Ritholtz on Recovery

Barry Ritholtz in the Washington Post:

Spring brings signs of hope and renewal — except in the housing market

Ahhh, winter is finally over. Each year about this time, flowers push up through the soil, trees begin to bud — and the stories about a real estate recovery appear.

Am I skeptic? But of course. To understand why, let’s consider a few questions:

What is shadow inventory?

This is important, as lowering the total inventory of houses for sale is how prices stabilize and sales volume moves higher.

Most buyers are familiar with ordinary inventory — houses listed for sale with real estate agents or by owners. Unfortunately, shadow inventory adds to the backlog. It includes bank-owned real estate, distressed houses not yet for sale, short sales and delinquencies that have not yet defaulted. Foreclosure properties are also in the shadow inventory.

These houses will eventually become part of the total supply for sale. Although there is no official count, estimates of potential shadow inventory run as high as 10 million.

That’s not all. There’s also a huge overhang of underwater homeowners — whose houses are worth as much as 25 percent less than what is owed. The owners don’t qualify for a mortgage modification. They may be delinquent but aren’t in default.

Are houses affordable?

Here’s where every discussion of affordability seems to start: the National Association of Realtors Home Affordability Index. In my view, it’s worthless.

Why did I come to such a harsh conclusion? The index offers little insight into how affordable housing actually is. In the biggest run up in housing prices in American history, the index never dipped into the level of unaffordable. Imagine that.

As ridiculous as that sounds, it’s even more absurd when we look at the NAR methodology, which ignores factors such as family savings rates, cash assets, consumer credit, indebtedness, credit servicing obligations, inflation and income gains.

The affordability index looks at the wrong things and ignores the important ones. The correct question is not whether the houses are affordable in theory. Rather, it’s whether potential buyers can afford to buy them.

Are the prices cheap?

Few had forecast the steep drop in median house prices.

Some regions that were excessively frothy during the boom — California, Las Vegas, South Florida and Arizona — have seen much greater price drops. Other areas had laws (Texas) or financial conventions (New York City) that mandated significant down payments and other prudent requirements and avoided much of the bloodshed.

The conventional wisdom seems to be that prices have stabilized and are overdue to start rising. The data, however, suggest something else. The most recent Standard & Poor’s / Case-Shiller index of national prices (January) shows prices are still falling, about 4 percent year-over-year.

What is the psychology of renting?

As the chart shows, costs of owning vs. renting are back to where they were in 1997, 1988 and 1976. The context is obviously different today. However, this is a favorite metric to show that houses are not all that expensive.

While rentals look less appealing as they go up in price, the other side of the equation is simple mean reversion. By most other metrics, house prices have nearly reverted to the mean.

For a lasting recovery, we need to see houses cheap enough that they fall into “good hands” — long-term owners who can afford their mortgage payments.

Until that happens, houses will stumble along the bottom of the price range. The nation could easily see another 10 percent to the downside — assuming nothing else goes wrong.

This would actually be good news. The government interventions (first-time buyer tax credit, mortgage modifications and foreclosure abatements) have prevented prices from finding their own levels. If they did, houses would be much more affordable, and buyers would come out in droves.

That is how a true housing recovery begins.

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109 Responses to Ritholtz on Recovery

  1. Mike says:

    Good Morning New Jersey

  2. Mike says:

    Excellent article! Nice to see a journalist with some common sense for a change . Give him the Pulitzer.

  3. grim says:

    From the Trentonian:

    Municipal consolidation movement picking up steam

    Faced with police and teacher layoffs, reduced garbage collection and other municipal service cuts — largely due to slashed state aid — citizen activists are prodding their elected officials to consider municipal consolidation.

    They have the power now, under the 2007 Municipal Consolidation Law, to petition municipal governing bodies to undertake talks with a neighboring town — even when local leaders don’t like the idea.
    What would happen and how much would we save, they are asking, if we erase municipal borders between one or more towns, and merge our police, fire and schools and eliminate redundant municipal jobs? After all, these activists point out, New Jersey residents pay the highest property taxes in the nation.

    It’s time, these activists are saying, to address consolidation for some of New Jersey’s 566 municipalities, one-third of which have populations of just a few thousand.

    “It’s time to starve the beast,” says Ben Dworkin, director of Rider University’s Rebovich Institute for N.J. Politics and adjunct professor of political science. “That’s what Gov. Christie is doing,” Dworkin continued, by lowering the state’s municipal budget cap from 4 to 2 percent, forcing municipalities to slash spending just to survive.

    Christie made his views clear about the redundant local government costs in a 2009 town hall meeting, when he said: “My wife and I think this is crazy, Mendham Township (where Christie resides) has 5,200 people and Mendham Borough has 5,000 people. Now I have no idea why it can’t just be ‘Mendham’ with 10,200 people. But we have two school boards, we have two police departments, we have two volunteer fire companies, we have two public libraries. Crazy.”

    Inspired by the impending merger of Princeton Township and Princeton Borough after decades of talks, consolidation and merger study committees spurred by citizen activists are springing up all over the Garden State.

    Fanwood-Scotch Plains citizens spearheaded consolidation talks for those two Union County municipalities by circulating petitions.

    Scotch Plains has 23,510 residents and 9 square miles; Fanwood has 7,318 residents ant 1.3 square miles. They share the Scotch Plains-Fanwood Regional School District.

    Cherry Hill and Merchantville residents in Camden County likewise petitioned their elected officials to launch a consolidation study.

    Merchantville, which is six-tenths of a square mile in size and has a population of 3,921, proposed the merger talks with Cherry Hill, population 71,000 and 24 square miles, 16th largest in the state.
    Hightstown businessmen seized the initiative and financed a professional consolidation study that considers the consequences of merging Hightstown with East Windsor. The study was finished in 2009.
    And merger talks have been initiated for Somerset County’s police departments, and also for police departments in Camden County.

    Hardly a new concept, municipal consolidation in New Jersey has been the subject of speeches, newspaper articles and at least one notable book for more than a century.

    Back in the late 1800s, there was talk of merging the Oranges with Newark in Essex County, but it never happened, so today, there’s Orange, East Orange, West Orange and South Orange. In 1934, Gov. A. Harry Moore called for municipal reduction to save money during the Great Depression. His call went unheeded.

  4. grim says:

    From the APP:

    Online gaming plan inches ahead

    Legislation that would allow people to gamble online in virtual Atlantic City casinos took a tentative step forward last week.

    Although the Senate Budget and Appropriations Committee voted 11-0 to advance the proposal, five senators voiced concerns, primarily about excluding horse tracks from the plan. And while the bill’s chief sponsor expressed hopes online gambling could be running by the fall, he also said an agreement hasn’t yet been reached with Gov. Chris Christie, who vetoed a similar bill once before.

    “What we want to do is get this Internet gaming up and going before the end of the year, hopefully by September, so that New Jersey can be the first in the nation and lead the way,” said Sen. Raymond Lesniak, D-Union.

    Bill Pascrell III, a lobbyist for Interactive Media Entertainment & Gaming Association, the online gaming industry’s trade group, said the state that establishes Internet gaming first is likely to become the technology hub for that portion of the industry as it becomes more common. He said Delaware, Nevada, California and Florida have action stirring in the area.

    “We must be first,” Pascrell said. “We need to create the Silicon Valley of Internet gaming in New Jersey.”

    A consultant cited by officials from the state Casino Revenue Fund Advisory Commission said online gambling could generate $210 million to $250 million in gross revenue, 1,900 jobs and $46 million to $55 million in tax revenue.

  5. Ten Swamps says:

    Tenafly Comp Killer

    20 Kensington Ct, Tenafly NJ
    Townhouse, 2,752 sqft, built 2004

    Purchase price: $1,070,000 (May 2004)
    List price: $910,000 (August 2011)
    Sale price: $850,000 (November 2011) – short sale?

    Tax assessment: $943,900 (2011)

  6. Mikeinwaiting says:

    {“What we’ve observed in the employment figures is not recovery, but desperation,” writes John Hussman. Of the 1.84M gain in payrolls since the recession’s “end,” 2.96M jobs have gone to workers 55+, while employment for those under 55 has shrunk by 1.12M. By shorting savers of interest income and promoting repeated booms/busts – but no durable returns – “the Fed has successfully provoked job growth of the obligatory, low-wage variety.”}


  7. Mikeinwaiting says:

    Swamps 850k for a townhouse, we have a long long way to go to get to sanity.

  8. grim says:

    So what is the jobs dynamic in recovery? Are high wage jobs created first? Are low wage jobs created first? Is there no difference?

    If I recall correctly, we lost a large amount of retail and restaurant/food service jobs during the recession. Is this simply a matter of re-filling from the lowest wage up? Should we be looking at this as a positive? Retail spending up, restaurant spending up, this clearly points to a rebound in retail spending. While you may not like the fact that consumer spending is a huge driver in our economy, it’s hard to ignore these as being leading indicators.

    What’s the alternative? A million new hedge fund manager jobs created? Is that even realistic?

    What about all the construction workers and manufacturing/trade jobs around building materials? Can they really do anything but build? I know some were able to rejoin by shifting into the multifamily sector, but wouldn’t we need another new construction bubble to create these jobs?

  9. grim says:

    The other jobs sector that will pose a challenge is public sector, mainly because we don’t want these jobs to come back, period. We don’t want recovery here, and we certainly don’t want growth. This shift will not be without significant pain.

  10. Mikeinwaiting says:

    Grim 9 there is no problem in the mix of a recovery with creating low wage/entree level jobs but they are going to the wrong segment of the population. It is not a case of hedge fund mangers vs can I have a fry with that as you state but the fact that over 55 people are taking these jobs. The Bernank & Greenspan have crushed them and we can then look at the youth unemployment rate who should be in these jobs.
    So I gather from the construction standpoint you are in favor of fed induced boom/ bust cycles.

  11. Mikeinwaiting says:

    Grim 11″we don’t want these jobs to come back, period” Amen to that.

  12. grim says:

    So I gather from the construction standpoint you are in favor of fed induced boom/ bust cycles.

    Greenspan didn’t give a crap when I threw a tantrum about it, and I don’t think Bernanke gives a damn either, and the next guy, he won’t devote a single second to thinking about what we’re in or not in favor of. Because in the grand scheme, what we think about it is irrelevant.

    I know that if I fight the Fed, I’ll lose.

  13. gary says:

    The affordability index looks at the wrong things and ignores the important ones. The correct question is not whether the houses are affordable in theory. Rather, it’s whether potential buyers can afford to buy them.

    Wow, what a concept!

  14. 3B says:

    #9 grim: If you want a real recovery in the economy, and a recovery in the housing market, you may not need one million new hedge fund managers, but you certainly need more than retail and restaurant jobs.

  15. 3B says:

    Thank You Barry!!!

  16. Libtard in Union says:

    CBOE Interest Rate 10-Year T-No (^TNX)


    Market futures down pretty large as well. Equity markets turning over? Will I once again be rewarded for cutting my equity position in my 401k to 50%? Let’s see now.

  17. Mikeinwaiting says:

    Gary 16 Ritholtz is preaching to the choir around here. Earth shaking news no, “Rather, it’s whether potential buyers can afford to buy them.” Now where did i put 1000 dollar plus monthly tax/extortion bill go.

  18. Juice Box says:

    Ritholtz with be on with Tom Keene at noon to talk about his latest series about housing.

  19. 3B says:

    We were considering putting a bid on on a house, the Realtor at the open house said we should put a fair offer in, because the house has had a lot of activity and showings, much interest etc. The price was just dropped this morning;just saying.

  20. Juice Box says:

    re # 10 – Happens all the time in China.


  21. Orange says:

    19 Enough to get the refi machine cranking again?

  22. gary says:

    The conventional wisdom seems to be that prices have stabilized and are overdue to start rising. The data, however, suggest something else. The most recent Standard & Poor’s / Case-Shiller index of national prices (January) shows prices are still falling, about 4 percent year-over-year.

    And it’s still got room to run. Our area was trailing when the bubble popped so we have an extended period of price decline as compared to Florida, Vegas, Cali, etc.

  23. Libtard in Union says:

    One can’t nail the top or bottom of any market cycles because one can’t tell if we are at the top or bottom until we are well past them. Ritholtz seems to be saying this. The herd mentality (JJ speaks to this all of the time) is to panic sell or panic buy. Buffet likes to say, “Buy when everyone is selling and sell when everyone is buying.” The key to investing successfully by following Buffet’s mantra though, is really waiting for it to include ‘everyone’ and not just during the many periods where ‘more than the average amount of people’ are selling or buying. Ultimately, if you sell between the middle and top of a cycle and buy between the middle and bottom of a cycle, you will come out way, way, way ahead of the herd due to the mob mentality.

    Grim, our local RE expert, bought recently as did the our family. We already know that we did not nail the bottom as average property values are probably down 3 or 4% from the time we both bought. But I’m guessing that Grim found a bargain, as did we. Our property would require over a 15% drop to get it’s value down to the price we brought it at versus the price it is currently assessed at. It takes time to find such a bargain in this market. In our case, nearly three years. We took the plunge knowing we weren’t at the absolute bottom of the housing cycle, but guesstimated we were at least within 15% of it. Grim and I took educated guesses. We both anticipated there wouldn’t be another two or three years to find a bargain. I’m fairly certain that when the market turns, it will turn up quickly at first. That three or four percent that Grim and I lost will easily be made up in less than a year and this will draw in all of the suckers probably driving prices up another five percent or so before the excess of shadow buyers (they’re out there, trust me) dries up to normal and the housing price recovery slows to the traditional 3% a year or so.

    There are most likely a lot of people out there (pant up demand) with the same prevalent blog mindset espoused here. The herd thinks housing will drop forever or that ‘it’s different this time.’ It is NEVER that different! These are the panic sellers and panic buyers and will miss the bottom by so much that they will lose again and again. Especially now considering that rents are getting absolutely bubbly. There’s a lot of anecdotal evidence out there that I haven’t seen for years. Mortgage rates are impossibly low, the builders are building once again both commercial and residential (couldn’t believe what I saw on the way down the GSP this past Saturday), and time itself will create buyers as people eventually get sick of paying rent and living with their folks. If there is one thing I am absolutely sure of, it’s that the mob mentality has a very short memory. Look how quickly the housing bubble occurred after the tech bubble. And the vast majority got snookered in both.

    Some here will claim that I’m just saying all this to defend my recent purchase. I’ve been wrong before, such as buying my multi back in 2004. But I do have quite a decent track record. Heck, even my investment club has returned for me 15.1% annualized since 04/27/2005. Remember the cycle. Buy in at the bottom half and sell in the top half. Unfortunately, the herd (of pigs?) continues to try to nail the tops and the bottoms and comes out behind nearly every time. It’s like pari-mutual betting. It doesn’t matter who you ‘think’ will win. It’s finding the horse which represents the best value. If a true 30 to 1 is going off at 60 to 1, it might take 30 races, but you’ll double your money versus the sucker who keeps betting the morning line 2 to 1 horse who goes off at even money. He’ll win every other race and will half his bankroll.

    So around here, I would guess that home prices have dropped 32% (+/- 2%). Unless the overall drop continues to 64%, I’m OK. Realistically, I could see it dropping 40% top to bottom, as I originally predicted here (where is that infamous chart). With the great bargain we got, I feel pretty good, especially when considering what our multi is renting for. Sure property taxes are the big unknown in the formula, but they absolutely can’t continue to go up unabated. Heck, they are even slowing in Montclair. I think the overall increase this year will be under 4% with many surrounding towns I’ve noticed meeting Christie’s leaky 2% cap. And if you need any other evidence, even JJ, the cheapest MFer I’ve ever seen, is shopping!!!

  24. Libtard in Union says:

    Angry Orange (19): The problem with reigniting the refi boom is that each subsequent drop must be about 50 cents below the last for it to make sense to most folks. The smarter people know that $1 is really the magic number or .75 at the minimum. For a while there the rates were locked solidly in the 1.85 area. So no new refi boom until we see 1.50 or so, which may not happen unless Europe starts imploding again. I need 1.70 or so to refi my multi down to a 15-year, but we are probably already at the point where we would have to add some cash to get back to the 20% equity zone. We may be better off just making extra payments for now. Rather than locking up more principle to obtain the lower rate. We’ll do the math when we get there. We really could use some stabilization in housing prices. :P

  25. grim says:

    We sure Barry is reading the renters right?

    From Fannie Mae:

    Americans’ Expectations Align to Encourage Home Buying


    Homeownership and Renting

    Thirty-three percent of respondents expect home prices to increase over the next 12 months, a five percentage point increase from last month, the highest level over the past 12 months.
    On average, Americans expect home prices to increase by 0.9 percent over the next 12 months (up slightly since last month).
    Thirty-nine percent of Americans say that mortgage rates will go up in the next 12 months, a five percentage point increase from last month.
    The percentage of respondents who say it is a good time to buy rose by three points to 73 percent, the highest level in over a year, while the percentage of respondents who say it is a good time to sell rose one point to 14 percent this month.
    On average, respondents expect home rental prices to increase by 4.1 percent over the next 12 months, a significant increase since February, and the highest number recorded to date.
    Forty-eight percent of respondents think that home rental prices will go up, a three percentage point increase from last month and the highest number recorded to date.
    Sixty-six percent of respondents say they would buy their next home if they were going to move, up one point since last month, while thirty percent say they would rent, up one point versus last month.

    The Economy and Household Finances

    The rise in confidence in the economy’s direction leveled this month, with 35 percent responding that they think the economy is on the right track, consistent with February’s total. The percentage who say the economy is on the wrong track rose slightly from 57 percent to 58 percent.
    Only 12 percent think that their personal financial situation will worsen in the next 12 months, consistent with February as the lowest value in over a year, and tied with January 2011 for the lowest to date.
    Twenty-one percent of respondents say their income is significantly higher than it was 12 months ago, up 1 point versus February, while 63 percent say it has stayed the same – consistent with February’s values
    Thirty-four percent say their expenses have increased significantly over the past 12 months (a slight increase of one percentage point).

  26. gary says:


    Neither you nor grim need to justify your purchase in the least. You both performed careful assessment, knew what you were looking for and made the move when you found it. The only thing holding me back personally is the fact that I’ve been working contracts since the collapse in 2008. I don’t won’t to make a switch to another house as a “temp” worker.

    The root of my anger (and many here) is still aimed at the RE industry from lenders to house tour guides who hoodwinked people and f*cked it up completely. They used people as nothing more than a setup and left them to rot. At the peak, their arrogance knew no bounds.

  27. Anon E. Moose says:

    Since the cop and the teacher in NJ are taking down $200k a year, what do you suppose happens to their prospect of selling their $500k POS cape (2012-market value; probably would have traded above $650k at the height of the bubble) when they will be subject to to 3.8% medicare tax ($19,000) under Obamacare?

    In other news, if 23 years of ownership, with obvious money spent in upgrades along the way, leaves the seller with a house that trades less than CPI-adjusted dollars over that time frame, are we in the overshoot part of the bust yet? Does housing still always go up?

  28. May I also propose that NJ become the national leader in Nigerian Letter scams?

    “We must be first,” Pascrell said. “We need to create the Silicon Valley of Internet gaming in New Jersey.”

  29. Libtard in Union says:

    “Does housing still always go up?”

    It may stay flat. And that is OK. What I don’t see is it going down in perpetuity. It simply lasts too long and new will always be constructed significantly krappier than the old maintaining some value in the old versus the new. It would go up if taxes were brought under control and material prices continued to get peaky. We are not talking about cars, which you trash every 8 years.

  30. grim (9)-

    Hard to say what “normal” employment trends are, since we’ve had a Federal Reserve doing nothing for the past 100 years other than inadvertently manufacturing boom/bust cycles of increasing amplitude.

    The US is now the organizational equivalent of a crack baby…essentially high and jonesing for more since the moment of conception. We have no baseline for “normal” anything.

  31. gary says:

    “Does housing still always go up?”

    Only if there is a stipulation in the contract that you must feed the squirrels.

  32. Juice Box says:

    re # 32 – Tard “which you trash every 8 years.”
    It’s actually 4 years now, even though cars last longer.

    The herd will begin to stampeded again as soon as somebody opens up the credit spigot.

  33. Marty says:

    “The root of my anger (and many here) is still aimed at the RE industry from lenders to house tour guides who hoodwinked people and f*cked it up completely”

    And years after the fall no one had been found guilty of anything. It makes me sick that our federal government is so corrupt it can’t even bring charges against Jon Corzine. The President can get out infront of the cameras the minute a shooting takes place knowing that could have been his “son” if he had one, but not so much on the fall of MF global and the destruction of truth in the capital markets.

  34. Libtard in Union says:

    Juice, Yes. Credit is the key. I would expect the gubmint to open the spigot again and soon. The debt on FNM/Freddie is all but forgotten and FHA has not even been mentioned. As long as no one is paying attention, open it up. Right?

  35. gary says:

    Marty [36],

    We’re witnessing the orderly decline of a once great country. History will mark Oblama’s crowning glory as the caretaker of a meticulous dismantling orchestrated magnificently to the delight of wannabe dictators the world over.

  36. Libtard in Union says:


    The president and government doesn’t represent nor care about you. It cares about MF Global and the industry it’s in. Once you understand this, you will get why the craft queen of Nutley Martha Stewart went to jail and Corzine will soon get nominated to a government post.

  37. lib (32)-

    The US has never experienced an epic housing bust in which TPTB essentially rigged the market afterwards to keep the asset insanely overvalued. What we’re experiencing right now is essentially price supports, and we do have a long history of those in the US. The one common thread in that sad history is when price supports are removed, the asset in question collapses (see cotton, for a good example).

    The housing bust cycle is being prolonged and exacerbated by price supports, so I don’t think we can assume the passing of a generation will erase the collective memories of the buying public. In fact, chances are good the next generation may be the ones to the bear the full brunt of this generation’s collapse because of the current TPTB’s game of feed the zombie.

  38. Anon E. Moose says:

    Gary [29];

    Like I’ve said recently, I come to bury realtors not to praise them.

    Orange, you compared BB/JJ wanting access to the MLS to wanting to park his beater for sale on Paul Miller’s lot. What that example ignores is the intense level of cooperation among so-called competitors selling real estate. If you want to use Paul Miller as an example: imagine any car-seller in a closed group could park their cars on his lot, and he on theirs, with an agreement to split the sales commission, but the closed group had established rules to limit the privilege to some/most/all others — this is a cartel, against antitrust law.

  39. zieba says:

    I need a one paragraph schooling on bank appraisals:

    A buddy had his house appraised recently as part of a refinancing. He claims it appraised for 500K because of extensive renovations he’s done to the property. This is 50K higher than what he paid for this house in 2008. The house sits on a Clifton block surrounded by homes which aren’t near that price tag or at least aren’t deserving of anything near that price tag provided you have all your mental facilities.

    I know appraisal prices aren’t indicative of market clearing prices but how could the bank have come in so high? Wouldn’t a rosy appraisal favor owner at the expense of risk to the lender? ..or is all this just horsesh*t. Thanks.

  40. Juice Box says:

    re # 37 – You mean when the MSM isn’t broadcasting? Capital ratio for the FHA is non-existent. They will be back to Congress for more money with over 700k loans in default and still surging. Fannie and Freddie are in a similar state with more pressure than ever for mortgage principal reductions.

    The credit spigot the Dems want to open for election season is a no doc surprise boom of mortgage principal reductions. Who wants to bet there won’t be any 1099-C “cancellation of debt” tax notices sent to the IRS either for this new found windfall?

    Latest on the battle for mortgage principal reductions.

    “”The Obama administration is ratcheting up the pressure on the Federal Housing Finance Agency (FHFA) to write down mortgage debt.

    Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, used an interview broadcast yesterday on C-SPAN to repeat the administration’s efforts to get the FHFA to reverse its refusal to begin a principal reduction program.

    “This isn’t about force,” said Donovan. “This is about making the right decision for homeowners and for the taxpayers.”

    FHFA Acting Director Edward DeMarco has resisted principal reductions, stating they would increase the costs of running Fannie Mae and Freddie Mac. His actions have been the subject of criticism from several prominent congressional Democrats, and several progressive political advocacy groups have called for the president to fire him.

    However, in a speech delivered last week before the Boston Security Analysts Society, DeMarco stated that he was considering a shift in policy based on changes made by the U.S. Department of the Treasury to the Home Affordable Modification Program. DeMarco said that he would make a final decision on the matter later this month.

    For his part, Donovan offered no clue on how the administration would react if DeMarco would not change his current policies. “We’ll have to look at that analysis and understand what his concerns are,” Donovan said.””

  41. Angry Orange says:

    41 dealers trade and co sell inventory all the time, maybe its not on the lot but all it takes is a phonecall and a trailer to get it there. ask mr paul himself – big fish wants a new turbo that he doesnt have – no worries, hell get it – come pick it up on friday. no cartel? you ever go to a used car auction? youd realize most ooff lease and used is a 20%+ commission, buyers get screwed eveyr time

  42. Libtard in Union says:


  43. Angry Orange says:

    of course you havent been to an auction, public not invited, maybe yuo can ride on someones coat tails for a couple benjamins

  44. Fabius Maximus says:

    #3 grim

    From reading the local papers in my little corner of the state, there seems to be a few issues with consolidation. The first is trying to get the study done. One town put the study out to tender with zero bids. The next is timing. With many budgets due in the next few weeks, it is likely that the window has closed on getting anything done this year. Now the last ditch attempt at saving cash is to turn over policing to the county. This will not end well.


  45. seif says:

    #30 – stop the campaign of misinformation?

    From factcheck.org

    We’ve been flooded with queries about this one ever since the health care bill became law. At the last minute, Democratic lawmakers decided on a new 3.8 percent tax on the net investment income of high-income persons. But the claim that this would amount to a $15,200 tax on the sale of a typical $400,000 home is utterly false.

    The truth is that only a tiny percentage of home sellers will pay the tax. First of all, only those with incomes over $200,000 a year ($250,000 for married couples filing jointly) will be subject to it. And even for those who have such high incomes, the tax still won’t apply to the first $250,000 on profits from the sale of a personal residence — or to the first $500,000 in the case of a married couple selling their home.

  46. Libtard in Union says:

    Seif…That was pointed out a number of times here in the past.

  47. seif says:

    i must have missed it.

  48. Yet another day in hell.

  49. Anon E. Moose says:

    Oh, its just on the “rich”? I suppse that’s OK, then.

    BTW, when the first permanent income tax was passed in America (1913), there was no tax on incomes below $10,000 ($230k today, CPI adjusted); rates ranged from 1% to 7% on incomes above $250k ($5.75 MM today, CPI). Where do we stand today against those wholly unobjectionable trifling rates of taxation on just the “rich”? For a more modern example, how’s that AMT doing at only catching the “rich”? Rich ain’t what it used to be, I guess.

  50. AG says:

    Re: Refi

    If QE3 entails another 1 trillion worth of MBS purchases and they open up a market for sub 3.50 coupons then we may see Japanese rates. If thats the case then I will refi yet again but that would necessitate rates down around 2%. 15 year works for me right now. I was throwing chunks of money at the mortgage anyway. Now I can let it ride until hyperinflation occurs.

  51. moose (41)-

    Pretty much all of us here understand that no good Realtor would ever work with an asshole like you, so why don’t you find a new topic to run into the ground?

  52. Anon E. Moose says:

    AG [53];

    Now I can let it ride until hyperinflation occurs.

    Levering into a hard asset at depressed prices using 3% (sub-inflation) money is not without its appeal.

  53. BTW. I’m also the first to admit that there is no functioning RE market left in NJ.

    When all you have are delusional sellers and buyers like moose who are more interested in beating the game than getting a house, it’s a sign that the whole market is broken.

  54. It’s ok, moose. Wait a few more years; Klowngress will allow banksters to overrun the Commerce Clause and you can buy a nice house with the assistance of a bank teller.

  55. BTW, moose… what is it you do again?

  56. The Original NJ Expat says:

    Ritholtz left out some key metrics:

    1. Taxes – still rising unabated, must push down prices.
    2. Demographics – Baby boomers are done trading up, less buyers in the generation(s) behind, must push down prices.

    Another problem is measuring home prices in dollars. It’s like using a ruler that is a different size every time you pull it out of a drawer to measure something.

  57. Comrade Nom Deplume says:

    Nice to see that things haven’t much changed over the past week.

  58. The Original NJ Expat says:

    How about measuring house prices in (Average wage) x (hours)? Let’s take $25/hour as an average wage ($52K/year). $40K down payment = 1600 gross wage-hours or 40 gross wage-weeks for a down payment on a $200K house. 8000 gross wage-hours or 200 wage-weeks to purchase for cash. It still takes years of savings to buy a house the “right” way. Who saves money for years to purchase anything anymore? Buy now, pay later.

  59. joyce says:


    A national education and health care system is OK, but a few tiny towns in one county can’t have a consolidated police force?

    I do not like the consolidations for other reasons.

  60. seif says:

    52 – rich or poor doesn’t matter, spreading misinformation or fear mongering is the same with both. don’t make a claim and then move the goalposts.

  61. Libtard in Union says:

    Having moved from a large town to an itty bitty town, I believe consolidation is the devil. Get rid of the counties and you would save 20% easy.

  62. jcer says:

    lib the problem is in a non uniform population, economically. In GR you have predominately wealthy people who are driving local politics, in a place like montclair, West Orange, or South Orange is political groups pandering to interests that will make sure they get elected. The wealthier the town the lower the tax rate and the better the services are. It is best to have a cheap house in an expensive town.

  63. Libtard in Union says:

    jcer: Bingo!

    “It is best to have a cheap house in an expensive town.”

    I can’t tell you how much better our services are in GR compared with Montclair. It’s just mind-blowing. And now the guvner wants us to merge with that disease of a local government or he’ll take our state aid away. To which GR says “What state aid?”

  64. 1987 condo buyer says:

    #65….agree…seems the larger the town, West Orange, Montclair, etc. they more inefficient and tax laden, i think the increase in politics is the cause. In CG, we have a non partison town council, the moment we allow parties, the time i look to sell.

  65. PGtips says:


    what’s the point of justifying your losing investments? If housing has another 15% down then this is what you lost. Assuming that you are so good in finding bargains, then you could get a similar discount when prices where lower. No to mention that since prices are 3-4% lower since you bought, you could have paid your improvements with the money you lost.

    Also, you sound like a realtor pushing glen ridge which has one of the highest tax rates in NJ yet school performance is lackluster for this tax.

  66. Libtard in Union says:

    PG…Not justifying, even though it sounded like I was. The point I was trying to make was in response to Barry’s article. And you can’t necessarily get the discount when prices are lower because it took an awful long time to find that discount. Nearly three years. There’s a fair chance prices might not stay low for three more years, nor mortgage rates this low.

    About GR. I don’t have a lot to compare it to. Since birth I’ve lived in Merrick, East Brunswick, Montclair, Little Falls, Jersey City, West Hollywood, Wayne, Clifton, Montclair and now Glen Ridge. So far, the best services I could find were in Clifton and Glen Ridge. From what I’ve experienced so far of the schools, I’m pretty impressed. And not just like how every one thinks their kid’s schools are the best. From a curriculum standpoint, extra-curricular activities, willingness to give a lot of homework to a first grader, no snow days used, transparency in the BOE, even clever fundraising. The schools appear strong and the town isn’t on a mission to cut them to the bone as is what’s happening in Montclair. The commute from GR is decent and the housing stock is beautiful. I know it’s not the cheapest, but if you are going to pay this much, you might as well get something for it.

    Where is U?

  67. PGtips says:


    I am in NY. I argued about lackluster schools in an earlier post-don’t want to revisit. Gr has similar crime rate to Montclair. Commuting is a problem as the montclair line is worse than the morris line which is worse than metro north. GR is highly taxed and things will only get worse as the state/town has many liabilities.

    Of course you waited for three years as the more you wait the better the bargain. If one is bound to loose $30K per year in depreciation then buying makes no sense (as an investment).

  68. PGtips says:

    “Bargains” come up all the time for someone who keeps an eye. Unfortunately there is no bargain right now as housing in NY suburbs is still unaffordable that’s why prices are going down. Perhaps if economy does better employment and income wise there might be a bottom but now prices are too high.

    “There’s a fair chance prices might not stay low for three more years, nor mortgage rates this low.”

    Hahaha, the ol’ “buy now or priced out forever”. If low rates translate to buying then why do you criticize gov for supporting your overvalued assets.

  69. Libtard in Union says:

    You don’t lose 30K per year if you are only putting down 20%. Perhaps you are right about NJ vs. NY, but I also commute to Union NJ every other day. The crime rate is a lame comparison unless the numbers are significantly better or worse. Plus, I have a dog who will keep the burglars away and I’m less likely to get held up due to my size. BTW, our taxes are now lower than in Montclair and in Bloomfield. Our lack of capital debt should prove to be helpful as well. Plus, with our complete lack of ratables, business cycles won’t impact our budgets. We did our research.

  70. Libtard in Union says:


    Rent for the next 20 years. It doesn’t concern me. At the end of the 20 years, I’ll have what ever my house is worth. You can rent right through retirement. Come June and my tenant of 8 years is moving out. Once we raise the rent on the new tenants to the current rental market rate, we should clear close to $1,000 per month profit. Maybe you’ll want to move in? I’m really fair, though you’ll have to take out your own trash.

  71. jcer says:

    PGtips, GR has pretty good schools. Better than NY state which is IMO a disaster. Also house for $ is much greater in NNJ than Westchester, no one is arguing the craptasticness of NJT. You argument is somewhat pedantic, the issue is to find the home they wanted it might not be available at the bottom. I think the point of lib’s post is that while the market will fall somewhat, he personally will not lose money on his home based on purchase price and the window he is planning to live there. At the end of the day a home is not an investment, it is a place to live and a cost, plain and simple. Will I potentially lose money on my purchase, mayber, but what are my alternatives, if the downside looks pretty reasonable(it was a back breaker before, potential for hundreds of thousands of loss) might as well get it over with and start more permanent living without the uncertainty that comes with renting. If you can’t stomach the potential downside or need the greater flexibility offered by renting than you rent.

    As for consolidation, I think rather than combining towns, the first step is eliminating police forces in each town. Do it at the county level, if your town has under a certain population you lose state aid if you have a town police force. No reason for all the chiefs, captains, detectives, etc keep the beat force the same size and cut the costs. Do the same with public works, and many other local govt entities and watch the savings pile up.

  72. Anon E. Moose says:

    PG [72];
    “There’s a fair chance prices might not stay low for three more years, nor mortgage rates this low.”

    Hahaha, the ol’ “buy now or priced out forever”.

    Looks like you missed the point on that one.

    Libtard made his choice and put his money behind it. As did Grim, et al. Even Buffett said he’s always made money moving too soon rather than too late (another way of making Lib’s point that the extremes are only visible in the rear view mirror).

    Some people have a price to pay while waiting, too. People pay lots of money to get the latest iSh!t as soon as it comes out, when the better model. If waiting 6-7 years (my case) saved me 25-30%, should I wait another 6 for the last 5-10%? My time horizon is longer than that.

    My judgement, price declines have ceased to out pace inflation and cost of renting. At worst buy/rent is a wash, so why not live in a place I like?

  73. PGtips says:

    I repeat if you are a bargain hunter then a bargain after a 15% off will cost 15% less than a bargain now. Pedantic or not, it is rational and you lost money. If, however, you believe that house is not an investment then don’t brag as an investor.

  74. PGtips says:

    “My judgement, price declines have ceased to out pace inflation and cost of renting. At worst buy/rent is a wash, so why not live in a place I like?”

    Annual depreciation of 3-4% + mortgage + tax + maint + etc is not less than rent not in this area. Frankly who cares buy whatever and whenever you like, just don’t brag that purchasing a house a year ago was a good INVESTMENT.

  75. Anon E. Moose says:

    PG [78];

    just don’t brag that purchasing a house a year ago was a good INVESTMENT.

    Wrong post you’re replying to. I haven’t bought any houses yet. As bearish as you are you must be short 6, maybe 8 of them? And I’m not doing so for investment (unlike Lib, at least partially).

    My point is that if it costs me $2,500 a month to rent; what I rent is nowhere near as comfortable as what I can buy (that goes for $4,500 a month), the magic 8-ball says suck it up and buy. At 4% mortgage rates, the government really is giving you a free loan to buy a house. Like I said earler, I see deal after deal where the sellers lost money relative to inflation — they paid their improvements and taxes, and they get out with their capital to move on. And, thanks to inflation, the nominal dollars are greater, so the seller feels like they made money.

    Add it up – free loan to buy (nothing silimar available to rent); pay my taxes and maintenance (sound like ‘rent’); if it keeps up with inflation for 15 years I get my capital out and move on to another phase of life — and in the mean time I get to like where I live for the next 15 years, unlike the vast majority of decrepit rental stock.

  76. PGtips says:

    “Add it up – free loan to buy (nothing silimar available to rent); pay my taxes and maintenance (sound like ‘rent’);”

    Look perhaps what you want to buy would cost more to rent. However, people usually rent lesser houses: smaller or less bedrooms, home depot kitchens, etc and if you you have a good rent lease then it actually costs much more to buy. You save money for larger downpayment, investing, retirement/unemployment and spend less time on house maint so you spend your time in other things (career, kids, etc). Meanwhile houses are depreciating. That’s where most buyers are and it is no worth buying unless prices go down considerably even when rates are so low. NV or FL where prices are 50% off are another story.

  77. Anon E. Moose says:

    PG [80];

    First of all, I’m not about to compete with your hypothetical omniscient housing negotiator who knows the precise best deal on the market (whether buy or rent, and there’s plenty of overpriced both on offer) and precisely the best time to buy or rent and or either or both. He doesn’t exist, not even in you.

    It’s not just the right price for the asset: the seller has to be ready to take what it market price when they become ready. Example: house lists for $499 – sits for over a year. Drops to $480… $450…$430…$410…$395… finally sells for $380. It wouldn’t have sold for $380 when new to the market due to seller resistance – so its not just a matter of getting the price right, its a matter of being there at the right time.

    people usually rent lesser houses

    Wasn’t that my point? The rental stock is crap. Yes, you can rent >something< cheaper, but you live in a sh!thouse. Pay your money and take your choice.

    You talk about career/kids/life — do you think the bargains are going to come to you? House hunting is a part time job at least — if not you're not doing it right and are walking into the casino. The realtor and closing fees are not the only "transaction cost" of making a housing decision.

    Are houses depreciating? Yep. However, I now think its going down slower than the market, and is an inflation-asjusted wash. My view of the market was good enough to keep me out of a house in 2005-06 (you know, the bubble that the mass media would have us believe that "Nobody saw [it] coming" or, quote Tanta HOCOODANODE?), so I’m fairly confident in my assessment. YMMV.

  78. PG tips (77)-

    You haven’t “lost” or “gained” ANYTHING in housing until you sell your asset.

  79. Wow. PGtips is making moose look like Einstein.

  80. PGtips says:

    “However, I now think its going down slower than the market, and is an inflation-asjusted wash.”

    I am not sure what your point is. Actually prices are off lower than 3-4% inflation adjusted. And what price correction won’t achieve it is inflation that will. In fact as long as buying a house does not produce some (inflation adjusted) profit as in any capitalist society should (due to invested capital) then we houses will not appreciate. It pays to wait. You seem to have buyers fatigue (as libtard has buyer guilt).

  81. pgTIPS (85)-

    By this method of reasoning, can we extrapolate that you have water on the brain?

    “You seem to have buyers fatigue (as libtard has buyer guilt).”

  82. chicagofinance says:

    Bullspit…..depends on your location and price range….

    Anon E. Moose says:
    April 9, 2012 at 5:29 pm
    The rental stock is crap. Yes, you can rent >something< cheaper, but you live in a sh!thouse. Pay your money and take your choice.

  83. PG, can you explain “buyers anxiety” to us?

    “Buyer depression”?

    “Buyer schizophrenia”?

    “Medicated buyer”?

  84. PGtips says:


    nonsense. there are a few things you can’t/won’t do now that your house cots less. Best of luck.

  85. chi (87)-

    Shhh! I’m enjoying the dolt fight.

  86. PGtips says:


    at least there is something in my brain

  87. PG (89)-

    Please list for me these “things I can’t do”. You may also not use “walk away” as one of your choices, as if the necessity were to arise, I’d short sell or DIL in a split second.

  88. PG (91)-

    Your ripostes should be at above a third grade level.

  89. If Morgan Stanley can flip the keys back on a skyscraper, I can walk on my house about as easily as dropping a deuce.

  90. PGtips says:


    who cares for you– pity there is no ignore button in this blog

  91. When I do talk about RE here, I tend to offer accurate information based upon actual experience in the industry.

    You offer half-baked opinion and other outbursts of mental diarrhea.

    Methinks you’d be the victim of any ignore button here.

  92. Albanian repatriation from Greece!

    “And as one Albanian migrant worker, so critical to keeping the Greek construction sector supplied with cheap jobs puts it, “It looks like there’s no money left,” he said of Greece. “It all dried up.” As a result even the Greek illegal-yet-symbiotic-aliens are giving up and going back home. Yes folks: the “indicators” on the ground are telling us that it is now easier to make money in Albania than in Greece.”


  93. PGtips says:


    what’s wrong with being ignored. you should try it some time.

  94. borat obama says:

    Hi fivee

  95. borat obama says:

    I missed jj

  96. sh1tting skittles says:

    Everybody says that housing will just continue to go down so it always will, right?

  97. zieba says:

    Staying busy today I see. Did Moose and Clot just agree on something??? It looks like they put their differences aside to gang b*ng PGtips. I thought I’d never see the day!

    I believe the assertion made was that, in the state of NJ, given price/income ratios coupled with uncertainty of the job market and stagnating wages, prices will continue to languish/decline further, albeit at a much slower pace.

    We’ve back in the middle of the bell if you consider it in terms of absolute historical YoY price change and this is where many will get restless.

    The point that the decline will not outpace inflation is a valid one. As is the rebuttal that carry costs and taxes kill NJ-ians. For some the decision to rent is purely a game of numbers, which is the same game those invested played until recently. One pays a small premium (prem = rent – (re tax + maint +int to the extent not deduced) to stay liquid. A portion of the premium that I pay each month for this luxury also affords one a put opt on housing (though naked).

    Like JJ said, if you’re 40 have wife and two kids, you’re the bosses bi*ch and you can’t afford to fence sit. If you’re younger, don’t have kids who will

    Lastly, ‘tard, I thought interest rates and prices are inversely proportional. You can’t have an environment of rising interest rates and home prices. What you do have is a good argument against what some perceive as inevitable inflation on the horizon.

    When we were on the extremes of the YoY change bell curve everybody kept their mouth shut as people here knew what time it was. Now we’re nearing a trough in the cycle and people get anxious.

    Everyone is looking to snatch a different piece of the market. Some of you are looking at $2.5K plus homes others’ needs dictate smaller more centrally located spaces. The thing is that with a purchase you get emotionally involved, start seeing potential and eventually tear half the place down to reno; whereas rental units are evaluated at face value, so if it doesn’t come nicely wrapped, you’re likely to discount it and reach a conclusion that stock is crap. I feel exactly the opposite, my SO have an automatic gag reflex at most listings we see. It’s not a 400K home if you need to put in 50K to make it habitable.

    In the end to each their own. I am convinced that at least some on this blog are perpetual fence sitters. We’ve come a long way, most of you have been pecking away for 5+ years now!

  98. zieba (103)-

    Problem here is that conventional thinking can’t be applied to the mountain of shit that residential RE has become in NJ. We’re at a point where- were this a normal (albeit nasty) recession- all the statistical indicators indicate a slow recovery is at hand.

    The problem is…this is no normal recession. The momentary lightening in mood and weather is simply the eye of a Cat 5 hurricane passing overhead.

    The monumental ass-kicking shall resume shortly. No one will be spared.

  99. The eye wall of that Cat 5 hurricane is your property tax bill.

  100. Fabius Maximus says:

    #65 Lib

    “Having moved from a large town to an itty bitty town, I believe consolidation is the devil. Get rid of the counties and you would save 20% easy.”

    Let me put in these terms
    Glen Ridge
    Population : 6600
    PD Dept : 28 Staff , 22 officers.

    Population 37000
    PD Dept : 127 Staff , 106 officers.

    My town
    Population 4800
    PD dept 10 officers

    Now my town doesn’t have a lot of 25×50 or 50×100 lots so it’s a lot bigger than GR, so how do you justify the size of GR PD outside of “that’s what we’re paying for!”

    Montclair could absorb GR PD without breaking sweat.

    You are paying for

  101. Fabius Maximus says:

    #106 cont

    You are paying for the luxury of your over sized municipality. I am all for consolidation, because there is always economies of scale. Do you need both chiefs. Put both PD’s together and blow the GR spend on the mid tier detective level were you will see a better bang for the buck.

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