Sunday, March 26, 2006

Sunday Afternoon Open Discussion

No rules, open discussion, anything goes.

For readers that have never commented, there is a small link on the bottom of each new message that reads "# Comments". Go ahead and give that a click, you might be missing out on a world of information you didn't know about. While you are there, introduce yourselves to everyone.

For new readers that have only read the messages displayed on the main page, take a look through the archives, a substantial amount of information has been put online in the past 6 months. The archives can be found at the bottom of the right hand menu and are categorized by month.

Caveat Emptor!
Grim

44 Comments:

Anonymous Anonymous said...

We boycotted all open houses today!

No buyer traffic until prices reach sane levels!

3/26/2006 03:01:00 PM  
Anonymous Anonymous said...

Does anyone know approximately how much construction costs (excluding land) for a 3000 sf 4br 2ba house in northern NJ would be? House would be standard fare, nothing extravagant. Thanks in advance.

3/26/2006 03:19:00 PM  
Anonymous Anonymous said...

House would be standard fare, nothing extravagant. Thanks in advance....

Uh! since when is 3000 sq ft not extravagent? I hope you meant 2000.

M. Reynolds

3/26/2006 03:28:00 PM  
Anonymous Anonymous said...

Does anyone know approximately how much construction costs (excluding land) for a 3000 sf 4br 2ba house in northern NJ would be? House would be standard fare, nothing extravagant. Thanks in advance.

3/26/2006 03:28:00 PM  
Blogger skep-tic said...

interested in people's thoughts on a couple of questions:

1. will 100% financing be available for housing as all of this unravels?

2. assuming you have a downpayment in hand, are there any situations in which 100% financing makes sense outside of a rising market?

thanks to all

3/26/2006 03:33:00 PM  
Blogger njresident286 said...

I got lost in edison this morning, and drove for about 1.5 miles down grove street and EVERY block had at least one sign on it, if not 3-4. This was on both sides of the street. I know I have seen stats on here that edison is one of the most overvalued markets in NJ (maybe the country ?) by 30+ %. Well seems like a lot of people are trying to get out at the peek.

3/26/2006 03:40:00 PM  
Blogger njresident286 said...

Skeptic -

The only was I would consider 100% fianancing if I knew I could easily afford it AND the money I had for a down payment could be locked into a CD for 5+ years at a rate of return higher than what I would be paying on my mortgage. If not, I would put the money down to keep the payments low and have some equity in the house.

I have a question, if you have a 30 year mortgage, can you always pay it down or only in certain sitautions? I would like to be able to pay one extra payment per year, reducing the time i pay the mortgage from 30 years to 22.5.

3/26/2006 03:43:00 PM  
Blogger grim said...

Significantly tighter in the future.

1) I/O will continue to be available, but only to borrowers that can afford the equivalent costs of a standard mortgage.

2) Teaser rate mortgages will disappear, the Government will see to that.

3) Payment option loans will likely disappear as well (I believe the Neg-Am's will be 'banned' as being predatory).

4) Stated income loans will be tightened significantly or modified to reduce the ability for fraud (i.e. average of last two years income verified by income tax).

5) I'd love to see downpayments come back into fashion. It might just be the case that banks will want to see "skin in the game".

grim

3/26/2006 03:48:00 PM  
Blogger grim said...

Those are just my guesses by the way, I wouldn't even call them predictions at this point.

jb

3/26/2006 03:48:00 PM  
Blogger skep-tic said...

"The only was I would consider 100% fianancing if I knew I could easily afford it AND the money I had for a down payment could be locked into a CD for 5+ years at a rate of return higher than what I would be paying on my mortgage."

This is very sensible. Sometimes the thought of dropping the downpayment into a diversified portfolio is very tempting though.

3/26/2006 04:02:00 PM  
Blogger grim said...

The scenario you describe was the original intent for interest-only mortgages. They were never intended to be used as "affordability" products. They were aimed at investors who were able to coax higher rates of returns in other markets.

grim

grim

3/26/2006 04:16:00 PM  
Anonymous Anonymous said...

Hoboken inventory as listed on the realtor.com website is at 508. That's roughly a 70% increase in the last six months.

Annualize that!

3/26/2006 04:36:00 PM  
Anonymous Anonymous said...

Regarding the hoboken inventory comment - the actual inventory is signifacantly higher once you factor in new construction. There are a large number of new properties not displayed on MLS.

Go to most hoboken realtor's web sites and you will find exclusives not displayed on realtor.com.

Also, regarding the inventory that is displayed in MLS, the annuallized increase is especially large in the over $750k price range. While this may be due in part to higher listing prices, the number of high priced units have tripled since last year.

3/26/2006 04:51:00 PM  
Anonymous Anonymous said...

In response to the earlier construction cost question, I can only give an estimate based on what I know regarding florida. In florida, builders cost / sq foot for high end residential in estimated at 100-125 dollar per sq. foot.

Might want to up that for NJ since labor is cheaper down there and less of a need for heating.

3/26/2006 04:53:00 PM  
Anonymous Anonymous said...

i was on washington street today, in hoboken, and For Sale signs were everywhere... my wife and i were quite amazed... we counted 6 signs on 1 particular street corner.

3/26/2006 05:05:00 PM  
Anonymous Anonymous said...

Notheren New Jersey Construction costs
Figure about $160/sf to high $200/sf , excluding land cot and permits.Using $175/ sf for not to extravagant will be reasonable

Cliffy.

3/26/2006 05:07:00 PM  
Anonymous Anonymous said...

Any thoughts on whether the residential homes in certain towns along Midtown Direct corridor (Short Hills, Summit, Chatham, Madison, New Providence) will retain value regardless of what happens in the cooling North Jersey market

3/26/2006 05:50:00 PM  
Anonymous Anonymous said...

"assuming you have a downpayment in hand, are there any situations in which 100% financing makes sense outside of a rising market?"

If you were buying a real POS, and wented to keep some cash to fix it up, perhaps.

But not sure how if the numbers would work out to your benefit, given the higher interest paid out.

3/26/2006 06:33:00 PM  
Anonymous Anonymous said...

"Any thoughts on whether the residential homes in certain towns along Midtown Direct corridor (Short Hills, Summit, Chatham, Madison, New Providence) will retain value regardless of what happens in the cooling North Jersey market"

They'll always command a premium over other towns, but will still drop in value as the market continues to tank.

You can probably assume a 1% benefit for those towns (if other towns drop 5%, then they'll drop 4%).

All gut take on my part, so take it for what it costs. :-)

3/26/2006 06:39:00 PM  
Blogger chicagofinance said...

skep-tic said...
interested in people's thoughts on a couple of questions:

1. will 100% financing be available for housing as all of this unravels?

2. assuming you have a downpayment in hand, are there any situations in which 100% financing makes sense outside of a rising market?

thanks to all

3:33 PM



All: Correct me if I misstate fact. Aren't the best loan programs only available to those who put 20% down, can afford the mortgage, and have full documentation to back it up? Sure you can tack on a subordinated piggyback loan, but the rate is crap. What ever happened to PMI?

Am I nuts, or the world?

3/26/2006 07:50:00 PM  
Blogger skep-tic said...

"Aren't the best loan programs only available to those who put 20% down, can afford the mortgage, and have full documentation to back it up?"

yes, which is why I'm trying to figure out why anyone who has a 20% downpayment would choose to finance 100% of the purchase.

maybe the answer is, no one would.

3/26/2006 07:56:00 PM  
Anonymous Anonymous said...

just my opinion... but if biff and muffy can't sell their condo in hoboken for an outrageous 700K, then that means no outrageous 900K house out in the burbs in Short Hills, Summit, Chatham, or Madison,etc...

3/26/2006 08:02:00 PM  
Blogger njresident286 said...

I have no idea what happened to PMI. I never hear anyone talk about it anymore.

From my personal experience, all my friends who bought houses with no money down take out a loan for 80%, then ANOTHER for the other 20. They use the second loan as a downpayment, to not have to pay the PMI. it is kind of like a way to get around it. I have NO clue what lender would give people that much cash.

3/26/2006 08:15:00 PM  
Anonymous Anonymous said...

I drove by a few open houses today, not intending to buy any property, more to find out how is the "traffic" out there. It is no surprise to me: Nobody shows up, except me. I don't know how the association of realtors will spin that.

3/26/2006 08:38:00 PM  
Anonymous Anonymous said...

I have an old girlfriend who bought 3 condos in Hoboken over the past two years as "an investment". She has been unable to sell any of them and she listed the first one in September, the second in October and the third in January. She also has refused to drop her price by any significant amount, becuase she thinks the market is having a hiccup. I advised her to sell while she still can and before the market drops. She continues to think, as do other sellers, that buyers will have to capitulate.

3/26/2006 08:38:00 PM  
Anonymous Anonymous said...

Every time I hear realtors talking, I want to close my ears. It is the most incredible bullsh*t you will ever hear from any body. It just drives me nuts. Do they really think we are so stupid or so manipulatable? Here is some examples:
a few years back, " this is the best time to buy, interest rate is in the bottom, the price is going to go up, so buy now";
now," this is the best time to buy, there are a lot more properties to choose from, buy now".

No matter how the market changes, what you hear from them is "buy NOW". What a bunch of dirty, rotten skoundrels. They are worse than the crack dealer on the corner. Those guys make $10 or $20 deal. The realtors steal much more from people and really put people in trouble when bubble busts. They should be in prison.

3/26/2006 08:44:00 PM  
Anonymous Anonymous said...

who really needs to buy a condo in hoboken, especially when rentals are much lower than the price of a mortgage?... seems like a really tough one to justify...

3/26/2006 08:47:00 PM  
Anonymous Anonymous said...

Looked at some open houses throughout NJ - there was traffic at least in Somerset County. I've been seeing some townhouses in Franklin Park and Bridgewater coming down to more realistic prices. Hopefully this trend continues!

SK

3/26/2006 08:48:00 PM  
Anonymous Anonymous said...

I have a friend who bought a 1 bedroom for 400K in Hoboken. He was renting a 1 bedroom for about $1200-1300 per month. His condo is actually smaller than his old apartment -- and he just told me the other day that including his mortgage, taxes and condo association fees, he's paying twice the amount of his old rent. This market doesn't make any sense and i think people are actually starting to catch on.

3/26/2006 09:35:00 PM  
Anonymous bubbled-out said...

You really can't expect honesty from RE agents, they are commission sales people after all and they are going to tell you whatever BS they need to to make a sale just as most sales people do.

What is unfortunate is that the unsuspecting public considers them RE experts and advisors. Even the media often quotes local brokers and agents in news stories, which I never understood.

3/26/2006 10:38:00 PM  
Blogger Richie said...

Notheren New Jersey Construction costs
Figure about $160/sf to high $200/sf , excluding land cot and permits.Using $175/ sf for not to extravagant will be reasonable


Too high. $60-$100/sq. ft. seems more like it. I built my house for $80/sq ft in 2003-2004.

-Richie

3/26/2006 11:07:00 PM  
Blogger Richard said...

was out in summit and westfield today. lots of open house signs and not alot of traffic. still the quality properties that are reasonably priced in comparison to their competition are selling shortly. this will always be the case though. i am noticing quicker price reductions (after 2 weeks). i've 'been told' this is because sellers test the market by putting their properties on the market at a high price hoping someone will bite on the asking. if no one does they lower it to something more competitive. not a bad approach i guess and it sure beats being a stubborn seller thinking his 'palace' is different than others.

3/26/2006 11:25:00 PM  
Anonymous Anonymous said...

Unless you either had a lot of raw space(i.e. did you include a basement in your math?) or minimal expensive sq footage (i.e. bathrooms), 60 -100 sq/foot seems way low. Given the current high energy costs and the costs of construction materials, I would be shocked if anyone could hire a builder to build at that rate.

Of course, if you choose to GC the job yourself and managed it well, I suspect you could get it down to that range - it depends on how much you value your time and energy and how well you deal with frustration :)

3/27/2006 07:52:00 AM  
Blogger Richie said...

Yes, we had an advantage since we did all of the work ourselves with the help of family & friends...

House is all brick, 4 bathrooms, hardwood floors, lots of tile, etc.

Energy costs don't cut into the cost of construction too much. They come into play after you move in... We got lucky with the lumber & concrete because we finished the house before the big rush of construction that swept the nation in late 2004/2005. Right now lumber is 50% more, and concrete is 200% more then it was back then.

-Richie

3/27/2006 08:21:00 AM  
Blogger grim said...

I did some research on sq/ft costs about two years back. I believe the numbers were $70-$90. However realize that materials costs have skyrocketted recently, so I would put the number at $80-$100.

I'll see if I can dig up the report..

jb

3/27/2006 08:21:00 AM  
Anonymous Anonymous said...

"Notheren New Jersey Construction costs Figure about $160/sf to high $200/sf, excluding land cot and permits. Using $175/ sf for not to extravagant will be reasonable"

...

Too high. $60-$100/sq. ft. seems more like it. I built my house for $80/sq ft in 2003-2004."



Well, that's apples and oranges -- you're comparing paying retail vs do-it-yourself.

To pay a builder (retail) $150-200 sq/ft is about right.

3/27/2006 08:42:00 AM  
Anonymous Anonymous said...

Hi:

How can I determine the real value of townhouses in Edison. LP 380K-400K.

How much should one offer, 30% off?

KBR

3/27/2006 09:41:00 AM  
Anonymous Anonymous said...

My wife and I have been married for almost a year. Both in our early thirties with combined income of about 145k. It sad to see we cannot afford a decent house. We refuse to pay 450 for a shack that we wont even enjoy.

For now we have been renting and keeping an eye on the market.

3/27/2006 10:45:00 AM  
Anonymous Anonymous said...

My wife and I also make roughly 150k yearly. We have 125k in CDs and cash and a stock portfolio currently worth over 50k (some bonds as well). Our combined 401k's and IRAs are worth roughly 75k. We currently rent and have zero debt. We are both in our late 20s.

We can afford to buy, but we won't, we refuse to pay these prices.

We will gladly "throw our money away" while we wait for the bottom.

3/27/2006 10:56:00 AM  
Anonymous db said...

Anon @ 10:45 & 10:56,

My fiancee & I are in the almost exactly same boat (age & fiancially) as both of you (couples). It is nice to see others that won't give in to the madness either.

3/27/2006 11:21:00 AM  
Anonymous Anonymous said...

So db,
You and your fiancee make almost $150,000 combined and have about $100,000 in savings (not including retirement) and you're wondering how people can afford to buying houses at these prices? I felt sorry for you, as I thought you were in my situation for a minute when I was reading your posts on "Who wants to buy in a falling market". Our combined income of $120,000 supports 2 kids who are in daycare (at a cost of $25,000 per year) and the savings we had went to the purchase of modest cars in order to avoid payments or leasing.


According to http://wnjpin.state.nj.us/
OneStopCareerCenter/
LaborMarketInformation/
lmi19/T15.pdf
the annual household income in 2002-2003 for a 2 person household was $58,380. You currently make 257% more than that.

Try living on $45,000 with two kids (not in daycare at the time) since your spose was laid off 3 times in 3 years.

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