I’ll be blogging from the Otteau Valuation Group Fall Workshop this morning. We’ll try something new today, Real-Time Blogging. I’ve got broadband, and I’ve got a power plug, so I’ll be blogging throughout the presentation, which runs from 9:30 until noon.
8:50 – I arrived a few minutes ago and was one of the first participants through the doors. Brokers and agents are starting to stream through the door. No doubt the continental breakfast has enticed some to come early.
8:53 – Just got a cup of coffee, I only recognize one person so far.
9:00 – Few more agents coming through, surprisingly, I recognize a number of faces. Trying hard to remember where I know these folks from, but more importantly, if I’ve scoped out one of their open houses acting as a ‘buyer’.
9:03 – That first cup of coffee didn’t last nearly long enough. I’m heading back to the continental breakfast to mingle and ‘network’.
9:10 – About 40-50 people here at this point, we’re filling up quick. I took a quick look at the registration sheet and it looks like we’ll have at least 100 here today.
9:13 – Jeffrey Otteau just walked in to set up, I’m going to head over to chat.
9:21 – Heading back for more coffee. I promise this will get more interesting as the seminar starts.
9:26 – Up to about 80-90 at this point, we should be starting momentarily.
9:31 – And we’re off!
9:36 – I’ll be sharing what I can today. This material is, of course, copyright and all of the participants paid real money for the information. It wouldn’t be fair to Otteau and the others who paid for the information to reproduce it.
9:37 – Agenda is as follows: the “Field of Dreams”, the housing slump, right pricing, and of course, the market forecast.
9:38 – “While there are some bright spots, overall it’s a bit gloomy.” Jeff is promising to give an accurate and honest assessment of the market. He just told the group that the market will remain challenging long after the slump is over.
9:41 – For those who have been to an Otteau Workshop, you are familiar with Jeff’s “Right Pricing” concept. Just an anecdote, right priced homes sell in 16-30 days. The problem in the current market is that sellers are “trying to recapture yesterday’s price.”
9:43 – Jeff isn’t holding back, he’s turning these agents into ruthless price cutters.
9:44 – And I’m not kidding, he’s talking about 18 months of price declines.
9:46 – Jeff is taking the position that the housing boom will *not* repeat. Bringing in many of the topics that we’ve discussed on the blog before. Affordability, cost of doing business, business friendliness, decline in manufacturing, etc.
9:48 – The main driver behind the 1980-2005 boom, the “economic miracle”, was due the 80s shift from manufacturing to higher paying office jobs. Population of boomers moving into the home buying phase caused the frenzied market.
9:51 – Jeff is providing a very interesting commentary on the 80’s new-construction market. From sleeping bags to the Hovnanian lottery at the Meadowlands that drew 20,000 potential buyers.
9:52 – The 1990s were defined by technology, telecommunications and pharmaceuticals. As boomers transitioned from SFH to Condos, builders followed.
9:55 – For the agents that read this blog, if you haven’t attended the Fall Workshop yet, it’s worth every penny.
9:57 – Jeff is giving a very sobering talk. No pep talk, no cheerleading, and certainly no cherry on top. Very few smiles in the crowd.
10:03 – Excellent play-by-play of the drivers behind the bubble and the events that defined it.
10:11 – First time buyers were priced out around the third quarter of 2005. For every first time buyer that buys, four other sales take place simultaneously. Those who have been here before already know the 1:5 ‘rule of thumb’.
10:18 – Spring rally fizzles, inventory saturated.
10:21 – Big changes are due to “market localization” and a return to “primary vs secondary markets”, something not seen for more than 20 years. “Manhattan is king.” Great analysis of submarkets and the drivers behind the current hot markets. If you want more information you’ll need to pay Jeff for his work.
10:28 – Another interesting anecdote, urban markets, redevelopment, revitalization takes approximately 25 years before buyers will choose them as a housing option.
10:30 – Jeff just mentioned that we’re getting into the “dark and gloomy” part now. I thought we were there already. Handing out plenty of reasons why next year will be worse. Lots of grumbles in the audience. I think I might have ever heard a gasp.
10:35 – There is just way too much information for me to report on. Just to give you folks an idea, I’d guess that I’m posting less than a 1/10th of what is being discussed here. Jeff is running through this material like a freight train.
10:38 – Jeff is really hammering on the data. Population, jobs, migration, he hasn’t missed a beat.
10:41 – Moving on to subprime, mortgage delinquencies and foreclosures. Jeff isn’t happy about foreclosure reporting. We’ve touched on Jeff’s criticisms of the Realtytrac numbers before.
10:48 – Jeff is estimating approximately 10,000 REOs over the next 1.5-2 years. County by county projections were provided as well.
10:53 – Break, more coffee. I’m off to mingle.
11:03 – Restarting, heading into the second half. Focus is going to be on “Right Pricing” and CMA/Pricing techniques.
11:07 – Another interesting anecdote, 4 out of 10 condo/townhome purchases last year were single women, single paycheck households.
11:09 – Since most agents simply parrot Otteau, expect agents to downplay the foreclosure problem over the next year.
11:10 – “Overpricing virtually guarantees that the home will sell for less.”
11:13 – Working through some CMAs demonstrating that overpricing leads to lower overall prices.
11:15 – Jeff keeps on repeating the mantra, prices going down, prices going lower.
11:17 – “Sellers have unrealistic expectations.”
11:19 – More CMAs, covering the high-end markets.
11:22 – Summary of the CMAs, If it doesn’t sell in a few weeks, it’s overpriced. Period.
11:27 – MLS based CMAs are no longer accurate.
11:35 – Walking through some great examples of why median/average pricing isn’t accurate.
11:39 – My own comment, no way agents will talk sellers into “Right Pricing” their properties.
11:47 – Oof! Got a listing that doesn’t want to price properly? It’s worthless.
11:53 – Working through commercial, not of interest to most here so I’ll skip it.
11:57 – Housing slump to extend into 2008 or 2009.
11:58 – Bottom in pricing has not yet been reached.
12:00 – Won’t see price gains until 2011. Year by year forecast was provided.
12:04 – Surprisingly, the forecast mirrors many of the discussions we’ve had on the blog.
12:07 – Some very interesting information on “Green” homes and “Green lending”.
12:09 – We’re done, heading back to the real world.
do you have NJREREPORT Tshirt and caps on? we need real real scoops on mozillo and Art from there. I hope papprazzis are not disturbing too much.
Pretty cool real time blogging, however no details about your bathroom breaks. lol
Coffee meter is currently at a 6 cups per hour average….
I was tempted to wear my bubble prayer t-shirt, but I opted for business casual.
http://www.cafepress.com/nnjbubble.68233219
Come on, kick it up a notch.. Post pictures of the meeting!
Unfortunately I didn’t bring my camera. I probably should have. The Blackberry doesn’t have a camera.
Hedge fund Yankees
http://www.bloomberg.com/apps/news?pid=20601109&sid=aQ0b.NwuM66M&refer=home
Reporting from the belly of the beast… Great!
Grim,
You Rock!!
JB,
I’d like know what people are saying about demand trends. Seems like growing share of people buying homes in NJ want to live in Hudson County condos, and fewer want McMansions in exurban counties like Hunterdon.
Is there a shift in which NJ counties people are moving to? Is there a shift in housing type preferences?
this may be a stupid question for most here…but where is JB? grim = JB ? confused..
pre,
Register and expense it, it is worth your time.
But I’ll ask the question at the end of the workshop.
The Blackberry doesn’t have a camera.
You should get yourself a Q…
Bubble? Jeffie actually said the word “bubble”? I was told by a realtor, and I quote: “This bubble stuff is a bunch of bullsh*t.”
Are they handing out boxes of tissues to the realtors yet?
JB is James Bednar, James Bednar is Jim Grim (the Garbage Patch Kid), Jim Grim = grim.
if U.S. stock (real estate) market is a bubble, this is super bubble:
http://finance.yahoo.com/charts#chart1:symbol=000001.ss;range=2y;charttype=line;crosshair=on;logscale=on;source=undefined
J.B. Otteau should refund your payment and pay you 4k for the ad space and endorsement.
Seriously, good job.
bi Says:
October 15th, 2007 at 10:30 am
if U.S. stock (real estate) market is a bubble, this is super bubble:
Bi,
The stock market is not the same as the real estate market. there may be some overlapping components, but the act on different time scales
http://www.insidercow.com/history/company.jsp?company=cfc&ref=patrick.net
WOw the country wide exec love to sell stock. Notice the column should include insiders purchases of stock. But their are no Ps only S’s.
I know someone here explained the difference between oil price and gasoline price. It is still hard to believe you pay the same at gas pump while oil hits record each day.
20#, kettle1, thanks. i know they are different. just want to point out chinese stock market up 400% in two years. same for india real estate. as dollar weakening and commodity going up, i doubt u.s. stock or real estate market will collapse.
from the WSJ:
Nomura to Close U.S. Mortgage Business
By ANDREW MORSE
October 15, 2007 6:50 a.m.
TOKYO — Nomura Holdings Inc., Japan’s largest investment bank by market capitalization, said Monday it would close its New York-based residential mortgage-backed securities business, marking the latest fallout from the meltdown of subprime mortgages in the U.S.
Nomura said it would take a loss of $621 million on write-downs of residential mortgages and an additional charge of about $85 million for restructuring the business. That will swing Nomura to a pretax loss of as much as $510 million in the quarter ended Sept. 30, 2007. In the same quarter a year earlier, Nomura posted a net profit of about $2.1 billion.
“This is an extremely regrettable result,” said Nobuyuki Koga, Nomura’s president and chief executive officer. He added that while Nomura was retreating from the U.S. residential mortgage market, it planned to expand its electronic trading arm, called Instinet, and its asset management arm in the U.S.
[snip]
Prior to Monday’s announcement, Nomura had written off about $620 million in residential mortgage-backed securities over a period of two quarters. The investment bank now has very little exposure to the field left on its books. Nomura said it has just $119 million in residential mortgages, of which less than $1 million is classified as subprime, to dispose of.
Nomura said it would reduce its U.S. headcount by 400 people, or 30%, to 900 people in the reorganization, which is expected to be finished by the end of March. Mr. Koga said he and two other executives will each take a 30% salary cut through March.
http://online.wsj.com/article/SB119243751907459021.html?mod=hps_us_whats_news
Bi #20,
That was me who explained the gos/oil price relation, a week or so ago. Basically oil is priced on supply and how much it costs to get out of the ground( or what the markets thinks it will cost to get out of the ground). Gasoline is only 1 of many products produced from oil, so the price of gasoline is based on the stockpile that refineries have on hand and at what rate they are refining new gasoline. Oil can be high and gas can be low if there is an ample supply of gasoline in storage. If refining capacity is outstripped by demand ( as often happens over the summer), then the price of gasoline goes up. Gas price is related to oil price, as oil is the raw material, but they are not directly tied together ( This is a quick and dirty explanation and leaves out numerous factors)
Mr. Koga said he and two other executives will each take a 30% salary cut through March.
how’s that for accountability; it happened on my watch, I’m taking a personal hit for it.
Too bad the agent turnout was less than 100. If we could get 300-400 at each of these events, agents would come a heck of a lot closer to being an actual influence on the market.
Right now- as a group- we’re just gawkers at a car crash.
We’re probably around 150 or so right now, most every seat is taken.
Bi, # 28
Regarding China and India; Both of those economies are approaching some shaky ground. Wages and related manufacturing costs in china are increasing. Combined with the increasing demand for environmental regulations due to massive pollution, the wage increases and general manufacturing costs, China will start to see effects in their economy.
India is in a situation similar to the USA. They have had an economic explosion and the lower classes and lower middle classes have recently been priced out of huge segments of their economy.
On top of all of this, with the dollars value going down like lindsey lohan, our economic weakness is impacting both china and india.
In short, both china and India are huge economies currently experiencing strong growth, but there is underlying weakness in both countries. As to how that plays out, i do not know, but its not all sunshine.
bergenbuyer Says:
October 15th, 2007 at 10:17 am
JB is James Bednar, James Bednar is Jim Grim (the Garbage Patch Kid), Jim Grim = grim = SLACKER
grim: you packin’ heat among all them agents?
Don’t need to, all too easy to distract them with a pastry.
Bednar for president.
ABC should do a season of The Biggest Loser with nothing but RE agents as contestants.
Bednar for dictator.
It’s unbelievable. Until now, Otteau seemed to gravitate towards the middle with prices moderating down somewhat but the market remaining strong. From what JB is posting, it seems like he’s foretelling a major correction/crash.
BOOOYYAAHHHHHH
Has anyone here either converted from a fuel oil boiler to a forced air system in conjuction with installing central air or converted to natural gas? I’m looking to remove the ancient boiler and tank from our basement and am not sure what the best route is.
What does CMA actually stand for?
CMA Children’s Miracle Award
CMA Covariance Matrix Adaptation
CMA Cumulants Matching Approximation
CMA Cover My Ass
http://acronyms.thefreedictionary.com/Cost-Minimisation+Analysis
What is a CMA?
The best method available to home sellers to learn their home’s current value so they can select the best sale price is a CMA
http://www.homegain.com/info_center/seller/listing/what_is_cma/show_article
CNBC Poll reports that 90 percent of home owners think prices will stay the same or go up in the near term. Who will admit that their home will go down in value? Shame on CNBC for airing this.
On a more interesting note, the Remax CEO was part of the segment. Pay for Play I suggest.
#40, They can think that prices wont go down, but buyers set the market price, not sellers.
Sometime CNBC reports these idiotic polls that doesn’t make sense at all. Which seller will admit that his/her home price will go down. This data is more useful for a pyschology audience than it is for a financial audience.
I would bet a lot of money that ReMax funded the CNBC poll since the CEO was on the segment.
as far as i can tell, the prices havent really come down any…jb noted that around 2005 was when first time home buyers were priced out of the market…prices have still been rising since then till about late 06, early 07! those price increases will first have to be wiped out….baseline from 2005 and then start to cut prices from that timeframe otherwise, no one will come out to buy a home, especially first time home buyers…
CAIBC
re: Otteau’s comment that a mis-priced listing is worthless… you would think this would be completely obvious to most agents. yet they continue to invest time and resources to market wildly mispriced houses. I just don’t understand it. The place across the street from me just had its fifth open house yesterday–only 1 looker, who left after about 15 minutes
re: Otteau’s comment that a mis-priced listing is worthless… you would think this would be completely obvious to most agents.
In the boss’s eyes, having plenty of listings with no sales is better than having no listings and no sales.
It’s the market’s fault if you have listings and nothing is selling. It’s your fault if you have no listings.
good point. the boss is a moron
http://online.wsj.com/article/SB119243751907459021.html
Nomura Holdings Inc., Japan’s largest investment bank by market capitalization, said Monday it would close its New York-based residential mortgage-backed securities business…
2011..that puts this on track with the 1987 bust, where 1987 = 2005.
I have been using my experience with 1987 and this informative blog to reach similar conclusions. i think 2011 may still, in fact, be a tad early.
sorry didn’t see #24
BTW Grim, anyone in your family work for Grumman on Long Island a long time ago?
“Since most agents simply parrot Otteau, expect agents to downplay the foreclosure problem over the next year.”
Probably one of the reasons I’ve perhaps been a bit unfair with JO; constantly hearing my agent say “but Jeffrey Otteau (he’s the guru of NJ real estate, you know), says that…”
This would have been great if he’d done it in the spring or last fall.
Thanks for the blogging, grim – very cool.
“11:57 – Housing slump to extend into 2008 or 2009.”
Get OUT! Into 2008? But I dont WANT to wait three months to get top dollar for my house again!
“12:00 – Won’t see price gains until 2011. Year by year forecast was provided.”
Well, Ok then.
“12:07 – Some very interesting information on “Green” homes and “Green lending”.”
Don’t shoot me, but I’m interested in the former – what kind of interesting information are we talking about here?
Instability in US housing market will shake global economy
By Joseph Stiglitz
Monday, Oct 15, 2007,
There are times when being proven right brings no pleasure. For several years, I argued that the US economy was being supported by a housing bubble that had replaced the stock market bubble of the 1990s. But no bubble can expand forever. With middle-class incomes in the US stagnating, Americans could not afford ever more expensive homes.
As one of my predecessors as chairman of the US President’s Council of Economic Advisers famously put it, “that which is not sustainable will not be sustained.” Economists, as opposed to those who make their living gambling on stocks, make no claim to being able to predict when the day of reckoning will come, much less identifying the event that will bring down the house of cards. But the patterns are systematic, with consequences that unfold gradually, painfully, over time.
There is a macro-story and a micro-story here. The macro-story is simple, but dramatic. Some, observing the crash of the sub-prime mortgage market, say, “Don’t worry, it is only a problem in the real estate sector.” But this overlooks the key role that the housing sector has played in the US economy recently, with direct investment in real estate and money taken out of houses through refinancing mortgages accounting for two-thirds to three-quarters of growth over the last six years.
Booming home prices gave Americans the confidence, and the financial wherewithal, to spend more than their income. the US household savings rate was at levels not seen since the Great Depression, either negative or zero.
With higher interest rates depressing housing prices, the party is over. As the US moves to, say, a 4 percent savings rate (still small by normal standards), aggregate demand will weaken, and with it, the economy.
The micro-story is more dramatic. Record-low interest rates in 2001, 2002 and 2003 did not lead Americans to invest more? — there was already excess capacity. Instead, easy money stimulated the economy by inducing households to refinance their mortgages, and to spend some of their capital.
It is one thing to borrow to make an investment, which strengthens balance sheets; it is another to borrow to finance a vacation or a consumption binge. But this is what former US Federal Reserve chairman Alan Greenspan encouraged people to do. When normal mortgages did not prime the pump enough, he urged them to take out variable–rate mortgatges — and interest rates had nowhere to go but up.
Predatory lenders went further, offering negative amortization loans, so the amount owed went up year after year. Sometime in the future, payments would rise, but borrowers were told, again, not to worry: House prices would rise faster, making it easy to refinance with another negative amortization loan. The only way (in this view) not to win was to sit on the sidelines. All of this amounted to a human and economic disaster in the making. Now reality has hit: Newspapers report cases of borrowers whose mortgage payments exceed their entire income.
Globalization implies that the US’ mortgage problem has worldwide repercussions. The first run on a bank occurred against the British mortgage lender Northern Rock. The US managed to pass off bad mortgages worth hundreds of billions of dollars to investors (including banks) around the world. They buried the bad mortgages in complicated instruments, buried them so deep that no one knew exactly how badly they were impaired, and no one could calculate how to re-price them quickly. In the face of such uncertainty, markets froze.
Those in financial markets who believe in free markets have temporarily abandoned their faith. For the greater good of all (of course, it is never for their own selfish interests), they argued a bailout was necessary. While the US Treasury and the IMF warned East Asian countries facing financial crises 10 years ago against the risks of bail-outs and told them not to raise their interest rates, the US ignored its own lectures about moral hazard effects, bought up billions in mortgages and lowered interest rates.
But lower short-term interest rates have led to higher medium-term interest rates, which are more relevant for the mortgage market, perhaps because of increasing worries about inflationary pressures. It may make sense for central banks (or Fannie Mae, the US’ major government-sponsored mortgage company) to buy mortgage-backed securities in order to help provide market liquidity. But those from whom they buy them should provide a guarantee so the public does not have to pay the price for their bad decisions. Equity owners in banks should not get a free ride.
Securitization, with all of its advantages in sharing risk, has three problems that were not adequately anticipated.
While it meant that US banks were not hit as hard as they would otherwise, the US’ bad lending practices have had global effects.
Moreover, securitization contributed to bad lending: In the old days, banks that originated bad loans bore the consequences; in the new world of securitization, the originators could pass the loans on to others. (As economists would say, problems of asymmetric information have increased.)
In the old days, when borrowers found it impossible to make their payments, mortgages would be restructured; foreclosures were bad for both the borrower and the lender. Securitization made debt restructuring difficult, if not impossible.
It is the victims of predatory lenders who need government help. With mortgages amounting to 95 percent or more of the value of the house, debt restructuring will not be easy. What is required is to give individuals with excessive indebtedness an expedited way to a fresh start? — for example, a special bankruptcy provision allowing them to recover, say, 75 percent of the equity they put into the house, with the lenders bearing the cost.
There are many lessons for the US, and the world; but among them is the need for greater financial sector regulation, especially better protection against predatory lending, and more transparency.
Joseph Stiglitz is a Nobel laureate in economics.
“yet they continue to invest time and resources to market wildly mispriced houses. I just don’t understand it. The place across the street from me just had its fifth open house yesterday–only 1 looker, who left after about 15 minutes”
There is a house near us that was overpriced by a good 15% when it went on the market in about August ’06. They had about 10 open houses or so over the course of the next 12 months, and lowered the asking price once by approximately 2%. In August ’07 it went off the market. Couple weeks later, it popped up again at the same price minus about another 2%. FSBO. Still available, of course, with no price reductions.
What a monumental waste of that agent’s time.
By now, it’s overpriced by about 25-30%.
It’s been sitting empty for over a year.
Has anyone here either converted from a fuel oil boiler to a forced air system in conjuction with installing central air or converted to natural gas? I’m looking to remove the ancient boiler and tank from our basement and am not sure what the best route is.
The biggest issue on a conventional forced air system is you probably do not have ductwork in your home. There is no easy way to get the warm or cool air to the rooms. There are lots of variables however.
How many stories is the home? If it is a ranch on a basement they can run the ductwork from the basement and force the air up. Multiple stories make things trickier unless you want to open up the walls.
If you have an attic and a single story they can put the furnace in the attic and force the air down. Same issues apply if it is more than one story. If you have an attic, a basement, and only two stories they could run seperate systems.
Another potential option is a high velocity system. Unico is one manufacturer I am famililar with: http://www.unicosystem.com/
These use high velocity air through tubes that can typically be run within the 2×4 wall space. Regardless of what you do it will be VERY pricey to convert.
I did some research on this topic and Hughesrep is spot on! Many of my neighbors in Montclair went the Unico route and are happy with their decision. All options are pricey though.
On an 1800 sq ft ranch with basement or attic access, what are we talking for standard ducting? $10,000 or way higher?
Has anyone here either converted from a fuel oil boiler to a forced air system in conjuction with installing central air or converted to natural gas? I’m looking to remove the ancient boiler and tank from our basement and am not sure what the best route is.
You might want to look into a geothermal heat pump. It will not be cheap, but there are several different state and federal subsidies you may apply for
njpatient,
Here’s an article from the WSJ on green lending:
Going Green to Save Some Green
Lenders Push Mortgages
With Discounts and Credits
For Energy-Efficient Upgrades
By SARA SCHAEFER MUÑOZ
September 12, 2007; Page D1
Environmentally conscious homeowners can trick out their homes with a bevy of “green” products, including carpets, windows — even dog beds. Now, they can pay for those homes with green mortgages.
Lenders are the latest group to jump on the environmental-marketing bandwagon by pitching mortgage products that offer homebuyers bigger loans or discounts if they are making energy-efficient improvements — or if their new home meets certain efficiency standards. Last month, Citigroup Inc.’s mortgage division launched a program that offers $1,000 off closing costs with its energy-efficient mortgage through the end of the year. Also last month, Bank of America Corp. launched an Energy Credit mortgage, which offers a $1,000 credit toward closing fees for mortgages on new homes that meet efficiency requirements set by the government’s Energy Star program. J.P. Morgan Chase & Co.’s mortgage division recently began offering Expanded Energy Conservation Mortgages in some markets that give borrowers more credit, as well as $500 off closing costs, if they find a builder who will use a specific type of spray-foam insulation.
Smaller lenders, too, are promoting energy-efficient mortgages. Indigo Financial Group, based in Lansing, Mich., started selling such mortgages in Michigan, Indiana, Illinois and Florida in 2005, and this year expanded its services into Kentucky and Missouri.
While energy-efficient mortgages have been available from many lenders for some time, they are receiving renewed attention. They allow borrowers to qualify for bigger loans because lenders permit the estimated savings on utility bills to be added to the borrower’s qualifying income. For example, energy-efficient improvements could save a homeowner $50 a month. The $600 extra a year could allow a person to borrow about $10,000 more on a 30-year mortgage, depending on the interest rate, says Mark Wolfe, executive director of the Energy Programs Consortium, a Washington, D.C.-based nonprofit that helps coordinate state and federal energy policy.
The new products and incentives are aimed at a market worried about increasingly high energy prices. And amid the turmoil in subprime lending, analysts say, energy-efficient mortgages can be a more secure way to qualify marginal borrowers, since these homeowners are saving money on utility bills.
The energy-efficient products are structured like traditional adjustable or fixed-rate mortgages, yet they incorporate the cost of energy-efficient improvements, such as insulation, windows and cooling systems, into a mortgage so customers can pay these costs over the life of the loan. When customers wish to a buy a home, they have an energy audit done by a certified third party, which evaluates the home and creates a list of energy-efficient improvements that can save the homeowner money on utility bills. The lender — which will identify a certified auditor — puts the money needed for the improvements in an escrow account and the improvements are made after the home is purchased.
The products are also available for new construction. Homes that are already energy-efficient can be audited and the amount that is predicted to be saved on utility bills is counted as extra income for the home buyer.
When Gavin and Danielle Craig were looking for their first home in Lansing, Mich., last year, they found a house that dated to 1923 in a nice area. But they quickly realized it would need a lot of improvements, including a new furnace and better insulation. They got a $98,000 energy-efficient mortgage from Indigo, which included $12,000 to make the home more energy efficient.
“We liked the house but wouldn’t have been able to afford to fix it up,” Ms. Craig says. She says the cost of improvements adds an extra $100 to their monthly mortgage costs, but they save an estimated $2,000 a year on energy bills.
Even though they can save homeowners some money, the mortgages typically haven’t generated much interest for several reasons. In the housing frenzy of recent years, the products were rarely marketed, and many consumers didn’t know they were available. Meanwhile, an inspection of the home can add several days and extra layers of paperwork to the process. Also, some lenders say that the monthly savings weren’t enough to get buyers interested, which is why some banks have been adding incentives such as the $1,000 in closing-cost savings.
Environmental advocates say coaxing people to make changes to their homes that trim energy consumption is important. The residential sector accounts for about 20% of the nation’s greenhouse-gas emissions, according to government figures.
States are also subsidizing loans for energy-efficient improvements. Pennsylvania last year started a program that offers low-interest, unsecured financing for energy-related home improvements such as windows, doors, insulation and air-conditioning systems that meet certain criteria. Kansas started a similar program last year. New York state started a loan program several years ago that allows families to qualify for reduced interest-rate loans for up to $20,000. The New York State Energy Research and Development Authority says participation has grown by about 20% this year, and is working on a state-subsidized mortgage pilot program that will be launched as early as next year, says Paul Tonko, the authority’s president.
Mark Bartowski, a retired firefighter in Syracuse, N.Y., recently qualified for the New York state loan program. He used the money to help fund the cost of new insulation, and more efficient windows and back door. He says the low interest rate he received through the program saved him about $50 a month, or more than $4,000. He also said he has saved about $20 a month so far on cooling bills.
“I wish I had come across it sooner,” he says. “I could have been saving money years ago.”
Such products also offer an incentive for builders to build “green,” or Energy Star certified homes, if they know there are mortgage products that encourage people to buy them. Some banks also offer similar loans to builders.
Developer Roy Pachecano, the owner of Portico Residential LLC, says such products can help buyers afford his projects, which are speculative homes with energy-efficient materials and retro-fitted historic properties. When dealing with prospective buyers, he makes them aware of the energy-efficient mortgages that are offered.
“As a builder, I need everything that I can find to promote my product, to make it stand out from your average McMansion,” he says.
njpatient,
There’s also a small, snapshot style chart that goes with the story:
http://online.wsj.com/article/SB118955748175824511.html
Staying on the subject, does anyone has recommendations for floor heating systems?
On an 1800 sq ft ranch with basement or attic access, what are we talking for standard ducting? $10,000 or way higher?
An estimate is tough to guess. I sell HVAC equipment, but not ducting. There are so many variables about how tough it will be to route the ducting, where the registers can be placed, how far the venting has to be run, getting gas to the unit, where the outdoor AC unit can be set and running the lines to it, etc.
There are a lot of variables in equipment sizing as well, based upon insulation, number and types of windows, etc. A SWAG would be a 4 ton AC, and a 90K BTU furnace, I would sell it to a contractor for about $2500 ( that is for a 13 SEER AC, which is the minimum efficiency sold these days, and 90% efficient furnace).
Add another $1000 for miscellaneous duct, registers, piping, etc. He’ll double that for his sell price, then add labor. Depending on what the job is like figure 2-3 days. If I had to guess I would say &15-17,000.
Most reputable companies will give free estimates. Start with that. Make sure they actually do a calculated heat loss and heat gain which figures all of the factors involved to properly size the equipment. Bad companies will just figure it by square footage, or “this is what I put in your neighbors house”
Don’t be swayed by “name brand” HVAC equipment like Lennox or Carrier. You don’t need to pay for their advertisements or race car teams. Dollar for dollar, I’ve always been a fan of Rheem or Ruud, same company and good solid equipment. BTW, I don’t sell either brand, so this isn’t a shill.
Why would anyone put a dime into their house, 10K HVAC, just burn the damm place down!!
Staying on the subject, does anyone has recommendations for floor heating systems?
I feel like Bob Villa in better clothes.
I assume you mean radiant floor heating systems using a boiler? My personal favorite type of heating system. It is all about the boiler, the pump, and the mixing valve system.
Unfortuantely I’ve been out of that game for about 10 years, so I’m not up to date on the current info. They are by far and away the most comfortable heating systems in my opion.
Thanks man, that’s a lot of dough for even a simple application. I can imagine it would be much higher in a multi story home.
I’ve been looking at a lot of properties on the MLS without central AC and some even with electric heat that would eventually need that to be considered a “modern” house.
There’s so much housing stock for sale out there that needs it that that’s one more incentive to look to other areas in the country to live which offer more recently constructed homes. You have to spend $500,000 for a run down cape with $9,000 in taxes that needs new kitchen and baths PLUS $25,000 just to get central AC. UGH!!!!
hughrep:
Thanks for the information. We are definitely going to have central AC installed (including the duct work) and need to replace our boiler. The question for us is whether to install a new natural gas boiler or to go the forced air route. We have a 2-story colonial with attic and basement. I understand what you are saying about putting the AC unit in the attic and the furnace in the basement. If that is the case, then it seems to make sense to stick with a boiler so we would only have to do the ductwork for the central air.
My thinking is also towards buying on the cheaper side and put the savings in price into upgrades and remodeling the way I like it. Also would not need to rip out the ugly black granite counters some people seem to like.
Listings I looked at so far that came with the typical “a little TLC” or “a diamond in the rough” remarks were all pretty much beyond repair. (you would think realtors provide hazmat suits before letting you walk blindly down a mold infested basement)
What does JB do for a living ? Very interesting blog today
then it seems to make sense to stick with a boiler so we would only have to do the ductwork for the central air.
Maybe I was a bit unclear on this.
They use the same ductwork. The central air uses the blower fan from the furnace to circulate the air through the ductwork. When I mentioned you could put it in the attic or basement I was assuming there was only one or the other, you could use either depending upon which is easier.
If you want to stick with the boiler heat you can just get what they call a fan coil unit to circulate the air for the AC. They are basically just a big box that the cooling coil sits in with a fan above or below it. It looks like a furnace without the “heating parts”. Personally that is the way I would go, but I’m a big fan of hydronic heat as opposed to forced air. Once the ductwork is in you could always put in a furnace later.
Were there any estimates given for the % price decline in NJ and NYC metro area in 2008?
Any comments on home cogeneration? Worth it? Considering how much electricity costs in the northeast…
Re: Central Air – I have seen a lot of homes with lots of through the wall air conditioners as most towns view central AC as something that improves the home value which in turn jacks your RE tax. If you do it without a permit you avoid the tax but get nailed if you try to sell. Plus a lot of the older homes I have seen with limited closets and a small attic that is used for storage don’t install central air as it eats up too much storage space. Plenty of time adding central air on an older small home is additon by subtraction. Whatever increase the central air provides is taken away by the higher taxes and the lost storage space and in a small yard less backyard space.
62/3 – thanks, scribe
IMHO, mini-split ac units seem to have become relatively inexpensive lately.
Looks like SOMEBODY in NJ is hiring.
http://www.northjersey.com/page.php?qstr=eXJpcnk3ZjczN2Y3dnFlZUVFeXkyNjMmZmdiZWw3Zjd2cWVlRUV5eTcyMDgyODgmeXJpcnk3ZjcxN2Y3dnFlZUVFeXky
jamey – looks like we need to step up the marketing of NNJ to the Taliban. What don’t they like?!
The FBI’s elite Joint Terrorism Task Force in Newark says it is not only monitoring a number of North Jersey residents with ties to al-Qaida, but that agents have quietly “disrupted” their activities and even deported a few
This is goona hurt housing as more inventory will be hitting the market as Al Quida get deported. Damn Arabs, they always find a way to hurt us.
How does this relate to Real Estate, business, economy, or making money???
More Mozillo:
http://www.minyanville.com/articles/Angelo+Mozilo-Countrywide-Bernie+Ebbers-Enron-Worldcom/index/a/14471
This is goona hurt housing as more inventory will be hitting the market as Al Quida get deported. Damn Arabs, they always find a way to hurt us.
How does this relate to Real Estate, business, economy, or making money???
Browse the nj.com forums. An awful lot of ignorant clowns out there who think Indians are Arabs. There have already been a spate of racially motivated attacks on Indian people at Durham Woods in Edison. News like this will make it worse. Worst case, we’ll have to move even closer to each other until we have neighborhoods where if you ain’t Indian, you stand out. That’s your impact on RE right there.
Concerns over attacks on Indian immigrants in Edison
EDISON, N.J. (AP) A series of attacks seeming to target Indian immigrants at an apartment complex in Edison has residents on edge.
Police in Edison report eight incidents such as assaults and vandalism involving Indian victims at the Durham Woods complex since June, although some area residents say the real number may be higher since new immigrants are reluctant to contact the police.
Soumendra Naik and Ranjan Pradhan were walking around the complex in early August when they said two juveniles rushed up and punched them.
The men quickly reported the crime but said after relaying their experience to other people in the complex, they quickly realized that other tenants had suffered similar experiences.
Mayor Jun Choi has twice met with tenants from the complex to discuss their concerns.
HEHEHE
Holy S#!T Mozillo:
Has approximatley 925,000 shares. From OCtober 8th thru October 12th he liquidated 700,000 shares(about 75%). Unbelievable ! Too bad, his white hair and tanned face will look awful in the orange jump suit.
From the Star Ledger:
In each of the attacks reported to police, the assailants were black juveniles.
Everything I know about India I learned from the movies…..between Siddhartha and Bollywood I will say “Damn you people can dance…and you are a reflective bunch”.
Re: Realtor CMA’s
I’ve seen some of these CMA’s and for the most part, they miss the mark by a wide margin.
The realtor just pushes a button on the MLS and spits out an average price. The data used for this “analysis” contains Active Listings, and Colonials used as comps for Ranches….no thought whatsoever. I even found one that used an Expired Listing which was way over-priced as a means to pump up the average.
87…with value-add like that you should add “flower arranging” to the list of things realtors do to sell homes at an open house….Note: the day of reckoning is here….chips are down….no more free rides, signed…the economy
Any comments on home cogeneration? Worth it? Considering how much electricity costs in the northeast…
Your options are very limited.
It’s generally cheaper to buy power than convert diesel or delivered natural gas into electricity via a generator. This doesn’t even include air pollution regulations, synchronizing to the grid or utility standby charges.
Solar is a good option in NJ due to the generous subsidies, but good luck getting a rebate. There is a waiting list that exceeds the ability of the state to fund projects.
My advice is to pursue energy efficiency. This will give you the biggest bang for the buck. Those compact fluorescent bulbs will pay for themselves in less than a year and will deliver substantial savings over their lives. Of course, this is just one efficiency option. There are many.
fiddy (87)-
Garbage in, garbage out. I’ve also seen some CMAs that are better than appraiser reports.
An agent’s attention to accurately comping a home is more than a rote activity in this market environment. Your comps are the “proof” of your argument for proper pricing to a seller. If that argument is no good, you’re cooked before you even get started. Nowdays, you can’t take a listing at too high a price and wait for the market to correct your error (or your lie to the homeowner) by appreciating into the asking price you’ve set. A poorly-priced home these days either expires or gets withdrawn.
To be totally serious for one moment:
Today’s real-time blog has to be one of the coolest things ever done here. Props to Grim for having the idea & taking the time to do it. Little happens in RE that is reportable in real-time…or even merits the effort. So much of what we do can only be evaluated in hindsight. When something remarkable- and documentable- does happen “live”, it is newsworthy. Of course, we can count on the MSM to completely miss it, so the existence of forums such as this are critical to documenting the facts as we burrow deeper into the rotpile of this market.
So, Grimster, how about my offer of real-time reporting from the convention in December?
I can promise you it’ll be more Hunter Thompson (as opposed to your Bob Woodward). I should be worked into a properly nasty mood by the time this event starts…and a few belts at the vodka bar in the Trop should sharpen my wit.
From Reuters:
S&P cuts $4.6 bln of subprime mortgage backed assets
Standard & Poor’s on Monday cut its ratings on $4.6 billion worth of residential mortgage-backed securities exposed to subprime mortgages, citing expectations of further defaults and losses in the securities.
The downgrades include 402 pieces of 138 transactions. All are backed by first-lien subprime mortgage loans issued in the first three quarters of 2005.
The majority of the ratings cuts were in the “BBB” category, which is the lowest tier of investment grade.
“These rating actions incorporate our most recent economic assumptions, and reflect our expectation of further defaults and losses on the underlying mortgage loans and the consequent reduction of credit support from current and projected losses,” S&P said in a statement.
“Furthermore, the affected transactions include provisions that allow the release of credit support on certain step-down dates,” S&P said. “The release of credit support after the step-down dates will leave these transactions even more vulnerable to losses going forward.”
mr potter Says:
October 15th, 2007 at 3:06 pm
What does JB do for a living ? Very interesting blog today
Harry: He is a pistol packin’, spandex wearin’, bike ridin’, dog lovin’, vet tech marryin’, tech geekin’, snapple swillin’, card carryin’ IT dude with a econ bent and a broker license…..SLACK-ON DUDE
JB–am curious about the pronouncement ‘Manhattan is king.’ Can you elaborate?
Chi-#94-
Left out the fish…
The rationale behind his statement was in-line with what has been discussed here before. Mainly, the drivers of markets that offer fast/easy commutes into NYC are NYC wages and NYC real estate. This goes much further than simply suggesting that NYC access commands a premium, something we’ve touched on before as well.
Just listened to Bernake’s speach at the Economic Club of New York. He tries to explain why we shouldn’t see the feds actions as a bailout at tax payers expense.
http://www.federalreserve.gov/newsevents/speech/bernanke20071015a.htm
To highlight two points raised by Bernanke. The subprime/alt-a market is still in the dumps. There’s margnial pick up in prime non-conforming activity. Contrary to Reechards observations, he thinks that secondary mortgage market will continue to be difficult.
We replaced our boiler over the summer. We needed to stay wil oil heat because PECO never put a gas line on our street 50 years ago. We are the only street in the neighborhood without gas. I’m hoping that our oil consumption drops by at least 20%.
I’ve resisted the temptation to add central air to my POS split-level. The lower lever is half-underground and stays cool. The main level is cooled with one window unit. We cool our bedrooms with two window units.
We are air-conditioning sissys. So our electric bill is about $100.00 higher in the summer than the winter, because one unit is always on in the summer. But my siblings have sky-high electric bills in the summer from central AC. Plus, as a benefit, everytime a sibling moves, I get their no longer needed window unit air conditioners.
#94 re JB
Thanks, but you could have left out the spandex….
I second that real-time blogging thing as being one of the coolest things ever. I was totally blown away. Oh and don’t forget the coral growing thing as one of Grim’s many occupations.
Now… LET’S GO GIANTS!!!
Talk about being clueless, I have friends who have been in Long Island 30-40 years who were attacked after 9/11 because they wore turbans. Why? Coz some bozos thought that they were terrorists since they wore turbans, not realizing that they were Indian Sikhs.
SO these guys (physicians and surgeons)actually had stickers on their car and home doors saying “I am proud to be a Sikh and an American.”
Essex, I recommend the movie “Monsoon Wedding” That’s the modern India…not the land of snake charmers and curry-smelling IT programmers most people think.
“..Has anyone here either converted from a fuel oil boiler to a forced air system in conjunction with installing central air or converted to natural gas? I’m looking to remove the ancient boiler and tank from our basement and am not sure what the best route is…”
Commanderbobnj sez:
I personally would stay away from a forced-air heating system and go for a multi-zoned hot water baseboard system (gas-fired boiler)
Depending on how you home is presently cooled (window or high-mounted through-the-wall air conditioner units ?)–you could save money by having a power attic ventilator fan (with four roof intake/exhaust vents) installed on your attic roof—that keeps the heat load low in your attic and makes the rooms below more comfortable in the hot summer months—This also works great if you decide to go with a ducted central AC system…Make sure that you have your attic re-insulated to a R-Factor of R-25 or R-30 and all the new hot water heating system pipes insulated with the rubber or fiberglass pipe covering….
The above is by far (IMHO) the most energy-efficient, reasonable in cost and simple to maintain..
Bob
If you like your Bollywood more Americanized, you can’t go wrong with Bride and Prejudice.
I agree about people being idiots but I just want to say one other thing. Even if some actually is an Arab, it doesn’t mean they’re Al-Qaeda. There are millions of law-abiding Arabs and Arab-Americans who live in this country and maybe a handful or two of actual terrorists.
Chuchundra 105,
There are millions of law-abiding Arabs and Arab-Americans who live in this country and maybe a handful or two of actual terrorists.
Try explaining that to the millions of idiots who listen to Savage on a daily basis.
In light of Citigroup’s slump, what should CEO Charles Prince do?
Stay as CEO / Step down
21 votes (18%) / 93 votes (82%)
Total Votes : 114
Blueprint for public exposure of stupdity….
WSJ
Citigroup Model Is Left Shaken By Credit Crunch
By ROBIN SIDEL and JEFFREY MCCRACKEN
October 16, 2007
Touted as a diverse financial colossus that could profit in good times and bad, Citigroup Inc. is reeling after two weeks of dreary news — including a 57% profit drop reported yesterday — that show how unprepared the bank was for the recent bust in credit markets.
With businesses struggling from Texas to Tokyo, the banking behemoth’s capital ratio — or cushion against losses — has dwindled to its lowest level in years. Citigroup has halted a program to buy back its own shares. The stock fell 3.4% yesterday.
Citigroup is at the center of an industry plan to rescue a series of bank-affiliated investment funds that invested in mortgage-backed securities and other risky assets. Citigroup once boasted about its big presence in such funds, but now is leading the charge to shore them up by creating a single big fund to buy up their assets.
The dismal news adds to pressure on Chief Executive Charles Prince, who had declared 2007 “the year of no excuses.” Yesterday, he said, “This quarter’s performance was well below our expectations and, frankly, surprising.”
Analysts and investors fear the bank is so weighed down that it won’t be able to jump on new business opportunities. That would put it at a big disadvantage to rivals such as J.P. Morgan Chase & Co. and Bank of America Corp. They’re already swooping in, for example, to build market share in the mortgage industry.
[edit]
‘It’s Not a Bailout. It’s ‘Financial Engineering.’
http://blogs.wsj.com/marketbeat/2007/10/15/its-not-a-bailout-its-financial-engineering/
Grim great real time info!Its good to hear the re agents getting on the program.The sellers are next,I think they both are still in denial to some extent.This will take time we will be patient and prevail.
To our friend with the heating ?.I have to agree oil,hot water way to go.On ac I went from window to central bills went down.We like it COLD.
if you people are still sitting on your hoard like a dragon look into buying 7-30 day corporate paper. when the worst of the credit crunch hit i was making almost 7% on 7 day paper. it’s eased but still paying close to 6%. who the heck needs the mass market MMA like emigrant if you have 10k+?
friend told me a house he looked at recently in saddle river has been on the market for over a year. original listing price was $2.8 million now it’s $1.5 million and still hasn’t sold. asking prices don’t mean jack people so stop quoting them sales price is the only thing that matters.
>>Were there any estimates given for the % price decline in NJ and NYC metro area in 2008?
meaningless. RE is very very local all depends on where you are.
>>There’s so much housing stock for sale out there that needs it that that’s one more incentive to look to other areas in the country to live which offer more recently constructed homes.
so move and stop whining every day.
>>I have friends who have been in Long Island 30-40 years who were attacked after 9/11 because they wore turbans.
you know how many ‘minorites’ live on long island today? your ‘example’ is such a huge minority there’s no point in giving it any credence whatsoever.
Monsoon Wedding….good movie — saw it.
Also Missippi Masala…a winner.
Richard, give me a break, will ya? I’m not generalizing…just pointing out a specific instance of ignorance that took place. Just because an incident happened (a huge minority as you phrased it) does not mean it never happened.
Who didn’t want to hang out with this dude as a kid????? Come on!
http://i15.photobucket.com/albums/a381/rrrob/hadji.gif
Johonny Quest ruled!Essex!
Giants kicking a**!
Good day!
Chuchundra (105)-
Sounds goofy, but I coach a soccer team on which we have Jewish, Persian, Korean and Hispanic and Chinese players. We have no white, Protestant “Americans”.
My players have gotten along from day 1, and the Persian and Jewish kids are fast friends (yes, the parents like each other, too). Of course, when we play the homogeneous, lily-white, suburban teams, the comments start early. Hearing a 10 y/o kid get called Bin Laden really makes your day.
The only positive that comes from this is that the chatter makes my kids play hard. I don’t know how they have the self-control to keep from going after some of the kids who make these comments, but I hope whatever it is might be the thing that gets us all through this age of stupidity.
Reech (112)-
“…asking prices don’t mean jack people so stop quoting them sales price is the only thing that matters.”
Thanks for that news flash.
#96
um …. it’s coral not fish….
NJPatient #55-
I can put you in touch with one of the founders at this Green builder.
http://www.buildgreeninc.com/Index.html
Let me know through Grim/JB…
JM
Sounds goofy, but I coach a soccer team on which we have Jewish, Persian, Korean and Hispanic and Chinese players. We have no white, Protestant “Americans”.
My players have gotten along from day 1, and the Persian and Jewish kids are fast friends (yes, the parents like each other, too). Of course, when we play the homogeneous, lily-white, suburban teams, the comments start early. Hearing a 10 y/o kid get called Bin Laden really makes your day
Yeah. Those horrible lily-whites should get packing. They’ve done absolutely nothing for American society. The USA was nothing but grunting savages until the Jewish, Persian, Korean, Hispanic, and Chinese got here.
Take the white sheet off for a second and try to understand what he’s saying. It’s comments like yours that perpetuate this ‘us vs. them’ mentality. If 10 year old ‘non-white’ kids can get along with each other why can’t you? The world is only getting smaller so you had better get used to seeing people who don’t look like you doing great just like the rest of us who have more important things to worry about than race.
Their ancesters may not have come over on the first boat like yours did, apparently, (and that evidently threatens you) but I can assure you their roots go just as deep. The people who ‘made this country great’ are long since dead- those of us here now are the people of the next generation who will CONTINUE to make this country great- white, black, brown, native and foreign and everything in between regardless if people like you want to stand in their way.
The USA was nothing but grunting savages until the Jewish, Persian, Korean, Hispanic, and Chinese got here.
Actually, most of the savages prefer the term “Native American.”