Preliminary September sales and inventory data for Northern New Jersey is in. Please note that this data is subject to revision.
The first graph plots the unadjusted sales data (closed sales) for the counties listed. Please note the lower bound of the graph, it is set to 1000, not to zero. I do this to emphasize the seasonal nature of the Northern NJ market.
(click to enlarge)
The second graph is another view at the sales data for the full year. Please note that this graph does cross at zero.
(click to enlarge)
The third graph displays only September sales, 2000 to 2007 YOY.
(click to enlarge)
The fourth graph displays an overlay of Sales and Inventory from 2003 to 2007.
(click to enlarge)
The last graph displays the year over year change in inventory on a monthly basis.
(click to enlarge)
Contract-sales data can be found in spreadsheet form here: contracts.xls
Sales and inventory data can be found in spreadsheet form here: salesinvoverlay.xls (large file)
wow. Feb 2008 could be lower than 1000
Started to update the contracts spreadsheet with multiyear data, 2005.Q3 has been added.
https://njrereport.com/files/contracts.xls
Should give a better sense of the slowdown now that we’re in the second year.
Please note that monthly revisions have been significant lately. Don’t talk about “falling off a cliff” until we get at least one month of revised data.
wow. Feb 2008 could be lower than 1000
YTD sales are down roughly 8%. If we assume that sales will continue declining at this rate, February 2008 sales would come in at roughly 1200-1300.
Whoa.
YTD sales are down roughly 8%. If we assume that sales will continue declining at this rate, February 2008 sales would come in at roughly 1200-1300.
I don’t know…assuming the September data holds up, it shows a pretty significant break from the trend for the year versus M-O-M ’06 numbers.
Of course it’s only one month (a month doesn’t make a trend) and is subject to revision. But it nonetheless poses some interesting questions:
Is September just an anomaly? Is it the short-term result of a credit crunch that is now stabling?
Or;
As Clotpoll et. al suggest, are we seeing the beginning of the next leg down; The next “deflationary wave”?
the world is coming to an end. get into your bunkers folks and when you come out you can buy a house for 5 cents on the dollar.
WSJ
Weak Economy Doesn’t Always Spell Job Losses
October 5, 2007
School’s in session and today’s lesson is fun with employment statistics.
Last month, investors got a jolt from August jobs figures. The Labor Department said that the economy had lost 4,000 jobs — the first decline in four years. The Dow Jones Industrial Average fell 250 points that day.
Economists polled by Dow Jones Newswires expect to see a rebound in today’s report, with 100,000 jobs added to U.S. payrolls in September.
One wild card is the way the government counts teacher jobs. The August report registered a loss of 32,000 public-school teaching jobs, which came on top of 50,000 lost teaching jobs in July. “While it is possible that some school districts around the country have downsized this year, we think it is more likely a number of districts have simply changed the timing of the start of their school year,” economists at Lehman Brothers noted ahead of the report.
Actually, the number of districts that changed the start of their school years is Texas-size — and then some. This year, Texas mandated that its school districts begin school no earlier than Aug. 27 — a move popular with both parents and the tourism industry. In Florida, schools weren’t allowed to open until Aug. 21. Between them, the two states represent 14% of the U.S. school-age population.
When the Labor Department counts jobs, it includes only those workers on the rolls for the pay period including the 12th of the month. Many teachers don’t draw paychecks through the summer. The Labor Department adjusts the figures for the summer months. In recent years this adjustment has become progressively smaller, as more schools moved toward early start dates. Now Florida and Texas are at the leading edge of a backlash against early start dates. The Labor Department’s adjustment model, which is based on what’s happened in the past, likely hasn’t picked it up yet.
The best way to deal with the teaching job confusion may be to ignore it and simply look at what’s happening with private-sector payrolls. Some commentators expect investors will do exactly that.
That brings up tomorrow’s lesson: Does it make sense to think the market is that rational? Despite all of the hubbub in the markets after last month’s report, private-sector employment was actually fairly stable — soft but growing slightly.
The jobs report might resolve some other recent mysteries. The August employment report showed a big drop in teenage employment, which is odd when you consider that all those kids in Texas and Florida weren’t in school. Manufacturing jobs showed a big drop in August, even though the Institute for Supply Management’s manufacturing report suggested that they were growing. On the other side of the ledger, construction and real-estate jobs still don’t seem to have caught up with the downturn in housing.
The bigger question is whether apparent weakness in the economy will translate into broader job losses. It may not. After the last recession, hiring never grew the way past experience suggested it would. One implication of companies’ still-high profit margins is that they are running very lean. In contrast to a jobless recovery, we may be in for a job loss-less downturn.
I miss Boooooooooyaaaaaa.
From publicradio.org:
Bad for Wall Street, bad for New York
Amy Scott: A report by the Manhattan Institute says each time the ax falls on Wall Street, other industries in New York City take an even bigger blow.
Nicole Gelinas is a fellow at the public policy think tank:
Nicole Gelinas: What happens is that these well-paid jobs create so much demand in New York City’s local economy that the state’s comptroller estimates that each of these jobs creates two additional jobs outside of Wall Street.
So far, many of the layoffs have affected jobs outside New York. UBS recently let go of 200 back-office workers in Weehawken, New Jersey.
But Gelinas says it’s just a matter of time before losses from the credit crunch hit brokerage and investment banking jobs in New York. Wall Street bonuses are projected to take a dive this year. They’ve been a major driver of the local real estate boom.
The Dirt on the Neighbors
Home buyers usually don’t get details like this without some serious shoe-leather investigating. But Jean didn’t even have to set foot in upstate New York to get the inside dope on this “Spectacular Queen Anne.” He learned it all by logging on to Zillow.com, where would-be buyers now have a new tool for getting the dish on the neighborhood.
From above article,
Jonathan Butler, founder of the Brooklyn-based blog Brownstoner. On his site, armchair experts closely parse neighborhood listings for exaggerations and omissions, and the pros have taken notice. One broker admits that the critical consensus helped pressure him to drop the asking price on one home by $400,000.
JB: I guess site is lagging behind in this Blog feature.
From NorthJersey.com:
Corzine hasn’t yet lost faith in EnCap
Governor Corzine, the former Wall Street bond trader whose nose for deals propelled him to the chairmanship of Goldman Sachs, remains bullish on the Meadowlands.
That’s why he’s personally taken up the search for a deep-pocketed investor to save the floundering EnCap project.
In a far-ranging 90-minute interview with The Record on Thursday, Corzine said he will “chat up” the EnCap site among his contacts in the nation’s capital markets.
The governor said he was confident that a financial angel akin to Colony Capital LLC, the private investment firm that saved the flagging Xanadu venture in 2006, would ride in and rescue the latest Meadowlands disaster.
EnCap did not dismiss the possibility of a sale, but said the company was committed to finishing the project.
From the Jersey Journal:
Final OK for Journal Square plan
The two-tower development planned for the old Hotel on the Square block in Journal Square has received final site plan approval from the Jersey City Planning Board.
In a 7-0 vote on Tuesday, the board gave the half a billion dollar mixed-use project a unanimous thumbs up.
“The new buildings are quite impressive, very stylish,” Leon Yost, the board’s vice chairman, said today. “These are going to be icons for Jersey City.”
The 1,500-unit project is to consist of a 7-story base with retail and parking, and two residential towers rising from the base — a 58-story north tower and a 38-story south tower. Construction is scheduled to start in the spring.
grim Says:
Please note that monthly revisions have been significant lately. Don’t talk about “falling off a cliff” until we get at least one month of revised data.
The preliminary August figure was lower than what is represented here.
https://njrereport.com/index.php/2007/09/05/north-jersey-august-residential-sales/#comments
From the WSJ:
The Gofer Broker
In the soft market, clients are asking Realtors to perform menial, sometimes humiliating tasks. June Fletcher on scooping, painting, vacuuming and drawing the line.
By JUNE FLETCHER
October 5, 2007
Jonathan Marks makes his living as a real-estate agent. Lately, he’s been babysitting rats.
With the housing market in a dive and homes lingering unsold for months, the relationship between real-estate agents and their clients is beginning to change. Both buyers and sellers are demanding more from their brokers, and getting it.
Jim Perry, an agent in St. Helena, Calif., spent most of an afternoon vacuuming up thousands of flies from one client’s guest house. Mary Hartley, in Albany, Ore., organized a garage sale for one seller, spent 10 hours painting the side of the house for another and recently enlisted her grandchildren to help clean out the debris in a crawl space for a third. And to help Sandra Le Buhn sell her $1.2 million, four-bedroom home in Mill Valley, Calif., Mr. Marks agreed to board her nine-year-old daughter’s cherished brown-and-white rats, Zack and Cody, who had been living in a cage in the bathtub.
But some agents are drawing the line. Kirsten Lindquist, a Sonoma, Calif., agent, says she made a marketing pitch to a seller a few weeks ago. Two days later, he called her from the hospital and asked if she would drive him home from his colonoscopy appointment. She declined, even though it cost her the listing. “I’m licensed to practice real estate, not medicine,” she says.
During the boom times just two years ago, real-estate agents didn’t have to do much more than post a house on the multiple listing service and watch the bids roll in. But the dynamic is changing. In August, existing-home sales were down 12.8% from a year earlier, to 5.5 million, and the index of pending home sales plummeted 22%, according to the National Association of Realtors. During the same period, new-home sales dropped 21.2% to 795,000, according to the U.S. Commerce Department. It would take 10 months to sell the number of existing homes on the market, according to NAR, the highest supply since the trade group began tracking this number in 1999. New homes are at an 8.2-month supply, about twice the level they reached during the boom years of 2001 to 2005.
WOW
looks like we’re close to 50% below the Sept 2005 number.
this is getting very interesting
Is September just an anomaly? Is it the short-term result of a credit crunch that is now stabling?
Shows a strong break from the contracts data, my guess is we’ll see the number revised up roughly to the 1600-1800 range. Given what Yun said about contracts and financing falling apart at a higher rate, we may see some of those contracts settled at a later date.
More recent contracts have taken a significant tumble. October and November sales won’t be particularly impressive.
U.S. attorney probing Bear hedge funds’ collapse: report
http://www.marketwatch.com/news/story/us-attorney-probing-bear-hedge/story.aspx?guid=%7B09CEE620%2D2EA4%2D4FD9%2DB52F%2D5F18350261DC%7D&dist=hplatest
The U.S. attorney in Brooklyn has started a criminal investigation into a pair of hedge funds that had positions in mortgage-backed securities and subsequently collapsed at Bear Stearns Cos. …
Amy Scott: A report by the Manhattan Institute says each time the ax falls on Wall Street, other industries in New York City take an even bigger blow.
Great, so now the economic engine for this company moves from Housing to Wall Street. Love it.
“now face the worst choice in the worst residential real estate slump since the 1930s. They’re selling homes at any price they can get.”
[13],
Have we already danced thru 1990?
JB,
Great job on the charts. I just wish some of the the past chart analysts were still posting. The march trendline, going back to 2003 on the chart, will be penetrated like a knife thru butter.
For both new and existing homes, prices are buckling while inventories rise to unprecendented heights. From here it becomes self perpetuating, lower prices beget lower prices. For builders it’s all about cash flow and survival, for investors, it’s a rush to monetize their sinking asset. The existing seller, holding out for 2005 prices, take a trip to a Smithfield Foods plant.
From MarketWatch:
Washington Mutual Q3 profit to fall 75%
Washington Mutual Inc. on Friday said it expects a third-quarter earnings drop of about 75% because of factors related to the weakening housing market. The Seattle-based lender said its loan loss provision for the period will be approximately $975 million, which exceeds net charge-offs for the quarter by approximately $550 million. It’ll also book downward adjustments of approximately $150 million related to approximately $17 billion in held-for-sale mortgage loans that were transferred to the company’s investment portfolio due to secondary market conditions. It also reported impairment losses of $110 million and another $150 million in securities trading losses. Washington Mutual said it “continues to have the liquidity and capital necessary to grow the company’s businesses and support its current dividend.”
EU banks forecast no improvement in funding
Further tightening of lending standards expected, ECB survey finds
http://www.marketwatch.com/news/story/eu-banks-see-no-improvement/story.aspx?guid=%7B41037FA1%2D8E8D%2D4313%2DAC0C%2D8FD480F836F1%7D&dist=hplatest
BC,
I’m going to start releasing some of my other charts on a monthly basis as well. Here is an example of one that is input to my own black box..
Morris County GSMLS SFH/Condo/Coop Sales vs. Contracts (shifted 2m)
https://njrereport.com/files/morris.xls
SG Says:
October 5th, 2007 at 6:29 am
I guess site is lagging behind in this Blog feature.
Shail: grim in addition to being a slacker is also hopelessly mired in past glory….this site is running on fumes…..
U.S. payrolls grow by 110,000 in September, August numbers revised upward; unemployment rate rises to 4.7 percent. More soon
The charts are very interesting. The September numbers if accurate look like traditional Feb numbers(the worst month historically). Builders with empty houses,sellers with houses on the market must be thinking…what next ?
LOWER PRICES
U.S. job growth rebounds to 110,000 in September
http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B0185621C%2D281F%2D4B9C%2D8D86%2DF78556236AD7%7D&siteid=mktw
>>
Pretty good. Birth death model adjustments – 17k.
that’s +17k
http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=latest_numbers&series_id=CES0000000001&output_view=net_1mth
Sis they revise Aug from -4K to +89K??
From BusinessWeek:
OCTOBER 15, 2007
COVER STORY
By Mara Der Hovanesian and Christopher Palmeri
Housing: That Sinking Feeling
Homeowners are getting slammed as builders slash prices. The big question: Will this shock treatment help hasten the end of the painful downturn?
Las Vegas was once the hottest of the red-hot real estate markets. But when sales really started choking up last year, developer KB Home (KBH ) did something drastic. Determined not to be caught with a big backlog of unsold homes through one of the industry’s notorious down cycles, the builder started slashing prices. A lot. In the 1,400-home Huntington community, a subdivision of two-story stucco houses west of the famed Strip, homes that started at $320,000 a year ago are now listed for $270,000–just a starting point for potential deals.
Those sorts of discounts seem to be attracting buyers. Pending sales contracts jumped 23% after KB cut list prices by $25,000 in May, one of the recent price breaks in the Huntington subdivision, according to the market research firm Hanley Wood. That may be good for KB, or at least less bad than holding on to a lot of unsold units. It may also be good for current buyers who snap up homes at huge discounts to recent asking prices. “We try to make prudent decisions regarding pricing,” says Jim Widner, regional general manager for KB in Las Vegas. “Prices are going to rise and fall over the short term, but long term a home is one of the best investments.”
For homeowners who jumped in at the height of the boom, the discounts aren’t so good. In Quayside Court, a quiet cul-de-sac in Huntington, many residents who bought last year suddenly own homes worth a whole lot less–making it hard for anyone who has to refinance, sell, or borrow against the equity. “When we first moved here [in the summer of 2006], the housing market was incredible,” says Tammy Elder, a mother of three. “Unfortunately we bought a house that was overpriced, and we don’t know if we’ll ever break even.”
KB’s extreme strategy at Huntington is playing out across the country–even in places like Minneapolis and St. Louis that were bypassed by housing mania. For the first time, big builders are offering massive, often six-figure, price cuts in overbuilt developments nationwide, giving the industry a kind of shock treatment designed to move inventory off the books fast. It remains to be seen whether these radical measures will revive the market or deepen the slump, but it’s certainly having an impact on the local communities. On Sept. 14, Hovnanian Enterprises Inc. (HOV ) kicked off a 72-hour Deal of the Century, in which it slashed prices by as much as $100,000 in 19 states. That same day, Standard Pacific Corp. (SPF ) launched its Mission: Possible campaign in 49 communities across Southern California, promising $20 million in total discounts. And on Sept. 29, D.R. Horton Inc. (DHI ) auctioned off 53 homes in San Diego with bids starting at $150,000, half off the list price. “We wanted to get the message across louder,” says Hovnanian CEO Ara K. Hovnanian. “Customers needed a stimulus.”
http://www.businessweek.com/magazine/content/07_42/b4054001.htm?campaign_id=nws_insdr_oct5&link_position=link1
“Here is an example of one that is input to my own black box..”
JB,
This may be the one black box that is not marked to fantasy.
From MarketWatch:
Half-point rate cut may be enough: Fed’s Kohn
The Federal Reserve’s half-point rate cut on Sept. 18 may be enough to keep the economy from sinking from the financial market turmoil, said Donald Kohn, the vice-chairman of the Fed Board on Friday.
Richard Says:
September 4th, 2007 at 9:42 pm
august looks weaker than the overall pattern. i’d expect september to look stronger to even out the overall trend we’re seeing this year compared to others.
Hey Rich,
It doesn’t look like you hit this one on the nose. I guess you can’t hit a homerun everytime at bet can you?
I find it fairly amazing how long it takes sellers to react to the reality of the market. Such steep declines in sales numbers and only marginal declines in price. I bet the floodgates on price declines hit once jobs start getting cut. Already seeing some of that on Wall St…
We’ve already seen price declines. It will stay flat for the next couple of years at best (or worst). I wouldn’t expect any further substantial drop.
make,
It appears that the dislocation that began in August has continued into September.
https://www.njrereport.com/files/contracts.xls
Contracts for Northern NJ (GSMLS) were down roughly -19.5% in August, that declined even further to -21.5% in September. August and September contracts show a clear break from the trend seen earlier in the year.
YOY Contracts
Q1 -0.2%
Q2 -3.4%
Q3 -12.5%
August -19.5%
September -21.5%
YTD -5.1%
Can someone tell this person to get a clue?
http://new.gsmls.com/public/detailLst.do?mlsNum=2448931
MLS # 2448931
A $910k cape cod in Chatham? Others seem to be asking for max $750k.
Closed sales lag contracts by approximately 2 months with a pretty high correlation.
Given what we’ve seen regarding August and September contracts, closed sales will certainly show further declines in the months of October and November.
Can someone tell this person to get a clue?
Maybe you should be asking the same of the buyer, it’s in Attorney Review. It was previously listed for $995k.
Markets are inefficient in the short term and efficient in the long term. In the short term people will refuse to sell their houses for a ‘loss’ and this causes inefficiency. But over the long term, prices will reflect fundamental values either by comibation of lower prices or stagnant prices with high inflation. RE is very illiquid. While the opposite is true for stocks.
To make money, exploit inefficiencies in the system.
Has this been posted yet? (I was out all day yesterday at a conference.)
From the WSJ:
Home-Price Outlook
Takes Another Shot
Trading on CME
Indicates a Decline
Into Late 2011
By JAMES R. HAGERTY
October 4, 2007; Page D6
The outlook for house prices is getting even gloomier as traders on the Chicago Mercantile Exchange bet on steep price declines and the number of homes for sale grows.
Traders on the CME expect home prices in 10 major cities to drop an average of about 10% from mid-2007 to November 2011, according to an analysis by Tradition Financial Services Inc., New York, of prices for housing futures traded on the exchange.
http://online.wsj.com/article_print/SB119146645724948646.html
Gary – When sales volumes stop declining than I expect prices to stop declining. Simple economics. Excess supply and little demand requires price declines. Inventory is still increasing, albeit at a slower pace so demand is not absorbing the excess supply. Only further declines in prices will eat into the excess supply. If people really feel like there is a recession around the corner, if I were a seller, I would mark the house down now before it gets worse. Why do you think the homebuilders are slashing prices to reduce inventory. Depreciating assets on their balance sheet have to be sold, before they become impaired assets that can’t be sold. Unfortunately there are not a lot of new home developments in northern NJ, so this has not fanned the flames of price decreases. Prices are set at the margins. The new developments are 1 1/2 hr to 2 hr commute to NYC. These prices have dropped and when people see the relative values compared to houses 1 hr and w/in commute to NYC than the ones that are able to move farther out will move out. This will create a feedback loop eventually creeping inwards to NYC. If Wall Street tumbles this makes it worse as prices will now not be set at the margins, but right in the middle of the page.
ie.. don’t fight the system. Play with it. Don’t get mad because sellers refuse to lower prices. That is how the system works.
The U.S. House of Representatives Thursday overwhelmingly approved legislation providing tax relief to homeowners facing a foreclosure.
Under the bill, which was approved by a vote of 386-27, any debt forgiven to homeowners unable to repay their mortgage would no longer be treated as taxable income.
“It simply makes good sense to do this,” said Rep. Richard Neal, a Massachusetts Democrat.
The legislation was passed in response to a subprime mortgage crisis that has reduced property values and left a growing number of homeowners unable to pay rising interest costs on their loans.
To cover the roughly $2 billion 10-year cost of the bill, the bill would change tax rules on the sale of vacation homes and rental property that were used as a principal residence.
The bill now heads to the Senate.
http://www.cnbc.com/id/21145356
I don’t even know what to say anymore…….
grim – you’re sh!ttin me!!
Wow, that’s amazing. Good for the buyer, bad for the seller. Wonder what will be the final closing price? That has to be the most unremarkable $910k house I have ever seen. They must have oil underneath the house.
Zack – Very well put! “Exploit inefficiencies in the market.”
That’s why some of the largest fortunes are made in real estate.
1. Leverage
2. Illiquidity
3. Slow moving market
So if you time it just right you can make a killing.
I’ve got aunts/uncles who have made high tens of millions, if not a couple hundred million in the commercial RE market.
Unfortunate for me, I’m the poor nephew. Though I’m building up a portfolio when the time is right.
Subprime Woes At Cerberus
It bit off a big hunk of risky loans when it bought GMAC
General Motors took some flak when it sold a 51% stake of General Motors Acceptance Corp. (GM ), then the carmaker’s most profitable unit, to Cerberus Capital Management and others in late 2006. Most figured the private equity firm got a good deal from the beleaguered carmaker, paying $7.4 billion for the auto and mortgage lender. That investment isn’t doing so well now that GMAC’s mortgage business, ResCap, is losing money. Owing to that drag, GMAC reported a $12 million loss for the first half of the year, compared with profits of $1.3 billion in the same period of 2006
ResCap jumped aggressively into subprime back in 2003. Today such risky mortgages account for 71% of its $62.7 billion loan portfolio. In ResCap’s holdings, delinquent loans (those more than 60 days past due) spiked to 15.5% of the mortgages’ outstanding balances as of June 30, from 13.7% a quarter before. ResCap has also lost 18 cents for every $100 of the subprime loans made in 2005 and 2006 that it owns, vs. the industry average of 12 cents, according to Fitch Ratings Ltd. “Their overall performance has been weaker [than their competitors’],” says Christopher Wolfe, a Fitch analyst. “This goes beyond just general market conditions.” Says Gina Proia of GMAC: “We have taken aggressive action to date and will continue to restructure operations in line with the changed environment.”
Deteriorating conditions may only complicate matters. With huge numbers of adjustable-rate mortgages resetting through 2008, the market could face another wave of defaults and foreclosures. One GM executive, who declined to be named, says he expects a rough third quarter for GMAC because August and September were rocky for housing. “It could be 2008 before quarterly earnings [at ResCap] appear,” says Phillip Kibel, a Moody’s analyst. “Profitability prospects are not good.
39#, 41#, street address? curious about the sales history.
To any sellers on this blog and realtors who are listing houses:
Can you give an update on your pricing strategy? I asked this question a few months ago and I know Clot replied that he was pricing lower than comps and ahead of the curve and his listings were selling. Any seller that didn’t agree with his strategy he didn’t take the listing.
If you’re selling today, where are you priced? If you’re still priced with other comparables that aren’t selling, why haven’t you lowered your prices? Do you believe we’ve hit bottom? If so, what is your reason for believing we’ve hit bottom?
Personally, I don’t think we’ve hit bottom and if I were selling today I’d price below other comps ahead of the curve and I’d probably sell first. I’ve seen plenty of price declines, but not as much as I expected. It seems like everyone is holding on hoping for a turn around. Meanwhile you’re paying two mortgages because you’ve already moved and you’re paying two tax bills as well. What you paid for your house is a sunk cost, it has no relevance on what you can sell your house for today.
104 Chatham St. – looks fairly close to train station. Sold for $550K in 10/02. Roughly 10.6% annually if sold at asking. I guess you pay for proximity to train, but for a cape cod? There are nicer homes in Short Hills for that price.
Hard Place Says:
October 5th, 2007 at 10:39 am
104 Chatham St. – looks fairly close to train station. Sold for $550K in 10/02. Roughly 10.6% annually if sold at asking. I guess you pay for proximity to train, but for a cape cod? There are nicer homes in Short Hills for that price.
=====================
If it sounds and looks like a pos it is a pos. Bid accordingly to past sales pre-2000-2001 and give fair appreciation rates of 5%. If the seller will not listen to reason then giv’em the cold shoulder treatment. Next.
Patience. Buyers with strong finances should be really patient and greedy now. Real greedy.
Hard Place #44,
I agree but I still get listings from realtors with prices not far from peak prices. I can’t figure it out. I keep hearing “you’ll see”. As of now, I’m still “not seeing”.
Gary [54],
Akin to finding a P-Boy[don’t know if spelling it will cause the filter to flash] mag in the woods when you were 11-12. Unfortunately, you had to be patient and wait a bit.
52#, i also think it is overpriced -:) but it fits my premium/discount hypothesis: people who have equity elsewhere (for example manhattan/london apts.) are rolling to suburban premier towns for school and easy commute to the city.
“Under the bill, which was approved by a vote of 386-27, any debt forgiven to homeowners unable to repay their mortgage would no longer be treated as taxable income.”
This actually encourages people to hand their keys to the bank.
This may actually speed up the drop in price.
“Gary – When sales volumes stop declining than I expect prices to stop declining. Simple economics.”
Not really. That only addresses demand. If demand rises, but supply rises even faster than demand, prices will keep dropping. (This is not a prediction, however).
#47 ..I would offer no more tahn 25-30% of asking price!!!
#57 This actually encourages people to hand their keys to the bank.
This may actually speed up the drop in price.
I agree, before I could see more people holding out for the price they needed because they didn’t want to get stuck with an IRS bill that you can’t really avoid too easily.
If I bought with $0 down and 2% teaser 2 years ago and now I can leave without any recourse, why would I do anything but hand the keys to the bank. I just had cheap rent in a house beyond my means for 2 years. Sounds like a pretty good deal. In fact, you might as well just stop trying to pay your mortgage, with all the extra foreclosures banks have now it would probably take months if not a year for them to eventually kick you out.
bi – your hypothesis holds until Manhattan takes a hit.
Given Wall St. is a major reason why Manhattan real estate is so expensive, once there are more losses on Wall St, it will accelerate declines on Main St. Housing markets in NJ have declined more when you get outside the commutability to NYC area. I have seen it in comparing prices in towns further out in Morris County like Mendham vs. closer to NYC like Chatham. A difference of about 1/2hr commute to Manhattan. All approximations, but Mendham has seen price drops from 10-15% off peak and Chatham only 5-10%.
#59 bb
This relates to what we discussed a couple of weeks ago – this amounts to complete rescission of contract from the buyer’s perspective. These are folks who had bad credit, no cash, and should have rented. Now, they still have bad credit, no cash, and it’s as if they rented. The bank is just as screwed as it always was, and the only real difference is that the gov’t doesn’t take a cut.
The bill doesn’t really bother me.
“The bill doesn’t really bother me.”
Agreed. All this does is add “liquidity”. Much more efficient to unwind these untenable deals and get them out of the way.
“To cover the roughly $2 billion 10-year cost of the bill, the bill would change tax rules on the sale of vacation homes and rental property that were used as a principal residence.”
I’d add that this part of the bill would also contributed to accelerated price depreciation.
with apologies if this was already posted:
http://www.philly.com/inquirer/business/20071005_07_mortgage-backed_bonds_even_shakier.html
Subprime-mortgage bonds created in the first half of 2007 contain loans that are going delinquent at the fastest rate ever, Moody’s Investors Service said yesterday.
The average rate of “serious loan delinquencies” in the securities has been higher than for bonds created last year, Moody’s analysts Ariel Weil and Amita Shrivastava wrote in a report. Serious loan delinquencies are those 60 days or more past due and include properties in foreclosure or already foreclosed upon.
“It is shocking what you see,” said Kyle Bass of Hayman Advisors L.P., a Dallas hedge fund that bet the U.S. housing market would fall. It reported a 400 percent return on those investments.
“Anything securitized in 2007 has got to have the worst collateral performance of any trust I’ve seen in my life,” Bass said.
Moody’s, Standard & Poor’s and Fitch Ratings Inc. have been downgrading subprime securities issued in 2006, and Fitch said Wednesday that it now was reviewing ratings on bonds created in 2007.
re 64, it looks like this may be the result of kicking the can down the road (i.e., ’06 was worse than it looked).
Merrill posting a big $5.5 Bil write down.
http://www.marketwatch.com/news/story/merrill-lynch-write-down-nearly/story.aspx?guid=%7BA8C4BEB8%2DEB92%2D4EB3%2D8A11%2DDC49CE6EDD0B%7D
WaMu has 75% 3Q profit fall.
http://www.marketwatch.com/news/story/washington-mutual-says-profit-decline/story.aspx?guid=%7BEA782697%2D4C1D%2D4048%2DAA0E%2D8AF51A92B1D0%7D&dist=TQP_Mod_mktwN
I’m surprised to see the upward revision to August. Upward revisions are rare things these days.
What really struck me though was how comparable Sept. 07 sales are to Feb./Jan. 07 sales. That’s new, and it ain’t good.
I’m surprised to see the upward revision to August. Upward revisions are rare things these days.
The revisions are almost always upward when it comes to closed sales. The primary reason being late status changes, secondary being “old sold” additions.
toshiro_mifune Says:
Merrill posting a big $5.5 Bil write down.
I’m anticipating that the Wall St. firms will be out of the woods far sooner than the mortgage companies. All they have to do is stop trading the risky mortgages going forward and clean up the mess they made over the last few years. Mortgage companies, on the other hand, have to deal with the fact that they can no longer do 50% of the deals they once did because there’s no market anymore. Revenues will be cut in half for the forseeable future.
With this bill, Congress is allowing these people to have exercised a risk-free option with pre tax dollars (since they were already receiving mortgage interest deductions).
Congress subsidized these people on the upside and gave them a put on the downside.
Most of us here are renting, paying housing costs with after tax dollars all while your downpayment money inflates away sitting in the bank (even in a high interest account).
I do not understand why anyone in this situation would think the proposed bill in Congress is good policy.
Also, I think I suggested this before, but I think most of the “vacation” homeowners and the people looking to get the debt forgiveness untaxed are probably the same people. how many stories have we heard about people who closed on a retirement home before they sold their present home or a flipper living in NJ who bought a condo in FL?
“I’m anticipating that the Wall St. firms will be out of the woods far sooner than the mortgage companies. All they have to do is stop trading the risky mortgages going forward and clean up the mess they made over the last few years. Mortgage companies, on the other hand, have to deal with the fact that they can no longer do 50% of the deals they once did because there’s no market anymore. Revenues will be cut in half for the forseeable future”
I agree. Wall street is dumping everything in one quater and continue with business as usual without the CDO, MBS and staying away from anything that spells mortgage. They’ll be fine.
Now, that 50% of the market is gone, and credit is much tighter question is not only who is gonna be giving out the loans but who is going to qualify for a mortgage with 20% down?
When we get to the point that we don’t have this piggy back second mortgage option and the buyer has to pay PMI then you will see the second leg on decrease in prices.
I think we are somewhere in the 3rd inning of this mess. Long way to go.
By the time the presidential elections are going on foreclosure and the bail out, economy and monetary policy are gonna be main issues. War will take a seat.
GO RON PAUL 2008.
a flipper living in NJ who bought a condo in FL?
That would be my dentist!
i think the idea of changing the tax rules on second/vacation/investment homes is a good idea. it’s just closing a loophole for the rich (yikes! i sound like a liberal!) – and contributed to the increased cost for everyone else struggling to buy a first home with after tax money earned through productivity.
as far as short selling – if someone is upside down on their house and wants to sell short, are they able to do so if they have other assets (ie- cash in bank or investments) , since the mortgage is only a lien on his home? or does he have to pay the bank as much
as he can with his other assets before he can sell short?
“With this bill, Congress is allowing these people to have exercised a risk-free option with pre tax dollars (since they were already receiving mortgage interest deductions).”
Fair enough, although I’m not sure about the put. And if you said “moral hazard” you’d be right about that, too.
I’m renting, and I’d like a tax subsidy as well.
That being said, I stand by the proposition that the bill would accelerate price deflation.
…and on the “vacation home” aspect, I agree with tcm
These people get an artificial floor under their losses– if the bank decided to forgive their entire loan they would pay nothing rather than their marginal tax rate on the loan, as any other person making a losing leveraged investment would have to do. that’s why this is a put, I think
I agree that this bill will accelerate deflation in the short term, but it seems to me that the moral hazard element introduces an additional leg to prop up housing over the longer term. I don’t think it makes sense to look at this as anything other than another subsidy for housing
You want to talk about tax loopholes?
Let’s talk farmland assessment in NJ.
…or, for that matter, the federal farm bill.
if the fed cuts again in the face of this pretty solid jobs data, is there anything other to conclude than that our gov’t is bailing out homeowners in full force?
I think prices will drop further, but I am amazed at the scrambling that is going on to prevent people with zero equity from losing money.
the deck is heavily stacked against us non-homeowners
already in the pipeline:
tax forgiveness
changes to bankruptcy code
state sponsored bailout funds
interest rate cuts
a lot of this is just window dressing, but the market only recently started heading down in a big way. what will be on the table in 6 months?
skep-tic…
no matter what the govt does, the market always corrects itself
the key here is going to be patience….it may take longer than we want to wait but we have to be patient
all these govt plans will only prolong the downward spiral – just be patient
#81 – Skeptic
This is more a matter of the Fed. bailing out the banks than the borrowers. Under no circumstances would the Fed let JP, BofA or any of the large US banks become the takeover target of a foreign national.
CAIBC– yes, I guess I shouldn’t make a big deal about it. it obviously just frustrates me to see our gov’t continually side with people who lever up like crazy while taxing the sh*t out of people who pay rent and save
skep-tic, i too am a renter (been waiting for about 2.5 years now for this correction to happen)
if i can wait 2.5 years to buy a house, we should all have a little patience and pay for a house only what we think that house is worth…
for example, houses in Fair Lawn (i mean the once low end POS Capes) were selling for 500K+…no matter what happened, i would tell the realtors that i wouldnt pay a cent more that 300K for these houses! well, guess what, some of these POS Capes have already crossed the 400K mark and are continuing to head downward…our time will come – JUST BE PATIENT….
Help me understand..
Today the jobs report came out better than consensus. Dollar rallied and gold fell because of expectation that fed may not have to cut interest rates…
After a couple of hours gold reversed and went up and stocks went up too. This is very confusing because if the economy is strong then gold should sell off because fed should not have to cut interest rates. Stocks should fall for the same reason.
Selective amnesia or drug induced behavior. If anyone can explain this I would appreciate it…..
Goldman cuts a few jobs?:
http://www.dealbreaker.com/2007/10/layoffs_watch_07_goldman_is_su.php#more
bergen (60)-
Yep. Why mail the keys back to the bank? Stick around and live in the damn house all the way up to the sheriff sale.
And, of course, stop paying the mortgage.
Of course, disposing of all the foreclosed, abandoned and dilapidated properties we’ll be seeing will be some pretty juicy work for moi. This could keep me busy for years!
Congressional pandering at its finest.
i kinda sorta maybe don’t have too much of a problem with not taxing the debt forgiveness because in a way, the govt. bears some responsibility for this mess. i am a big believer in caveat emptor, but the truth is that the govt. was asleep at the switch with regards to regulation in the mortgage industry. in fact, one could argue that perhaps it was a bit of willful blindness. don’t you remember how all the politicians were touting how great it is that homeownership is at an all time high? especially minority and lower income homeownership.
same with bailing out some homeowners with a fixed rate fha mort.’s – ONLY if the borrower has an EXTREMELY high likelihood of holding on to the home with the new mortgage. for all the rest, i don’t think the govt. should touch their mortgages. let them foreclose, and let the banks and investors take the hit, not the taxpayer.
but all tax changes, help and or bailouts should come with significant legislation to prevent this from happening again.
from #90
also, maybe a condition to the borrower who accepts any govt. help should be some sort of profit give back when and if they ever are able to sell at a profit.
So let me get this straight: All these defaults, foreclosures and insolvencies that were wrapped up in these toxic MBS packages just get wiped off the books? Am I missing something? Besides the bankrupt homeowner, isn’t the lender or whoever’s holding the note going to get hammered? Can someone please explain this? How does Wall Street just continue on like nothing ever happened? Isn’t somebody going to feel the pain?
grim 79:
I always thought what they should do is freeze zoning on properties with the farmland assessment.
They should make them zoned for agriculture with no way to change this.
Why should other taxpayers subsidize a landowners investment?
This would maintain a bunch of open space without costing the state anything.
#93 Aaron
I like your proposal!
Don’t even need to be that restrictive.
Just modify the legislation to update the gross sales requirement so that it reflects inflation.
The farmland assessment act was created in ’64, I believe, and it was then that they created the $500 gross sales requirement.
Adjust that for inflation, and we’re really talking about $3,500 in gross sales to be classified a farm (on the minimum acreage).
Push it up to $5,000, adjust the legislation so that the gross sales figure is adjusted for inflation yearly.
Let’s see:
Stocks:
Profit – taxed
Losses – $3000 p.a. sheltered; balance carried over
RE:
Profit – taxed above $500K
Losses – no phantom taxes with new proposal
Expect more inventory to hit the market – less need for people to hold out (those fearing a 1099) to break-even. Expect deadbeats to stay on without making payments; pushing out inventory increase another 6-12 months before they lose the house.
All the band-aids and kook-aids isn’t going to help hemorrhaging RE.
#39
This house is a few blocks down the road from me. Chatham is a great dead end street and the homes are on it almost all well over $1M (1-2M range and a status street for sure). The fact that is a 4BR 2.5 Bath is what props it up so high. 4 beds are tough to get in the borough and that second full bathroom also commands a premium in Chatham. I can send you the link on a house that sold for just under $1M that is literally down the block from me that you would have to say WTF. Corner lot, no back yard, smallish rooms, etc. A builder came in last year, put a new kitchen in and painted, that was it! Bought for about $800K and tried to sell initially for $1.4M. Chased the market down for nearly a year until it they found someone to unload the place on. I think after realtor and carrying costs they must have lost a few bucks. I totally agree that ~$900K for a cape is insane but that is what the market still is like in Chatham. My colonial is about the same size without the 4th bedroom and second bath and is just as nice and went for ~$300K less. If the market rebounds in the next few years the first thing I am going to do to my place is add on a master suite and bathroom above my den. Spend $150, hopefully get back $300.
This is amazing. Alan Greenspan tries to explain why we need a Federal reserve and he really can’t.
RON PAUL 2008
http://www.youtube.com/watch?v=bfuTMexCePE&mode=related&search=
To anyone in Somerset County: if you started a business there, but wanted to live in Pennsylvania to get more house for your buck and lower taxes … are you looking at a drive to work of 20 minutes or 1 hour?
I know i’ve been saying this for about 6 months, but those houses i was eyeing in the 600k range (asking) in may/june might just be closer to 450k by jan. They’re already in the 500-525k range.
If there isn’t a dead cat bounce in spring (and if a recession comes, we don’t see one), next summer could be really, really ugly.
Farmland assessment-
There is a guy in Mullica Hill, NJ (South) who has a double building lot with a custom single home on it. He has two buffalo fenced in his yard so that he qualifies for the assessment.
“If anyone can explain this I would appreciate it…..”
[87],
These reports serve one purpose, take out the stops on both sides of the market. The long term trend is much more important than short term witch hunt trading.
“Farmland assessment-”
d2b [100],
Christie Todd Whitman, Clot’s neighbor.
Gary #92,
The vast majority of MBS investors are getting paid back. What has changed is the value of these securities, and most investors need to book these changes. They recognize on loss today even if they know they’ll get paid back in the end.
Obviously the third quarter has been bad for the banks in terms of GAAP earnings. Billion dollar profits should return during the fourth quarter though.
More than a trillion dollars of US corporate bonds will be issued this year. That is a record.
This surge in corporate bond issuance has offset the slowdown in issuance of asset-backed securities.
[101]
Please explain remove stops on both sides of the market.
The only explanation I could come about is a 25 bps cut is baked in, thus gold(dollar bear) goes up and market(ppt) goes up despite whatever kohn says…
[104],
Buy and sell stops.
Is somebody finally listening??
“The president of the Federal Reserve Bank of Dallas has cautioned against ignoring the inflation represented by rising food and energy prices, revealing a continuing debate inside the US central bank over how best to evaluate price pressures.”
“Richard Fisher on Thursday said the increases in food and energy prices over recent years could represent “longer-lived trends rather than transitory blips”. If this was the case “the arguments made for excluding food and energy prices” from core inflation, the Fed’s traditionally preferred measure, “would be on shaky ground”.”
http://www.msnbc.msn.com/id/21141647/
When did the whole food/energy exclusion begin? Or was it always excluded?
I mentioned earlier about how Wall St. is propping up the Manhattan market and the surrounding metro earlier. Well here is some evidence cracks may be showing in Manhattan…
http://curbed.com/archives/2007/10/03/luxury_letter_indicates_september_sales_debacle.php
“When did the whole food/energy exclusion begin?”
When the average American citizen stopped eating and driving, of course.
hehe [107],
Arthur Burns, in the 70’s. The characters on the stage are very similar, same seat, different #ss.
NJPatient (64): Bingo! Not good for NJ Shore communities.
Anybody who doesn’t think Manhattan is going to be affected by this is out of their mind. There are so many condo projects in the works it’s laughable. I don’t want to say it looks like Tampa circa 2006, just about everywhere below 60th on both sides, there are massive condo projects in the works.
My buddy lives in the East 40s and when his yearlong lease expired, he was informed that he could buy his 2 bedroom apt (no central AC and no window in the common area = no fun in the AC for three months) or be put on a month-to-month. He went with the latter. One month later, he received a note saying he had 60 days left … they were selling his apartment.
Between all the new construction and the conversion of apartments to condos … NYC is going to be nailed in the housing crunch – i would guess in the spring of 2008 (when many of the brand new ones are completed).
Wonder how many of those condos were to be financed with hefty wall street bonuses that now may never show up?
BC 106
The worlds central bankers have given the US the middle finger by holding or raising rates the last few weeks.
I think they will have to wait for ECB to cut before they can do it again.
Aaron,
How about we forced their hand?
Too funny:
http://ml-implode.com/countryfried.html
BC (102)-
By mentioning “Christie Whitman” and “farmland assessment” in the same sentence, you’ve triggered a reaction in me that may require 24-36 oz. of Ridge Zinfandel to quell.
Don’t get me started. I know where the bodies are buried.
if you are looking for higher rates –
http://www.bankofamerica.com/deposits/checksave/index.cfm?template=save_overview
5.35% on a 4 month CD.
“Ridge Zinfandel”
Damn – that’s my favorite vin. Paso Robles? Late Picked Pagani? What’s your tipple?
That and Rosenblum would make my desert island tolerable.
These sales/inventory charts are beautiful to look at. We have to get the average sales number to about 800 a month for about 14 or 15 months. That should adjust prices a tad, don’t ya think?
Bloodbath 07 (112),
Not so sure on that one- our friends with Euros in their pockets may be heading over, to buy a few NYC flats at 40% off.
But they won’t be buying in NJ, that’s for sure…
Steve
The egg is cracking :( :( :(
WSJ
401(k) Loans: At Your Own Risk Borrowing Rises a Bit Despite Long-Term Danger
By JILIAN MINCER
October 6, 2007
Despite potential tax and investment consequences, more individuals have been borrowing from their 401(k) plans or taking hardship withdrawals in recent months, some retirement-plan providers say.
Not all plans have seen jumps, and more-comprehensive statistics won’t be available until next year. But a number of plan providers that follow month-to-month patterns, including T. Rowe Price Group Inc., Hewitt Associates and Hartford Financial Services Group Inc., have seen a small but noticeable uptick.
Many in the field expect more 401(k) borrowing in 2008 as consumers struggle with tighter credit and potentially higher mortgage payments.
“I don’t think it’s a groundswell, but it’s enough to be noticed,” says Rick Meigs, president of 401khelpcenter.com, which provides information on 401(k) plans.
To be sure, the indications are preliminary, and some big providers, such as Fidelity Investments, say they haven’t seen any increase in 401(k) borrowing. About 20% of Fidelity 401(k) investors have a loan, a figure in line with the industry.
Even those firms that are seeing increase in 401(k) borrowing aren’t sure what to ascribe it to, though financial advisers say it could be due to the effects of the credit crunch and slumping housing prices.
“A few years ago, the buzz was about borrowing from a 401(k) to buy a second home,” says Jeff Carbone, a financial adviser in Cornelius, N.C. “Now it’s people looking at their 401(k) because they’ve extended themselves on their homes and credit lines.”
Most plans allow borrowers to take money out of their 401(k) accounts to pay tuition, purchase a residence, pay medical or funeral expenses, or to avoid eviction or foreclosure. Borrowers must repay the loan plus interest, which is typically set at one or two percentage points above the prime rate.
While plans vary, the most you can borrow is the lesser of 50% of your vested balance or $50,000.
Employees usually must repay money borrowed for a mortgage within 15 years, and money used for other purposes within five years. If you fail to pay back the loan on time and are younger than 59½, you’re subject to regular income tax and an IRS penalty tax of 10% for early withdrawal.
Though borrowing against your retirement nest egg may seem tempting, it could significantly reduce your savings at retirement and create an expensive tax bill if you can’t repay the loan when it is due.
Tom Foster, a national spokesman for Hartford’s retirement plans, says that he considered borrowing from his 401(k) when he was saddled for more than a year with an extra mortgage, but decided against it.
“Most Americans see this as a panacea, but instead it erodes time in the market and adds a new payment,” he says.
[edit]
Should you lose your job, the costs could be even higher. Borrowers who are fired, laid off or quit typically have to pay off the loan within 90 days, or face additional taxes and penalties, says Stuart Ritter, a financial adviser at T. Rowe Price.
[edit]
This takes the cake!!!!
__________________________
DIC to mortgage servicers: Freeze ARM rates
Top bank regulator suggests industry cuts losses now to prevent foreclosures.
By Jeanne Sahadi, CNNMoney.com senior writer
October 5 2007: 5:03 PM EDT
http://money.cnn.com/2007/10/05/real_estate/fdic_rate_freeze/index.htm?postversion=2007100517
(typo) DIC = FDIC
Ridge Zinfandel? Another good tip picked up from this blog. I will have to try it, zinfadel is the only wine I drink (acutally the only liquor I drink) and I know clot has good taste.
I’ll let you know, how it stands up to the barefoot I love
KL
I guess everyone was watching the Yankee game. Bost…would you really re-up at $35M a year for that choker?
What game??
Phillies and Yanks…. buh bye.
to be fair to Arod, the rest of the lineup went 3 for 31.
Rhymingrealtor –
I drink mostly Zins as well, although I’ll tolerate the occasional Sauvignon of either color quite nicely as well.
If you love Zin, while you’re rustling around in the Ridge bins you should grab yourself a bottle of Rosenblum’s Rockpile Ridge, Annette’s Reserve or even their Vintner’s Cuvee, which are all stupendous. The North Coast from their Appelation series can be incredible (it packs a wallop) if it’s the right year (2004 is top notch).
But it was Ridge that made me become a vinophile. Can’t beat it with a stick.
#124 KL-
You could probably buy a half a case of that Barefoot for the cost of one bottle of that Ridge…
Hey – where’s the weekend open thread??
It’s 12:41 am: do you know where your blogger is?
The Rockies will win the WS.
You heard it here first!
patient (118)-
Paso Robles or Geyserville. Am also a Rosenblum fan…any cuvee will do, even the Vintner’s (which is better than any of the foul, nail-polish-smelling stuff brewed up by Ravenswood).
Don’t forget Ridge Petite Sirahs, either. Skull-busting, but as good as any Hermitage or Cote Rotie…at a fraction of the price.
I want to be in the room when Boras is negotiating A-Clod’s next deal, and the subject of his 0-for-the-playoffs comes up.
“$6 Million for the Co-op, Then Start to Renovate”
Talking about having too much time and money.
http://www.nytimes.com/2007/10/06/business/06renovate.html?_r=1&hp&oref=slogin
Hey – where’s the weekend open thread??
At this point, we might as well use this thread as the weekend discussion..
grim Says:
October 6th, 2007 at 7:53 am
Hey – where’s the weekend open thread??
At this point, we might as well use this thread as the weekend discussion..
grim: slacker evidence du jour
Frank,
People like that always amaze me.
What’s more stunning – the Times’ fascination with people like that.
#139,
The liberals are all about money, take it from the poor and give it to the rich, but pretend it’s the other way around.
while you’re rustling around in the Ridge bins
Oh ! bins, yeah never buy my wine from bins, the end cap sale shelf…
You could probably buy a half a case of that Barefoot for the cost of one bottle of that Ridge…
I am going to give it a try, but it definitly has to be better than a half a case of Barefoot!
I was always a cheap date!
KL
http://www.epi.org/content.cfm/ib237
Job growth during economic cycles since 1960.