own a lot of CDOs (collateralized debt obligation). It is a structured product. These CDOs own a lot of subprime mortgage but they also own other fixed income products, like corporate bonds (both high grade and junk bonds), student loan securitizations, etc. If CDOs start getting repriced and some forced to liquidate, then all types of products are going to hit the street, from the simple prime mortgages to junk bonds, to leveraged loans, etc. It can get ugly. And you know what makes it especially ugly? Leverage. Just like in LTCM. Leverage is great for equity holders when things are going great, but is a killer when things start to slip up.

  178. rhymingrealtor says:

    Pretorius #152,

    The rising value of my home, along with my skill and willingness to accept risk, enabled me to make it happen

    You also must possess the ability to stop. That taste of easy money makes it hard not to do it again, and again and just once more – its the just once more that’ll get ya.

  179. rhymingrealtor says:

    italics off?

  180. R Patrick says:

    finshed basement

    Does the house have a basement, you can finish it yourself if you want.

  181. Home Seller says:


    JB, not necessarily if you are moving OUT of NJ. You can move “up” to a different part of the country and live like a king.

  182. d2b says:

    I hate buying tires.

    There’s no doubt in my mind that every time I buy tires I’m getting ripped off.

    I had a blowout on the highway today. The blowout was on the wall of the tire, so there’s no doubt that the tire needs to be replaced.

    Has anyone ever been able to collect on tire warranties? Is there really a benefit to name-brand vs. generic?

  183. UnRealtor says:

    D2B, just go to TireRack.com:


    Depending on your vehicle, a new tire will run $50, to $150 for the high-end performance stuff.

  184. UnRealtor says:

    RE: name brand vs generic

    A tire is one of the most important safety aspects of a vehicle.

    If it performs well, it will help you avoid an accident. A quality tire will also tend not to fail catastrophically, preventing a rollover, etc.

    Tires are not a place to save money, IMHO.

    Plug in your vehicle make and model at TireRack to see what’s available, and look at the user reviews of the tires. (Note: there’s an inherent bias in such reviews, as people tend to rate highly what they just bought, but there are many objective reviews there as well.)

  185. ithink_ithink says:

    Anyone care to place weekend bets for Monday’s existing home report?

    Will existing on Monday, new homes on Tuesday, and MBA apps have any impact for Thursday’s statement?

    *rolling dice* c’mon rate hike, baby needs a pair of papa boomers over-extended shoes!

  186. looking in ny says:

    Wow, mind blowing article about the developments at Bears Stearns-

    $3.2 Billion Move by Bear Stearns to Rescue Fund

    Bear Stearns Companies, the investment bank, pledged up to $3.2 billion in loans yesterday to bail out one of its hedge funds that was collapsing because of bad bets on subprime mortgages.


  187. UnRealtor says:

    #189 looking – a scary article:

    At first, the Bear Stearns hedge funds appeared to weather the storm. But in March, the older fund registered its first loss. One investor, who asked not to be identified because he was trying to recover his investment, said that when he moved to get his money out, he was told investors had tried to redeem 10 percent of the fund.

    “They [investors] didn’t realize this was Katrina,” the investor said. “They thought it was just another storm.”

    Perhaps the most startling development was a sharp restatement in April of the second fund. The firm revalued some securities and told investors that the fund was down 23 percent, not 10 percent as it had said earlier.

  188. politely says:

    A few thoughts about the current emphasis on the Bear situation:

    1) Generally, investments are risky. And it shouldn’t be surprising that higher potential returns means higher risk. The fact that these investments crater now and then shouldn’t be a surprise to anyone. Sure, it’s sensational, but it shouldn’t be surprising.

    2) The message about CDOs has been unnecessarily complicated. The equation is fairly simple, and it goes like this: more borrowers than expected defaulted on mortgages, which caused mortgage-backed bonds that rely on mortgage payments to take more losses than expected, causing CDOs that invest in MBS to take more losses than expected. Again, this shouldn’t be a surprise to anyone, particularly on this blog.

    3) Fears about the impact on “the market” are overblown. The targeted investor class for hedge funds and CDOs, and other “complicated” structures, are institutions and extremely high net worth investors. The effect on the average person? Probably zero. It’s not like the dot com bust where we collectively lost trillions of dollars, or like Enron and Worldcomm, at roughly $70 and $120 billion of losses apiece.

    4) I think fears of a market collapse based on repricing of securities based on an extremely well publicized instance of a distressed firesale is silly – whatever you may think of bond traders, they’re not stupid.


  189. Orion says:

    For those who enjoy in-depth analysis of mortgage reset impact:


  190. James Bednar says:

    From the WSJ:

    Center of a Storm: How CDOs Work
    June 23, 2007; Page B1

    Mortgages are among the most widespread and simplest forms of financing. So how is it that a bunch of home loans caused the crisis that has gripped Wall Street for more than a week?

    Because mortgages have morphed into something quite different on Wall Street — and some say more dangerous — a trend that has accelerated sharply in recent years. The two Bear Stearns Cos. hedge funds at the heart of the crisis invested heavily in complex financial instruments known as collateralized debt obligations, or CDOs, as a bet on the mortgage market. The Wall Street firm’s wager under Bear executive Ralph Cioffi went badly wrong after particularly risky home-loan borrowers defaulted in record numbers as a result of lax lending standards and a slowing housing market.

    But the funds’ problems quickly became more than an issue for just mortgage markets. Fears grew that other investors could suffer losses, causing a ripple that would crimp lending and curtail the flow of borrowed money that has fueled rallies in a variety of financial markets. On Friday, Bear unveiled a $3.2 billion bailout of the funds (see related article.)

    So what exactly are CDOs, the structures at the root of so much angst? They are financial vehicles that bundle different kinds of debt — ranging from corporate bonds, to securities underpinned by mortgages, to debt backed by money owed on credit cards — and cut it into slices. These slices are sold to investors in the form of bonds. While the slices contain the same debt, they differ in terms of which pay the most interest and which are least at risk of losing money.

    Slices that pay lesser amounts of interest are the last to get wiped out by losses if there are defaults in the debt pooled in the CDO. Slices that pay more feel pain more quickly. In other words, the CDO slice with the lowest yield is at the front of the line on payday, but at the back of the line when pink slips are handed out.

    This is the way that some high-risk debts can be packaged to receive investment-grade credit ratings. That’s a result of the CDO structure and the diversification gained by bundling different debts. At the same time, CDOs use borrowed money to amplify returns.

    Although CDOs have been around for about 20 years, their use soared in recent years. Investment banks in 2006 issued about $500 billion in CDOs, compared with about $84 billion in 2002, according to research by Morgan Stanley. The popularity of CDOs grew as low interest rates caused investors to embrace products that offered the promise of higher yields.

    Fans argue that CDOs allow investors to buy into higher-yielding securities while taking on the same risk as they would with safe, lower-yielding securities. They also say that CDOs are another tool that allow financial markets to further spread risk so it isn’t concentrated in the hands of a few players.

    But some investors think CDOs are an example of financial engineering gone haywire. CDOs are “more sleight of hand” than a sound way to generate diversified returns, said Brad Alford, founder of Alpha Capital Management, an Atlanta-based investment advisory firm that caters to wealthy families. “They’re a method for Wall Street to repackage securities as a way to make more money.”

    Indeed, Wall Street has made millions of dollars in fees in recent years by creating CDOs, selling them, servicing them and helping investors trade them. The vehicles are generally used by institutional investors, such as pension funds or hedge funds, not individual investors.

    CDOs have generated debate because they are complex, and pose a risk because they are several steps removed from the actual asset, or debt, that is being packaged. Consider a mortgage. Jane Sixpack borrows $100,000 from a bank to buy a house. The bank then pools Jane’s loan with thousands of other mortgages. It then issues securities backed by this pool and sells those to investors. Jane keeps making her payments to the bank, but her mortgage is now owned by investors.

    An investment bank creates a CDO, which is really just a company. The CDO then buys some mortgage-backed securities, one of which holds Jane’s loan. The CDO then pools these with other mortgage-backed securities and maybe some corporate bonds, slicing them up based on investor preferences for yield versus risk.

    The CDO manager sells portions of the package to other investors. In some cases, other CDOs are the buyers. There are even CDOs comprised of CDOs that have invested in CDOs.

    The bundling of different debts, along with the fact that the CDOs are a few steps removed from the debts they include, give rise to another risk. It’s tough to get an accurate price for CDOs, which don’t trade in active markets. When markets sour, the lack of available prices can make it even more difficult to value a holding, or to get out of it without taking a big haircut.

    So investors often have to estimate the value of a CDO and have a lot of leeway in how they do it. That’s a worry for investors in hedge funds, big buyers of CDOs. Hedge-fund managers make most of their money through performance fees. This gives them added incentive to use price estimates that work in their favor, even if they might not reflect the price at which they could actually trade the CDO.

    Or it could mean that the managers themselves don’t know exactly what their holdings are worth, because they are so far removed from the underlying investment. In the case of Jane’s loan, that means the CDO buyer will have a tough time gauging whether she’s a good risk or not. And if she defaults, it may take a while before that affects the value of the CDO, even though market conditions overall might have already changed.

  191. Clotpoll says:

    Grim (193)-

    What an ironic turn of events: giant waves of hot money have been tossed into investment vehicles that are proving- for a whole host of reasons- to be almost illiquid (unless dumped at fire sale prices). These structured investments, so far removed from their collateral sources that they are virtually untraceable, promise safety through the tranching and tissue-thin spreading of risk. Yet, if the risk is spread so thin, why the rush for the exits? And, as BC has noted, why are the exits all barred shut?

    Risk may be spread thin through CDOs, but it’s still there. And, the premium on it is not enough to keep anyone around once storm clouds gather. You can’t turn subprime risk into an investment-grade security just by stapling garbage onto high-quality paper. As Grandpa used to say, you can’t polish a turd. This whole CDO thing, to me, seems like the same concept “credit counselors” are using to artificially pump FICO scores: just “borrow” the creditworthiness of individuals willing to allow it to be lent to deadbeats, and voila! The deadbeat has a 680 FICO.

    Is that deadbeat now anymore creditworthy than before? Is the CDO with several tranches of “sludge” (my favorite word of the week) an investment-grade security? I think not.

    And now, CDOs may become subject to a volatility that the structuring “model” never took into account (again- as BC has correctly noted- they are marked-to-blackbox, not to market). It is especially troublesome that the fire sale that commenced this week bogged down when it came to certain tranches that none of the geniuses on the Street could figure out how to value, much less how to price. Talk about RE being illiquid! Houses are like $2 win tickets at Belmont compared to this stuff.

  192. James Bednar says:

    A new Lowball! has been posted. Please be sure to scroll down on the main page.


  193. Orion says:

    Auction! 24 Luxury Townhomes. Chelsea View at Atlantic City, NJ.
    Minimum Bid from $250,000-Over 50% off the previous asking price.
    Additional open house added this weekend.
    Construction units will be available for viewing this weekend


  194. BC Bob says:


    Your Freddie analogy was a wee bit aggressive. A better one; Iverson jukes left, goes right leaves Kidd behind with his pants down, easy basket, score. OOOPS, out of nowhere Mutombo swats it away. He then turns to the crowd and waves his finger.

    IMO, the real problem is not what is happening but rather what we don’t see happening. What is the total exposure to this sector? Is this a one off with little collateral effects or are more lurking. Maybe the extent will be PM’s writing down their collateral and int rates rising. Maybe much worse? You can’t seem to get a handle on the how widespread it is/may be. Nobody owns it, then again everybody does. Why is Bear going deeper into their pockets? No liquidity in the market? Others trapped? You press the pedal for as long as the market allows and are highly leveraged in a somewhat illiquid trade.The key to watch will be downgrades and how investors stomach this. Are hedgies about to be flooded with redemption requests? We talk all the time about the chain in RE. What about this chain?

    Do you think quants are tinkering with their boxes this weekend?

  195. chicagofinance says:

    politely Says:
    June 23rd, 2007 at 2:37 am

    I disagree with you. The concern isn’t the CDO in itself. It is the use of CDO’s as high yield de facto cash and levering [borrowing at multiples/exponentials of face/notional] the hell against it [as collateral]. The fixed income pricing securities do not have to move dramatically, but when spreads blow out, the market value drops precipitously, and the leverage amplifies the effect.

    I once worked for a moderately successful dot-com firm that was bankrolled by private equity. We got nuked not because of anything egregiously wrong with our business. Instead, the portfolio of other companies with the investors tanked and capital calls abounded. They had to cut us off at the quick, and if you do not see the correlation between Bear’s sewage spilling into the capital markets aquifer, then all you need to do is wait for the slow motion train wreck. How big? Unknown. Timing? Unknown. However, we’ve had Amaranth, sub-prime jitters, now Bear……sooner or later you get closer to cut number 1000 in the death by 1000 cuts……..

  196. James Bednar says:

    No comments on Brookstreet?

    From Reuters:

    Brookstreet Securities says closes after CMO losses

    Brookstreet Securities Corp., an Irvine, California broker-dealer, closed its doors on Friday after heavy losses in the collaterialized mortgage obligation market, terminating at least 650 independent brokers, the firm’s president said.

    Brookstreet President Stanley Brooks said the firm faced heavy markdowns over the last two weeks in its CMO investments held in margin accounts and was forced to close.

    Brooks said the firm had a value of about $17 million at the end of May which has evaporated. He said he turned down several tentative offers to recapitalize the firm.

    “I am flabbergasted,” said Brooks, 59. “My life’s work is gone.”

  197. BC Bob says:


    I agree. It’s that L word.

    On another note, quants, especially Monte Carlo’s, are the hottest item on the street. Anybody a contrarian?

    “Investors are buying bundles of CDOs without having a clue as to what is in them
    Rating CDOs is a cash cow for the rating companies
    There is a clear conflict of interest between the rating companies and the deals they are involved in
    Ratings programs are based on Monte Carlo Simulation but the initial input assumptions about defaults and recovery rates may be far off the mark
    After the initial rating, CDOs are not marked to market thus no one really knows what anything is worth
    No one is rating the rating companies or their models
    No one is even concerned about this state of affairs”

    “Long Term Capital Management blew up (see When Genius Failed) when models written by Nobel prize winning economists Myron Scholes and Robert Merton failed.”

    “Are the Monte Carlo models (or more importantly the assumptions going into the Monte Carlo models) any better? How can anyone even know if the only “mark to market process” is based on what the model says?!”

    “The scariest thing is that we are in a monetary environment that is unprecedented in history. M3 is soaring in nearly every major country on the globe. Asset prices have never been more correlated than now. The amount of derivatives in play is in the hundreds of trillions of dollars all bet on Monte Carlo Simulation. Wow!”


  198. ADA says:

    This is a bit old but really funny. I love the Onion.

    Home Sales Dropping from the Onion.

    For the third straight month, sales on preexisting homes dropped, leading realtors to call it a “buyer’s market.” Here are some strategies sellers are using to entice buyers:

    Dropping price by 50 bucks

    Carrying around wad of money; acting like owning this house got them that money

    Pointing out dishwasher several times

    Explaining to potential buyers how fulfilling it is to make mortgage payment on time

    Telling long, touching story about how grandmother needs $712,500 for kidney operation

    Letting third blouse button go

    Drowning out sound of noisy furnace with soulful vocals of Michael McDonald

    Reassuring buyers that people purchase things they can’t afford all the time

  199. hoodafa says:

    I just came across this listing on Craigslist – North Jersey Real Estate for Sale section…looks like someone’s setting the cat among the pigeons:


  200. scribe says:

    Did anyone else see the 20/20 program on buying or selling a house last night?

    First, they had a “real estate as a means of creating wealth” guru showing two couples who thought they couldn’t afford a house that they could. One couple had joint income of just $40,000.

    BUT … they also had a segment on “toxic neighbors.” Jim Belushi feuding with his next-door neighbor Julie Newmar. Another feud where one of the neighbors had a shotgun and it went off, killing someone.

    AND …another segment on people who bought houses from a major developer and found unexploded bombs from a WW II training site in their backyard.

    Weirdly mixed messages.

    Some of the segments are here.

  201. AdAgencyWoman says:

    Very discouraged today. My husband and I finally came to a number this past week with a seller. He agreed verbally and we were very happy. Realtor tells me a few hours later that the seller is still proceeding with an open house despite accepting our bid…,but not inking the contract yet. This seems so disingenuous to me. Now we have to sweat out the weekend hoping that no one found the house appetizing during the open house. No offense to the realtors here but this is exactly why I really don’t trust them.

  202. sas says:


    Don’t get emotional, or you will play into the game. Sit up straight!

    You put in the bid at a price w/in your comfort level. If it doesn’t work out, you go back to the market. Yes, it a pain, but hey, short term frustration isn’t worth getting into some type of bid war, and then have a life long loan outside of your range.

    Play it cool.


  203. sas says:

    off topic,

    any you blokes going to get that new iphone?
    think I might ;)


  204. Clotpoll says:

    Ad (205)-

    It may not be the Realtor…that move could be the seller’s idea of “smart”. It is legal (though cheesy), so the Realtor cannot prevent it outright.

    Why don’t you just tell them that your offer is rescinded if they go thru with the open house? That should get their attention.

  205. Read My Lips: NO REBOUND NO HOPE 2008 Misery -Real Estate Depression says:

    AdAgencyWoman Says:
    June 23rd, 2007 at 11:25 am
    Very discouraged today. My husband and I finally came to a number this past week with a seller. He agreed verbally and we were very happy. Realtor tells me a few hours later that the seller is still proceeding with an open house despite accepting our bid…,but not inking the contract yet. This seems so disingenuous to me. Now we have to sweat out the weekend hoping that no one found the house appetizing during the open house. No offense to the realtors here but this is exactly why I really don’t trust them.
    who said grubbers were easy to deal with? Stand up and flex your muscles. Call realtor up tell’em deal is off. Don’t let’em shop the deal.
    Now what you do is add in closing cost.
    If they whine about it walk away. You can;t have everything you want at an exact moment. Good things happen to those that are patient in the face of adversity.

    Good luck

    You will get more house next year imo.

    Bleed’em dry



  206. Read My Lips: NO REBOUND NO HOPE 2008 Misery -Real Estate Depression says:

    2008 Misery coming to ahood near you.

    Much more house next year for your money.

    Sellers pull this BS you walk away then if they come back they PAY FOR IT.

    greed cost money. MAKE’EM PAY





  207. James Bednar says:

    Don’t let’em shop the deal.

    I do agree with this point. You don’t want to be “the other offer”.


  208. UnRealtor says:

    AdAgencyWoman #205, you can be sure that after the open house, the realtor will call every person on the sign-in sheet, and hint that they can get the house for just over your bid.

    Trust no one.

    Your offer should have a 24-hour expiration, at most. Either they accept, or not.

  209. lisoosh says:


    Granddad, Did You Believe in Central Banks Once?

    June 21 (Bloomberg) — “Granddad Benny, is it true that central bankers used to believe they could steer the global economy with quarter-point twitches in overnight rates?”

    Granddad looked up from his GoogleSoft iSpreadsheet, where a flashing red “health care” box was blocking 2027’s planned expenditure from matching the income cell. “Yes, Joel. For about a decade we all believed central banks could ensure people had jobs, and could afford food and housing and such. That all changed after the Gigantic Global Bubble Burst of 2008.”

    Joel put down his Mandarin dictionary. “That’s what my socio-economics teacher says we’ll learn about next week. She called it the Giglobubu. What happened in 2008, Granddad?”

    “Did China cause the Giglobubu, Granddad?”

    “It played a big part, Joel. At the start of the century, China started to engage with the global economy. We were able to buy stuff like clothes and televisions really cheaply from China’s factories, making everyone feel wealthy enough to spend and borrow instead of putting something aside for a rainy day.

    “All of that borrowed money had to come from somewhere, and most of it came from Asia. When China stopped turning up at bond auctions in 2007 and started investing directly in companies instead, alarm bells should have rung. They didn’t.

    “Even though central bankers in the West had been puzzled by low bond yields and wage increases, they still took the credit for slow inflation!

    “Granddad, it also says here that hedge funds and the derivatives market made things worse. What are hedge funds and the derivatives market?”

    “Well, they are illegal now, Joel. As the global economy started to crumble under the weight of soaring raw material costs, financial markets melted down, with prices of stocks and bonds whipsawing. Hedge funds were supposed to be clever investors; it turned out that they had all made the same bet on the global economy staying wonderful for ever.

  210. lisoosh says:

    More from the above article. (Sorry about the length of the post, but it seemed pertinent,and funny).

    “Companies thought they’d borrowed money from their bankers. Instead, hedge funds had bought up all of the IOUs.

    “Lots of the banks had sold insurance on those IOUs and on a bunch of other stuff that they bundled together into derivatives called collateralized debt obligations. When those investments started to blow up, we all realized that nobody knew who owed what to whom. And banks and hedge funds had become such a big part of the global economy that they dragged everything else down with them.”

    “I’ve been meaning to ask you, Granddad; what are all those funny little rectangles of green paper in that big frame on the wall next to your desk?”

    “They’re called dollars,” Granddad said. “We used them to buy things in the olden days.

    “There was a global referendum to make the decision on which currency people wanted. Which is why we now use the yuan all around the world. Anyway, it’s getting late. Back to your Mandarin homework, young Master Bernanke.”

  211. rhymingrealtor says:

    Adagency women,

    I can second clot on the fact that seller’s are more manipulative than you may think. Withdraw your offer. Let them call you on Monday.


  212. Rey says:


    it’s neutralization.. lot of things going on leading to the neutralization of world economy for the just distribution of this world’s goods……business climate will continuously change..business structure will continuously reform..for business corporation, flexibility will the name of the game. but for us, let’s just enjoy the show and live life……

  213. Robert Troll says:

    Ad Lady,

    I would keep the offer in place and I would not worry. Serious buyers rarely show up to open houses these days so it is unlikely you will get into a bidding war.

  214. Tim says:

    Adagency women,

    We are in the largest Housing Bubble Ever and the sellers are playing games. Tell them you rethought it and your going to wait a little while for fall season when you will be able to pick up something similiar and save 50k or more. Why you in a hurry to purchase at the beggining of a Burst. Were not buying till next year in the fall and were low balling at that. Good Luck.

  215. justbought says:

    205 – How long was the house on the market? If just listed it’s tough. If more than a couple of weeks you have more power in this negotiation. In either case call the realtor right now and tell them that you are withdrawing the offer. Open house is a way of price discovery. If no one comes through maybe you offered too much and should reduce your offer after the open house. Also have the seller agree that once they accept the contract there will be no showings and they will not accept any competing offers through the attorney review period. Dont be affraid to lose the house. With sellers like this you are going to get a call for “best and final” if something other than your offer materializes.

  216. Robert Troll says:

    “Tell them you rethought it and your going to wait a little while for fall season when you will be able to pick up something similiar and save 50k or more.”

    Prices are going to fall $50k between now and the fall? Get serious.

  217. Robert Troll says:

    “Open house is a way of price discovery. If no one comes through maybe you offered too much and should reduce your offer after the open house.”

    WRONG. Serious buyers don’t come to open houses. They come by appoinment. Open houses mainly attract nosey neighbors and passer-bys. Does not matter if the house is overpriced or well priced.

  218. syncmaster says:

    Open houses mainly attract nosey neighbors…

    Guilty as charged…

  219. Robert Troll says:

    Open houses also attract competing sellers (WINK WINK)

  220. justbought says:

    agree that unlikely a buyer will emerge from open house. the point is that the seller is stalling for time while his agent is calling everybody who expressed any interest and shopping the offer. she should withdraw and think if she wants to resubmit later if seller not ready to accept now.

  221. UnRealtor says:

    “WRONG. Serious buyers don’t come to open houses. They come by appoinment.”

    Hogwash. I’ll don’t use a realtor and will therefore only go to an open house, unless the house is priced properly (which none are), then I’ll call the listing agent.

    We’re 50% down buyers.

  222. syncmaster says:

    Found a hilarious post on nj.com forums. This may piss off the REAs on board, but it’s just a joke!

    2111. Realtors in Somerset County
    by mom2x, 6/21/07 11:17 ET
    Hello,Was wondering if anyone has any realtors that they could recommend in the areas of Hillsborough, Bridgewater, Branchburg and Basking Ridge areas???

    2111.1. Go to the nearest pond
    by cyberbully, 6/21/07 12:36 ET
    Go to the nearest pond, go underwater into the mud, then underneath the lawyers, new and used car salesmen and politicians, you will find thousands of realtors just waiting to get you 6% commission for doing absolutely nothing!

  223. Lindsey says:

    Jumping into the wayback machine again (but not too far):

    Re post 113 by Clot:

    an investor disciplined enough not to pull the trigger on properties that won’t cash flow positive…

    Clot I clearly don’t have as broad a perspective of the RE market as you do, but I have to believe that “cash flow positive” residential RE properties are very few and far between.

    So few, I would imagine, that investing the time and energy to find them right now would not be worth the effort.

    Just as an example, I happened to take a look at potential investment properties in Belmar last week and everything was very seriously cash flow negative. I think I might even have mentioned it in a thread here.
    Prices there need to drop by at least 30% before they could even sniff break even.

    Isn’t the investor market as dormant as daffodils in January?

  224. Bloodbath in Winter 2007 says:

    Tim – Great point. That house that’s on the market now will go unsold this summer … and if it’s on the market for 700k now, look for it at 650k by October.

    Just wait it out!!

  225. Clotpoll says:

    lindsey (228)-

    You’re half-right. Most listed stuff- assuming a sale anywhere near list- will burn cash like an incinerator.

    However, the investors are working the pre-foreclosure and foreclosure markets. All this stuff going belly-up has got to go somewhere…and many of those properties can be picked off at the right price.

  226. njrebear says:

    AdAgencyWoman ,
    Why don’t you tell your realtor that you want to start looking again? You have nothing to lose. Your don’t care attitude and a bad open house may make the blood suckers go on the defensive.

    My policy :
    Don’t attend open houses until you feel market conditions are favorable. JB’s low ball updates allow me to sit at home and gauge the market.

  227. Lindsey says:

    Re Post 189:

    If your going to read that NYTimes article you should be sure to read Tanta’s take on it at CR.


  228. AdAgencyWoman says:

    Thank you all for your response. The issue is as follows. The house is on a big lot, in a low tax town, and needs tons of work. I mean tons. It’s the ugly duckling on a nice block. The price of the house is favorable….for my husband and I. It would most likely scare alot of people away since it needs the work. Husband can do kitchens, baths, etc with some help from friends. In other words a big fixer upper is exactly what we want. This is why I want this house.
    They had one deal fall through already so I was hoping the seller would just ink the deal and be done with it.

    Husband wants to pull the deal and lower our bid just because he is pissed off about the whole thing. I, on the other hand, don’t want to play games and just pick it up.

  229. njrebear says:

    I would have pulled the deal.

  230. sas says:

    I bought a bag of chips and a beef jerkey bar.
    Both items said “Product of China”.

    I can’t believe it. Now, even are food says made in China. Son of a gun!!

    btw: I threw it away too. I ain’t gonna eat anything thing made in China. Odds are they watered it down with chalk & glass pieces.

    Maybe I am just getting old and stuborn.
    I will buy a TV from China, but not my tater chips.

    Like I’ve said on these boards before, better teach your kids to speak Chinese because they will be the boss of your kids.

    Ciao ;)

  231. Robert Troll says:

    Ad Lady,

    Based on your description of the house, it is unlikely that any offers will be made on it at the open house. As far as rescinding the offer and putting a new, lower one in, that will anger the sellers and they won’t want to deal with you. If your husband is ready to withdraw the offer just because they are holdiong an open house, then you probabaly should have never made an offer in the first place because he is not that attached to the house. Trust me, if I found an ideal home and the sellers wanted to hold an open house, I would have no problem with it.

  232. Robert Troll says:

    “Hogwash. I’ll don’t use a realtor and will therefore only go to an open house, unless the house is priced properly (which none are), then I’ll call the listing agent.”

    Why don’t you use a realtor? That is stupid. It does not cost you anything. What if there are nice houses that choose not to hold open houses? Do you never see those? There are plenty of properties that you are missing out on.

  233. Robert Troll says:

    “which none are”

    So no houses are priced properly, yet homes are still selling. Sounds like someone needs to come home from fantasy land.

  234. njrebear says:

    Mr Duck,
    Prepare for the duck hunting season in fall. I want to see fat ducks lined up on granite counter tops.

  235. Robert Troll says:

    “I want to see fat ducks lined up on granite counter tops.”

    No, they will be lined up on formica countertops. This is Bergen County. Kitchens in homes for under a million leave a lot to be desired.

  236. UnRealtor says:

    Donald writes in #238:

    “Why don’t you use a realtor? That is stupid. It does not cost you anything.”

    Because they’re unnecessary middlemen who add no value. I’d rather negotiate for myself, as well.

    “What if there are nice houses that choose not to hold open houses? Do you never see those?”

    If they’re priced right, I’ll call the listing agent.

    “There are plenty of properties that you are missing out on.”

    Nope, I know every single property for sale in the zips I watch. Nothing is “missed.” Additionally, I can look at any house, in any town, at any price, and not worry about “offending” some tour guide.

  237. James Bednar says:


    Deleted a comment by accident, sorry about that.


  238. #233 Listen to hubby, you are being emotional, hs is not.Emotion always ruins these things;its just a house, let it go, or bid lower.

  239. #220 They ar already falling 50k now!!! This is fun. I like to say I told you so.

  240. gary says:

    AdAgencyWoman #205,

    It happened to us a few years ago when the shark frenzy was in full swing and we pulled the offer and said “buh-bye” to the realtor.

  241. sas says:

    “Because they’re unnecessary middlemen who add no value”

    I am not a big fan of realtors myself, because most are not worth anything and are haggle jockies.

    BUT, there are some realtors whom have been in the game for awhile, and know the game pretty well, and CAN actually help you. In my experience, they blokes are usually of the older persuasion, and not some young punk who thinks he is Joe Cool.

    I have never used one for my personal transactions, but I have been involved with deals where realtors have been involved.


  242. sas says:

    A good quote from an old friend (who still owes me lunch from a bet we had back at a strip bar in LA back in 82)

    “Perhaps the greatest cost of wave conflict in America will be paid by the millions of children currently compulsorily enrolled in schools that are attempting to prepare them – and not very successfully at that – for jobs that won’t exist. Call that stealing the future.”


  243. Robert Troll says:

    “Because they’re unnecessary middlemen who add no value. I’d rather negotiate for myself, as well.”

    Realtors provide lots of valubale experience, besides finding you a house. When I bought my house, my agent got me a really good moretgage rate through the mortgagae company that their firm owned. I shopped around at Lending Tree and all the local banks, and their rate was the best.

    And how do you negotiate for yourself? You can’t just call up the seller and make an offer. That’s not how it works.

  244. Robert Troll says:

    “#233 Listen to hubby, you are being emotional, hs is not.Emotion always ruins these things;its just a house, let it go, or bid lower.”

    Why are you so determined for her to lower or withdraw her bid? Maybe she likes the house. Since her husband can do renovations, they are saving lots of money by buying a run down home rather than one that does not need any work. I wish I knew how to do something. I can’t even change a freaking exterior lightbulb.

    If it is the house she wants, they should keep their bid in place. If another offer comes in, they can always look elsewhere. Buying a house is not like buying a condo. You can’t go somplace else and buy the exact home. Each house is different.

  245. Robert Troll says:

    Prices are not falling $50,000. On a $2 million home, yes. But not on homes that we can afford.

  246. Robert Troll says:

    And don’t let falling prices fool you. I know of one house that was overpriced. They started out at $899k, went to $869k, and then went to $799k. How DARE they price their home the same as mine. I saw the house. It was half the size as mine and 60 years older. They did not drop the price $100k. They just adjusted the price to put it where the house will sell. If you have an older and smaller home, you are committing suicide by pricing it the same as newer McMansions. Buyers today want new.

    Down the street from me, 2 comparable houses are under construction. If they get put into the MLS for a price similar to mine, I am screwed. I will have no choce but to take my home off the market. BUT most contractors today are greedy and I doubt the price will be the same as mine. I think each house will be at least $1 million. Also, it costs a lot more to build houses today than it did 10 years ago so it would not be economically possible to price the houses under $1 million.

  247. UnRealtor says:

    Donald writes in #248:

    “Realtors provide lots of valubale experience, besides finding you a house.”

    That hasn’t been my experience, but glad you had a good transaction.

    “And how do you negotiate for yourself?”

    Simple: just you and the listing agent, with the seller possibly there as well. Much better than “your” realtor, the seller’s realtor, and the seller. One less parasite in the chain.

    And if the listing agent doesn’t like an offer, and refuses to present it, the seller will indeed meet me as I knock on the front door. Wannabe gatekeeper realtors are in for a shock with me.

  248. UnRealtor says:

    Donald writes:

    “Prices are not falling $50,000. On a $2 million home, yes. But not on homes that we can afford.”

    Not so:

    18 Meadowbrook Rd
    Short Hills, NJ

    Jun 15, 2004 – Closed $755,000 (MLS 1671861)

    Mar 05, 2006 – $879,000 (MLS 2253723)

    May 01, 2006 – $829,000

    Jun 05, 2006 – $795,000

    Jul 13, 2006 – WITHDRAWN

    Jul 14, 2006 – $795,000 (MLS 2299446)

    Sep 07, 2006 – WITHDRAWN

    Sep 09, 2006 – $745,000 (MLS 2317848)

    Sep 27, 2006 – Under Contract

    Oct 20, 2006 – Closed @ $705,000

    This seller too more than a $50,000 loss, they took a $102,300 loss after paying realtor fees and closing costs.

    Two years, and $100,000 cash down the drain…

  249. UnRealtor says:

    “Buyers today want new.”

    Not me. Can’t beat a 1920s Tudor, or a 5-ganged 1940s center hall colonial.

    Most stuff built today is horrendous — vinyl siding, silly big windows over the front door, a hodge podge of rooflines, improperly-sized dormers, plastic “shutters,” etc, etc.

    This is the typical crap you see today:


  250. Waiting it Out says:

    Unrealtor – Nice find. I’m sure there are more of those … must be nice to have access to MLS …

    see anything like that in Bergen County?

  251. still_looking says:

    oh cripes… hideous….


  252. Rich In NNJ says:


    I do not have the time to read ALL the comments, but…

    1. Don’t listen to “Donald”/”Robert Toll”.
    He can’t even sell his OWN house, yet he’s going to give advice to others. (The man doesn’t even understand the word ‘inflation’.)
    2. Don’t let emotion rule your decision. They’ll always be another home as good if not better that matches your ‘dream’.

    Moving on… here’s a laugh!

    ACT BROOK WAY $1,396,500 6/15/2006
    PCH BROOK WAY $1,279,000 8/3/2006
    PCH BROOK WAY $1,179,000 9/21/2006
    PCH BROOK WAY $1,085,875 10/16/2006
    PCH BROOK WAY $999,900 10/31/2006
    U/C BROOK WAY $999,900 11/13/2006
    SLD BROOK WAY $950,000 12/13/2006

    ACT BROOK WAY $1,649,000 6/22/2007

    Yea, that’ll happen!

  253. Rich In NNJ says:

    Shopping in Clifside Park this weekend?

    Open house Sunday…

    SLD HIGHRIDGE AVE $524,000 3/5/2001

    SLD HIGHRIDGE AVE $810,000 3/16/2005
    (“APPRX 4 YRS”

    ACT HIGHRIDGE AVE $1,049,000 8/8/2006
    (“3 YEAR YOUNG”?! What kinda math is that?)
    PCH HIGHRIDGE AVE $999,000 8/24/2006
    PCH HIGHRIDGE AVE $969,000 8/28/2006
    PCH HIGHRIDGE AVE $929,000 9/29/2006

    ACT HIGHRIDGE AVE $928,888 2/3/2007
    PCH HIGHRIDGE AVE $899,000 3/6/2007
    PCH HIGHRIDGE AVE $858,000 3/29/2007

    Sad… they’ll be lucky to see $700k
    (But wait, by their math it’s 2 years YOUNG…)

  254. Politely says:

    #193, #194, #198

    Just to clarify a few points about securitizations and CDOs.
    1) Moving away from the actual borrower is less risky, not more risky. For example, owning 10% each of 10 mortgages is less risky than owning 100% of 1 mortgage.
    2) You can actually, to some extent, polish a turd. It’s a matter of risk tranching. Simplifying greatly, and using some numbers I’ve seen batted about, let’s say 20% of subprime loans will default, and let’s say we have 100 subprime loans of $1 each. That means that you should expect to lose $20 and collect $80. If you’re the first in line to collect the first $20 of payments, you’re almost positive you’re getting your money back (that’s why this first tranche is rated AAA). If you’re the last $20 to get paid, then you’re gambling that losses will be less than expected (that’s why this tranche is unrated). Why would an investor pick the last $20? Because the yields are higher than what you’ll get as an AAA investor. And if you’re buying this first loss piece, you’re no retail investor. Of course, if you believe that every subprime loan will default, then this explanation won’t sway you at all.
    3) There are many flavors of CDOs. For example, some include leverage, some are synthetic, some are static pool, some are managed, some are backed by loans, others by ABS or corporates – they all have different risks. One can’t generalize without understanding the differences. But even within the CDO structure, you’ll have tranched the risk within the CDO as described in (2), and the investors within a CDO will all have bargained for a different risk and return profile.
    4) As far as pricing a CDO being complicated, perhaps it’s a lot of work making sure you can price each underlying asset, but I’d argue that pricing debt or equity of operating companies (eg, GE or IBM) is incredibly more difficult and much more of a random guess, if for no other reason than you can’t get marks on their assets.

    With respect to securities pricing, I don’t think that excessive widening is sustainable, especially on higher rated bonds (that’s not to say that bonds won’t be downgraded). Further, even if subprime MBS blows out, I don’t think you can extrapolate to fixed income instruments in general, to CDOs in general or even to prime MBS.

    With respect to whether the subprime mess will touch off a run on the market because of the effects of leveraging, I don’t really know enough to judge, but I haven’t really seen it. Even the Bear articles expressed much surprise at how leveraged they were.


  255. James Bednar says:

    From the Philly Inquirer:

    Housing, rental markets reacting to complex forces

    Real estate times, they are a-changing, in so many ways.
    Diane Cirafesi has spent many an hour in the last eight months cleaning her West Chester house for prospective buyers.

    “Some weeks, there are five; some weeks, three,” Cirafesi said. But none of the visits have come to anything, even after she brought the price down to $287,500 and brought in Fred Gusz, a neighbor who is an agent with Piedmont Realty, to work for her after having no luck selling the house herself.

    Cirafesi’s situation is a little different from that of most sellers: She’s not in a hurry to sell the house she’s owned for almost 13 years. The proceeds will finance a move to New Mexico, where she plans to be an artist, live mortgage-free, and work part time, probably in advertising, which is what she does now.

  256. James Bednar says:

    Donald (aka Robert Troll):

    I don’t mind you posting your opinion, but when you do, please be sure to preface your statement that makes that absolutely clear (eg. “I think that…”, “I believe that…”, “It is my opinion that…”).

    I have no problem with you sharing your opinions and feelings, but I have serious issues with you trying to peddle misinformation as fact.


  257. James Bednar says:

    From the Allentown Morning Call:

    State ends part of Poconos fraud case

    Five years ago, with great fanfare, then-state Attorney General Mike Fisher sued a Monroe County builder and several others, claiming they had duped hundreds of homeowners into buying homes at inflated prices.

    Fisher, who sought $10 million in fines and restitution, said the suit against Gene Percudani, who owned Raintree Homes and Chapel Creek Mortgage in Tannersville, was one of the biggest fraud cases he’d ever seen.

    On Friday, Fisher’s successor, Tom Corbett, settled the suit against Percudani, who agreed to pay $250,000 and accepted permanent banishment from participating in the mortgage business in Pennsylvania.

    None of the money will go toward restitution to the homeowners, and Percudani, who is free to build homes again, admits no wrongdoing, said Kevin Harley, a spokesman for Corbett.

    ”We’re certainly not as happy as we would like to be, but it is an equitable conclusion to this case,” Harley said.

  258. James Bednar says:

    From the Record:

    Highlands preservation leaves little for some boards to do

    The state’s Highlands preservation campaign is leaving some local planning boards with little to do.

    So some Highlands towns are merging or considering merging their planning and zoning boards.

    With development curtailed because most of the remaining open space is in the Highlands preservation area, Bloomingdale merged its planning and zoning boards in December. And Wanaque is considering doing the same.

    In Kinnelon, the Planning Board has met just three times this year and has reviewed no new applications since 2004.

    A big reason for merging the boards is to cut costs of paying lawyers and other professionals on both boards.

    Bloomingdale Mayor William Steenstra said the council decided to merge the boards when it became clear that fewer applications were coming in. “So why not save the money?” he said.

  259. James Bednar says:

    From the Asbury Park Press:

    Private sector jobs pay less than Uncle Sam

    Sometimes the easiest way to find a good-paying job is to ask a wealthy relative to hire you.

    For many, that relative is Uncle Sam.

    Federal workers, on average, are paid almost 50 percent more than employees in the private sector, an Asbury Park Press analysis of salary data shows.

    The average federal worker made $59,864 in 2005, compared with the average salary of $40,505 in the private sector, according to the latest data from the U.S. Bureau of Labor Statistics.

    And that pay gap appears to have widened in the first nine months of 2006.

    The gap may be driven by increased competition in the private sector, where globalization and technological advances have held salaries down. Meanwhile, the federal work force has no harsh business realities to face, said James Sherk, a labor policy analyst at the conservative Heritage Foundation in Washington.

    “The government doesn’t have to worry about going bankrupt, and there isn’t much competition,” Sherk said.

  260. sas says:

    Thinking about getting a road bike.
    I would like to ride about 5 miles a day.
    ANyone have any recomendations? I would like to keep the price reasonable, since I am not one of these speed demons racer types.

    How about it JB?


  261. James Bednar says:

    The most important factor is fit, everything else is secondary to that.

    First step is to find a shop that will properly fit you for a bike. Typically this is going to involve taking measurements of your appendages, torso, feet, and so on. These measurements will determine on what geometry you’ll fit well, unfortunately, it’ll also serve to constrain your possible choices, as geometries differ radically among makes/models.

    As far as frame materials go, old schoolers prefer steel frames (steel is real!), aluminum frames used to be hated by roadies (terribly stiff and fatiguing) but have improved dramatically. Some feel that the Ti/Carbon or Ti/Carbon mixes are really the peak in terms of combining the performance and comfort/feel.

    As far as your group (components), basically only two choices, Campy (Campagnolo) or Shimano. Both offer a wide range of price points, and the top end at both ends is extremely expensive.

    I wouldn’t be so concerned about weight, you’ll be sacrificing reliability to get a lighter bike. It irks me when salespeople push weight as a selling point. Light is great when racing, but how many casual riders have the money to buy a new bike ever season or two? Not to mention that one crash will send most of these flyweights right into a dumpster.

    Price, ultimately, is going to play the biggest role in your decision. For only a few miles a day, I’d suggest a bike with either a Shimano 105 kit, or an Ultegra kit if you want to spend a few more bucks. I’ve got a thing for Italian bikes, I ride a Ciocc (not really well known outside the racing circuit). I wouldn’t really recommend any of the lower end bikes, they simply aren’t worth it. To give you an idea of where you’ll end up at the entry level, it’ll probably be around $1,200, give or take.

    SAS, you are in Bergen? I can give you a few references if you’d like. I’d rather have you talking to a pro at a shop, instead of some no-nothing kid trying to sell you the wrong bike.


  262. James Bednar says:

    So much for trying to give you a quick summary, you are probably pretty confused at this point.

  263. A friend says:

    RE:226 Confederate makes a machine called the Hellcat. You can check them out at http://www.confederate.com

  264. RentinginNJ says:

    Velocity auction today.

    “The minimum bids in the auction start at $295,000 for a 790-square-foot one-bedroom unit. That previously had an asking price of $450,000. A three-bedroom, three-bath, 1,549-square-foot condo has a minimum bid of $545,000, compared with an earlier asking price of $865,000. Monthly condo fees range from $347 to $680.”

    Please post results

  265. Robert Troll says:


    I think your policy of not peddling misinformation as fact also needs to apply to Rich’s statement below:

    “Sad… they’ll be lucky to see $700k”

    Or do certain rules only apply to me?

  266. scribe says:


    I’m all in favor of buying the land and location first.

    Question: Had the open house already been advertised so that they felt it was too late to cancel it? Or did they suddenly decide to hold an open house after you’d already negotiated a price, in the hopes that another bidder would materialize, making for a bidding war?

    Are you sure they’re really holding an open house? Or do you think they’re stalling for time while they shop your bid around?

    Can you drive by today and see if there really is an open house?

    How much would you have to put into this house?

    You say it’s the “ugly duckling” on the block.

    But there are plenty of long-term owners who’ve maintained their properties. Maybe the kitchen and bathrooms are older and need to be replaced/updated. But the properties are well-maintained – don’t stick out as “ugly ducklings.”

  267. Clotpoll says:

    Un (252)-

    Possibly your best yet…a kind of RE version of “Dirty Harry”. You can almost imagine these words coming out of Clint Eastwood’s mouth:

    “…Simple: just you and the listing agent, with the seller possibly there as well. Much better than “your” realtor, the seller’s realtor, and the seller. One less parasite in the chain.

    And if the listing agent doesn’t like an offer, and refuses to present it, the seller will indeed meet me as I knock on the front door. Wannabe gatekeeper realtors are in for a shock with me.”

    Let’s see…what’s one of the reasons sellers employ agents? Oh yeah…to NEVER have to look people like you in the eye. No seller with a decent agent- in his right mind- would ever give you face time. Your assumption that sellers who employ agents simultaneously resent them and are somehow itching to field offers directly from buyers could not be further from the mark.

    The context of your remark also implies that you and a seller- negotiating without benefit of agency- can somehow automatically fashion a better, more-equitable deal. Please explain to me how that works. If/when you are able to negotiate in person, will you somehow become a kinder, gentler buyer…one looking to create a “win-win” for both parties? You have stated in other posts that you are a “50% down buyer” (who cares?) and have no problem with lowballing. Will the seller, in dealing directly with you, magically accept on faith that your intent is benign? And, how will the seller (IF he even agrees to see you) accept your gracious and completely fair offers…once he sees that you’ve bulled your way past two Realtors in order to get face time?

    Your statements, taken as a whole, reek of a self-serving, self-important inconsistency. One the one hand, you espouse an almost Panglossian belief in the ability of a buyer and seller to create agreements superior to those that could be achieved through some sort of mediation…yet on the other, assert your intention not to meet today’s market on today’s terms (thus the need to bypass one- maybe two- agents, in order to personally present your lowball).

    I’ve never met you, and I have no way of knowing whether you’re trolling, enjoy baiting people like me or actually believe some of the unhinged stuff you post here. However, as even Ducky has pointed out, your intended approach will be a total non-starter…if and when you decide to take the plunge. It’s also so completely off-the-mark that I doubt you could use it in approaching FSBOs or pre-foreclosures.

    BTW…do you think I could come into your office, sit down at your desk, and on my first day-with no training or experience- do your job as well as you?

  268. Robert Troll says:

    Prospective buyers knocking on my door and making lowballs? My goodness! Release the hounds…

    I would be afraid to make a lowball in person. Who knows what the seller is going to do? Yikes.

  269. Clotpoll says:

    I can’t believe I’m agreeing with Ducky. I need a drink.

  270. scribe says:


    Consider the possibility that if you knock on someone’s door with a lowball that circumvents the agent, they’ll think you’re a would-be flipper, and they won’t want to deal with you at all, ever again.

  271. Robert Troll says:

    Not only would the seller not want to deal with him, but so would the listing agent. Perhaps a better idea would be to send a letter in the mail with your offer and give the seller the chance to talk face to face in the future, but ONLY if they choose to. Knocking on their door is an “in your face” strong arm tactic that sellers will not appreciate.

  272. Pooch123 says:


    Before you buy a bike, I highly recommend you borrow someone else’s road bike to make sure its for you. Road bikes are very expensive and contort your body in a somewhat strange position and have strange handlebars (don’t get me wrong, being able to have multiple hand positions is useful for long haul tours but its a strange thing for newbies to adjust to and you should make sure that if you’re not comfortable with it, you’re at least capable of becoming comfortable with it).

    I’m a fairly serious cyclist (do many 50+ miles tours) but those factors, plus price, caused me to reconsider my initial decision and get a flat handled road bike instead of a regular ‘ol entry level road bike.

    Agree with JB that regardless of what you decide to do, fit is by far the most important factor, which is one reason to buy at your local bike store instead of online.

  273. justbought says:

    I think Un has something there. As a seller you need an agent. As a buyer if you know the area very well, you have access to MLS, you know what you want to pay, then a buyer’s agent is a waste of time and money.

    We’re not talking knocking on seller’s doors here. When you call a listing agent and tell them you want to present an offer through them a double commission gets their atttention very quickly and they will really want to make sure YOUR deal gets done lowball or not. Of course you’ll still hire your lawyer, home inspector, etc. But someone please explain why you need an agent to “represent” you as a buyer. All they want to do is get you to close on anything soon so they get paid.

  274. hoodafa says:

    From today’s New York Times:

    Subprime Fallout Could Hit Shares

    Published: June 24, 2007

    THE long-scheduled meeting of Federal Reserve policy makers is a highlight of the calendar this week, but with no change in rates expected, investors may focus instead on subprime mortgages, where rates have been changing for the worse.

    An index that tracks the subprime market hit a low last week as a group of Wall Street banks participated in an attempt to rescue two hedge funds that suffered severe losses in them.

    The banks, which had lent money to the funds, run by Bear Stearns, agreed to sell some of the mortgages used as collateral for the loans slowly and privately. To replace their capital and try to shore up at least one of the funds, Bear Stearns will commit more of its own money.

    One investment adviser warns that continued weakness in the subprime market could bode ill for stocks. The potential source of trouble is not just what investors know about the subprime market and the hedge funds, run by Bear Stearns and others, that made big bets on it, but also what they do not know.

    “It’s all out there in front of us, and it will all come out in the wash,” said Henry J. Herrmann, chief executive of Waddell & Reed. “We just don’t have any idea when the washing machine will finish its cycle. It could be two weeks or two years.”

    It is also unclear who might be taken to the cleaners. Further losses in subprime mortgages could send yields higher on other forms of risky debt, including the borrowing that serves as fuel for corporate mergers.

    If such yields rise, “a lot of private equity transactions may not go on because they’ll be more expensive and less lucrative, and that could affect the stock market,” Mr. Herrmann said.

    Whether troubles in the subprime market result in a widespread increase in yields and further damage to hedge funds and other assets “is the fundamental question,” he said.

    “I don’t have the answer,” he added, “but with all the leverage in hedge funds and other vehicles, losses could be substantial and the consequences great.”

    DATA WATCH If investors in subprime mortgages hope that new information from the housing market will provide a respite, they may be disappointed.

    A Bloomberg News poll of economists forecasts a dip of 0.3 percent in sales of existing homes, to an annual rate of 5.97 million units in May from 5.99 million in April. That report is due Monday. The next day, a 5.7 percent drop is predicted for sales of new homes, to an annual rate of 9.25 million from 9.81 million.

    No change in key interest rates is foreseen when the Fed meets on Thursday. The federal funds rate stands at 5.25 percent. But close attention will be paid to the statement issued at the end of the meeting, looking for shifts in the Fed’s assessments of the risks of inflation and of a slowdown in the economy.

    While investors had been hoping for a cut in short-term interest rates, inflation has been running higher than the 1 to 2 percent annual rate with which Fed policy makers say they are comfortable.

    The core personal consumption expenditure deflator, an inflation measure that is preferred by the Fed, is due on Friday, and it is expected to show that inflation remained at an annual rate of 2.2 percent in the first quarter.

  275. Robert Troll says:

    “Seems like this is only happening in certain areas. Was hoping to see South Amboy on here. Love the info I’m reading here. Making think I should hold off a little on my home purchase.”

    Are you sure about that? If you have been watching interest rates lately, your housing expenses, once you decide to buy, are only going up. Many first time buyers with very small down payments will be kicked out of the housing market since they will no longer be able to afford the monthly payments. Those with larger down payments will need to downsize their budget an look at cheaper homes. Buyers took the risk that home prices would continue to delcine while interest rates remained low. They LOST. First time buyers lost big time. If rates go up again, more buyers will be thrown out of the market. Some buyers’ market, huh?

  276. chicagofinance says:

    Politely Says:
    June 24th, 2007 at 3:31 am

    I spent the time yesterday reading the story profiled in the WSJ [not the one grim posted, but one page one]. Ultimately, there is a soap opera component here related to LTCM. Bear stiffed everyone in 1998 and it still sticks in everyone’s epiglottis. Bear tried to stiff everyone again, and the response was a not-so-polite Cheney-ism [“go f– yourself”]. Ultimately, it is a case of “stand behind your product”, because Bear did not have legal reason to step-in, but they did.

    Interesting, I still contend the issue is not with the CDO’s, but rather how they were used.

    An issue of note: we need to understand Bear’s signaling here….

    1. maintain black box/obfuscation?

    2. $3.2B hit less asset value relative to what? is there a bigger threat? now in context I understand what Merril was doing by trying to go to market to unload collateral – they were threating to give Bear a tire iron in the back of the knee

    3. Bear’s reputation? what franchise is being defended? they didn’t have to do this….

    4. this is a mess, but no Katrina – think of this as we are the White House and Katrina hit, and we are trying to get all of our information from Anderson Cooper – this is a busy weekend, but the skies are fair…..what next?

  277. Robert Troll says:

    “they will really want to make sure YOUR deal gets done lowball or not.”

    The agent’s opinion does not matter. The seller makes the final decision and they could not care less how many agents there are. A lowball is a lowball.

  278. justbought says:

    To a seller like yourself clearly does not matter.

  279. Robert Troll says:

    “To a seller like yourself clearly does not matter.”

    Clot agrees with me. I have a fanclub, believe it or not.

  280. R Patrick says:

    I think it will be too many people looking for a deal ( people my age mid 20’s ) seeing a way to get into Hoboken RE on the cheap.

  281. chicagofinance says:

    grim – unmoderate

  282. Rich In NNJ says:


    You’re right.

    Sad… I THINK they’ll be lucky to see $700.

    PS You’re wrong about your statement that there are no trailer parks in Bergen County. There are at least six.

  283. James Bednar says:

    Contemplating taking a ride down to the auction to see if I can get a peak at the “action”.


  284. Robert Troll says:

    “Contemplating taking a ride down to the auction to see if I can get a peak at the “action”.”

    I believe potential buyers were required to register in advance so you might not get in at the last minute.

  285. Robert Troll says:

    “You’re wrong about your statement that there are no trailer parks in Bergen County. There are at least six.”

    Yes, I was wrong. You were correct because you live in one of those 6 trailer parks.

  286. sas says:

    I have a secondary residence in Bergen.

    Whats a good shop?

    I live near 2 shops, I will check them out today or tomorrow and report back.

    You are correct about salespeople and weight.
    I checked out a shop on Fri, they just tried to sell me more exspensive light weight bikes. Didn’t measure me. Just looked at me and said “you look like a blah blah blah”

    I don’t really know anyone that has bikes. People my age are too busy on slim fast and driving their Toyota Camrey.

    Appreciate the input fellas ;)


  287. t c m says:

    although i understand why it would not be a good idea to knock on a seller’s door to bypass the seller’s agent, what’s wrong with looking up listings, and contacting the seller’s agent directly without using an agent myself?

    when i bought my first house (a long time ago),i did this. i was using an agent myself, but i discovered he used my bid on a house to get a higher one – so i decided to deal directly with any agent listing a house that i liked.

  288. Lindsey says:

    So the Duckman managed to trick me by changing his name. I just thought we had a new simpleton/RE industry shill rather than a recycled one.

    Ah well at least I got to experience the pleasure of his 4th grade level insult ability. Really. “you live in a trailer park.” That’s your idea of a joke? You are far more pathetic than I thought (and I thought you were pretty pathetic before.)

    Anyway Mr. Duck/Troll, even though it means I’m going to have to look at more of your postings while I await an answer, I’m going to ask you a question.

    Since your perception of the market is largely at odds with most of the posters here I’m wondering why you think what you do.

    What are the factors that will keep RE prices where they are?

    And while you’re at it, if you could be so kind as to answer why you think a buyer (adagency) who clearly is being mistreated by the seller of the home she seeks to ignore the way she is being used?

    Do you really believe it’s proper to accept an offer and continue to seek other offers on the single item for sale?

  289. Robert Troll says:

    “What are the factors that will keep RE prices where they are?”

    1. Low unemployment

    2. Soaring stock market

    3. Proximity to NYC

    4. Significant increase in new construction (where I live, anyway). Newer construction attracts buyers to new areas that they might have previously overlooked.

    5. Sellers refusing to sell for a loss

  290. sas says:

    Robert Troll,

    and what happens when there is a down tick in one of the 5? or NYC is no longer the financial capital of the world (which is a high probability in the globilization era).

    The old passes away and something new must replaced.

    Things and life are never linear.

    Ciao ;)

  291. UnRealtor says:

    “Consider the possibility that if you knock on someone’s door with a lowball that circumvents the agent, they’ll think you’re a would-be flipper, and they won’t want to deal with you at all, ever again.”

    Possibly, but nothing lost if the realtor refused to present the offer.   The least of my worries is an “insulted” seller.

    And plenty of homes sell to flippers, as we’ve all observed ad nauseum these last few years.

    With most realtors having an ego and inflated sense of importance almost as big is Clot’s, sometimes you have to get that extra parasite out of the equation, and go straight to the seller.

    And if a seller sees an acceptable offer that a realtor refused to present, well, that would probably bring legal issues into the equation.

  292. UnRealtor says:

    justbought #278, and for another buyer’s offer to be as attractive as mine to the listing agent, they would have to offer double the price.

    I have listing agents calling me nearly every day, chasing that full commission.

  293. Bloodbath in Winter 2007 says:

    Does anyone on this board live in Nutley? The prices there seem much more reasonable than Bergen County, and Nutley – at least on maps – appears closer to Manhattan (for work).

    It’s in Essex, so that means higher taxes, right? We’re just starting to look into Nutley .. if anyone is very familiar with the town/homes in that area, I’d love to hear about it.

  294. UnRealtor says:

    “Sellers refusing to sell for a loss”

    This assumes the seller has a choice. With ARMs adjusting upward, and the market moving downward, people are forced to sell since they can’t refinance.

    Add in death, divorce, a move to the nursing home, foreclosures, etc.

  295. AdAgencyWoman says:

    Scribe #271

    Question: Had the open house already been advertised so that they felt it was too late to cancel it? Or did they suddenly decide to hold an open house after you’d already negotiated a price, in the hopes that another bidder would materialize, making for a bidding war?

    They told me that the open house was already in the works. Seller accepted on Thursday, OH was yesterday.

    Are you sure they’re really holding an open house? Or do you think they’re stalling for time while they shop your bid around?

    Yes, it was advertised on the website but interestingly enough not in any of the papers I inspected.

    Can you drive by today and see if there really is an open house?

    Didn’t have the guts to do it. Didn’t want to see any activity.

    How much would you have to put into this house?

    You say it’s the “ugly duckling” on the block. Yes, needs landscaping and cement work. New siding down the road.

    But there are plenty of long-term owners who’ve maintained their properties. Maybe the kitchen and bathrooms are older and need to be replaced/updated. But the properties are well-maintained – don’t stick out as “ugly ducklings.”

    The house is updated versions on either side. It is the ugly duckling.

    I was hoping a call had come today to give me a morsel of what went down. No news from realtor though.

  296. HOUSE OF CARDS says:

    Home Sales Drop, Consumer Spending Gains: U.S. Economy Preview

    By Bob Willis

    June 24 (Bloomberg) — Home sales dropped last month to a four-year low and consumer spending picked up, signaling the housing recession isn’t rippling through the economy, reports this week may show.

    Combined purchases of new and previously owned homes fell to an annual rate of 6.897 million, the fewest since April 2003, according to the median forecasts of economists surveyed by Bloomberg News. Americans spent 0.7 percent more on goods and services last month, a gain not exceeded since January 2006, another report may show.

    The spending report may also show that, for the first time in three years, inflation slid within the Federal Reserve’s preferred range. Still, policy makers will hold the interest rate target unchanged when they meet this week and will maintain that inflation remains their biggest concern, economists said.

    “The U.S. economy, ex-housing, seems to be showing strong signs of recovery, which will prevent the Federal Reserve from lowering interest rates any time soon,” said Eugenio Aleman, a senior economist at Wells Fargo & Co. in Minneapolis.

    A report tomorrow from the National Association of Realtors may show sales of previously owned homes fell to an annual pace of 5.972 million in May from 5.99 million a month earlier, according to the median estimate of economists surveyed.

    The following day, the Commerce Department is forecast to report new homes sold at a 925,000 annual rate, down from April’s 981,000 pace.

    “We haven’t seen the bottom yet for home sales,” said Ellen Zentner, a macroeconomist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “Housing will continue to be a drag on growth.”

    Builder Losses

    Homebuilders also see no relief. Hovnanian Enterprises Inc., New Jersey’s largest homebuilder, last month reported its third consecutive quarterly loss as sales plummeted, it cut prices and wrote off land options.

    “Without a doubt, things have slowed since about March,” said Ara Hovnanian, the builder’s chief executive officer, in an interview June 18. “There is not a recovery that is about to happen.”

    The projected gain in consumer spending last month would follow a 0.5 percent increase in April, the Commerce Department’s June 29 report is forecast to show. Personal income probably rose 0.6 percent, after dropping 0.1 percent in April, according to the survey median.

    Job and income gains are keeping consumers spending even as food and fuel prices jump and home values drop.


  297. scribe says:


    That doesn’t sound bad.

    Maybe you’ll get a call tomorrow.

  298. BC Bob says:

    “1. Low unemployment”

    “2. Soaring stock market”

    I’ve been out of touch. Is this Donald that was exposed, naked long/realtor, last week?

    Quick questions. Unemployment based on BLS or ADP? Real employment or birth/deaths? Who’s creating those jobs?

    Regarding the soaring stock market. Your thoughts on Merrill,DJU and the Titanic Indicator? You brought it up, now explain.

    Also, what currency are you referring to? How have the chaps, across the pond fared, in our stock market?

  299. James Bednar says:

    Should be an interesting week…


  300. RentinginNJ says:

    Velocity Auction

    Can’t confirm the authenticity of this anonymous report…

    An anonymous posting here

    …says that 9 units were sold through auction. The developer didn’t like the clearing prices they were seeing and decided to close the auction after the sale of 9 units.

    Has anyone heard anything?

  301. chicagofinance says:

    Robert Troll Says:
    June 24th, 2007 at 2:46 pm
    “What are the factors that will keep RE prices where they are?”

    6. Utter lack of any transaction volume

  302. scribe says:


    You’re free to do whatever you want.

    Just be aware that you might be giving the seller and the seller’s agent the wrong impression if you want the house to live there.

    There are always lots of houses, but “the house” you really, really want has always been hard to find.

  303. Clotpoll says:

    Un (296)-

    “With most realtors having an ego and inflated sense of importance almost as big is (sic) Clot’s, sometimes you have to get that extra parasite out of the equation, and go straight to the seller.”

    Another classic. Law requires that agents present ALL written offers to sellers. This is a duty that is spelled out so clearly in statute, even the least competent agents perform it.

    If you present a sh*t offer thru an agent and the answer comes back “no”…it’s no. If you think there’s skulduggery afoot, ask for a signed, notarized acknowledgment of the offer from the seller.

    And, where did you get the imbecilic idea that RE agents suffer from ego problems and an inflated sense of importance? Most RE agents I know are quivering, totally-insecure walking containers of self-doubt.

    You wouldn’t be able to identify a good agent if he introduced himself by beating you over the head with a club. I suspect one of your biggest problems with RE is that you unconsciously seek confirmation of your bias by gravitating to the worst among us. I equally suspect that good agents can read you in a heartbeat and quickly steer clear. Most top agents are very shy, soft-spoken and understated in their approach (I guarantee you that the only place I talk smack is here…the minute I’m in the office, it’s another story).

  304. SG says:

    74 percent of the survey respondents said they were confident that they could sell their home within six months at the price they think it’s worth.


  305. Robert Troll says:

    “The prices there seem much more reasonable than Bergen County, and Nutley – at least on maps – appears closer to Manhattan (for work).”

    Ok, I can’t beleive I am responding to someone named “Bloodbath in 2007” but here it goes. Yes, prices are chepaer in Essex than Bergen. Bergen is the most expensive county in NJ. As far as property taxes in the 2 counties, they vary greatly. Towns like Alpine have super low taxes while towns like Leonia have some of the most expensive taxes around.

  306. Robert Troll says:

    I like UnRealtor’s approach. If the sellers of the $1.888 million home in Alpine reject my lowball for $900k, I am going to knock on the door and harass them until they give in. I hope everyone here has some money. UnRealtor and I will need to be bailed out of the county jail in Hackensack first thing tomorrow morning…

  307. SG says:

    NJ Chester township story on NYTimes:

    “The developer would have put 17 homes on the land, and each of those households would have had two school-aged children,” he said. “In just two years, we save our half-million on schooling costs alone.”


    I don’t understand this. How 34 kids can increase costs for half-million??? Gimme a Break !!!

  308. Clotpoll says:

    Troll (311)-

    I wouldn’t bail out either one of you chumps. The best outcome would be that you and Un would be locked in a holding cell together, then commence re-enacting your own version of Thunderdome.

    Then, the winner would start busting rocks on a chain gang the next day, a la Cool Hand Luke.

  309. Former NNJ says:

    Clot wrote:

    Most RE agents I know are quivering, totally-insecure walking containers of self-doubt.

    Most top agents are very shy, soft-spoken and understated in their approach.

    Wondering if you say this in jest.

    With all due respect, this just has not been my experience (and I’ve been around a lot of real esate sales agents.)

  310. Lindsey says:

    To Robert Troll/Duck

    Since BC has raised questions about 1-3 I’ll concern myself with 4 and 5 for the moment.

    Significant increase in new construction (where I live, anyway). Newer construction attracts buyers to new areas that they might have previously overlooked.

    While I would agree that new construction in direct proximity to an existing home, ceteris paribus, will raise that home’s value, a “significant increase in new construction” overall, cannot possibly increase the price of homes.
    I’ll stick with 300 years of economic theory and say that if supply rises relative to demand, prices fall.

    Sellers refusing to sell for a loss

    This is a pretty interesting point. I would first say that the pool of potential sellers who might be facing sale at a loss at the moment would be limited, at most, to people who purchased in the last 36 months.
    Every other potential seller is merely looking at a smaller profit than they would have received if they sold at the peak.

    Now, in the pool of those who purchased in the last 36 months, the only ones likely to be considering a sale now are people who have no choice.

    This group would be flippers; those who have been transferred from the area; those who have had a life-changing experience (death, divorce, job loss or serious illness); and those who bit off more than they could chew in terms of debt to get into the house. If there are any other reasons a person might be looking to sell, I can’t think of them.

    In each of those cases, the seller has virtually nothing in the form of ammunition to battle the forces of the market as it pushes prices down.

    Just to be clear, my short version of reasons for prices falling are: affordability; declining wages; excess supply; and affordability (it’s worth repeating, and yes, I realize that declining wages actually means I said affordability three times).

  311. Lindsey says:

    My apologies for the lateness of my response, and specifically, apologies to Un who gave a similar respone to Troll Point 5 at post 299.

  312. Lindsey says:

    I realize I’m way behind with this (the report came out June 15) but I don’t recall seeing anything similar posted elsewhere and it is the weekend open thread…


    With the New York-Northern New Jersey Consumer Price Index for All Urban Consumers at
    227.146 in May (1982-84=100), $22.71 was required to purchase what $10 could in the 1982-84 base
    period. The purchasing power of the dollar was 44.0 cents in 1982-84 dollars and 15.2 cents in 1967

    I just found that kind of surprising. It sure feels like $20 doesn’t go as far $10 20 years ago, but it’s still surprising to see it in black and white.

    The information is available in a pdf at the bls.gov site.

  313. syncmaster says:

    People are “excited” about this lifestyle? Hmm.

    New townhomes wait for owners

    Park Place at Garden State Park, a new development of $500,000 townhomes, is crossing the finish line at the one-time racetrack.

    For buyers who prefer the look of a model home, the developers also are introducing a new service, offering fully furnished and decorated townhouses.

    On a sneak preview tour, Morris and business partner Joe Marino said they loaded up on amenities such as 10-foot ceilings, copious closets and energy-efficient Pella windows that will appeal to higher-end buyers.

    Exteriors are clad in stone and brick, connected by curving paver walkways. Inside, expect to see granite countertops and sumptuous master suites in which coffered ceilings and architectural columns are standard.

    Three bedroom, two-and-a-half bath townhomes range in size from 2,190 square feet to 2,750 square feet. Finished basements offer 9-foot ceilings and the potential for an additional 1,000 square feet of living space.

    “We are not builders of tract homes,” Morris said. “We build custom homes.”

    Sales manager Jilleen Kitson said some prospective buyers expressed disappointment with the projected property tax bills, expected to run $14,000-$16,000 annually.

    “Of course, we wish they were lower,” she said. “But we’re finding it’s not a deterrent because people are so excited about the lifestyle.”

  314. Jaywalk says:


    Re: #298

    I grew up in Nutley, and I work for a Nutley-based company, so I’m quite familiar with the town.

    Nutley has a reputation for decent schools, although I understand they’ve slipped a bit over the past several years. The better elementary school districts are Yantacaw, Spring Garden and Radcliffe, followed by Lincoln and Washington.

    There are buses into the city and you can catch NJ transit trains from Delawanna in Clifton (very close)or Lyndhurst or Rutherford. I work in Jersey, so I can’t vouch for travel times.

    Nutley has a terrific park system that runs throughout the town. The cops in town have a reputation for being a pain in the a$$, but it does tend to keep the place decent. There are some quirky ordinances like no front yard fences and no overnight parking on any street.

    There are lots of Italian-Americans in town, so there’s no shortage of good pizza. There are a few good restaurants on Franklin Avenue, but don’t look for too many shopping choices. Plenty of places to have your nails done, though!

    If I were to buy in Nutley, I would avoid the area east of Franklin and South of Centre, which is adjacent to Belleville. IMO, Belleville is slowly losing its battle to keep Newark out.

    Good luck with your search, and let me know if I can fill you in on anything else Nutley-wise.


  315. Clotpoll says:

    NNJ (314)-

    I stand by my statement. Note that I said TOP salespeople.

    The best RE agents are very low-key with clients and do a lot of listening. Being quiet and “mirroring” the client are important parts of the process.

    Some 200 lb lady in a bad suit, too much makeup and a leased Jaguar is not the profile I’m describing.

  316. James Bednar says:

    If you think a suit is bad, I’d like to get your thoughts on leotards (re: One of my open house visits yesterday). Not to mention actually having the owners and their kids present at the open house.


  317. Jamey says:

    Jim (44)

    I’m sure this has been answered ad nauseum, but once more into the breach, like Hal V:

    Homes: “asset”
    Petroleum: “commodity”

    Rise in the former, good; rise in the latter, notsogood.

  318. Jamey says:

    re: 265/66: Grim, sorry to contradict you on one point: there are a LOT of really terrific bikes in the $700/1200 range that would perfectly suit a recreational rider. And weight does NOT necessarily equal reduced durability–in many tests, CF and Ti have proven FAR more resistant to fatigue than Al and even steel.)

    105, IMO, is overkill for the itinerant rider; the new Tiagra, while 9-speed, is, functionally, the same as the 5500-series 105 10-speed (I know, because I had my new Bike Friday built with Tiagra, and I ride it daily. It performs as well as any other components I own, and that list includes Campy SR [old school], DA, Ultegra, and Campy Chorus, to say nothing of off-road kits in the Deore LX/XT range.)

    SAS: Tis true, that fit is the ultimate arbiter. Just this weekend, I discovered how a 5 mm adjustment of my seat height made a huge difference (was getting saddle sores). But if you cannot resist purchasing online, where things are A LOT cheaper, and don’t mind adding in your own stem and handlebars (the two items bike shops most often swap out to fit), you can create your own size chart: http://www.competitivecyclist.com/za/CCY?PAGE=FIT_CALCULATOR_INTRO

    Just be sure you want drop bars. For several years, I’ve commuted from Leonia to Midtown on a flat-bar bike with bar ends. I happen to prefer drops, but flats can be more comfortable.

    But I have to agree with the consensus: really, your LBS (local bike shop) is the best bet–they support the product, which is important if you’re neither inclined nor able to wrench your own bikes. Just a year’s worth of adjustments and free assembly alone–the standard for bike shops–are worth $100-200. I recommend Strictly Bicycles in Fort Lee**. Nelson, the owner, is a straight-shooter. His people take the time to figure out what you want/need. Feel free to mention my name, Jamey (the guy with the BikeFriday). In that $700-1200 sweetspot, Strictly sell Fuji, which are terrific bikes. They lack the promotional muscle of Specialized, Cannondale, and Trek. But Fuji bikes at the lower price ranges seem far less prone to the sorts of design and spec compromises that plague the lower-priced offerings from the big three.

    **unsolicited and uncompensated endorsement; have bought two bikes there, and will buy a third before the end of ’08.

  319. James Bednar says:

    I concur on the Fuji recommendation.


  320. Jamey says:

    re: 310

    Robert “Donald” Troll, f*ck you. No, seriously. With a splintered ax handle. I don’t know what your game is, but just stop it before you or someone else gets hurt.

    I live in Leonia and can say without qualification that the taxes are, considering lot size and comparable improvements, a good deal lower than those in FOUR of the adjacent communities–Pal Park, Ft Lee, Englewood (duh!), and Teaneck.

Comments are closed.