Thursday, February 16, 2006

Star-Ledger Comments On Median Home Price Survey

From today's Star-Ledger:

Recent home-price report has ups, downs
by Sam Ali

Quarterly survey has fuel for optimists, pessimists

For the "glass is half full" crowd, the quarterly, home-price report released yesterday by the National Association of Realtors was impressive.
On the other hand, the "glass is half empty" crowd had plenty of ammunition, too.

Median home prices in many regions fell when compared with the previous quarter. On a seasonally adjusted basis, the median home price in the Northeast declined 3 percent, to $243,150 in the fourth quarter from $246,640 in the third quarter, said Celia Chen, director of housing economics at, a research company in West Chester, Pa.

Seasonally adjusted prices? Sorry, those numbers just don't illustrate anything Sam. The Median Sales Price in the Northeast fell to $240,300 in the fourth quarter, a drop of 3.6%. The fourth quarter Northeast numbers also fell below the first, second, and third quarter numbers, so while prices were up year over year, they were down for the year.

"I've been saying all along there isn't a housing bubble and that the market will ease but it will stay healthy," said Dominick Prevete, regional vice president for northern New Jersey at Morris Plains-based Weichert Realtors. "But I think those people who have been beating their chests about the housing bubble bursting will find something in this report to say 'Ah-ha, it's happening!'"

Are you serious Dominick, "those people who have been beating their chests"? Who are they? Is it the first time homebuyer that is planning on taking out a risky neg-am I/O loan to afford a home? Is it the homeowner that has been convinced to buy an investment property in Florida? The person that took out a mortgage on their home to buy a home at the shore, all the while knowing they can't really afford it. Is this some kind of you-versus-them game Dominick? These are real people here, these are real lives. You seem to put very little stock in the fact that it's very possible that many lives will be ruined here Dominick, many lives. And you know what Dom, I've already showed the precident for it, the 1980's bubble and burst. I suppose that was the past, and this time is different.. Right?

Dominick, you give no basis for your outlook, yet you continue to peddle it. Your argument is as follows: "Real estate did well in the past, thus, it must continue to do so." Sorry, but past performance does not guarantee future results. When this is finally over we will see national legislation barring real estate brokers and agents from making predictions or promises of future appreciation. Do you think Dominick reads this blog? I do.

Nationally, existing home sales, which include single family home and condos, rose an ever-so-slight slight 0.3 percent compared with last year. And if you dig a bit deeper, fourth-quarter sales in the Northeast actually declined 2.7 percent and an even bigger, 7.7 percent in New Jersey, year over year, the report said.

I thought prices never declined?

"Sales are slowing and it is taking longer for people to move their homes," Chen said.

Everyone is seeing the same slowdown here in New Jersey.

Still, Ken Baris, president of Jordan Baris in West Orange, said he remains an optimist about the residential real estate market in northern New Jersey.

"All along, we have gone out on a limb and we have been saying we don't believe we are in a bubble," Baris said. "At this point, we have seen one of the most incredible runs, maybe in real estate history, and the market has been extraordinary. Is it slowing a bit? Yes, but we don't see the bottom falling out."

We're all out on limbs here Ken, So state your reasons and back it with something tangible, not opinion.

The strongest gains in the region could be found in the New York City-Wayne-White Plains area of New York and New Jersey, where the median price of a home soared 19.2 percent, to $537,300.

Can't argue with that, data shows a peak in Q4.

In the Edison area, a four- county span that includes Middlesex, Monmouth, Ocean and Somerset counties, the median home price rose 11.9 percent, to $384,600 compared with a year earlier.

Edison hit a peak of 394.1 in the second quarter and has been declining over the second half of the year.

Home prices in the Newark metropolitan region -- a five- county span that includes Essex, Union, Morris, Warren and Sussex -- rose 14.5 percent, to $427,600.

Newark metropolitan region hit a peak of $446.8 in the third quarter, declining 4.5% in the fourth.

Caveat Emptor!


Blogger grim said...

What are the odds that Mr. Prevete appearing in print has something to do with the advertising revenues of the papers he appears in?

Something to ponder.


2/16/2006 07:02:00 AM  
Anonymous Anonymous said...

To me, the biggest surprise of all this:

No newspaper has done a story about all the blogs devoted to the housing bubble. Don't you think there's one journalist out there who finds this interesting?
Full admission: I am a journalist. I used to work in newspapers, but not in business (or real estate). Currently in magazines.

And I KNOW journalists are surfing the web for ideas, trends, etc, ALL THE TIME.
Surely they have come across this blog, or others like it.
And the story the public NEEDS TO read is about blogs devoted to the housing industry, and why you guys are linking the stories you are a linking. (And they need to learn how to save, but that's another story).

The only problem I can see: There's too much doom and gloom here. Everything is very, very negative (well not necessarily here, but on other housing blogs).

It's as if many of these blogs WANT the housing bubble to pop. It's as if the blogs WANT people to suffer, and want blood in the streets.

I read lots of snarky comments, and lots of laughs ... but I don't read ANY solutions. Why do you think that is?

again: Love this blog and the housing blogs, there is unbelieveable information in them.

2/16/2006 08:45:00 AM  
Blogger grim said...


Please an email to the following journalists and ask for a story on the bubble blogs.

Robert Gebeloff

Prashant Gopal

Dave Sheingold

Sam Ali

These are all regulars on the NJ real estate scene.


2/16/2006 08:57:00 AM  
Blogger Metroplexual said...

Anonymous Journalist,

I agree that there is a story in covering blogs. The problem is that RE is a big business and the papers do not want to bite the hand that feeds them (think friday and sunday RE sections).

Damon Darlin gets many of his ideas fro the NYT RE blog "The Walk Through" from bubble blogs. He of course is pro RE because it is in the NYT interest to be so. He regularly snaps on bubble blogs.

As for the doom and gloom, many of us are not looking forward to what is coming at us as a nation. While we have had bubbles in RE before, this time it feels very different: bad different. Like the hangover from this party will be like it never has been.

The country has gone into gambling mode, first dotcoms then RE, where do we go next? No this is not schadenfreude it is people questioning why housing prices are where they are and the psychology of the people buying. I think your confusing critical thought with negativity.

I will concede that some comments are snarky and there are some people who do wish ill of others. But it is my opinion that alot of the bloggers just want a house at a price that reflects the fundamentals and not the price a mania creates. And just to keep things in perspective sometimes the comments are just for humor especially because the topic is so gloomy.

2/16/2006 09:39:00 AM  
Blogger Richard said...

you forgot another topic of gambling which i believe has the greatest ability to bring down the entire system. it's called the derivates market and right now it's $12.5 trillion and growing. this is unregulated and who the heck knows what will happen if say a GM defaults and you have to unwind all the positions. i believe this one will start the snowball rolling downhill and will take everything else with it.

2/16/2006 10:10:00 AM  
Anonymous Anonymous said...

The blogs have opened up the world. Dan - I hate Bush - Rather would of been able to continue his evil plot against the govt if not for blogs.

The NAR would have us think that home prices increase 20% a year and that they really need a 10% commission.

Bottom line is that information is power. And you do not need newspapers for this informaiton. If you get the sheets on houses they only go so far but the information is out there.

So why would a newspaper let others know of better informaiton sources? Why would a newspaper that has those big Sunday sections on homes say " The market will crash for houses"? They will not, but if they say small decrease they are covered.

IMHO, metro and rich are right.

The issue is not we want to see the streets run with blood but we are saying that there are allot of factors at work and we do not agree with what others are saying. We use facts that we gain as a group. These facts allow us to be better informed. We may not be right but we are doing the research.

I for one believe that this using homes as an ATM is going to be the start. Then when there are some people selling rather than foreclosure more and more will hit the market. Simple supply and demand then takes hold.

Americans have way too much debt, pension plans are a thing of the past, and people are thinking that if they listen to some guy selling books they can be a million dollars richer.

Bottom line is that if you add the geo political issues we are ripe for something to hit us in the pocket book. Now, we may all be wrong but it is our decision.

One last point, as I ramble, I like the comment about the SEC broker siutation vs the real est. broker. it would be VERY interesting to see the liability if a agent PROMISES 15% increase in value. That has to be illegal..

Well anyway, I enjoy this blog and the information and the people on it are good. Cigars and beer all around.

As always - GO GRIM


2/16/2006 10:30:00 AM  
Anonymous Anonymous said...

Just wanted to comment as to why people would buy in these crazy times: life.

Sometimes another kid comes along, or a first kid comes along, and people decide they need a home.

People don't live forever, and waiting 5 years for the market to 'normalize' is not a realistic option for many.

Not everything is done for financial / investment reasons -- but clearly a lot is, and clearly homes cost far too much in relation to incomes.

2/16/2006 10:42:00 AM  
Blogger grim said...

Anon @ 10:42

I don't agree with your assessment at all.

Sometimes another kid comes along, or a first kid comes along, and people decide they need a home.

I didn't know owning a home was a prerequisite for having or raising children. Why do they *NEED* to buy a home? Think about what you are saying.

Is your argument House versus Apartment or is it Rent versus Buy?

Take a condo versus an apartment? Not much difference in many cases, at least as it applies to raising kids. The same goes for townhomes.

As for rent versus buy, there are plenty of homes available to rent, cheaply I might add. In fact, currently, it is actually cheaper to rent than to buy, this is a radical departure from the past. Anyone who purchased real estate for investment purposes to rent recently is basically subsidizing your rent.

People don't live forever, and waiting 5 years for the market to 'normalize' is not a realistic option for many.

What is the rush? Why isn't it realistic? This is just another example of the gotta-have-it-right-now mentality. Who cares about saving up for a 20% down payment or buying something affordable. Give it to me now, and give it to me big.

Why, exactly, isn't 5 years realistic? That just doesn't make any sense at all. In the past people waited until they had the downpayment and wage to afford a home. Now? Fiscal responsibility thrown by the wayside.


2/16/2006 10:55:00 AM  
Anonymous Anonymous said...

anon 10:42

That is correct but there is a hype factor that the folks on this board are talking about.

Also many things can change in 5 years. A home is a place to live but the burden of ownership could place ones family at risk.

Any couple with 2 kids looking for a home that is not fully informed and what to do the best for their kids and family may not be getting advice based on their best interest. In short, there really may be people that want to line their pockets more without regard to the needs of their customers.

On the way to my office there were 3 radio ads for mortgages to pay off credit cards and other debts. This will be an issue. Why? Because they will continue to spend over what they make. Yes, we learned a lesson from Congress but we cannot just print money.

As for waiting, again 5 years is a little long. I think that the decrease in prices will start showly and then will pick up as sellers know they need to sell.

So with the 2 kids, which I also have, I would rent. I checked rentals in Morris Cty and they are pricy but they also have been sitting which tells me that there is room to get a cheaper rent.

This year things will start and 2007 , in the spring, will be the dumping period IMHO. This boat is not going to sink fast at first.

Keep the comments coming. The more informiaton the more we learn.


2/16/2006 11:02:00 AM  
Anonymous Anonymous said...

Great post over at HousingBubbleCasualty today:

2/16/2006 11:37:00 AM  
Blogger chicagofinance said...

"Richard said... you forgot another topic of gambling which i believe has the greatest ability to bring down the entire system. it's called the derivates market..."


I apologize and I should show some circumspection, but I have to politely and strongly disagree with your comments. Derivatives allow people to mitigate risk; incompetence causes havoc. The proper use of derivatives is to identify an exposure and use instruments to refine exactly how you want to face it. The fantastic blow-ups that have been publicized create the wrong general perception.

A car is not dangerous, but driven aggressively with confidence by someone from Hawaii in icy conditions can cause an accident.

2/16/2006 11:39:00 AM  
Anonymous Anonymous said...

Grim 10:55 AM,

We have the 20% down payment (plus extra), and are looking at 30-year fixed mortgages @ 6.0%.

But houses with good schools, and a commute into NYC that's less than 60 minutes (e.g., Summit), are priced completely insane.

I don't see any houses for rent in Summit (for example), only small apartments, and who wants to raise a kid in a cramped apartment?

In fact, we have already been waiting 5 years, and see no light at the end of the tunnel (except for the past few months, but the houses aren't dropping much, and they're selling quickly). A 10% drop for a $700K house -- $7,000 -- doesn't help much.

We can probably wait another 6 months to a year, and then either move out of state, or enter the insanity of buying a $700K+ home.

2/16/2006 11:50:00 AM  
Blogger Richie said...

10% of $700k is $70k.

2/16/2006 12:15:00 PM  
Anonymous Anonymous said...

Oh Grim,
Don't be so perplexed over what Anon with 2 kids said... it was just his opinion.
It's my exact opinion as well. I also have 2 kids, own a house in Southern Bergen Co, but I want to get into a town with better schools before school starts in September and that's why waiting 5 years is unrealistic for us too. I am in no way looking for a mcmansion and after the sale of my house will have a downpayment of about 50%. And I'm not even looking above $600 but you get nothing for that in Northern Bergen County. That's why when something halfway decent comes along, you jump at it.


2/16/2006 12:27:00 PM  
Blogger grim said...


I really hope, sincerely, that your $7,000 figure was a mistype, and not a miscalculation, although the fact that you said "doesn't help much", makes me think that it wasn't. I don't know anyone who would say a $70,000 reduction "didn't help much".

The number I have said before, and will continue to stick with, is a 30% drop in Northern New Jersey. That puts your $700,000 house at $490,000 when all is said and done. In fact, I've actually considered raising my 'official' estimate to 35%, although I'm going to hold that back for now until I see more data to support that.


2/16/2006 12:56:00 PM  
Blogger chicagofinance said...


You are better off paying for the best private school in the area rather than making a costly mistake from which you may not have the means to recover.

You should be able to afford something good for $1500/month. Compare that figure to the additional carrying cost of a requisite home where you wish to be.

Bear in mind, we are due for a statewide property tax reassessment. I'm not saying it will happen, but the money has to come from somewhere.

If you can't afford it, it means you should not do it.


2/16/2006 01:02:00 PM  
Blogger Richard said...

chicago, as with most things the intent is pure but the result could be otherwise. i'm not knocking the concept of derivatives, i'm knocking how they're managed. this is an unregulated market today. the Fed is quite concerned with its potential impact on the financial sector. today if a big position unwinds you'd have a devil of a time matching the holder with the insurers cause it's not regulated. at $12.5 trillion this could rock the bond market and clearly spread throughout the system. i'm not talking about a complete meltdown but the potential to rattle the markets is quite strong.

2/16/2006 01:29:00 PM  
Anonymous Anonymous said...

I agree for many people, babyboomers or people with kids waiting for five years is not realistic. The former would likely kick the bucket the latter the kids will grown up. I wonder if Grim would think that it is a good idea to wait out 2006 and make a decision by 2007. Didn't all the pundits out there predicted that the drop will be precipitatious the first two years and then slowly dowhill till past 2010. I don't think it is sensible to wait that long if one needs a home. Cannot sit so long. Life goes on!!!!!

2/16/2006 01:33:00 PM  
Anonymous Anonymous said...

Richie wrote:

"10% of $700k is $70k."

Sure enough, but there's not much practical difference between a house that costs $630K and $700K, when incomes haven't increased 100% over the last 5 years as homes have.

2/16/2006 01:41:00 PM  
Anonymous Anonymous said...

Grim wrote:

"The number I have said before, and will continue to stick with, is a 30% drop in Northern New Jersey. That puts your $700,000 house at $490,000 when all is said and done."

I certainly hope you are right!

2/16/2006 01:45:00 PM  
Blogger Richie said...

There's a big practical difference between $630k and $700k.

$70k can buy a lot of nice upgrades or furnishings.

I do agree with your statement though, the run up on housing does not make sense when wages are stagnant and NJ is losing jobs by the thousands every year. It'll only be a matter of time before it makes headline news, though.

You can blame the run up of housing costs on cheap financing, advertising, the media, and the frenzy of people who think they can't lose on real estate. Real estate is a LONG term investment, not a pump & dump scheme.


2/16/2006 01:58:00 PM  
Blogger grim said...

Sorry if I come off as angry or argumentative. I'm not trying to be, I'm just a bit passionate on the issue.

Look, everyone has a story and no two are the same. Every situation is different. There isn't one piece of information can help everyone.

I, personally, feel it's a very risky time to buy a home. I've laid out the facts, I don't think many people would argue that fact.

The issue is, can you handle the risk? The real estate industry is putting on the pressure. But just like the decision wait doesn't apply to everyone, neither does the decision to buy.

Many people are saddling themselves with significant financial risk. Does life go on? Sure. But believe me when I say I'm going to do everything I can do today to ensure that tomorrow is worth living (and sacrificing) for.


2/16/2006 01:59:00 PM  
Anonymous Anonymous said...

For what it's worth, this article predicts slight declines in NJ (1-3%) for 2006 and a "flat" 2007:

I hope they're wrong.

2/16/2006 02:06:00 PM  
Anonymous Anonymous said...

Right now my day care bill for a Kindergartener (full day kindergarten is almost non-existent in Bergen County public schools) and a 3 1/2 year old, is, get this, $2200 per month. Day care is a necessity because we both work full-time.

I am counting on the fact that one child will be in 1st grade in Sept, saving me about $700 per month (still need to pay for after school care). That $700 per month can go toward a higher mortgage. Catholic schools around here are about $450 per month, however, I think the public schools in the towns I'm looking at do a much better job, in some ways. There are only 2 private schools I know of in Northern Bergen County, which aren't commutable from where I live now. They are about $1,600 per month per child! When my second child gets out of daycare in 2 years I can save another $700 and that can go into savings.

Has anyone created a model or spreadsheet comparing "buy a house in a better public school district vs. stay where you are and send kids to private school"?


2/16/2006 03:09:00 PM  
Blogger grim said...


Have you sold your home yet? Or is it still on market?


2/16/2006 03:42:00 PM  
Anonymous Anonymous said...

Not even on the market yet. Figured I shouldn't list it until I really find something I want

2/16/2006 04:18:00 PM  

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