Wednesday, October 12, 2005

Northern NJ Weekly Inventory Update

Weekly Inventory Update for 10/5/2005 - 10/12/2005

GSMLS

Total
10/5 - 12611 10/12 - 12745

Bergen
10/5 - 833 10/12 - 852

Essex
10/5 - 1918 10/12 - 1934

Hudson
10/5 - 100 10/12 - 97

Morris
10/5 - 2540 10/12 - 2568

Passaic
10/5 - 1408 10/12 - 1425

Somerset
10/5 - 1677 10/12 - 1711

Sussex
10/5 - 1560 10/12 1572

Union
10/5 - 1767 10/12 - 1777

Warren
10/5 - 808 10/12 - 809

NJMLS

I had issues with the NJMLS service on 10/5, so my last datapoint is 10/4. Please realize that my figures include an additional day.

Total
10/4 - 5542 10/12 - 5675

Bergen
10/4 - 4005 10/12 - 4106

Essex
10/4 - 381 10/12 - 393

Hudson
10/4 - 382 10/12 - 382

Passaic
10/4 - 774 10/12 - 794

(All figures are Residential Single Family, Condos/Townhomes. Multifamily residences are not included in these figures).

I'll let you all draw your own conclusions from the numbers.

Caveat Emptor,
Grim

39 Comments:

Anonymous Anonymous said...

timbeerrrrrrrrrrrrrrr!!!!!!

10/12/2005 01:44:00 PM  
Blogger grim said...

Mortgage rates rise again

Seems that Greenspan's conundrum is beginning to slowly resolve itself. Bond yields have been on the upward move (almost across the board) lately, the 10Y is up to 4.44 today. I don't even believe this weeks mortgage update includes the recent movements we've seen, so expect mortgage rates to increase next week as well (and likely into next year).

I'm going to firmly stand my ground at 30Y fixed rates in the 7's next year.

-grim

10/12/2005 03:17:00 PM  
Anonymous Anonymous said...

If your 7% target is hit next year bewteen the higher rates and tougher/normal credit standards, the housing market is toast.
7% mtgs with conventional mortgages will require prices to just collapse down.
many using risky mtgs to get in at these crazy prices. No more crazy buyers due to no more crazy loans = home price pummeling.

10/12/2005 04:00:00 PM  
Anonymous Anonymous said...

I bid on a house this weekend; 20% less than ask. The seller snubbed the bid. According to the seller's realtor, they were insulted. I responded by saying i was insulted by the price that is about 85% higher than 5 years ago. I was not going to be stuck holding the bag losing money while they have made a fantastic return.

10/12/2005 06:36:00 PM  
Anonymous Anonymous said...

by the way the house was asking $499k and about 45 years old. Basic junk.
$400k was my insulting bid. After a few days of contemplation I wouldn't bid anymore than $325k for the crap box.
As a matter of fact they can shove it.

10/12/2005 06:40:00 PM  
Blogger grim said...

A little daily hotsheet update..

New Listings 129
Back on Market 30
Total Added 159

Sold 72

Price Changes 131 (Almost entirely reductions).

Alot of very interesting big number reductions, some as large as 10%. I am even starting to see reductions in towns that typically saw overbids (Chatham, Madison, South Orange, etc)..

Caveat Emptor!
-grim

10/12/2005 06:58:00 PM  
Anonymous Anonymous said...

Thanks for all your hard work on this blog. My wife and I have been seriously in the housing market since July and have been observing the dropping of prices steadily in the Morris County area. However, interestingly enough, the town that we truly want to move into has NOT experienced a reduction in asking prices. Rather, the sellers seem content to keep the listings open at the original listing price. Is there a rational explanation for this phenomenon?

10/12/2005 07:28:00 PM  
Blogger Grim Ghost said...

I know that day-to-day numbers are very volatile, but is there any significance to the number of homes coming back on to the market ? Maybe buyers are finding themsleves rejected for loans because lending standards are tighter.


Or maybe buyers are using inspection problems to try to back out of deals they think they made in haste ?

Or maybe this is just normal :-)

10/12/2005 07:56:00 PM  
Blogger grim said...

In what towns have you been looking?

There are still towns in North Jersey where bidding wars and paying thousands over asking are commonplace. I think a few of us on here have mentioned some of them. Some of these towns are 'prestige towns', you know, the places where noses are held a little higher than others. These folks will come up with hundreds of reasons why their real estate will hold value, but everything else will collapse around them.

It's going to take a long time for psychology to shift. My guess is this is going to be measured in years, not weeks or months. July really wasn't all the far away.

Maybe you can take some solace in the fact that it's the places where people hold out the longest, that get hurt the worst. Instead of dropping the price quickly now and cashing out of the market, people in these places hold out until the bottom has fallen much further.

I don't ever expect anyone (except myself) to follow my advice. But you certainly aren't missing any boat. We're heading into what looks to be a very slow winter season. The absolute worst case scenario? You'll have more of a choice of overpriced homes to choose from..

Whatever you do, buy sensibly and buy carefully.
grim

10/12/2005 08:02:00 PM  
Anonymous Anonymous said...

I was discussing Long Valley earlier. It doesn't seem to be pretentious, the way that Chester or Mendham can be, but there does seem to be a desire to continue to price homes at the very top of the scale. I am determined to wait out the market for a sensible price! It just does not make any sense for me to pay astronomical asking prices for houses that are simply "nice."

10/12/2005 08:51:00 PM  
Anonymous Anonymous said...

What's a sensible price?

How many times your total income you willing to pay?

Currently and for last 3 years prices have been insane. So how much of a fall makes them sensible?

10/13/2005 06:52:00 AM  
Blogger NJGal said...

Anon at 7:36, can you see if you can follow that house, just out of curiosity? I am not familiar with Long Valley, but I think it would be interesting to see what it goes for after your "insulting" offer. I think that was a good grassroots effort to bring things down a notch!

10/13/2005 07:45:00 AM  
Blogger grim said...

Bond Yields up again today, the 10Y hit 4.49 a little after 9am this morning. The market was spooked a bit by this mornings economics reports. Tomorrow is a big day on the calendar, if the CPI numbers come in above or at estimates, it'll all but seal the deal (in my mind) that short rates are going to increase at the next 3 fed meetings and 30Y fixed mtg rates won't see sub 6% again for a long long time.

10/13/2005 08:54:00 AM  
Blogger gravitymatters said...

just came across this blog & am happy to know I'm not the only one in great state of NJ that thinks prices are ripe to fall.

my wife & I have been trying to find a home ever since we sold our condo in June (currently renting).

we've been focusing in morris county & last month made a 735k offer on a 790k home in Montville.
we have been the only offer (according to realtor) & the house continues to sit today (no price reduction yet).

owners/sellers are still stubborn in the face of less willing buyers due to rising rates, taxes, energy, food, healthcare etc (not to mention prices doubled in less than 5 yrs).
these dumbasses don't yet get it, but i'm sure they will soon.

anyway, maybe this for the better. my wife who had been brainwashed into thinking RE only goes up & renting is throwing money away, is now starting to see the light. all of a sudden renting doesn't seem like such a bad idea to her.

AMEN!!!

10/13/2005 10:07:00 AM  
Blogger grim said...

Home prices are going to need to come down at least 30% to be in line with norms.

How did I come up with 30%? A number of ways, but somehow this keeps coming up. It almost seems like it is a 'magic number'.. or is it?

If we go back to say 2001 or 2002, and increase prices for a slightly elevated yearly inflation rate (say 5%). Todays median price would need to fall by about ~30% to come back into line.

If you look at the gaps between wage growth and home appreciation, again, you find that same ~30% haircut necessary.

If you look at the gaps between rent and cost of owning, again, you see similar numbers emerge, again, need to drop some ~30%.

Why does this seem like the magic number? Because the fundamentals (wages, inflation changes, rents) have been increasing at a very similar rate, while home prices have been detached from fundamentals, rocketing sky high for no reason other than speculation of further increases.

(note, I'll put together some actual calculations with references to illustrate my claims, until then, please just take this as anecdotal).

Caveat Emptor,
-grim

10/13/2005 10:21:00 AM  
Blogger pascackvalley said...

grim: I do not think it is going to take years, but rather months, the change in my area in BErgen county from the ealry summer to now, is incredible.

Grant it I agree, some price drops are nickle and dime stuff, 10K on a 500K crap box, but the fact that they are reducing is IMHO big news, other price drops have been 10% or more.

I have been following closely, houses that closed in my zip code in early Spring, are now underwater.

Due to the absolute mania over the last three years or so, I think the market is going to fall hard and fast, I think we could easily be back to mid 03 prices by this Spring.

10/13/2005 10:22:00 AM  
Blogger InvestorDavid said...

I bet the price will come down 30% by this time next year and move laterally for 6month to 1 year.

As Grim said, if there is 5% appreciation over last 5 years, it's compounded at about 27%. Price went up about 80% over the last 5 years. So $100K house should be at $127K now. But the price is at $180K. So if you take 30% off (54K), the price becomes $126K. Yes, 30% is the magic number.

I have been buying gold whenever it drops below $470.

Due to inflation fear, I bet Gold will break $500 soon and when it does, watch out.

10/13/2005 10:33:00 AM  
Blogger InvestorDavid said...

Also, watch out for Palladium and Silver. I bet Silver will break $10/ounce within 3 months.

I wonder how competitive it will be to get into foreclosure market once the RE market take a dive.

Will there be many people lining up to buy foreclosure or REO properties? or would it be an easy picking?

10/13/2005 10:35:00 AM  
Blogger grim said...

It's going to take years. If prices drop significantly and quickly, buyer psychology might view this as a bargain and buying opportunity. Thus, we'll likely see a nice upwards spike in home prices as sellers think the mania is back on (i.e. dead cat bounce).

It won't be until there is real pain felt that buyer psychology shifts (i.e. why try to catch a falling knife?).

What will cause pain?

1) Tightening lending standards cutting back on buyer demand.

2) Increases in both short term ARM and long term mtg rates.

3) ARM recasting into significantly higher rates putting pressure on over-leveraged owners.

4) ARM holders unavailable to refi after their period due to the fact that new assesments don't justify the mortgage amt.

5) Proposed changes to the tax codes that would cut down the mortgage interest deduction from 1 Mil to ~300k. (this will be the last straw, it will all but destroy amateur speculators).

6) Elimination of the cap gains deduction on second and vacation homes (this is a wish list from myself).

grim

10/13/2005 10:37:00 AM  
Blogger gravitymatters said...

"I have been buying gold whenever it drops below $470.

Due to inflation fear, I bet Gold will break $500 soon and when it does, watch out."


I used to be firmly in the hyper-inflation camp, but now i'm not so sure.

I do still believe commodoties are good short-term trades (probably a spike coming with all the recent FED talk of inflation), but not so convinced looking out a year from now.

whether a falling RE market causes a recession or a recession causes RE to fall (the old chicken or the egg analogy), with all the excess dollars slushing around due to tremendous leverage in the system (the derivatives market alone is mind-boggling), when asset & bond prices start going the wrong way in force, those dollars will go to money heaven very quickly.

in a USA led global recession, there will be millions of indentured servants to the banks walking around with no appetite for more debt even if rates go to 0% (assuming they could even get approved in a tighter credit environment).

heavy debts & massive job losses will most likely lead to deflation. thus commodity prices will ultimately pull back again & certainly wages will not grow quickly (if @ all), which is a signature characteristic of hyper-inflation.

also...if you believe inflation is going to run wild, RE prices will not drop nearly as much, since our dollars will be worth less.

10/13/2005 10:58:00 AM  
Blogger pascackvalley said...

grim: Again I respectfully diagree, but assuming you are right. What do you think current renters who want to buy should do?

I myself for many reasons do not want to wait another 5 years.

I have a 20% plus down pymt, closing costes, and a wad of cash left over.

I was thinking that if prices got back to areound mid 2003 levels I would probably buy, ans take my chances from there.

10/13/2005 10:58:00 AM  
Blogger InvestorDavid said...

gravitymatters,

1. I don't think inflation will run wild. Feds will try to contain it by raising interest rates even higher. Ergo, falling price in real estate. In addition, RE had a nice run for the past 5 years -- around 80% in Bergen County. The correction of 30% is due.

2. Gold price will go up due to inflation fear. Increase price of natural gas and oil will feed the fear upon mass psychology. As for palladium, I was studying the chart and I think it's time for a break-out soon.

10/13/2005 12:15:00 PM  
Blogger InvestorDavid said...

pascakvalley,

I have a similar problem. I have been getting rid of my real estate holding and converting to cash.

One idea I came up with was investing in Gold, silver and Palladium. I so far put 5% of my cash reserve into precious metal and plan to put 5% more.

The other cash, I put into CD. I just renegotiated with my bank yesterday and currently getting 4.75% with the option to pull out any time without any penalty (meaning, I get all the interest accrued until the time I pull my money out from CD).

I have been looking into real estate foreclosure and REO (bank owned properties). I will start buying foreclosures and REO properties when the price start dipping 20%-25%.

If I were you, I would sit tight. Just rent it until the price comes down between 20%-25%, then buy it.

How long will it take? The longest you have to wait is about 2 years as many IO/ARM contracts are due in next 2 years. There will be massive amount of IO/ARM due in 3-4 years. But in the mean time, people might panic and start lowering their price massively starting next Summer (my educated guess).

10/13/2005 12:21:00 PM  
Blogger grim said...

Buy when you find something you like at a price you feel is fair. Keep your eyes open and think with your head, not emotion. Be prepared to walk away from a house you love because the price is high.

I have multiple agents, I still look at homes regularly. I've made bids on homes (only to be overbid excessively), no sweat off my back. Do I want to get into a home I really love soon? You betcha, but I will not leverage myself to the hilt and risk my future because of it. The thing that always changes my mind is realizing how much spare cash I'll need on hand to cover a 400k mortgage should I or my wife lose their job, come into financial distress, etc. Secondly, I question whether or not I'm going to stay in this area in the long term (10 years or more). This factors into my decision heavily, should there be a steep decline, I'd prefer not to be underwater on a mortgage or lose a huge amount of my hard earned down payment.

There is no sense trying to time the market or try to get in at the absolute bottom, but like I've said before, I'm not so sure about buying in at the absolute top either. While I don't know when the bottom will be, I do know with some certainty that we've hit the top.

Caveat Emptor,
-grim

10/13/2005 12:21:00 PM  
Blogger grim said...

30-Year Mortgage Rates Top 6 Percent Level

"Frank Nothaft, chief economist at Freddie Mac, said he expected mortgage rates to keep rising gradually in coming months and predicted that the 30-year mortgage could hit 6.4 percent in early 2006."

-grim

10/13/2005 12:32:00 PM  
Blogger pascackvalley said...

Grim& investor: Thanks for your reasonable and rational response.

I have to saty in the area for a tleast another 10 to 20 years, so on that fact I am limited.


I too do not want to take a reckless chance in this environment, but again the change in my Bergen co town since the Spring/Summer has been huge.

I do not expect to catch the bottom, but would certainly have no problem bidding 10 to 20% less than asking price, and if rejected, than simply walk away.

If my bid is hit, and I buy, I reun the risk of a further decline, but would have the cash to withstand that. In fact at this point, even if IC ultimately ggot what I paid for it, I would probably be OK with that, as opposed to renting long term.

I believe the marekt in Bergen Co once the bottom is reached will stay flat for years, hell I lived through the last down turn and remember it well.

As I said I think the psychology has turned quickly, and like I always say to uber Bulls, if prioces can rise 20% in a year, why can't they fall 20% in a year. Peace.

10/13/2005 12:39:00 PM  
Anonymous Anonymous said...

Prices can go up 15-20% a year but can't fall 20% in a year. Bologne.

I expect a 30% drop in next 16 months. Then I will bid less than that and be "greedy" homebuyer.

TC

10/13/2005 01:03:00 PM  
Blogger Richie said...

Came across this old article, not sure if someone posted it already.

http://money.cnn.com/2005/09/19/real_estate/buying_selling/price_declines/index.htm

What goes up... must come down..

10/13/2005 01:05:00 PM  
Blogger InvestorDavid said...

Grim,

how about a NEW Thread about "how to make money when the bubble bursts"?

Or how to make money while waiting for the Bubble to Burst?

If I can, I would love to Short the House. :) (but don't want to get into stock market).

10/13/2005 02:31:00 PM  
Blogger InvestorDavid said...

An interesting quote

"Clearly there is a momentum towards gold at work. It is flirting with $500 and the indications are it should go through it. That will be a worldwide headline and will attract more buyers," said David Kotok, chairman and chief investment officer of money management firm Cumberland Advisors in Vineland, New Jersey."

"Small increases in global central banks' and other major accounts gold holdings could have a major effect on the relatively small gold market, analysts say.

For example, many of the world's major oil exporters are big gold bugs and as oil prices rise their soaring revenues are likely to magnify demand for the yellow metal.

And as spiking energy prices put upward pressure on global inflation, the precious metal is gaining added attraction as a classic inflation hedge."

10/13/2005 03:38:00 PM  
Anonymous Anonymous said...

You can just feel the desperation building as those leveraged up to their eyeballs change course.
Jim

10/13/2005 04:03:00 PM  
Anonymous Anonymous said...

Found this web. Thank god. Tired of hearing people who own a house tell me prices are not high. Lets see if they say this in a year. HA.

10/13/2005 04:05:00 PM  
Anonymous catswamper said...

This is a great site.
I am in Warren county and am seeing houses taking longer to sell based on how long the for sale signs remain on the lawns.

My parents just sold in Mount Olive. Small 4 bedroom ranch,nice lot on a dead end. Asked 380k and got it within 2 days.That was July. The deal fell through and they relisted...had to settle for 360k Last month.

No dought many are buying more then they can afford. I have a friend who is a cop in Mount Olive and he tells me of patroling these new developments with all these huge houses with big windows all lit up at night.funny thing is he says there is very little furniture in those rooms!

I actually read in some magazine a quote from an finance guy "If your not taking the equity in your home and using it for other investments you are unsophisticated"

I bought my home 4 years ago with a 30yr fixed at 7%.refied down to 6% at 20yrs then did it again at 4.75% at 15yrs.

Hey one question,how many sq ft to qualify for a McMansion?

10/14/2005 12:54:00 PM  
Blogger InvestorDavid said...

McMansion?

I thought it was over 3000 square feet about 10 years ago. And maybe 5 years ago, it was 4000 square feet.

Now I see so many new houses with over 5000 square feet.

Just my humble opinion.

10/15/2005 09:14:00 AM  
Anonymous Anonymous said...

Normally you would think inventories would be dropping going into holiday season?

TC

10/16/2005 10:41:00 AM  
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