Fitch: New Jersey home prices to fall an additional 20%

From BusinessWire:

Fitch: California, Arizona, Florida Home Price Declines in Line with U.S. RMBS Forecast

Fitch expects that California will lead the way with an additional 36% decline in home prices from current levels over the next 12 to 18 months. Florida and Arizona are forecast to see declines of over 20% from today’s levels in the same period. Not surprisingly, these states saw the largest run up in prices, with them more than doubling in the 2002-2006 period. To date, home prices in these three states have already fallen by 40% on average.

“Though substantial further home price declines are still to occur, it does appear that the new data is not indicating declines beyond those already anticipated,” said Group Managing Director and U.S. RMBS group head Huxley Somerville. “Fitch expects that declines will continue for at least a year before home prices reach bottom.”

California, Arizona and Florida account for approximately 50% of the overall non-agency mortgage origination volume by dollar over the past four years. New York has averaged approximately five percent of the dollar volume with New Jersey, Texas and Illinois accounting for three to five percent on average.

Home price declines in the higher volume states outside of California, Arizona and Florida have fared substantially better and are expected to see more moderate further declines. Among these, Texas and Illinois are anticipated to see further declines of 1% and 9% respectively and New York and New Jersey are expected to see further declines of 11% and 20% respectively.

Fitch believes that most of the home price correction will occur in the next eighteen months, with prices exhibiting more stability beginning in late 2010. Fitch’s forecast analysis assumes a 1.5% inflation rate for 2009 and 2010 and 3% for the following three years. Nationally, Fitch expects home prices to fall a further 12.5% on average.

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282 Responses to Fitch: New Jersey home prices to fall an additional 20%

  1. grim says:

    From the AP:

    Report: Revenue and jobs decline at US casinos

    Revenue and jobs at the nation’s gambling halls fell last year as Americans became less willing to risk their money, according to a report released Monday by the national gambling industry’s trade association.

    The study by the American Gaming Association found revenue nationwide was down 4.7 percent in 2008 to $32.5 billion. The year before, revenue had increased by 5.3 percent.

    The nation has more than 1,600 casinos, slot parlors and other gambling halls. The number of casino jobs fell 1 percent to more than 357,000.

    The gambling halls paid $5.7 billion in taxes to state and local governments last year. That’s down slightly from $5.8 billion the year before.

    It also found that a poker boom that began in 2003 appears to be waning. Poker revenues in Las Vegas and Atlantic City declined last year for the first time since 2002.

  2. relo says:

    Frist-ish

  3. grim says:

    From Calculated Risk:

    Fed: Delinquency Rates Surged in Q1 2009

    Commercial real estate delinquencies (6.4%) are rising rapidly, and are at the highest rate since the early ’90s (as delinquency rates declined following the S&L crisis).

    Residential real estate (7.91%) and consumer credit card (6.5%) delinquencies are at the highest levels since the Fed started tracking the data (since Q1 ’91).

    Although there is credit deterioration everywhere, the rise in these three categories is especially significant. There was also a significant increase in C&I delinquencies (commerical & industrial).

  4. grim says:

    From the NYT:

    Post Office Has Cut 25, 000 Jobs This Year

    The U.S. Postal Service has cut its staff by 25,000 this year as it struggles to reduce massive deficits, Postmaster General John Potter said Monday.

    Postal employment is now below 635,000, Potter said, down from about 800,000 in 1999.

    Thousands of carrier routes have also been eliminated as mail volume declines, he said.

    ”We have an infrastructure that, quite frankly, we cannot afford based on the income we’re receiving,” Potter said.

    The agency still faces a potential $6.5 billion loss this year, Potter said, and even with increased borrowing and other changes it could finish the year with a $1.5 billion shortfall.

  5. relo says:

    237 – Last thread.

    Fallacy. AMT whacks most HNW, scum or otherwise, esp. in high state tax/ cost of living states.

  6. sastry says:

    Grim/Clot/others…

    I am inclined to putting in 40% down so that the monthly payments can be taken care of with my salary — wife makes more, but relatively less stable job. Given 1.9% interest rate on savings (just got a mail that it is down to 1.65% APY), what would be the risk of putting most of my savings into mortgage [we have additionally 20k or so in savings, and if SHTF, there’s 401k money]. The rate from Clot’s guy seems to be 4.75%, no points… Great rate.

    Additionally, I am pretty bad with money lying around — it’s just five clicks from a savings account to a 4x margin short position on an ultra-ETF!

    I guess I’m answering myself here, but, is there something wrong with my logic of putting in more into the down payment?

    S

  7. grim says:

    I guess I’m answering myself here, but, is there something wrong with my logic of putting in more into the down payment?

    Yes, if you lose your job, you’ve got no cushion. What about unexpected expenses associated with the new home?

    Now, if you’ve got a big cushion even after then 40% down, no problem. But if it leaves you strapped for short-term cash, it might not be such a great idea.

    On the other hand, with a 40% equity stake you would have no problem doing a HELOC if you need cash.

  8. Curmudgeon says:

    Relo..

    So you are under the impression that the Walton family is paying AMT?

  9. jcer says:

    Curmudgeon, in the tax argument I will concede that lowering the capital gains tax was a bad idea, it leads money to the market which has proven not the wisest investment.

  10. jcer says:

    Curmudgeon, in the tax argument I will concede that lowering the capital gains tax was a bad idea, it leads money to the market which has proven not the wisest investment.

  11. yome says:

    Will it not be a better idea to put down as little as required and keep mortgage close to rent prices in the area.In case the downturn gets worst jingle mail make more sense than holding the baggage.

  12. grim says:

    Welcome to NJ.

    Cop steals 100 pounds of cocaine from evidence, peddles it to drug dealers, and gets 6 years in prison.

    Dope dealer on the corner gets caught with 1/10,000th of that (probably less), and gets put away for longer.

    Cop should have gotten life, period.

    Protect and serve? Guess that don’t apply in Jersey.

  13. sastry says:

    How much buffer? 6 mos, 1 yr? At any point, my job is sort of safe for may be 2-3 yrs into the future. I’ll know a year or more in advance if SHTF.

    S

  14. yikes says:

    Curmudgeon says:
    May 18, 2009 at 12:57 pm
    Where exactly do you and the editors of the WSJ suppose “the rich” will be moving? Florida? Florida is one hurricane away from utter insolvency. The state is insuring about 40% of total RE market currently and has zero ability to pay claims. California? (if I need to explain Cali, you need remedial lessons…) Pennsylvania? The pension situation is actually worse than NJ and where do you suppose my neighbors on Navesink River Road will move in Pennsyltucky? The answer is simple; they are not moving anywhere.

    you lost me on “Florida.” you are aware that all the big baller athletes buy a primary residence in FLA and then have a place up in NY, right?

    This would be to escape taxes.

    And to say all of FLA is one hurricane away from insolvency is laughable.

    curious to hear more about the pension problem in pennsyltucky.

  15. sastry says:

    Yome #11. We wouldn’t feel much direct pinch even if prices fall another 30% [indirect effects may be bad though]. No intention of jingle mail. I look at it like keeping the old LCD TV or the old car…

    S

  16. xmonger says:

    re 6:

    I would put 20% max/min down.

    The excess can be used for cushion and flexibility to deploy capital anywhere globally as the US sh*tstorm still lies ahead.

  17. grim says:

    Breaking!

    AMEX to cut 4,000 jobs.

  18. yome says:

    S
    Just thinking in the investment stand point.If mortgage is close to rent all you are gambling is the down payment,Home prices goes down or not.
    Rent ,you loose anyway.Just ignore my 2 cents.

  19. grim says:

    Rent ,you loose anyway.

    Kind of like saying that the money you spend on food is wasted.

    I guess it is, but you still need it to live.

    If only you could live on the street, just think of the money you could save!

    If you want to talk about throwing money away, let’s talk property taxes. Paying rent is a gift in comparison.

  20. Curmudgeon says:

    Athletes with FLA residency..yes, it’s easy to maintain with their travel schedules. When MD’s had money, many did the same, many still do (especially with the Homestead exemption/malpractice failsafe) It’s back to my original point, though; many cheat, but it’s a consistent percentage…

  21. sastry says:

    “If mortgage is close to rent all you are gambling is the down payment”…

    I may sound like a republican, but… the taxes are pretty high — will soon be higher than the mortgage or rent of a small place we live in now.

    S

  22. yome says:

    Rent ,you loose anyway.

    I meant constant expense.You like it or not you need to spend it. Just like you said food.

  23. Silera says:

    My in laws have a 3 family in Union City. For 5 yrs we suggested they sell as they received unsolicited offers of over 1/2 mil for a 16.5′ x 100′ attached house. Instead they refinanced twice.

    I just received a call asking for help finding a realtor that will list this thing for 575K. I understand why Clot drinks.

  24. yome says:

    If you have kids in the school system property tax is cheap.

  25. grim says:

    From the Fed, via MarketWatch:

    Fed: 1Q Delinquencies at highest rate since ’91

    Fed: 1Q c. card delinquencies highest on record

    Fed: 1Q consumer loan delinquencies highest ever

    Fed: 1Q real estate delinquencies surge

    Nothing to see here, move along.

    Hey look over there! Are those green shoots!

  26. relo says:

    6: I am under the inpression that if they are paying income and/or RE tax in states like NJ/NY/CA/MA, they most likely are.

  27. grim says:

    If you have kids in the school system property tax is cheap.

    How is that any different from renting in the same town?

  28. yome says:

    When you sell you get the difference between what you owe and the selling price = to property tax given back to you.

  29. grim says:

    Excuse me while I go change my pants, I just wet myself laughing over this one.

    From the WSJ:

    Trump on Trump: Testimony Offers Glimpse of How He Values His Empire

    It’s one of the great mysteries of the business world: How much is Donald Trump really worth?

    The world famous real-estate developer and television personality has consistently said it’s in the billions. A 2005 book citing anonymous sources said it was between $150 million and $250 million. Mr. Trump sued the writer for defamation. He alleged damage to his reputation that caused him to lose out on future deals in locales from Philadelphia to Kiev.

    A hearing in that case will take place Monday in a state court in Camden, N.J. As part of the proceedings, the Donald, as he’s known to fans and detractors alike, has provided under oath the secrets to how he values his wealth and treasure. In one case, he says, he does “mental projections.”

    “My net worth fluctuates, and it goes up and down with markets and with attitudes and with feelings, even my own feeling,” he told lawyers in the December 2007 deposition.

  30. grim says:

    I don’t know about you, but I feel like a billion bucks today!

    (I know, the phrase is “a million bucks”, but I felt we needed to update for inflation.)

  31. Jason says:

    I remember one of my first times to Atlantic City a good friend of mine would play black jack in his mind. I had no idea he had so much in common with Donald Trump.

  32. Silera says:

    You have to have a lot of money to make this stuff up. If I said that I think I’d be institutionalized.

  33. grim says:

    #29 – The irony of it is that there is little difference between Mr. Trump’s rationale and thousands of other black boxes on the street.

  34. relo says:

    Make that response in 26 to 8: above.

    To 6: Would put down 20% and keep the difference dry. Can always pay extra down the road. As mentioned by others, ownership means expenses always arising. Best of luck.

  35. Curmudgeon says:

    Relo..

    The AMT can raise effective rates on earned income for those in lower brackets. Above $1 M in income, the effective rate is approximately 16% on the gain and gradually reduces to the baseline 15% as you go up from there.

    Sorry to break this to you, but the Walton’s pay a lower effective tax rate than you and I. Jon Corzine (I hear all the hisses) often relates this ridiculous situation to average Joe’s, in relation to his situation. He finds it rather ridiculous that he pays a lower rate than you.

  36. yome says:

    The AMT can raise effective rates on earned income for those in lower brackets. Above $1 M in income, the effective rate is approximately 16% on the gain and gradually reduces to the baseline 15% as you go up from there.

    Sorry to break this to you, but the Walton’s pay a lower effective tax rate than you and I. Jon Corzine (I hear all the hisses) often relates this ridiculous situation to average Joe’s, in relation to his situation. He finds it rather ridiculous that he pays a lower rate than you.

    From that explanation,does it make sense to increase taxes of high earners?

  37. yikes says:

    Curmudgeon –

    I highly recommend ‘the millionaire next door.’ Great book.

    it advocates saving money whenever you can. paying high taxes simply to pay them without exploring other options doesn’t fit into that meme.

  38. Traitor Nom Deplume says:

    (33). Note that, if you pay down prin early, it is applied to the last payment. So prepay gives the bank an interest free loan for up to 30 years.

    (35). True. The truly wealthy pay a lower eff tax rate than the HENRYs. That is well known, irrespective of AMT.

  39. sastry says:

    Nom… At this point, are there any things to be worried about? The contract is signed, the bank took a check for 5%. I am assuming that there is no chance of someone over-bidding, right? Anything that can go wrong?

    S

  40. Curmudgeon says:

    Nom:

    I did not know that they applied prepay that way. Of course, I’m not surprised. I’ve always rounded up; I guess I’ll stop.

  41. sastry says:

    Curm… you can ask them to redo the loan, but they charge some fees for recalculation (500 bucks or so, I’m not sure.) Again, “they” cover a very range — some guys are better than others.

    S

  42. BC Bob says:

    Nom [37],

    If you add a 2nd check with your mortgage payment and apply it toward principal you will eliminate years of interest. Depending on rates, if you make 13 payments a year, the 13th towards principal, you make knock off 8 years or more on a 30 year term.

  43. yome says:

    #41 i agree

  44. yome says:

    NEW YORK (Fortune) — Imagine if you were not really in the market for a house but the government came along and said that it would finance 94% of a home’s purchase price with a mortgage rate of less than 3%. Still not interested? Wait, Uncle Sam has some additional sweeteners: if you do the deal and buy the house for only 6% down, you also get the equivalent of rental income every month to the tune of at least an annualized yield of 10% of the purchase price.

    But wait there’s still more: if, say, after two years, you decide you don’t want the house any longer, you can just walk away from it. No need to pay the balance of the mortgage (it won’t affect your credit rating), and you can keep the rental income received to date.

    That’s essentially the deal that Treasury Secretary Timothy Geithner has offered qualified professional investors who participate in the so-called TALF (Term Asset-Backed Securities Loan Facility). Two months into the program as the first TALF- backed deals hit the market, you can see why the likes of hedge fund Fortress Investment Group are drooling over it. “I’m a big believer in the impact that TALF can and should have,” Fortress CEO Wes Edens said on a May 6 investor call, adding that he expects that Fortress will be “a big participant” in the TALF program “three to six months from now.”

    http://money.cnn.com/2009/05/18/news/economy/geithner-talf.fortune/index.htm?postversion=2009051810

  45. james says:

    “I am inclined to putting in 40% down so that the monthly payments can be taken care of with my salary — wife makes more, but relatively less stable job. Given 1.9% interest rate on savings (just got a mail that it is down to 1.65% APY), what would be the risk of putting most of my savings into mortgage [we have additionally 20k or so in savings, and if SHTF, there’s 401k money]. The rate from Clot’s guy seems to be 4.75%, no points… Great rate.

    Additionally, I am pretty bad with money lying around — it’s just five clicks from a savings account to a 4x margin short position on an ultra-ETF!

    I guess I’m answering myself here, but, is there something wrong with my logic of putting in more into the down payment?”

    I thought about that as well. After refinancing to 4.6% 30 fixed a couple months ago I figured I could advance the amortization schedule with cash lying around. Ran the calculator and decided against a lump sum. I am doubling up on my principal effectively making the loan a 15 year. If I run upon hard times then I am not comitted to the extra payment. The rest of the cash will be hoarded and once I have enough I may just get rid of the whole dam thing.

  46. yome says:

    #37 I think Nom is right if you don’t specify that extra payment goes to principal.

  47. Clotpoll says:

    sastry (6)-

    IMO, you know what your own level of comfort is. If 40% down feels right, do it. The rate on your savings is pitiful, so if you get peace of mind and feel the money is working better for you by putting it into your house, go for it.

    At the end of the day, the biggest financial element of owning housing is that it is a giant forced savings program.

  48. meter says:

    From prior thread, re: 232

    “Basically you are saying Mike has, but Peter deos not, therefore I will take some of Mike’s so that Peter has more.

    And if Peter did the bare minimum in life, or did nothing at all, but Mike worked hard his whole life, who cares, I am taking it anyhow.”

    Taxes are – for better or worse – part of the cost of living in a civilized society. Sorry you haven’t caught on to that yet. I don’t like subsidizing the war in Ir@q with my hard-earned money but I don’t have much say in that. We don’t get to pick and choose where taxes are spent. You don’t like paying for welfare (neither do I, to be honest), but I don’t like warmongering. Maybe you don’t either. Maybe you don’t have kids and don’t like paying high taxes to support teacher’s salaries. Don’t like it? Move.

    It’s not up to me to say who is rich or poor, but it’s like the famous quote about pornography: “I can’t define it, but I know it when I see it.” You made a blanket, vague statement and I responded with a blanket, vague response. On purpose.

    If you think you can get a better deal elsewhere – some place where you can keep more of your hard-earned income (assuming you have a business-friendly environment similar to the one you enjoy here in the US with security, access to infrastructure, access to top-educated employees, etc.) – up and move. Nobody is stopping you.

  49. Clotpoll says:

    grim (29)-

    Just a garden variety con man.

  50. Clotpoll says:

    cur (34)-

    I find it rather ridiculous that a dope like this guy can buy his way to being governor.

    “He finds it rather ridiculous that he pays a lower rate than you.”

  51. Cindy says:

    (44) James – That is exactly what I do. I will have the second polished off by the end of the year (been paying double) so that will come in 5 years early. Then, I’ll put that money on my first. I have a 15 year first but I am trying to have it paid off in 3 more years.

    My monthly payment is low, if I don’t have it paid off by the time I retire, I could afford it. Meanwhile – double down each month – the extra
    all goes to principle.

    Anything extra you can pay toward principle in those early years when the majority of your payment goes toward interest is great. Just add $100 or two a month to your regular payment on the months you can. It really helps.

    I started with a first in 99 and a second in 05. The goal is to have them both paid in full by 2012.

  52. sastry says:

    Clot, I asked Nom about this… Is there any chance of things going wrong at this time? As in, should I start planning for appliances, etc., right now, or wait till closing date?

    S

  53. james says:

    Cindy, I agree. The one caveat is inflation. Sure would hate to pay off a 4.6% mortgage in 5 or 6 years only to see through the roof inflation with bank savings rates at 8%. If I save the the bulk of the cash even if its only making 1% for now then I have maneuvering room. If real estate drops another 30% like some on this board suggest, I will buy more with cash. If inflation soars along with interest rates well then I can put the cash to work in a guaranteed return account making the mortgage even easier to pay off. Either way, I just dont see a 4.6% mortgage as an enemy beyond the intial first years.

    The above reason is why I will probably get the amortization schedule down to 50% principal 50% interest and then see how the economy looks.

  54. d2b says:

    I never regretted putting about 35% down on my house or paying our mortgage off early. The main reason was that I lost so much in dot com and I knew that I could pull the cash back out if I needed it.

    That being said, your position is stable for 2 to 3 years and your wife’s is not stable at all? Sounds like that cushion may be needed. I don’t know you situation, but 2 to 3 years shouldn’t be considered stable. I hope that you are not buying more house than you can afford. The 401k’s should be completely off of the table.

  55. james says:

    Here’s an article that pretty much sums up my view of the next 5-10 years.

    “Many of CFP’s readers probably have felt what I am now feeling. Something just seems fundamentally wrong, and it’s unnerving. What may be about to happen to our Republic is a complete change in what we’ve always thought was permanent in America. Glenn Beck calls it “The Perfect Storm” and the term is prescient. Several domestic and worldwide events could utterly change our lives forever. The events are economic, sociological, geo-political, and military. If the outcome is to be for good or ill, is up to the American people.”

    http://canadafreepress.com/index.php/article/11169

  56. Victorian says:

    “So question – Have we seen stocks selling at great values or below known values in this bear market?

    “Let’s take a look at previous bear market bottoms.

    “In July 1932, the Dow sold at a yield of 10.2%.

    “In June 1949, the S&P sold at a yield of 7.6%

    “In December 1974, the S&P sold at a yield of 5.1%.

    “In April 1980, the S&P sold at a yield of 5.7%.

    “In September 1982, the S&P sold at a yield of 6.3%.

    “And what was the yield on the S&P in March 2009 (the ‘supposed’ bear market bottom)? The yield on the S&P in March 2009 was 3.58%, hardly indicative of the bottom of a great bear market. Actually 3.58% is more what I’d expect at a market top. The current S&P dividend is now 2.45%.”

    Source: Richard Russell, Dow Theory Letters, May 11, 2009.

  57. d2b says:

    Sastry:
    Owning a house is a real pain in the ass. Wait on the appliances. Enough shit breaks on it’s own without replacing things that are in perfect working order.

    In nine years I’ve replaced the dishwasher(2x), range, stove, microwave, washer, dryer, and heater. Don’t go searching for ways to blow your cash.

  58. Cindy says:

    Good for you, James. Excellent plan. I have to have the place paid off (in my mind) before I retire. I try to save a bit too and put my $6,000 a year into CDs in a Roth. Maybe someday I can earn some decent interest on that.

    I had to cash in a 403b this year to help pay for a divorce (kid involved.) I learned my lesson about having some cash on hand. I have been so eager to get out of debt… but now I realize a girl’s gotta have a few bucks lying around.

  59. cobbler says:

    sastry [50]
    As the house is fairly new you should expect most of the appliances to work OK. If your wife has a dream of a one special dishwasher or whatever, go for it – but don’t waste money on things you don’t need right now, as a new homeowner you’ll find a bunch of things that HAVE to be taken care of on a short notice. [Amazing number of my acquaintances had to have the CAC, furnace or at least a hot water heater changed within 3 months of moving in…]

  60. 3b says:

    #28 yome:When you sell you get the difference between what you owe and the selling price = to property tax given back to you

    You do not really believe that, do you?

  61. yome says:

    #58 No.
    If you have kids in the school system property tax is cheap.

    How is that any different from renting in the same town?

    The reply should have been property tax is built in to rent.

  62. lurker til now says:

    sastry,

    Wow, you’re like the star of the blog today :)

    The house is great, you definitely got it for a steal. I would not worry about price depreciation. Veto that mentioned that he was waiting for 2002 prices. I think you got it for a 2000 price.

    As for down payment, I would put 20% down and get a 15 year mortgage. The rate is lower than a 30 year, and in just a few years your payments will be going mostly to principal, not interest.

    I don’t know how extensive a walk-through you were able to do, but I would have a sizable cushion for home repair. I’m guessing the occupants did not take stellar care of it simply because they didn’t have the money to do so. You never know what can go wrong, but it can range from $600 for a new water heater to $15k (or up) for mold remediation if there was a moisture problem that they never addressed. Given that you can afford it, I would have a $20k repair cushion, in addition to a 6 (or better yet 12) month liquidity cushion for all your other expenses, IMHO.

    Enjoy your new home!

  63. nwnj says:

    yikes says:
    May 18, 2009 at 5:51 pm
    Curmudgeon says:
    May 18, 2009 at 12:57 pm
    Where exactly do you and the editors of the WSJ suppose “the rich” will be moving? Florida? Florida is one hurricane away from utter insolvency. The state is insuring about 40% of total RE market currently and has zero ability to pay claims. California? (if I need to explain Cali, you need remedial lessons…) Pennsylvania? The pension situation is actually worse than NJ and where do you suppose my neighbors on Navesink River Road will move in Pennsyltucky? The answer is simple; they are not moving anywhere.

    you lost me on “Florida.” you are aware that all the big baller athletes buy a primary residence in FLA and then have a place up in NY, right?

    This would be to escape taxes.

    And to say all of FLA is one hurricane away from insolvency is laughable.

    curious to hear more about the pension problem in pennsyltucky.

    Agreed. Not a lot of credility in the original post. I suspect it’s intentional ignorance.

    NJ’s pension is in far worse shape according to public information. I assume what he was referring to is PA teacher’s pension deficit that was discussed recently.

    It doesn’t seem to be anywhere near the crisis that is NJ’s(insolvency within 10 years). Watch what happens from across the river when plans become insolvent.

    IMO, the biggest challenge facing PA is containment of the corruption and big government politics that Rendell’s trying to export across the state.

    The gambling gimic did work to lower property taxes initially, but I suspect it won’t in the long run. Corruption and overhead will devour the revenue.

    In the long run, PA has a much richer history of activism. From the repeal of the pay raises a few years ago, to the rejection of tolling on I-80, it’s a better polical climate to battle tax increases.

    Just today, I saw Beford county is posting armed guards at the property tax reval meetings.

    http://tinyurl.com/ohcue7

  64. veto that says:

    Downpayment…

    Sastry, In this economy you should at least consider a worst case scenario. So assume you put down 20% and then both you and your wife get laid off next week and you cant find a decent job for months. How many months do you want to give yourself to look for another job?
    That liquidity ratio has stopped me from buying more times than i can count.

  65. NJGator says:

    Grim 17 – Thanks. Now I’ll have to listen to Stu say “I told you so” all night for talking me out of taking a position with their publishing division last year.

  66. nwnj says:

    #61 in mod. reply about PA taxes

  67. ac says:

    Sastry, PSEG offers affordable insurance on appliances and HVACs. You should check it out. Congratulations on your new home.

  68. t c m says:

    #57 –

    ” If your wife has a dream of a one special dishwasher or whatever, go for it……..”

    yes, every woman’s dream – that special dishwasher! – welcome to 1965.

  69. Curmudgeon says:

    Stu:

    Politicians s–k. Having established that, what is it about Corzine that boils your blood?

    The man has wasted much of his fortune on a quixotic attempt to leave a legacy in public service. If you have any evidence that Corzine has derived any personal benefit from his political career, I would be very interested in hearing it. I can accept that you vehemently disagree with the man’s policies and philosophy, but I think you ought to be careful about what you are wishing for…do you honestly believe that Christie would be an improvement? Christie is the ultimate self dealer. The Ashcroft bid and his brother’s shenanigans are public, but that is the tip of the iceberg with this fool.

    As for the current state of New Jersey’s finances, Corzine has at least begun the debate on our absolutely unsustainable pension obligations and budget. The absurd situation that he inherited from Whitless and McGravytrain was and is a disaster. The public employees’ unions are all calling for the man’s scalp- doesn’t he get some credit for that in your book?

  70. Victorian says:

    Overhaul Likely for Credit Cards

    Now Congress is moving to limit the penalties on riskier borrowers, who have become a prime source of billions of dollars in fee revenue for the industry. And to make up for lost income, the card companies are going after those people with sterling credit.

    Banks are expected to look at reviving annual fees, curtailing cash-back and other rewards programs and charging interest immediately on a purchase instead of allowing a grace period of weeks, according to bank officials and trade groups.

    http://www.nytimes.com/2009/05/19/business/19credit.html?_r=1&hp

  71. dancing raisin (fka starting over in nj) says:

    Sastry–There is always something the home inspector doesn’t catch. Budget for a big repair within the first two years–if it doesn’t happen, mazel tov!

  72. yikes says:

    Curmudgeon says:
    May 18, 2009 at 6:03 pm

    Athletes with FLA residency..yes, it’s easy to maintain with their travel schedules. When MD’s had money, many did the same, many still do (especially with the Homestead exemption/malpractice failsafe) It’s back to my original point, though; many cheat, but it’s a consistent percentage…

    get a bank account, set up one speaking engagement, get a few receipts, set up a couple of clients in NY … you know it can be done.

  73. yikes says:

    relo says:
    May 18, 2009 at 6:21 pm

    Make that response in 26 to 8: above.

    To 6: Would put down 20% and keep the difference dry. Can always pay extra down the road. As mentioned by others, ownership means expenses always arising. Best of luck.

    we put down about 35% so that we could live comfortably on one salary should it come to that.

    only bought because we still have the 6 months living expenses saved. trying to get that up to a year. a bit harder than we thought it would be – as im sure others have noted, owning is much expensive. but it’s only been like 3 months.

  74. Qwerty says:

    RE: “Fitch believes that most of the home price correction will occur in the next eighteen months, with prices exhibiting more stability beginning in late 2010.”

    What event will cause a bottom in 18 months?

    Are new jobs coming our way in NJ? Pharma? Wall Street? Manufacturing?

  75. chicagofinance says:

    yome says:
    May 18, 2009 at 9:08 pm
    If you have kids in the school system property tax is cheap. How is that any different from renting in the same town? The reply should have been property tax is built in to rent.

    yome: NO..the rent is the rent…rent less monthly expenses is how much profit from cash flow a landlord makes….that profit can be a positive or negative number…

  76. Firestormik says:

    ChiFi:
    I think I’ll end up renting this crappy townhouse for the next 5 years and then buy a house for cash.
    sastry:
    Congratulations on your house!

  77. yome says:

    Brazil and China eye plan to axe dollar
    By Jonathan Wheatley in São Paulo

    Published: May 18 2009 18:24 | Last updated: May 18 2009 23:31

    Brazil and China will work towards using their own currencies in trade transactions rather than the US dollar, according to Brazil’s central bank and aides to Luiz Inácio Lula da Silva, Brazil’s president.

    The move follows recent Chinese challenges to the status of the dollar as the world’s leading international currency

    http://ft.com

  78. 3b says:

    #73 firestorm:I think I’ll end up renting this crappy townhouse for the next 5 years and then buy a house for cash.

    Why??

  79. Sastry says:

    Thanks everyone for the good wishes and useful advice. Mine is a lower paying, recession-resistant job (hence I said I’ll know years in advance if something is going to go wrong — 13 years total in current place so far). Wife is in IT, so I assume the worst case would be job gone next day. We have a fairly inexpensive (cheap?) life style.

    The 40% down logic is that it will give some peace of mind — though not necessarily the optimal investment. We have some “educational fund” savings for kid in a regular account set aside, which we can dig in if SHTF — we won’t tell her!.

    I was telling my wife that if everything goes very very wrong, we’ll flip the property! :)

    S

  80. Shore Guy says:

    Sastry,

    As you know, I am prettu conservative and like to manage risk. In your shoes, I would ladder CD’s for a one-year emergency fund, so that my current monthly expenses. plus some (say 20%, and include a car payment, even if you don’t have one now) comes due each month over the next year, then, I would replace each with a one year CD after that so that I had 1 year of expenses available without difficulty. I would do this in a different bank than I normally use, in an inconvenient location, and without any internet banling or cheques linked to it.

    Then, I would set aside another fund, in a different bank, sufficient to replace the roof, the HVAC, etc.

    Then, I would put down as much as possible and still pay extra prin each month, as possible. A longer-term loan gives one the ability to slide through lean times and does not prevent one from sending in more $ each month, think 3-4 extra prin payments each month in the early years of a 20 or 30 yr. mtg.

    Just one man’s thoughts.

  81. John says:

    Sastry I thought you were buying some dirt cheap REO, just whip out your wallet and write a check for the whole 49K.

  82. Dissident HEHEHE says:

    Well the PPT DOES EXIST:

    “Something strange happened during the last 7 or 8 weeks. Doreen you probably can concur on this — there was a power underneath the market that kept holding it up and trading the futures. I watch the futures every day and every tick, and a tremendous amount of volume came in a several points during the last few weeks, when the market was just about ready to break and shot right up again. Usually toward the end of the day – it happened a week ago Friday, at 7 minutes to 4 o’clock, almost 100,000 S&P futures contracts were traded, and then in the last 5 minutes, up to 4 o’clock, another 100,000 contracts were traded, and lifted the Dow from being down 18 to up over 44 or 50 points in 7 minutes. That is 10 to 20 billion dollars to be able to move the market in such a way. Who has that kind of money to move this market?

    On top of that, the market has rallied up during the stress test uncertainty and moved the bank stocks up, and the bank stocks issues secondary – they issues stock – they raised capital into this rally. It was perfect text book setup of controlling the markets – now that the stock has been issued…”

    http://zerohedge.blogspot.com/2009/05/flagrantly-visible-hand.html

  83. Sastry says:

    John… you are close, there is just one zero missing at the end…

    S

  84. Cindy says:

    http://www.cnbc.com/id/30816876

    Sean – It passed the House yesterday.

    “US Congress Gives Final OK to Mortgage Fraud Bill”

    “The US House of Representatives gave final approval on Monday to a bill that will create an independent commission to investigate the cause of the U.S. economic meltdown and give federal prosecutors more legal clout and staff to crack down on financial fraud.”

    “The money will allow the FBI to hire 190 special agents and hire 200 other professionals, which could nearly double its mortgage and financial fraud program, according to the office of House Speaker Nancy Pelosi.”

  85. Stu says:

    Curmudgeon (66):

    I haven’t ripped into Corzine in ages, so I’m not sure where the recent question stemmed from, but I can think of a few examples off the bat.

    1) He throws the stem-cell research facility staffing funding question on the ballot since he thinks it is a sure win. The electorate supports stem-cell research (as I do) but not funded from additional state borrowing. He takes the money that would have been spent on staffing and plows it into construction of such facilities. Yes, he bonded this capital expenditure.

    2) He raises sales tax from 6 to 7% to fund property tax relief. Within one year, the state budget runs larger than expected deficits (as always) and he stops funding the relief with the extra one percent. The sales tax increase remains.

    3) He also promises to end double-dipping on the state pension and when the time comes for him to push this through the assembly (many of which are double-dippers), he grandfathers current double-dippers in.

    4) Has he made a single cut on the state level to anything?

    5) The Katz thing was equally as deplorable as Bill Clinton’s alternative use of a cigar.

    6) His horrible treatment of Cody is also worth mentioning.

    Let’s face it, the man speaks loudly and carries a stick made of balsa wood.

    I’m glad that he wasted a small fortune to buy the governorship. Barack Pajama can’t assign him a cabinet position soon enough in my opinion.

    As for the future bullshiters vying to replace him? I expect more of the same regardless of their supposed platform. They are all out to help no one but themselves.

  86. Victorian says:

    HEHE (79) –

    Looking at my brokerage account, I am inclined to blame the PPT as well. However, it is just a pacifier. I lay the blame squarely on myself, the only thing I can do right now is try and figure out where I went wrong and correct it the next time around.
    If you think the PPT exists, trade with the PPT. The PPT could not prevent the market from crashing to 666 (that number!!), what makes you think that it will be successful this time around.

    I think that the primary trend is still down and this is a vicious correction. We did have a lot of these in Japan and during the great depression. A bear market tries to keep everyone on for the ride while it does its work. Conversely, a bull will try to shake you off at every chance it gets.

    Be patient and see if your original investment thesis has changed. If not and you think that the market is irrational, stay out till you are confident.
    Good Luck!

  87. Cindy says:

    http://www.bloomberg.com/apps/news?pid=20601087&sid=awU535_erBP4

    “Derivatives Market Declines for the First Time on Record” – Bloomberg

  88. Stu says:

    Vicroian (83):

    Perfectly stated.

  89. Victorian says:

    Apologize if I came off as patronizing, that was not the intent. Something is lost in translation over the internet.

  90. ricky_nu says:

    housing starts, mush!

  91. Clotpoll says:

    vic (83)-

    I’m with you on this one. The dump cycle that follows this dead cat is going to be one of the most vicious ever. If there are any old-timers out there that can remember professional managers chasing the market like rank amateurs (like the way they are right now), I’d love to hear the stories.

  92. grim says:

    From MarketWatch:

    U.S. April housing starts down 12.8% to 458,000

    U.S. April starts weaker than 519,000 forecast

    U.S. April housing starts set new record low

  93. we says:

    John, how much higher will FAGIX go, what’s your thought?

  94. Dissident HEHEHE says:

    I don’t even look at my borkerage account. I am not even upset about it. What upsets me is that obvious market manipulation is perfectly fine in this country if its what the gubmint wants but is illegal if its what they don’t want. I know which way this will play out.

  95. grim says:

    Must have been one hell of a frost last night.

    Those poor green shoots.

  96. Sastry says:

    Stu, I think Jon is going to be history in NJ… If he becomes a part of O’s team, he may end up pushing someone like Tim Geithner?

    Katz affair, in my opinion, is much worse than Clinton’s cigar experiments. The latter is just a personal mistake, but consensual stuff between adults.

    S

  97. Dissident HEHEHE says:

    Grim,

    Rally on!

  98. grim says:

    CNBC bearish? Say it ain’t so.

    Housing Starts, Permits Both Unexpectedly Lower

    New U.S. housing starts and permits unexpectedly fell to record lows in April, a government report showed on Tuesday, denting hopes that stability in the housing market was imminent.

    The Commerce Department said housing starts fell 12.8 percent to a seasonally adjusted annual rate of 458,000 units, the lowest on records dating back to January 1959, from March’s upwardly revised 525,000 units.

    Compared to the same period last year, housing starts tumbled 54.2 percent.

    Analysts polled by Reuters had expected an annual rate of 520,000 units for April.

    New building permits, which give a sense of future home construction, dropped 3.3 percent to 494,000 units, the lowest since records started in January 1960, from 511,000 units in March. That was well below analysts’ estimates of 530,000 units. Compared to the same period a year-ago, building permits plunged 50.2 percent.

  99. Sastry says:

    Dissident… you must be aware that the markets in China and India have gone up quite a bit from their recent lows. If it is just a bear market rally, we will all be really fuct (except SKF/SRS holders!) when they get back down — they’d probably have to fall another 30-40% from now just to hit the recent lows!

    S

  100. Stu says:

    ICSC-Goldman Store Sales
    Released on 5/19/2009 7:45:00 AM For wk5/16, 2009
    Previous Actual
    Store Sales – W/W change 0.3 % -1.2 %
    Store Sales – Y/Y 0.5 % -0.3 %

    Highlights
    Store sales were weak in the May 16 week, according to ICSC-Goldman’s same-store tally that fell 1.2 percent and is down 0.3 percent year-on-year vs. year-on-year growth of 0.5 percent in the May 9 week. Another month of weak retail sales would seriously push back the economic outlook. Redbook will post its results at 8:55 a.m. ET.

  101. WHYoung says:

    Regarding school districts… Elizabeth Warrens book “The Two Income Trap” has a lot to say about “good” school districts and the price of housing. A very good read that gives a lot of food for thought.

  102. John says:

    WASHINGTON (Reuters) – New U.S. housing starts and permits unexpectedly fell to record lows in April, a government report showed on Tuesday, denting hopes that stability in the housing market was imminent.

    Rally on, inventory overhang is killing the market, builders need to stop building and sell existing units to stablize prices. They need a Chrysler style stop making cars and sell all cars on lots at firesale prices and lets reset the clock. Green Shoots can only grow on vacant land, stop building those damm houses.

    The Commerce Department said housing starts fell 12.8 percent to a seasonally adjusted annual rate of 458,000 units, the lowest on records dating back to January 1959, from March’s upwardly revised 525,000 units. Compared to the same period last year, housing starts tumbled 54.2 percent.

  103. grim says:

    #94 – Rally on Garth!

    Bottom must be in, can’t possibly get worse. We were a month too early calling the bottom, no big deal, under the bridge, bottom here.

  104. Dissident HEHEHE says:

    Sastry,

    Not to be a jerk but you’ve hit on one of my biggest pet peeves in this country, the categorization of bad choice or decision being called a mistake. A mistake is putting on two different color socks or misreading a street sign and turning the wrong way. It’s not fooling around repeatedly with a 20 yr old. Somehow through all the spin doctoring people in this country can’t tell that difference anymore which is further evidence why we’re continually screwed by the powers that be.

  105. cli says:

    Just constructed a list of 6 houses and give it to my agent to view this weekend. 3 of them are short sale. 2 of the 3 short sales are new this month.

    One house was bought at $1m in 2006 and currently on short sale for $775k. Good deal?

    Clot, would you mind sharing your method of not losing a bid? Really appreciate.

  106. John says:

    This is not a manufactured rally, it is a change of flow, 2008 was the year of people protecting positions, 2009 is the year of going long. Look at equity flows vs. options flows. Also the bond rally is getting long in the tooth. Warren Buffet was buying fixed income to the cows come home the last year as rates were like 15%, whey buy riskier stock with 15% senior notes available> Also interest rates are down down down and no one is buying big ticket items like Cars or Houses. Cash has to flow somewhere. Right now it is flowing into equities.

  107. BC Bob says:

    J,

    When does Mr Volume join the party?

  108. Dissident HEHEHE says:

    Sastry,

    They’ll all fall down together. The BDI hasn’t seen any significant improvement yet and neither China or India has a significant enough consumer market to make any significant absorption of their exports. Bear market rallies pure and simple.

    The next leg down in this sh*t show is likely to be the one for the ages.

  109. Dissident HEHEHE says:

    John,

    When fundamentals start driving the market I’ll believe in this rally and pull all my shorts. Until then it’s a bear market rally and nothing more. There are no green shoots, just poop shoots.

  110. Stu says:

    “The next leg down in this sh*t show is likely to be the one for the ages.”

    My portfolio sincerely hopes you are right!

  111. John says:

    Now that is a 64,000 question. Yesterday Volume was very light for such a big move. However, equity volume as a whole has been pretty good in May.

    BC Bob says:
    May 19, 2009 at 8:49 am
    J,

    When does Mr Volume join the party?

  112. John says:

    Dissident HEHEHE says:
    Normally I love everyone, but I am longer than John Holmes right now so the only thing your shorts are going to be good for are ankle warmers as your get nailed like it is your first night in prision.

    Peace out.

    May 19, 2009 at 8:53 am
    John,

    When fundamentals start driving the market I’ll believe in this rally and pull all my shorts. Until then it’s a bear market rally and nothing more. There are no green shoots, just poop shoots.

  113. Dissident HEHEHE says:

    For John,

    “Like for Old Lodge Skins (Chief Dan George) that’s sort of the way technical analysis works or doesn’t sometimes. We moved to the sidelines for the most part today. Was that smart? It’s too soon to say but we didn’t get the high that’s for sure.

    One has to bow to the coordinated efforts to boost banks by Goldman Sachs (GS) among others, a rosier “the bottom’s in” forecast from Lowe’s (LOW), the fact that we were a little oversold and, of course, the always conflicted organizations like the National Homebuilders (housing in a “slump”) and National Association of Realtors (prices are “stable”).

    The Street has a lot of IPOs (some small followed by an AIG subsidiary attempt) and secondary offerings to sell you and they need to prop things up to get it done. Goldman Sachs putting out buy recommendations on BAC when there are secondary issues within the industry is transparent since they know what will lift one will lift all.

    Da Boyz are playing with risk-free money from government injections and they know how to get things going. It’s hard to play against the house especially with volume still light.

    Actually, volume was late summertime light today while breadth was as positive as one might expect.”

    http://seekingalpha.com/article/138332-tuesday-outlook-volume-still-light

  114. BC Bob says:

    “However, equity volume as a whole has been pretty good in May.”

    J,

    Actually it has been putrid. Only 2 decent days.

  115. Sean says:

    re: #103 “Cash has to flow somewhere.”

    John, other than your anecdotal yet amusing nonsense there is in statistical evidence that the amount of cash on the sidelines ever signals a top or a bottom or anything in between. There are no market timing techniques related to changes in the amounts of cash held in “Cash” accounts that correspond to stock market performance.

    The lastest numbers show that cash positions have actually increased in Money Market Mutual Funds.

    http://www.businessweek.com/ap/financialnews/D986SJN00.htm

    John, The program trading from the investment houses is at an all time highs.

    Do you care to discuss that instead?

  116. Stu says:

    “When does Mr Volume join the party?”

    There is tons of volume if you look for it.

    For example, glance over at insider selling.

  117. Dissident HEHEHE says:

    So let’s see, you have the first down week in a month so GS issues a buy rec on BAC when they know there’s a huge short presence, blow through a bunch of stops and WOW what a rally, things must have changed, come on joe six pack join the fun!!!

  118. Sean says:

    re: #112 should read “there is no statistical evidence”

  119. d2b says:

    What happened to Borat Obama?

  120. 3b says:

    #111 BC Bob: Thanks BC you beat me to it.

  121. Sastry says:

    An expensive lesson I learned — paid equivalent of tuition costs, since my tuition was completely subsidized in India… Sometimes the best way to win a game is to not play it. I have temptations of getting into SKF/SRS, but I’d end up staring at the screen 4x what I do now, and most likely make some impulse decisions that spiral out of control very quickly.

    S

  122. relo says:

    34: Ok, but that wasn’t your question.

  123. John says:

    Sean, I don’t need no stinkin scientific evidence, just let me belly up to the bar at harry’s for an hour or two.

  124. Traitor nom deplume says:

    [39] cur,

    Read your loan agreement but I am willing to bet that the provision is there. Banks touted heavily that there was no prepayment penalty, but in effect there was one—you give the bank an interest-free loan for years.

    I found out about this when I made a modest prepay but did not see a reduction so I reviewed the contract. I thought the language vague, so vague that I missed it the first time, so I was prepared to open the proverbial can of whoop azz on them when we decided to sell. In the end, the money I was out was negligible, but I was now hip to this provision.

    It was in my last loan and my current one. So I know that Citi and Wells use this provision.

    [38] sastry,

    I am not sufficiently knowledgeable in short sales and NJ real estate contracts to speak to this issue, but in general, once you signed a contract and gave consideration, it’s a breach if the bank or seller try to back out.

  125. Traitor nom deplume says:

    [109] John,

    “I am longer than John Holmes right now”

    I am willing to bet that John was a regular in the old Smith Barney “Boom Boom Room” from several years ago.

  126. BC Bob says:

    J, [120],

    When you belly up to the bar for a couple of hours take a look at the 200 dma. Then order a shot and compare the present day rsi and macd with early Jan.. After you complete this, I will join you for a drink.

  127. Traitor nom deplume says:

    [41] BC

    As I understand it, and as it was explained to me, even if you specify that your extra payment is for prin, they can apply it to the LAST prin payment on your amortization schedule which is up to 30 years out.

    At that point, your loan payments are mostly prin anyway so the “interest” you save is negligible.

    Perhaps I’m wrong. If anyone can show the math, I will listen. But it seems to me that the banks have gamed it so that prepay actually works for them, not you, and in a very simple, elegant, and, if properly disclosed, legal way. Seems better to put prepayments into a tax-free MMKT or other safe investments until you can take down a significant portion of the loan, and if interest rates are favorable, do a refi.

  128. BC Bob says:

    3b,

    How about this school board member?

    http://www.msnbc.msn.com/id/30809741/?gt1=43001

  129. BC Bob says:

    Nom [125],

    Didn’t happen in my experience with prepaying principal. However, it would not surprise me one bit.

  130. 3b says:

    grim: If Fitch is correct and prices in NJ fall another 20%, would that bring us to approximately 35% off peak, with the understanding that prices have already fallen around 15% in our area?

  131. lurker til now says:

    [125] hi nom,

    With a mortgage prepayment, the monthly amount won’t change but the percent of the payment that goes towards interest will decrease. Here’s an ok calculator that shows the amortization schedule with prepayments:

    http://www.hsh.com/cgi-bin/flap.cgi?prin=100000&int=5.00&term=30&strt=Jan&stry=2009&full=No&ppay=0&apay=0&pay1=0&ppno=0

    If you open it in two windows, you can compare the interest being paid and the length of the overall loan, both with and without any sort of prepayment.

  132. lurker til now says:

    sorry – this is actually the link to the input page:

    http://www.hsh.com/calc-amort.html

  133. Sean says:

    re #128 3b – everywhere except for River Edge. You cannot beat the view of the river rats frolicking in the mud of the Hackensack River.

  134. Rich says:

    The UAW on the loose on the casinos.
    They are looking to bankrupt another industry.

    United Auto Workers launch TV campaign against casinos.

    http://pressofatlanticcity.com/business/article_f9d6c9ed-4110-5ccd-9fc6-7622c2998539.html

  135. Cindy says:

    (Nom) 125

    I have never experienced such a phenomenon when I pay on my first or second.

    On the face of my bill, I am asked if I want to pay extra on principle. I always do. The next bill shows the reduced principle amount posted then interest is figured on my lower balance for the next month.

    I have paid larger chunks before and see it reflected the following month. Interest is then figured on the lower balance. I double check everything so I know it is happening.

    example balance 10-08 $71,117.58
    interest due $283.86

    example balance 4-08 $67,508.98
    interest due $269.59

    I still have a long way to go till I hit -0-!

  136. lurker til now says:

    alright, i know i’m about to unleash the firestorm but i truly don’t see the housing bubble in nj.

    otteau says median income can now buy more than the median house (i think 111%?).

    we have one of the lowest homeowner vacancy rates by state, and we are one of the most densely populated.

    where is the bubble?

  137. Silera says:

    126 Bob- I had to confirm a few times that was actually a news article and not the onion.

    Wow.

  138. kettle1 says:

    lurker 133

    otteau says median income can now buy more than the median house (i think 111%?).

    HAHAHAHAHAHAH

    that statement is based on HAI which is very misleading and heavily dependent interest rates. The median home price is about 5-6X median income now, and was 2-3X median income in 2000.

  139. BC Bob says:

    “we have one of the lowest homeowner vacancy rates by state, and we are one of the most densely populated.”

    “where is the bubble?”

    [133],

    Where? Would a Hubbel telescope help?

    Go back to last Wednesday and look at JB’s charts. What does the absorption rate indicate, in this densely populated region?

  140. lurker til now says:

    According to the NAR (which, trust me, is not a phrase I ever thought that I would utter), the HAI “assumes a down payment of 20 percent of the home price and it assumes a qualifying ratio of 25 percent. That means the monthly P&I payment cannot exceed 25 percent of a the median family monthly income.”

    To me this sounds fairly conservative.

    And the HAI should be interest rate dependent. That’s a huge factor in home pricing. Interest rates go up, home prices go down (which really doesn’t benefit either buyer or seller).

    Take sastry, for instance. He oculd afford a house 50%, or possibly even double, what he’s buying. He’s choosing to be very conservative. That’s fine. But that’s not really the makings of a bubble is it?

  141. grim says:

    the HAI “assumes a down payment of 20 percent of the home price and it assumes a qualifying ratio of 25 percent.

    Sounds just like the black box assumption Bear used.

  142. John says:

    How do we know Sasty can afford that, he is buying a 500K house? Total monthly cost should be around 25% of gross income, including insurance and RE taxes. at 25% down that is a 400K mortgage 2k amonth and taxes and insurance in the glorious state of NJ will be 12K, or soon to be. That is 3K a month, finally, houses should only be bought on one income. So Sasty income would have to be 12K a month or 144K a year. So NAR is saying the average 500K pos house should only be purchased where the primary breadwinner earns 144K or more. Sad but a true statement.

  143. John says:

    Stop talking about Onions!

    Silera says:
    May 19, 2009 at 9:57 am
    126 Bob- I had to confirm a few times that was actually a news article and not the onion.

    Wow.

  144. BC Bob says:

    “Interest rates go up, home prices go down (which really doesn’t benefit either buyer or seller).”

    [137],

    Really? What about those buyers that will put down significant dp’s, some 100% cash? I hope interest rates skyrocket. Who will benefit me, buyer, or the seller?

    In addition to this, to borrow from RentingNNJ, you can always refinance your interest rate. You can’t refinance your purchase price.

  145. grim says:

    From Bloomberg:

    Hamptons Homes Decline Most Since Realtors Kept Records in 1982

    Sculptor Fredi Cohen expected the hand-carved sinks and tubs in her East Hampton, New York, home to stand out in the real estate market and help sell her three- bedroom house for $1.25 million.

    Almost two years later she’s still waiting.

    “People have stopped buying real estate,” said Cohen, who designed the kitchen and bathroom tiles herself. “Now I would sell it for $999,000.”

    The number of unsold homes in the Hamptons rose 15 percent to a record 1,673 in the first quarter from a year earlier, according to data compiled by New York-based appraiser Miller Samuel Inc. Sales have declined the most in the 27 years that broker Town & Country Real Estate has kept records for the Long Island beach towns about 100 miles east of Manhattan.

    The inventory of Hamptons’ homes would take 34 months to sell at the current pace, Miller Samuel reported, or more than three times the 9.8 months’ supply of existing homes in the U.S. as tracked by the National Association of Realtors.

  146. yome says:

    Compared to the same period last year, housing starts tumbled 54.2 percent.

    Is that not a good thing?If there are real buyers out there,it clears inventory.

  147. grim says:

    (cont)

    “This isn’t like your typical Nor’easter where a tree falls and your lights flicker,” said Michael Daly, founder of the buyers’ brokerage True North Realty Associates in North Haven, New York, and a Hamptons real estate blogger. “This is more like a Katrina,” he said, alluding to the historic 2005 Category 5 Hurricane. “It’s going to be a number of years before the market recovers.”

    Sales in the Hamptons plunged 67 percent in the first quarter from a year earlier, according to a report by Town & Country. It was the biggest percentage drop in records dating to 1982.

    The median price dropped 28 percent from a year earlier to $698,461, mostly on a decline in sales of $5 million or more, Town & Country said. The total value of all Hamptons real estate sold in the first quarter fell 78 percent to $140.2 million.

  148. grim says:

    #143 – Declining new home construction will allow for inventory to clear, but at the very costly expense of lower GDP.

    The cure might just be more painful than the disease.

  149. grim says:

    From the Star Ledger:

    Housing construction, permits hit record lows

    Housing construction plunged to a record low in April, with the biggest drop coming in the Northeast, as a steep drop in apartment building offset a rebound in single-family construction. Permits for new projects also hit a new low.

    The Commerce Department said today that construction of new homes and apartments fell 12.8 percent last month to a seasonally adjusted annual rate of 458,000 units, the lowest pace on records going back a half-century.

    Housing construction fell 30.6 percent in the Northeast.

  150. Silera says:

    John says:
    May 19, 2009 at 10:20 am
    …So NAR is saying the average 500K pos house should only be purchased where the primary breadwinner earns 144K or more. Sad but a true statement.

    I’ve read many places that it should be 2.5 – 3 times ones income. For someone earning 144K, max would then be 432K.

    Median income in Bergen County is 67K. Median House price should get to 201K before anyone can start talking affordable.

    Based on those parameters, you have the choice of trailers or shacks in Bergen County for that kind of money. :

    http://njmls.com/cf/search.cfm?LineNbr=2&StartRow=21&thrshld=true&Cat=1&Town=2&MinPrice=0&MaxPrice=200000&bdrms=0&baths=0&baths_half=0&HTMLPage=/cf/select.cfm?County=Bergen&sortmethod=price&display=20&id=999999&zipcode=&distance=&county=Bergen&searchtype=1

  151. lurker til now says:

    [139] If Sastry is putting down 40% in a 490k house (which is not a pos, by the way) at 5%, then his monthly cost with taxes is 2600, which equates to 125k per year.

    He could out the same money down on a 750k house and still be at 26%. His monthly expenses would go to $4500, which means a total family annual income of $216.

    I don’t know what sastry does (and sorry to drag you into this, you’re just a good case study), but in a home with two stable breadwinners is that so far-fetched? Your conclusion is based on the “fact” that a house “should only be bought with one income.” That’s not a rule but rather an individual decision.

    Only counting one salary is very fiscally conservative. Again, that’s great, but it doesn’t make a bubble.

  152. Traitor nom deplume says:

    The prudent get the BOHICA:

    “Credit cards have long been a very good deal for people who pay their bills on time and in full. Even as card companies imposed punitive fees and penalties on those late with their payments, the best customers racked up cash-back rewards, frequent-flier miles and other perks in recent years.

    Now Congress is moving to limit the penalties on riskier borrowers, who have become a prime source of billions of dollars in fee revenue for the industry. And to make up for lost income, the card companies are going after those people with sterling credit.

    Banks are expected to look at reviving annual fees, curtailing cash-back and other rewards programs and charging interest immediately on a purchase instead of allowing a grace period of weeks, according to bank officials and trade groups.

    “It will be a different business,” said Edward L. Yingling, the chief executive of the American Bankers Association, which has been lobbying Congress for more lenient legislation on behalf of the nation’s biggest banks. “Those that manage their credit well will in some degree subsidize those that have credit problems.”

  153. Shore Guy says:

    A problem for inventory is that builders make money from selling new units. What the addition of those new units does to overall inventory is of no concern to them. To keep their own business going, even if they have to lay off nearly every employee they have and pick-up a nail gun themselves, they have to build. Like a shark that must keep moving or die, they must keep things going even if it means lower profits. Some profit beats shutting down and going to work for someone else.

  154. Alap says:

    A not-so-awful bad housing report

    CNNMoney.com – 44 minutes ago

    Government report shows surprising sharp drop in housing starts and building permits, but single-home data show signs of stabilization.

    you seriously gotta be effin kiddin me.

  155. we says:

    sastry, in the near future you will wish you had bought a bigger place, in the $700K range.

  156. 3b says:

    #151 Alap: No surprise that they are starting to spin it.

    That they indicate that SF housing starts are still down over 45% YoY?

  157. lurker til now says:

    [152] we, i’m kind of with you on that, unless they think that one spouse will be staying home in the future.

  158. John says:

    I am very very far from being a grandpa, but I think for the most part any first time grandpa or grandma with a daughter ain’t going to love it if their son-in-law announces we are buying a home that requires two incomes so when the grandkids come you will never see them as they will either be locked in daycare all day or I plan on sticking them with you all day.

    I pretty much assume Grandma and Grandpa would like the opportunity for their daughter to stay home with their kids at least for awhile and have bonding opportunities during the week. A powerful thing happens to a career woman when she has kids and she may want to stay home or work could become too hard to juggle or she could get laid off. I personally would be very happy if my daughters continued their career and became CEO or President of the USA. I would be very unhappy if my daughters did not like their jobs and wanted to stay at home with their children but some dead beat lazy son-in-law pimped their wives out to pay their bills cause they were too lazy to put in an honest days work. In my family I have two deadbeat brother-in-laws with very unhappy wife’s who work full time. I have lots of happy working mothers in the family but the difference is they love their jobs and want to work.

  159. 3b says:

    #133 lurker:where is the bubble?

    Are you really questioning that there was a bubble in NJ?

    Do you really think 500k for a POS cape was/is affordable, and that that price is indicative of anything other than a bubble?

  160. lurker til now says:

    [156] 3b, i’m just asking whether a bubble exists today. Regardless of what may have existed yesterday.

  161. 3b says:

    #131 sean: How is this for insanity. These poor fools paid 556K for a 3 bed 1.5 bath colonial in Sept of 2005, now listed as short sale at 449K, with taxes at 10k after this years increase.

    These people were dead the day they moved in.

    http://www.njmls.com/cf/details.cfm?mls_number=2921625&id=999999

  162. grim says:

    MarketWatch was just running a headline saying that housing starts bottomed.

    Oh bother.

  163. afe says:

    lurker –

    I think you mentioned yesterday that Sastry got a 2000 price on this place. ‘Nuf said.

  164. Sean says:

    Time for some Full House reruns….

    “A Wells Fargo & Company (NYSE:WFC) quarterly survey found that nearly one in four homeowners (24 percent) do not have any savings to cover their living expenses should they lose their income. At the same time, anxiety over job stability increased significantly (from 21 percent to 29 percent indicating jobs as their top concern) since fourth quarter 2008, the last time the survey was done. Respondents also have a significantly higher desire to increase savings while reducing debt (60 percent versus 53 percent) and pay down debt faster (53 percent versus 46 percent) compared to the last survey. Less than a quarter of respondents (23 percent) have increased their savings, but 37 percent say they have paid down debt and 12 percent paid off debt completely in the past year.

    Many people are taking drastic actions to reduce expenses. Since last year, one-third of homeowners (34 percent) say they have had family or friends move in with them, and 42 percent are spending less on their children. And, compared to a year ago, many have adjusted their spending. About two in five say that they are budgeting more or buying more of only what they need (39 percent and 41 percent respectively) and 30 percent say they are learning how to better manage their budgets on their own.

    Asked what would boost their confidence in the economy, one in four say an improvement in their personal situation is the top indicator. Meanwhile, homeowners are waiting for the economy to improve to make a major purchase: 30 percent say the first purchase they will make will be home improvement, 18 percent say they will buy an automobile while 13 percent say they will take a vacation. ”

    http://www.businesswire.com/portal/site/google/?ndmViewId=news_view&newsId=20090519005308&newsLang=en

  165. lurker til now says:

    afe – sastry got the bid in within 24 hours or so of this hitting the market to avoid a bidding war. ‘Nuf said.

  166. lurker til now says:

    afe – sorry, i wasn’t trying to be snippy.

  167. Sean says:

    re: #158 3b – They got to enjoy the River Edge Diner for a several years. You cannot beat the salad bar there, simply priceless.

  168. afe says:

    umm, you are being snippy you are being narrow minded. a bidding war for 2000 prices not 2009 prices.

  169. afe says:

    Correction: you are not being snippy

  170. confused in nj says:

    Credit cards have long been a very good deal for people who pay their bills on time and in full. Even as card companies imposed punitive fees and penalties on those late with their payments, the best customers racked up cash-back rewards, frequent-flier miles and other perks in recent years.

    Now Congress is moving to limit the penalties on riskier borrowers, who have become a prime source of billions of dollars in fee revenue for the industry. And to make up for lost income, the card companies are going after those people with sterling credit.

    Banks are expected to look at reviving annual fees, curtailing cash-back and other rewards programs and charging interest immediately on a purchase instead of allowing a grace period of weeks, according to bank officials and trade groups.

    “It will be a different business,” said Edward L. Yingling, the chief executive of the American Bankers Association, which has been lobbying Congress for more lenient legislation on behalf of the nation’s biggest banks. “Those that manage their credit well will in some degree subsidize those that have credit problems.”

    Must be part of Obama’s “Adopt an Illegal Alien Legislation”.

  171. Silera says:

    I never expected to stay home with the kids. I had my son on a Friday a month early and was at the office the following Tuesday with him in tow because I had not had the opportunity to set up for maternity leave.

    People make do with the situations they’re presented with. The could’ve, should’ve’s of it all really are irrelevant. When my husband was still able to work, he worked nights and I worked days so that we could be home with the baby and a parent was home for my older sons after school.

    Whether it be luxury or necessity that children grow up the way they do, as long as the feel love and joy they tend to work themselves out.

  172. BC Bob says:

    Sean [161],

    Well, how does a service economy, based on consumption/credit/debt, survive?

  173. jcer says:

    Lurker, the bubble still exists. Maybe if you buy from a bank you will get a good price people have not gotten real yet. People serious about selling will let a decent home in a good town like Franklin Lakes on 1 acre go below a million. That is 2000-2001-2002ish pricing, realistically that is where the market needs to be right now to sell volume and it isn’t there yet. When pricing returns to nonbubble we will be good, now unfortunately given the economic circumstances I see it going lower, 1999 or 98 is a distinct possibility. I think real estate will be in the dumps for a few years by 2012 though all bets change and inflation kicks in. Housing will begin to rise as the value of the dollar is depleted and it becomes an attractive place to park subsidized money as there will be a fundamental disconnect between loan rates and prevailing rates. This situation will correct but housing will begin assuming traditional inflation level increases. Which if I am correct in my guesstimation will be really running 12-20% per year. The government will try to keep rates low to grow the economy and domestic supply will become more necessary as China won’t want greenbacks any more. I think this is the plan of TPTB.

  174. Sean says:

    re: #169 – BC Bob – I would refer your to President Eisenhower’s farewell address for the answer to that question.

  175. lurker til now says:

    Ok, let me take a different tack. Do people who want a return to 2000-2001 prices still make what they made in 2001?

    And I’m talking about individuals, not about median income statistics. We know NJ does not fit neatly into one number, either from an income or a housing perspective.

  176. jcer says:

    BC, the answer is we don’t revive the consumer economy. The economy changes as creditor nations who are doing physical production no longer accept dollars readily, we will be forced to make things domestically to reduce costs. Now I wouldn’t take this literally to mean we will make little trinkets but higher value items will make more sense to build in the US. I think we should continue to extend of fabbing capabilities and our lead in semiconductors, computers are becoming ubiquitous and we need to cement our lead. Solar panels, windmills, turbines, etc things of real value we can trade, we need to remember we still have an infrastructure advantage over many developing nations who lack a real road system, power grid, and data grid.

  177. Shore Guy says:

    “sastry, in the near future you will wish you had bought a bigger place, in the $700K range”

    Sastry,

    Mrs. Shore and I bought what, in retrospect, was too small of a house — about 3,000 sq. ft., but we did so in order that we could pay for it on just a portion of one income. Although we could have made out okay buying a larger place, we never, for a single moment, worried about paying the mortgage and ended up paying off a 30 year loan in less than half that time.

    If you have the house you want, and can live in it for awhile, and can afford it easily (so you own it and it does not own you), sit back and enjoy the house and never look back at “what might have been.” It is not unlike spouses, any number of us could have married any number of people and been perfectly happy; we make our choice and we live and, with any luck, thrive in the marriage and it does not matter whether another could have been as good or better.

    Enjoy the house.

  178. jcer says:

    lurker, many make less. There is a place called wall street where the bonuses have become much smaller, and many people from NJ worked on the Street. I know people who were making a million a year in 2001, who now collect 200k! So I would say salaries are shrinking. The truth is affordability does not look bad right now if your salaries were increasing 5-10% annually, but they are shrinking 2-3% annually and unemployment is a distinct possibility. In the wealthy towns, where banker money once flowed I think you could go buy at 2002 prices. In this uncertain period housing is a poor investment at anything above 2002 pricing.

  179. Silera says:

    Lurker- after adjusting for inflation and the 10% pay cut I took this year, yes. I earn basically what I earned in 2000. I’m also contributing more to insurance than I was then and have a higher out of pocket deductible and expenses.

  180. zieba says:

    Stu,
    NPR doing a piece on prop tax appeals in NJ. You should call in, it would be entertaining to hear about your presentations.

  181. jcer says:

    Silera, I feel you. they are squeezing me with higher healthcare costs which suck, a gym membership cost increase, higher fees for parking, and eliminating coffee and a bonus less than half what I made last year. But I guess I still have a job given they seem to layoff every quarter.

  182. lurker til now says:

    jcer, silera – Thanks for the responses. Jcer, I was gong to say that all the anecdotes I’ve gotten so far have been along the lines of, “I know a guy” but silera, thanks for sharing your personal experience.

  183. 3b says:

    #172 lurker; Just an FYI as of 2005 70% of all households in Bergen Co have household income of 100k or less a year.

  184. BC Bob says:

    “BC, the answer is we don’t revive the consumer economy.”

    jcer,

    Bingo. That is why this will be no typical recession. A total restructuring is required. Consumption has to be replaced with savings, production and innovation. Capital will flow to those countries that produce goods and services. The shift will be painful. However, it’s our only long term solution. The old economy has blown up.

  185. Stu says:

    Zieba,

    I would love to, but I’m busy working. I think the funniest deal we tried to broker with the Montclair town lawyer was offering not to appeal next year, if he gave us a nice deal this year. Unfortunately, he didn’t go for it.

  186. grim says:

    From MarketWatch:

    Housing won’t lead the recovery

    Led by a huge drop in apartments and condo construction, U.S. housing starts cratered again in April, falling 13% to the lowest level in the post-war era, depressing the bulls and emboldening the bears.

    But investors would be well-advised to ignore the housing starts numbers for a few more months, at least. Housing led us into the recession, but it isn’t likely to lead us out.

    The housing market remains seriously distressed, and this bedridden patient isn’t likely to be walking any time soon. Prices are still too high in many areas to clear the glut of unsold homes stemming from too much new construction and too many foreclosures.

    That isn’t to say the patient’s condition isn’t stabilizing.

    The stabilization in single-family permits over the past five months is even more encouraging, because the standard error is just 2%.

    Of course, finding the bottom in building isn’t the same as finding the bottom in home sales or prices. The government has tried to revive sales by lowering mortgage rates and subsidizing first-time buyers, but few current owners are willing or able to trade up to a bigger home in such uncertain times.

  187. jcer says:

    I do not make much more now than in 2000, less than 10% more and they are eating into my wages with increased fees for every and all benefits.

  188. zieba says:

    jcer,
    You worked for a finance firm during the a boom period where even the IT guys ate well, tet you claim to make the same you did in 2000 factoring for inflation?

  189. zieba says:

    strike the

  190. lurker til now says:

    [180] 3b, That’s an interesting statistic. Do you happen to have the source handy? I tried looking but I’m getting all kinds of numbers: averages, medians, different years, by town, etc.

  191. Stu says:

    I you factor in my 10% loss of salary, end of 401k match and yearly employer contribution, increase in health care costs, then I am more than halfway back at 2000 levels of pay. Especially if you consider the opportunity cost of the missing money.

  192. John says:

    Wow, Stu March 2000 was the height of the internet bubble where cash was flowing!!! You lucky sob.

    Stu says:
    May 19, 2009 at 11:46 am
    I you factor in my 10% loss of salary, end of 401k match and yearly employer contribution, increase in health care costs, then I am more than halfway back at 2000 levels of pay. Especially if you consider the opportunity cost of the missing money

  193. yome says:

    #150
    A problem for inventory is that builders make money from selling new units. What the addition of those new units does to overall inventory is of no concern to them. To keep their own business going, even if they have to lay off nearly every employee they have and pick-up a nail gun themselves, they have to build. Like a shark that must keep moving or die, they must keep things going even if it means lower profits. Some profit beats shutting down and going to work for someone else.

    I agree,That is what we are advocating in this board for the longest time.Let Mr Market correct itself.

    How long can you stay in business if your running negative profit.That is how we are in this trouble in the first place.Borrow the money and use the same money to pay for it.I remember someone adviced me when i bought my 2nd home wich i paid cash from the equity of my primary home that the mortgage is paid already,keep the cash and pay your mortgage with that money.How long wil that cash last if i did what he suggested.

    Keep on going nothing to learn here

  194. John says:

    We need to get the servants and landscapers to move out of town.

    3b says:
    May 19, 2009 at 11:34 am
    #172 lurker; Just an FYI as of 2005 70% of all households in Bergen Co have household income of 100k or less a year.

  195. Silera says:

    Lurker- jc,
    Obviously I’m thrilled to be employed. I love my job, I love the people I work with. I’d be happy to earn more, but I’m not starving.

    I think that this blog is heavy on the over acheiver. Nothing wrong with it obviously. Survival of the fittest and all that. Also, many seem to be older, and peak earning years are between 45-55 I read somewhere. I may be off by a few years.

    Either way, I think I’m really a regular person, and actually maybe one of the more well off and prepared of all my peers (25-35 *I’m 32 but rounding down ten years for good reason). Still it isn’t enough. I’d LOVE a 200K house in my town. It doesn’t exist. Ridgefield is as blue collar Bergen County as you can get without a motel and Route running through it. Median house 440K????

  196. jcer says:

    Zieba, I’m a software engineer who works for a financial firm. In 2000 software guys, especially skilled people were making bacon. I was underpaid in the boom years, I guess that is why I am still around. Overqualified and underpaid.

  197. we says:

    Or get all those ‘business owners’ to declare their real income.

    —————————————-John says:
    May 19, 2009 at 11:48 am
    We need to get the servants and landscapers to move out of town.

    3b says:
    May 19, 2009 at 11:34 am
    #172 lurker; Just an FYI as of 2005 70% of all households in Bergen Co have household income of 100k or less a year.

  198. John says:

    Silera here is my simple advice, you can marry more money in a minute than you can make in a lifetime. Right now some extremely wealthy man has a daughter who is a butt ugly 29 year old who he would like to see married with kids. Hopefully, he owns a supermarket empire so you have a lifetime supply of free brown paper bags for her head.

  199. Stu says:

    John (189):

    “Wow, Stu March 2000 was the height of the internet bubble where cash was flowing!!! You lucky sob.”

    You have no idea how good it was :P

  200. jcer says:

    I’m also fairly young, I was newly minted around 2000. Fresh out of a good engineering program where top people got offers of 100k+(I knew someone who got a 120k offer), bottom was around 65k and software firms(MS, Sun, Oracle) were paying 90k+ to freshers. After 2001 money was much tighter for software guys as there was little worry for competition for talent and the threat of outsourcing.

  201. zieba says:

    There’s nothing wrong with overqualified and underpaid. I am jockeying that horse as well.

  202. zieba says:

    I refuse to believe anyone here except for John is older than 40.

  203. Silera says:

    John,

    I’m a chick, so unless some ugly lezbos dad wants her to adopt my kids, I’m ill equipped to assist with the grandkids scenario.

  204. Clotpoll says:

    3b (117)-

    This is the first sucker rally in the history of WS in which almost all the players and drivers know it and pretty much tacitly admit it.

  205. yome says:

    #176
    Lurker- after adjusting for inflation and the 10% pay cut I took this year, yes. I earn basically what I earned in 2000.

    Will salary catch up with this proposition?

    U.S. Needs More Inflation to Speed Recovery, Say Mankiw, Rogoff

    http://bloomberg.com/apps/news?pid=20601109&sid=auyuQlA1lRV8&refer=home

  206. jcer says:

    John, your forgetting that the rich guys daughter is likely to be spoiled, annoying and you’ll definitely be signing a prenup. So you will have to live with her, not to mention try finding a rich b*tch, it is not as easy as you’d think. Many have taken this page from your playbook. They also tend to be from stuck up families, you trying getting in on that if you’re just a regular punter.

  207. John says:

    Sorry, try this site. http://www.oprah.com

    Silera says:
    May 19, 2009 at 12:00 pm
    John,

    I’m a chick, so unless some ugly lezbos dad wants her to adopt my kids, I’m ill equipped to assist with the grandkids scenario.

  208. John says:

    I had a few rich girls I could have married, however I quickly realized it would all be for my future kids. I would have to have a miserable existence for 40 years of married life on the beck and call of the inlaws and wife to guarantee that my children and grandchildren would be very wealthy. I being selfish decided against it.

    jcer says:
    May 19, 2009 at 12:06 pm
    John, your forgetting that the rich guys daughter is likely to be spoiled, annoying and you’ll definitely be signing a prenup. So you will have to live with her, not to mention try finding a rich b*tch, it is not as easy as you’d think. Many have taken this page from your playbook. They also tend to be from stuck up families, you trying getting in on that if you’re just a regular punter.

  209. Shore Guy says:

    “I refuse to believe anyone here except for John is older than 40”

    Sad to say, I am well above that — as the polyester leisure suit in my parent’s attic will attest.

  210. Clotpoll says:

    Just a thought, after another morning of processor vs underwriter battles here:

    A bank that does not lend is no longer a bank.

    TARP, bailouts, handouts or not…banks that are not actively engaging in lending now (which is, all of them) will not have sufficient earnings in future quarters to justify even their putrid current valuations. Given the knowledge that they are all hoarding cash- either by gubmint demand or their own internal policy decisions- against future losses that absolutely WILL occur, what will result?

    – Further credit contraction and GDP erosion, as capital continues to be removed from the economy?

    – A massive sell-off in financials, beginning perhaps as soon as the current quarter?

    – All the above?

  211. Clotpoll says:

    Sooner or later, zombies begin to smell up the joint, no matter how much you transfuse them and douse them in perfume.

    Since zombies also have the need to keep devouring everything they touch, it also starts to have a bad effect on the neighbors.

    Just saying.

  212. Shore Guy says:

    Clot,

    Naah. B.O. will just redefine stink of death as the smell of a rose. No problems at all, move along.

  213. BC Bob says:

    “will not have sufficient earnings in future quarters to justify even their putrid current valuations.”

    Clot [210],

    You forgot one item. Don’t discount accounting trickery. As the value of their debt declines, their earnings rise. Citi reported a net gain of on the price of their debt. In theory, if they bought their own debt, based on its huge decline, they made 2.5B. Funny, I always thought you had to initiate a short position to profit from a decline in a security.

    John,

    Why don’t you give everybody a lesson regarding credit value adjustments.

  214. Victorian says:

    Clot(210) –

    The sad part is that BO is pouring trillions down this black hole known as the balance sheets of these zombie banks, and the collateral damage is the productive economy. The liquidity crisis, judging from the numbers, is over. We will not have a deflationary spiral as in the 30’s but the alternative does not look so good.

    This is Japan Redux, and we do not have a global export boom to bring us out of this quagmire.

    Stagnation for a decade is what I forsee.

  215. vr says:

    can someone with mls access pull the address on the following listing
    2850704
    thanks in advance
    vr

  216. 3b says:

    #203 John:in which almost all the players and drivers know it and pretty much tacitly admit it.

    Except for John.

  217. Sastry says:

    Shore and we…

    The house we are under contract… I am not exaggerating when I say it is a level or two higher than our “dream house”.

    If ever I wish I bought something bigger, that would mean something fundamental has changed in my approach to life.

    Lurker, you are right… I walked in with all pre-qual, income statements, and a pen. I was tempted to put something above the bid, but decided I’d bid exactly what the bank was asking and hope that they accept. It was a coincidence that I ended up going to a Temple and a Church [local Greek festival] on the day they accepted the bid.

    Oh, I’m becoming a republican, talking about religion and high property taxes. But, may be believing in multiple gods makes me stay a liberal!

    S

  218. 3b says:

    #192 silera:Ridgefield is as blue collar Bergen County as you can get without a motel and Route running through it. Median house 440K????

    I would say that number has dropped considerably

  219. Richie says:

    jcer,
    You worked for a finance firm during the a boom period where even the IT guys ate well, tet you claim to make the same you did in 2000 factoring for inflation?

    I could also attest to this. I’ve been independent contracting mostly since 1998. In 1999-2000 I had my peak rate. Right now; almost 9 years later, I’m just getting back to that same rate.. The rates were definitely insane back then.. I was single living at home, so I cashed out by buying a property that eventually became the site of our home (built when we got married).. Times were really good then..

    Many IT guys still do well; there’s a lot of people in the field; but definitely a tier of people that can attain higher rates and salaries as compared to an ‘ordinary’ IT resources…

    -Richie

  220. freedy says:

    does anybody think MGM will stay in NJ.

    NJ,, a business friendly state.

  221. Sastry says:

    Lurker… IMO assuming 2 stable incomes over a long term is a very strong assumption. Exceptions are things when both are Fed/State employees, physicians, or tenured faculty… Even if it is extremely unlikely, it is better to have a little bit of flexibility. May be one wants to leave the stable job and take a high risk/high reward position… or may be wife wants to work part time… those options disappear if their decisions are completely dependent on the mortgage.

    It is a bit conservative outlook, but I think it is a safe one. Of course, if that is the only way to afford (at least initially) something that we really want, then it is reasonable.

    S

  222. Nicholas says:

    My wife graduates from the University of Maryland with a degree in Early Childhood Education this weekend.

    It has become expensive to be a teacher.

  223. Traitor nom deplume says:

    [217] sastry

    “But, may be believing in multiple gods makes me stay a liberal!”

    Nope. No gods. Belief in an allmighty(ies) implies religious belief, which implies a belief in morality, and that don’t play too well with a lot of liberals. ;-)

  224. Traitor nom deplume says:

    [200] Zieba

    You lose. 47 tomorrow. And I absolutely will be spending it in jail.

  225. 3b says:

    #187 lurker: US Census Bureau. Also nj.com used to havethe info broken down by town for NJ.

  226. lurker til now says:

    Sastry,

    Thanks for the responses. And again, congratulations! It’s a fabulous house and I think you’ll be very happy. And I’m with you, I like to walk the better-safe-than-sorry line. I was just using you (sorry) as an example that NJ is perhaps both a mix of priced-out would-be-buyers and really conservative buyers such as yourself who aren’t going with the 20% down, two-income paradigm.

    lurker :)

  227. grim says:

    NJ residents are making more money????

    From the AP:

    ‘Worst year’ for N.J. tax collections, budget analyst says

    New Jersey had its worst year ever for sales and income tax collections in budget year 2009.

    Legislative budget analyst David Rosen of the nonpartisan Office of Legislative Services outlined the numbers today.

    He told lawmakers income tax collections during the budget year are off by 19 percent. They’re projected to be nearly 10 percent down in the 2010 budget year.

    Income tax off 19%? Ouch.

  228. grim says:

    Someone is going to need to make up that difference.

    Cut spending? Layoffs?

    Nah.

    BOHICA!

  229. Traitor nom deplume says:

    [192] silera

    “Either way, I think I’m really a regular person, and actually maybe one of the more well off and prepared of all my peers (25-35 *I’m 32 but rounding down ten years for good reason).”

    Sounds like match.com around here.

    I don’t know whether to offer you tax advice or ask you out!

  230. HEHEHE says:

    “Clotpoll says:
    May 19, 2009 at 12:05 pm
    3b (117)-

    This is the first sucker rally in the history of WS in which almost all the players and drivers know it and pretty much tacitly admit it.”

    Pssst, Clot only when they are overseas!

    http://zerohedge.blogspot.com/2009/05/daily-telegraph-to-un-retract-patterson.html

  231. Silera says:

    3b- I’ll agree that the prices have gone down. On mls there are 60 listings. 3 are under 300K. None are under 200K. #30 is 550K.

    http://www.njmls.com/cf/details.cfm?mls_number=2919111&id=999999

    It’s not garbage but its not a half million dollar house.

  232. Sean says:

    FYI, lowdown on the Credit Card reform that O’bama is taking credit for along with Sen. Bob Menended and Sen. Chucky Schumer.

    The cards are going to start reviving annual fees, curtailing cash-back and other rewards programs and start charging interest immediately on a purchase instead of allowing a grace period of weeks.

    Fun Times.

  233. Stu says:

    “curtailing cash-back and other rewards programs”

    There goes my Citibank funded vacations!

    Perhaps we’ll just staycate at Sastry’s crib?

  234. chicagofinance says:

    Dissident HEHEHE says:
    May 19, 2009 at 8:35 am
    What upsets me is that obvious market manipulation is perfectly fine in this country if its what the gubmint wants but is illegal if its what they don’t want.

    HEHEHE: In my opinion, you should pay attention to vic. Zero Hedge is officially a useless pile of $hit blog…..

  235. Rich In NNJ says:

    vr (215),

    Maywood?

    19 E Passaic St

  236. zieba says:

    RE: 231

    I like the ye’ol’corded phone in the bathroom.

  237. Stu says:

    ChiFi:

    “Zero Hedge is officially a useless pile of $hit blog”

    Yup! Kind of like the New York Post.

  238. chicagofinance says:

    John says:
    May 19, 2009 at 8:56 am
    Dissident HEHEHE says:
    Normally I love everyone, but I am longer than John Holmes right now so the only thing your shorts are going to be good for are ankle warmers as your get nailed like it is your first night in prision.

    Peace out.

    May 19, 2009 at 8:53 am
    John,

    When fundamentals start driving the market I’ll believe in this rally and pull all my shorts. Until then it’s a bear market rally and nothing more. There are no green shoots, just poop shoots.

    JJ: I do not have a specific sense of which direction things go. However, there is ample evidence to support an argument that there could be a whiplash up ride of between 5-15%. Alternatively, there is INDEED grounds for a significant correction. However, this dead zone of the last week may have been it. Scary thought if you are massively short…..

  239. zieba says:

    RE: 231

    I like the ye’ol’corded phone in the bathroom.

    Shore/Nom,

    In that case you are both hip as f@ck.

    Some of the early 90’s references heard here are dead on.

  240. HEHEHE says:

    Chifi,

    Hahaha, gets under your skin Mr Ivy league doesn’t it:)

  241. Sastry says:

    Silera:

    “I think that this blog is heavy on the over acheiver.”

    I am not in that camp, so I think you can relate to my case… I am most likely making the lowest salary among my undergraduate classmates (top school in India). And I make much less [on nominal terms, forget about inflation adjustment] than what I made a couple of years after I got my advanced degree in late ’90s, and when I was in a startup post-dot-com (’01 to ’03). However, it was my personal choice (and wife was very supportive)… That time, it was a struggle to imagine what sort of a house we’d have — single income then, and a close to 50% pay drop — within a year of marriage! I told her, we’d get a 2BR TH in Piscataway, and all she asked was freedom to replace the appliances and get ones of her choice… So, my promise was that when we get a house, she can throw out the appliances and get what she likes…

    We were close to zero savings after getting a house for my folks in India, but we were young(er)… She started working next year, we started saving from then and tried to catch up with rising properties, but slowly, our 2BR TH in Piscataway moved to 2BR TH in GreenBrook, and 3BR, and accidentally we stumbled on this property — and fortunately, with the help of many factors, we are close to getting it. I’ll tell this story to my kid when she can understand it…

    S

  242. HEHEHE says:

    Chi,

    How’s AIG doing these days?

  243. Stu says:

    You guys need to take it outside :P

  244. Traitor nom deplume says:

    [239] zieba

    ” hip as f@ck”

    ???

    That’s one early 90’s reference I am NOT familiar with.

    but if it means “wicked pissah” I’ll take it.

  245. d2b says:

    Grim:
    Didn’t you have a web link to a blog that listed daily job loss announcements? Seems like every day there are two headlines: “Stocks up because losses are not as bad as predicted” and “XXX company cuts 3,000 jobs”.

    If we lose 6,000,000 jobs this year and 2,500,000 jobs are created next year, will Obama see this as a victory?

  246. 3b says:

    #226 lurker. priced-out would-be-buyers

    Lets not forget the priced out would be sellers.

  247. chicagofinance says:

    Traitor nom deplume says:
    May 19, 2009 at 1:12 pm
    [200] Zieba You lose. 47 tomorrow. And I absolutely will be spending it in jail.

    Nom: 41 in a few weeks….clot is almost 70

  248. Sastry says:

    Nom… re religion… I’ve seen too many that preach more than they believe or practice. And some that want to make fun of others’ faiths or practices within the same faith, and at times within the same family. Religion can at times be a very potent weapon. More than taxes :)

    S

  249. Traitor nom deplume says:

    [246] chifi

    Makes sense. Clot is really the board curmudgeon, even if that sock got taken.

    Will try to post from jail tomorrow if they let me.

  250. Sastry says:

    d2b:

    “If we lose 6,000,000 jobs this year and 2,500,000 jobs are created next year, will Obama see this as a victory?”

    I think cumulative job history and forecasts by the time of mid 2011 will be a big factor. If there is a recovery and it appears sustainable by that time, he will sail through — think Clinton vs Dole on steroids.

    S

  251. Traitor nom deplume says:

    [247] sastry

    True, though it bears noting that in the US we fought two wars over taxes and none over religion (though both were revolts, not wars between sovereigns). This differs greatly from the rest of world history where religious war is part of the fabric of history.

  252. HEHEHE says:

    Spirituality is to religion what freedom is to government.

  253. Traitor nom deplume says:

    [249] sast

    respectfully, I disagree. A lot of O’s numbers, for and against, are “hard” numbers, and he did not win by a lot. It usually takes something dramatic to move hard numbers, and unless the economy turns up dramatically (dow over 10K, recession clearly over, U3 down under 6.5%), I see him squeaking by at best in pop vote, and not carrying electoral coll by nearly as much of a margin.

  254. Sastry says:

    Nom… The architect of partition of India in 1947, Jinnah, was a non-practicing Muslim, who pushed for an Islamic state. P!ssing contest between him and Nehru. Largest migration of population and large amount of bloodshed. They used religion as an excuse for some basal evil impulses.

    S

  255. Traitor nom deplume says:

    [246] chifi

    I remember 40. As a present, I got to take stock car driving lessons at Atlanta Motor Speedway. Now the little deplume notices the #20 Home Depot car and says “that’s the car you drove, Daddy.”

  256. Traitor nom deplume says:

    [253] sastry

    One of my polisci professors was from India. I remember reading about Jinnah (and got some hissing from Hindus for mentioning his name).

  257. Clotpoll says:

    vic (214)-

    My greatest fear is that the PTB will only admit that the current crisis is not one of liquidity only when what little liquidity remains completely dries up.

    That should be the point at which the balance sheets of both private companies and almost every gubmint on the planet will be in complete meltdown.

    Should make for some fun times.

  258. Sastry says:

    Will hit 40 a few months after Obama’s next inauguration! :)

  259. we says:

    Sastry, enjoy home ownership.
    Unfortunately, we live in interesting times, fortunes will be made and lost by sheer luck.

  260. Traitor nom deplume says:

    [257] sastry

    shut up and mind your elders ;)

  261. Sastry says:

    Nom… Hindus vs Muslims… No one is a saint!

    S

  262. Traitor nom deplume says:

    [260] sastry

    Ahem. That’s St. Nom to you!!!

  263. Hubba says:

    Some sick swings today.

  264. HEHEHE says:

    Yep, no volatility, just the same market manipulators putting a floor underneath trying to suck in the saps

  265. BC Bob says:

    “Some sick swings today.”

    70 point range in Dow and 10 in S&P? Maybe choppy is a better term?

  266. Sean says:

    Anyone got info on this foreclosure in Warren County?

    12 Cornerstone Dr, Allamuchy.

    Friend of mine was invited to take a look at it. Whomever lived there previously for the last few years apparently wrecked the place, reaks of dog piss, holes in the walls and the former owner went bankrupt as and somehow had a 620k judgement on the place. Deutsche Bank is trying to dump it now that the bankruptcy is over.

  267. Hubba says:

    VIX = Implied 30 day

  268. Hubba says:

    I agree with the choppy.

  269. John says:

    markets overcorrect on the upside and the downside. Both RE and stocks. This bear market rally you are talking about maybe just that but when it overshoots on the upside by the time the 3x ETF short crowd is right they will be broke. BTW 1982 to 1998 was a manufactured rally by a period of the Fed lowering interest rates pretty much steadly over a 16 year period, they started raising rates in 1999, they remanufactured another rally in 2002 by cutting rates that end badly in 2007 when they started jacking rates, late 2008 was another start of a manufactured rally. Manufactured rallys can last longer than the bears think.

  270. BC Bob says:

    “Manufactured rallys can last longer than the bears think.”

    I won’t argue this point.

  271. John says:

    Sastry says:
    Can you non-practice a made up religion?

    May 19, 2009 at 2:05 pm
    Nom… The architect of partition of India in 1947, Jinnah, was a non-practicing Muslim, who pushed for an Islamic state. P!ssing contest between him and Nehru. Largest migration of population and large amount of bloodshed. They used religion as an excuse for some basal evil impulses.

  272. John says:

    172967CU3 CITIGROUP INC NTS GLOBAL 4.125 02/22/10 3.438(M) 100.500

    Now this is an example of manufactured. Citi bond with a 4.124 coupon trading above par. With default risk off the table via backstopping and FDIC people drank the koolaid. I didn’t mind jumping in to citi at 14% and take the risk, what nut jumps in at 3% for the same risk? Lots of them.

  273. John says:

    073902ML9 BEAR STEARNS INC 5.500 08/15/11 2.639(M) 106.153

    Even better backstop bond example.

  274. grim says:

    New thread, up!

  275. james says:

    jcer 173,

    Agree, that is the only way out. Bye bye oil and hello wind turbines. I almost put solar shingles on my roof this summer but the numbers dont work yet. Close but no cigar. Just need a little bit more efficiency and a little less cost.

  276. grim says:

    Agree, that is the only way out. Bye bye oil and hello wind turbines.

    At $50 a barrel, the numbers aren’t working.

    Maybe at $150, solar and windmills make sense, not at 1/3rd that amount.

    Sell the Prius, buy a Hummer, good times are here again!

  277. jim says:

    With the new auto emission standards and BO and his social engineering crew want, it looks like the end is in site for US auto makers. Why add $1,300 to the cost of a new car when the industry is in such trouble and on the brink of disaster?

Comments are closed.