Friday, March 31, 2006

Northeast Market Cooling

From Bloomberg this morning:

`For Sale' Signs Rise, Home Sellers Cut Prices as Fed Tightens

Maryam Safai's 5,000-square-foot, five-bedroom colonial in Mahwah, New Jersey, has been on the market for a year, even after three reductions in asking price.

``I'm not going to give in to the market,'' says Safai, 44, a dentist. ``I'm not selling below our current asking price'' of $1.69 million.

Like Safai's northern New Jersey neighborhood, housing markets around the nation are cooling, mostly as the result of the Federal Reserve's drive to push up interest rates. That has slowed price increases in most of the country and reduced demand for risky types of financing that caused former Fed Chairman Alan Greenspan to worry about ``froth'' in the housing market.
...
The trend is most pronounced in affluent neighborhoods in the Northeast, where prices soared the most during the real- estate boom. Median prices for existing homes in the Northeast were up 5.2 percent in February from a year earlier, compared with almost 18 percent in the previous 12-month period, according to the Realtors group.
...
While damping price growth the most at the high end of the market and in the Northeast, rising rates have also reduced demand for riskier forms of financing and begun a shift of power from sellers back to buyers, economists and brokers say.

In a sign that buyers are starting to gain the upper hand, pre-sale home inspections are back in vogue in Montgomery County, Maryland, says Meg Finn, a Long & Foster agent based in Bethesda. Just a year ago, buyers who insisted on inspections jeopardized their chances of getting a house in a bidding war, she says.
...
On a Boston street, lined with a dozen ``For Sale'' signs, McCormack is trying to sell a three-bedroom house listed at $535,000. She's holding ``commuter hours'' open houses on Monday nights to lure would-be buyers on their way home from work.

``When the market was hot, we never would have had to do this,'' she says.

Caveat Emptor!
Grim

(Credit goes out to Ben at The Housing Bubble for finding this one)

49 Comments:

Blogger Richard said...

this will put increased demand at the starter level. while inventory has grown at this level i'm starting to see some of the more quality properties move. you need to get in somewhere and i ponder how long will renters and condo owners be able to hold out before taking the plunge, high prices or not.

3/31/2006 10:21:00 AM  
Blogger Richie said...

Ah yes. Maryam bought the house on January 3, 2003 for $1,100,000.

I don't see how 3 years of appreciation leads to a $1,699,000 asking price. That's over 50%.

As if Dentists weren't greedy enough..

BTW: All information was obtained from the tax boards on the internet.

-Richie

3/31/2006 10:27:00 AM  
Blogger skep-tic said...

I respectfully disagree. there is a huge disconnect btw the $1.5 million dollar homes in the area and the $1.25m and below homes. It appears to me that the high end has really started to cut prices, while the entry level is priced higher than they were last summer.

obviously, for most people, neither of these prices is a realistic option. still, people recognize value. If you see a split in the same town priced at $1.2m and a 3000 sq ft colonial priced at $1.5m, you start to think, "how does the owner of this split believe that his house is worth 4/5 of that beautiful house down the road?"

3/31/2006 10:32:00 AM  
Anonymous Anonymous said...

richard "High prices or Not"

YOU HAVE TO BE ABLE TO AFFORD IT FIRST.

MOST FIRST TIME BUYERS ARE PRICED OUT!
You can't figure this out.

3/31/2006 10:34:00 AM  
Anonymous Anonymous said...

``Entry-level buyers are still strong, while buyers looking to step up to bigger houses are becoming more cautious.''
This doesnt seem right - I thought that entry level buyers were out thereby raising the median house price? Is this double speak on the part of the writer of this article?
KL

3/31/2006 10:44:00 AM  
Blogger Bubble-X said...

This comment has been removed by a blog administrator.

3/31/2006 10:45:00 AM  
Blogger Bubble-X said...

Looking at the high end of the market may not be the best way to determine what is really going on.

I know -from my own experience- that the market is slowing in the Northeast. However, most stats, like NAR or the Census, do not bear that out yet.

Most other regions are cooling, and that has led to national numbers falling.

Just want to add some perspective.

-X

BubbleTrack.blogspot.com

3/31/2006 10:48:00 AM  
Blogger skep-tic said...

maybe it's just the criteria I use when I look, but it seems to me that there really is no "entry level" anymore. the entry level has caught up to the high end. when you have "starter" homes priced at $800,000, these terms start to lose meaning.

I don't think that the real "high end" has appreciated nearly as fast as entry level homes.

3/31/2006 10:53:00 AM  
Blogger grim said...

Can someone with NJMLS access look up this address?

The address isn't listed on GSMLS, and I can't seem to find a property listed at that price on NJMLS.

Wondering if he dropped the price again or pulled the listing.

grim

3/31/2006 10:55:00 AM  
Anonymous RW said...

richard,

"this will put increased demand at the starter level. while inventory has grown at this level i'm starting to see some of the more quality properties move."

Inventory is starting to grow at EVERY level. OK I know I sound like a broken record, but I have already seen things come down, and you are already getting more for your money than last year. Things are moving, but far slower than last spring.

"you need to get in somewhere and i ponder how long will renters and condo owners be able to hold out before taking the plunge, high prices or not."

You need to get in somewhere is very common realtorspeak...getting in at the top and losing all your equity is a lot worse than getting in in another year at a huge or even small discount.

When you can rent a comparable property for less than what you can buy, you are not losing by renting.


You can rent a mansion in Summit for 8500-10,000 a month, homes that are worth 2-3 million. Given the interest rates hikes to buy these same homes at the current market price with 25% down would be around 12-18K a month.

The "pride" of owning a home is simply not worth the current cost.

You are wise to keep looking in this market however because I have seen some things priced incredibly low, you know current values and you may come across a desperate buyer and get a good deal via a lowball. Sellers are now accepting bids that are good for only 24-48 hours as the inventory = competition is increasing.

If you find the perfect home in the perfect neighborhood at the right price and plan to stay for a very long time I guess it doesn't matter, but buy and then don't even look at what happens to the market in the next year or it may damage the psyche.

3/31/2006 10:59:00 AM  
Anonymous UnRealtor said...

"I'm not going to give in to the market"


LOL!

3/31/2006 10:59:00 AM  
Anonymous Anonymous said...

Unrealtor.

Don't you just love that!!!
I can smell the toast.

3/31/2006 11:12:00 AM  
Anonymous RW said...

Richard,
You are probably so sick of hearing my advice, but I know very well the towns you said you are looking at and it disgusts me to see what they are charging for "starter" homes. I only have money to lose on my own house by taking this position.

I hate to imagine all the young families strapped in to an upside down mortgage. I don't take pleasure in imagining the losses of what other people term F*K'"D borrowers. I feel very sorry for them.

I feel like the realestate and banking industry will be the next tabacco industry. The public is just now getting the "true picture" of the market like smokers that were addicted before they started releasing the true reports on the deadly consequences of smoking.....

3/31/2006 11:13:00 AM  
Blogger Shailesh Gala said...

BusinessWeek has good article today,

http://www.businessweek.com/magazine/content/06_15/b3979601.htm

Though the article does not yet accept downturn, but at least accepts few realities. IN NY metro area, author writes,

Of course, unaffordability is a chronic condition in cities like New York, so it's not necessarily evidence that a sharp correction is in the offing. Economists at Global Insight Inc. and National City Corp. deal with that by looking at whether metro areas have departed from their own historical trends in affordability. They conclude that in the fourth quarter, 42% of the top 299 metro markets were "extremely overvalued and at risk for a price correction." Florida and California dominate this historically adjusted list. Boston and New York look more reasonable by this measure, and San Francisco appears a bit less bubbly. Texas still comes out looking cheap.

Also I find following very interesting.

Even owners who stand to make a big profit on a sale often set the price too high. In this case the mental error isn't loss aversion but outdated thinking. New research shows that sellers set their listing price, in part, based on information six months to nine months old. That means if you don't pay close attention, you will tend to underprice in a rising market and overprice in a falling one.

I guess 6 months from spring/summer will be when the reality will really kick in.

3/31/2006 11:14:00 AM  
Anonymous RE said...

Will Russel Crowe play David Lareah in the next "Insider"?

3/31/2006 11:15:00 AM  
Blogger lisoosh said...

Richard -

Why would I move out of the townhouse I currently rent for $1300 to pay $2500 to live in a 2 bed condo with less square footage and someone walking over my head? And if I won't buy the overpriced condo, how can that person buy a house?
And how will that homeowner move up (or out to a retirement community)?

And on the other end - lowered prices on mansions put downward pressure on lesser properties.

This is the HOUSING market we are talking about - not stocks or dog food or widgets. It will take a lot longer than a couple of months for a total psychological shift in the market on the part of buyers and sellers.

3/31/2006 11:23:00 AM  
Blogger lisoosh said...

The other thing which surprises me it the belief that "nice" areas can't drop in price.
A starter home in Summit for $800,000 might seem OK when a similar house is $730k in nearby, almost as good areas but what about when the "almost as good" area starter homes are $400k? Lower price, lower taxes and the savings would more than cover private school.

I agree that the really nice neighbourhoods will hold their value RELATIVE TO NEIGHBOURING AREAS but that is not the same thing as holding peak prices. Just as no man is an island, neither is a neighbourhood.

And don't forget - Trenton is full of well built, once beautiful mansions that were once the apple of their well heeled owners eye. And look at it now.

3/31/2006 11:46:00 AM  
Anonymous Rich In NorthNJ said...

Can someone with NJMLS access look up this address?

Got it. They pulled the listing on March 15.

Here's a quick run down:
Sold 1/27/03 $1,100,000
(Last Asking $1,189,000)

Listed 4/2/2003 $1,349,000
Expire 10/18/2003

Listed 4/6/2005 $1,879,000
PCH 4/9/2005 $1,910,000
PCH 5/24/2005 $1,875,000
Expire 8/30/2005

Listed 9/1/2005 $1,749,900
PCH 11/9/2005 $1,699,000

Basic McMansion w/taxes of $14,596

3/31/2006 11:47:00 AM  
Anonymous Moneysmartz said...

A recent post on Moneysmartz mentions your site. Moneysmartz recently launched with a mission of identifying the best personal finance websites and blogs. Here’s a link to the post:

http://www.moneysmartz.com/weblog/archives/2006/03/real_estate_bub.html

Moneysmartz

3/31/2006 11:51:00 AM  
Anonymous Anonymous said...

Wondering if he dropped the price again or pulled the listing.

69 georgian court - expired 3/15

3/31/2006 11:59:00 AM  
Anonymous Anonymous said...

Just my opinion... but homes with value in towns even like Ridgewood are cutting their price. Not by very much but it is indeed happening... and they are just sitting. Pricing pressure from the top causes the market to adjust, correct, to a new reality. This is how capitalism works.

3/31/2006 12:09:00 PM  
Blogger Richard said...

appreciate all the responses. RE cycles take years. many would be buyers have been waiting for this thing to turn. it's been 5 years. that's a long time in our short existance. how much longer are all those fencesitters willing to wait is my point. many are renting or not in the circumstances they want to be in. they feel their life is 'on hold' until they buy a house and get settled. how long can the fiscally responsible side subdue this increasing onslaught? i hear it from people all the time. sure, sit on the sidelines waiting for prices to come down. even if you bought 9 months ago you're more in the money than today. so you're a dope. if you have infinite patience you'll eventually win, of that there's no doubt. but who has that?

3/31/2006 12:45:00 PM  
Anonymous Anonymous said...

OT; What most illinformed or too lazy, fail to "get", is that when you take out a million dollar mortgage (go into debt) or "extract equity" (go into debt)...every dollar of debt becomes an asset on the lending institutions book. Simply, your liability is their asset...which side of this trade is the wealth building one?

3/31/2006 12:46:00 PM  
Anonymous Anonymous said...

PS: I realize that the vast majority when purchasing a home have and will do so with a mortgage...but doesn't it make sense to try and keep that liability as low as possible. The last house I bought (since sold) I did pay cash, and I have to tell you that when the funds are going directly from your account to the sellers it sharpens the mind. Interestingly, the RE broker kept telling me that I'm not really buying a house rather I'm buying money...what a line of sh.., she didn't have much to add after I told her I'm writing a check and my experience has taught me that houses that you occupy, eat cash.

3/31/2006 12:59:00 PM  
Blogger delford said...

richard: if you bought in my town in north Jesey, 9 months ago, you are down at least 50K in price today,9 months later.

3/31/2006 01:02:00 PM  
Anonymous UnRealtor said...

What most illinformed or too lazy, fail to "get", is that when you take out a million dollar mortgage (go into debt) or "extract equity" (go into debt)...every dollar of debt becomes an asset on the lending institutions book. Simply, your liability is their asset...which side of this trade is the wealth building one?


You'll like this letter to the Boston Globe:

Q: "I purchased my home for $480,000 and it is now worth $600,000. Is there any way of cashing out this additional $120,000 of equity and applying it to the loan balance?"

A: You can borrow the $120,000, which will increase your loan balance by that amount, and then use it to pay down the balance by the same amount. Of course, that will leave the balance right where it was, and you will be poorer by the amount of the closing costs on your new loan.

http://housingbubblecasualty.com/forum/index.php?topic=489.0

3/31/2006 01:16:00 PM  
Anonymous Anonymous said...

Unrealtor.

Hilarious!

3/31/2006 01:22:00 PM  
Anonymous Anonymous said...

This guy richard won't be so smart talking when this housing market goes into full fledge Bear.

Back in 1992-1994, that kind of BS never was spoken.
I 1993, all i know was that realtors were harassing home buyers. we went to an open house and would be harassed for weeks about making a bid or needing help with another listing. Had to tell off the desperate realtor to keep them from calling again.
Did buy a house all on our terms. The seller and realtor kissed our @$$ to get a deal done.That meant maor concessions on the sellers part, not the BS buyers are dealing with at the recent peak last summer.It was a good felling.
It's coming. That cocky arrogant attitude will be long gone from the realtors and the sellers.

3/31/2006 02:00:00 PM  
Anonymous Anonymous said...

BTW, guys, where to get open house information? weichert.com has some. What about realtor.com or other places?

3/31/2006 02:14:00 PM  
Anonymous Rich In NorthNJ said...

Try this if your in North Jersey

http://njmls.com/

3/31/2006 02:20:00 PM  
Anonymous Rich In NorthNJ said...

Actually, anywhere in Jersey!

Oops.

3/31/2006 02:21:00 PM  
Blogger Richard said...

hey anon 2pm, i'm not condoning buying something today. in fact for those who know me i know the market will decline with the least declines in the top tier towns in the top areas of said towns. fiscal prudence is one aspect of making a house purchase. there are many stories here of people being pressured by their spouse to just get on with it and buy. once again, if one had infinite patience and could only make decisions for themselves, it would be a slam dunk, however life is never that simple.

3/31/2006 03:13:00 PM  
Anonymous UnRealtor said...

BTW, guys, where to get open house information?

Star Ledger -- print version.

The info online SUCKS, but there is always tons of stuff in the print version of the Sunday paper.

But I'm boycotting ALL open houses for the foreseeable future. Why look at overpriced houses? Even if you see a "bargain" for $400K, how much will it be worth 18 months from now?

Let the Realtor™ sign-in books sit empty!

Boycott open houses!

3/31/2006 03:27:00 PM  
Anonymous Anonymous said...

rich in NNJ, thank you.

3/31/2006 03:55:00 PM  
Blogger Shailesh Gala said...

Even though I do agree that House prices are up for correction, I don't think they will go down sharpely & significantly. Based on location & demand they may go down from 10% to 30%.

In New Jersey, I see the major issue is short supply. One of the reason for that is most towns do not want any more families with Children move in. At present it costs town about $10K per child per year. If a new house is built and is occupied by family with 2 kids, it costs the town $20K just for education. On top there are other expenses like Road, Traffic etc... While in Property Taxes on average they will get only $10K per year. Now a days in many central jersey towns, the township is only approving housing for Senior citizens, as that does not add the education burden.

3/31/2006 04:02:00 PM  
Blogger grim said...

Senior housing most certainly adds education burden. The link isn't exactly straightforward, so many miss it.

Older people do not move to Jersey to retire, the property taxes are terrible, there is very little incentive to do so.

Instead, locals tend to sell their homes and downsize into these communities. It reduces their monthly bills, reduces their tax burden, and reduces the household maintenance. It also lets them stay near families, friends, and the communities they lived in.

But just who buys the now vacant homes that these downsizers sell?

Exactly.

3/31/2006 04:16:00 PM  
Anonymous UnRealtor said...

Even though I do agree that House prices are up for correction, I don't think they will go down sharpely & significantly. Based on location & demand they may go down from 10% to 30%."

Hmmm, let's plug in your assumptions on a $500,000 home (which barely exists anywhere desirable).

$500,000 home price

10% off = $50,000
20% off = $100,000
30% off = $150,000

Are you so wealthy that you can afford to throw away up to $150K in 18 months?

3/31/2006 04:34:00 PM  
Anonymous RW said...

anon 2:00
don't be so hard on Richard. I understand his point of view- it's tough to be young, have done all the right things, work hard and still face this ridiculous market.

3/31/2006 05:27:00 PM  
Blogger Shailesh Gala said...

unrealtor:

I did not mean that this is right time to buy. You are right, if prices are even going to go down 10% it is better to wait.

Also, even if you may have to pay higher interest rate after 1 year, it is still better to buy at low price & higher rate. On the next recession cycle, you can always refinance.

But if you bought today at high price & low rate, god forbid, if you need to sell, you will take hit.

All the negative stories in Media is already having impact. I see many more houses for sale in town house complex that I live in. Also many price reductions from the guys who are getting desparate. At the least one should wait for middle of summer to see how things fall out.

3/31/2006 05:27:00 PM  
Anonymous Anonymous said...

Since the interest expense on a mortgage is what you can actually write off...doesn't it make sense to buy in a higher interest rate environment, and take advantage of depressed real estate prices, keeping your actual mortgage (money your on the hook for) to something manageable? I truly believe that net-net the 01'-06' period will prove to have been the worst time in history to buy a house.

3/31/2006 08:29:00 PM  
Anonymous Anonymous said...

2006 might prove to have been the worst time in history to have bought a house,but how in the world could 2001 or 2002 be, given how much prices have increased since then?

4/01/2006 07:24:00 AM  
Blogger chicagofinance said...

"UnRealtor said...
You'll like this letter to the Boston Globe:

Q: "I purchased my home for $480,000 and it is now worth $600,000. Is there any way of cashing out this additional $120,000 of equity and applying it to the loan balance?"

A: You can borrow the $120,000, which will increase your loan balance by that amount, and then use it to pay down the balance by the same amount. Of course, that will leave the balance right where it was, and you will be poorer by the amount of the closing costs on your new loan."

VERY NICE!

UnReal - as it were

4/01/2006 12:16:00 PM  
Anonymous Anonymous said...

Anon 7:24 Prices paid in 2001 and 2002 are bubble prices in the NY/NNJ area, The NAR has been talking about "record sales" since 1998...yes it has been that long.

4/01/2006 11:03:00 PM  
Anonymous Anonymous said...

anon 7:24 ps: yes, if you bought in 01' and flipped to the next sucker in 05'...show me 1 truly wealthy person who has really made it that way...it is a suckers bet, the same people that fill the seats in AC or Vegas.

4/01/2006 11:07:00 PM  
Anonymous Anonymous said...

Very nice! I found a place where you can
make some nice extra cash secret shopping. Just go to the site below
and put in your zip to see what's available in your area.
I made over $900 last month having fun!
make extra money

4/02/2006 10:33:00 AM  
Anonymous Rick J said...

I have been following a site now for almost 2 years and I have found it to be both reliable and profitable. They post daily and their stock trades have been beating
the indexes easily.

Take a look at Wallstreetwinnersonline.com

RickJ

4/18/2006 09:18:00 PM  
Blogger Alicia Bennett said...

Hi there, I was surfing the internet and I found your blog. I like the way how this all works.

I'll come by again.

Many thanks,

condo

4/24/2006 08:28:00 AM  
Anonymous Anonymous said...

Surfing for information on real estate, and I stumbled across your blog. Interesting work. Good read. Visit my site if you have a chance.

4/25/2006 05:06:00 PM  
Blogger Joe Berenguer said...

Hello Friend! I just came across your blog and wanted to
drop you a note telling you how impressed I was with
the information you have posted here.
I also have a web site & blog about credit center so I know I'm talking
about when I say yours is top-notch! Keep up the
great work, you are providing a great resource on the Internet here!
If you have a moment, please visit my site credit center
Best success!

5/12/2006 02:00:00 AM  

Post a Comment

<< Home