I Don’t See the Appeal
The Gold Coast (the Jersey side of the Hudson River) has seen a ton of development over the past few years and there are lots of new projects in the works. Some of the projects look like good ideas, in particular, those developments along the Hoboken waterfront including the Shipyard, the Tea Building and probably eventually the Maxwell House when it is finally built. I think these projects will retain most of their value when the bubble bursts since they are close to public transportation, restaurants and amenities that are more like New York than Newark.
Although these developments seem to offer a reasonable amount of value, I think that other projects further west in Hoboken, many Jersey City buildings and some points north of Hoboken look extremely risky. The condos that have been built on the west side of Hoboken over the past three years seem to have been specifically constructed to satisfy a perception by many twenty year olds that they must own rather than rent. In other words, the fear of being priced out of housing for ever led many young people to buy $500 thousand condos on Adams Street only because that is what they could afford. Never mind that Adam’s street is conveniently located next to nothing, and a walk to the ferry or the Washington restaurants means you have to pass through some questionably safe housing projects. If the fear of getting priced out forever wasn’t so rampant in 2004, 2004 and early 2005, then I seriously doubt many of those western Hoboken condo projects would have been planned and/or built. Those new condos in the west half of Hoboken are going to become pretty cheap rentals in a few years.
The residential buildings that are going up in Jersey City look even more confounding from an investment point of view. Although buying an investment property might have some appeal in Hoboken because of a lack of developable lots, one block in from the Jersey City waterfront is a vast wasteland of empty lots and derelict warehouses that could be made into condos that could house hundreds of thousands of Merril Lynch and Goldman Sachs back-office personnel from now until whenever the next Wall Street crash occurs. In short, Jersey City probably has enough developable property supply to satisfy whatever demand might arise for years to come.
little_silvered
Jersey Shore Bubble Blog
Although these developments seem to offer a reasonable amount of value, I think that other projects further west in Hoboken, many Jersey City buildings and some points north of Hoboken look extremely risky. The condos that have been built on the west side of Hoboken over the past three years seem to have been specifically constructed to satisfy a perception by many twenty year olds that they must own rather than rent. In other words, the fear of being priced out of housing for ever led many young people to buy $500 thousand condos on Adams Street only because that is what they could afford. Never mind that Adam’s street is conveniently located next to nothing, and a walk to the ferry or the Washington restaurants means you have to pass through some questionably safe housing projects. If the fear of getting priced out forever wasn’t so rampant in 2004, 2004 and early 2005, then I seriously doubt many of those western Hoboken condo projects would have been planned and/or built. Those new condos in the west half of Hoboken are going to become pretty cheap rentals in a few years.
The residential buildings that are going up in Jersey City look even more confounding from an investment point of view. Although buying an investment property might have some appeal in Hoboken because of a lack of developable lots, one block in from the Jersey City waterfront is a vast wasteland of empty lots and derelict warehouses that could be made into condos that could house hundreds of thousands of Merril Lynch and Goldman Sachs back-office personnel from now until whenever the next Wall Street crash occurs. In short, Jersey City probably has enough developable property supply to satisfy whatever demand might arise for years to come.
little_silvered
Jersey Shore Bubble Blog
9 Comments:
Basically the Jersey City Waterfront and Hoboken waterfront both have the potential to retain their values well. The Shore Club project in Jersey City looks good too.
Beyond the waterfronts of both regions, anything goes.
How about Ichabod's Landing in Tarrytown, Riverbend in Peekskill and halfmoon bay in croton on hudson. They are outragiously exorbitant. Do you think these developments have the potential to retain their value? The condo in Ichabod are in the 1 million and up.
Rentinginnj
"I’m not so sure that I agree with this. These places were close to NYC, transportation, restaurants and other amenities prior to bubble."
I should have been more clear in my original post. I meant that these places (the Hoboken Waterfront developments)should retain there value better relative to the projects on the western edges of Hoboken. Overall though, I would expect prices to fall in NYC and the Hoboken waterfront but most severely in projects further west.
I also think that some of the Weehawken and Edgewater condos that have been built or are going to be built look very sketchy.
I would expect prices to fall in NYC and the Hoboken waterfront but most severely in projects further west.
What is your projection on all these high price condos in the Rivertowns in Westchester? They are building more in Ossining. I think two developers were bidding for the right to build.
Development is just beginning in my neighborhood in Union City (the end of the Viaduct). Rumor has it that neighbors have been offered $4 million for their houses on the cliff. New lofts are starting at $600 and go to 1.3 million (the view is not so great). Apparently most of the lofts are under contract. I can't understand who these buyers are.
I get my biggest laugh when I see ads on Union City, West New York or North Bergen towns "Meadowlands Views". Why on Earth would anyone want to look at this so called view -- ugly warehouses, overcrowded streets, smog, old factories, strip malls, overcrowded houses.
Personally, I doubt very much that there are enough real buyers (not investors) for some of these new properties. You are paying the same amount as Edgewater, but you get lousy school systems and high taxes.
NJGal -
What's your sense on the construction quality of these $600k condos?
These projects are going up FAST and all seem to have the same metal stud construction (aluminum?). I've talked to someone in a newish place on Monroe who says it's really loud inside - cars, neighbors, etc. And already I see repairs being made to the facade of that turret castle by Columbus park. WTF? It's what, three years old?
I have the growing sense that the builders are just slapping up what they can while they can with no sense of whether these buildings will last until the next decade.
Also...while I will agree that 20-somethings shouldn't be buying, can you blame Jason and Jennifer when First Nat'l Bank of Dad is underwiting no-doc loans because "my kids deserve the best?" With that kind of subsidy, financial risk drops to nearly zero.
Gotta wonder too how much of these shenannigans goes on here...
(from AnotherF'edborrower.com)
"BUT, I will never forget the day it 'hit me' like a 'stack of t-boxes'. I had a file where the borrowers DTI was off the charts. There was no way they could or should be buying a house with their income. My manager told me to just state the income needed to DTI so that we could get the approval out. The broker and the bwr could decide if they wanted the loan the way it was conditioned. I had to state $2000 a month MORE than what was sent in with the file. I remember asking, how can we do this deal? The bwr only makes "x" per month, and we are having to state $2000 a month more than that for them to qualify. 'How are they going to make that payment?' ....I asked. Just do it, if they want the loan, and will find a way to make the payment. Ok, I said."
"Would you believe me if I told you that almost every landscaper and housekeeper in SoCal is making 6-figures?!?!? No, you don't believe that?!?!? Well, they do. They all have CPA letters that 'verify' the income stated for their loans."
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