Monday, March 27, 2006

Who wants to buy in a falling market?

This one is from Saturday morning. Decided to post it here for those who don't visit the other housing bubble blogs. The story comes from the Washington, D.C. area, but you could easily replace Arlington with any Northern NJ town (Hoboken, J.C., etc) and it would be just as accurate. So for all those obsessing about real estate that doesn't seem to make any sense, you are not alone.

From the Washington Post:

He's Obsessed With Condo Prices -- But Can He Ever Buy One?

James Cave, 34, navigates smoothly through the congested streets of Arlington on a recent workday afternoon. He's wearing a baseball cap and driving a new black SUV. He's the very picture of urban cool, but he is simmering hot with rage. Shaking his head and waving his arms in frustration, he points out what he sees as the rising signs of insanity all around him.

He gestures to one newly built condominium tower where he had considered buying. "$350,000 to $1 million," he snorts. "Next to a gas station and a fast-food restaurant. Smell it! Smell it! You can smell the fast food cooking!"

Cave points to another rising edifice. "You can see the signs -- luxury condos for $800,000. What could be so luxurious in a condo?"

He nods toward another pricey building, mockingly noting that it overlooks a bus parking lot. "That's no view," he says.

The real estate market has become an obsession for a lot of people in this region, and Cave is one of them.

Instead, he spends at least part of every day thinking about real estate -- what's for sale, how much it costs, where it is located, what it looks like. He wonders how people can afford it, whether home prices can continue to rise and what would happen if they were to fall. He worries most about what would happen to him if values were to fall after he finally bought, possibly draining years of his savings.
...
"It seems like the moorings are coming undone from reality," he said. "It's like the Internet stock craze -- you'd sit there and say something doesn't compute here. . . . What's happened in the last three years? My salary hasn't gone up anything like that."

He reflects on the old rule of thumb that people shouldn't pay more than one-third of their income for housing. When did that change? Some of his friends, he said, say they are paying 60 percent of their income for housing, doing it with interest-only loans, facing the prospect of balloon payments that will come due.
...
"In some markets, we've seen prices go down, and nobody wants to buy in a falling market," he said.

Caveat Emptor!
Grim

81 Comments:

Anonymous Anonymous said...

Wow,

As someone the same I age, I totally identify with this guy. I have had the same thoughts the last 3-4 years here in NJ. The prices are outragious for homes in lousy locations or needing work.

3/27/2006 08:02:00 AM  
Anonymous Anonymous said...

Last week on Criag's List, I found a 3BD/2.5BA in Summit for 800k and my fiancee and I shook our heads in amazement. Who the **** can afford this stuff?

I was at an engagement party over the weekend and again some people I thought who should know better (since they have financial jobs/degrees) gave the same reasons for the prices, wall street bonus money, location, etc....now that is amazing....all I do now is keep my month shut.

Again, this blog is reassuring for a reality check. Otherwise, it blows my mind driving around NJ and seeing all this and wondering how do people afford it.

BTW in case you didn't see it on another blog: here is a very interesting study by the FDIC on possible scenarios for the next US recession. They list 3 things that I have been estimating will push the US into a slowdown which shouldn't surprise anyone here: 1) Persistent high energy prices over the last couple of years 2) Housing bubble 3)the huge debt load carried recently by the average American.

http://www.fdic.gov/bank/analytical/fyi/2006/032306fyi.html

3/27/2006 08:12:00 AM  
Anonymous Anonymous said...

BTW I forgot to add that the 3BR/2.5BA in Summmit was a townhouse. I meant to say who the **** buys a townhouse for 800k?? And by the interior photos I am guessing that someone is trying to flip it

3/27/2006 08:14:00 AM  
Anonymous Anonymous said...

Well if they don't want to buy they can always sink themselves into debt with a construction loan - did anyone see NY times sunday biz story on calif couple (one math teacher/part time realtor the other a realtor) enlarging their home to tune of 1.2 mil? This as calif sales figs go ever lower and inventory higher?

3/27/2006 09:11:00 AM  
Blogger grim said...

I know a many people that borrowed money via Refis and HELOCs to remodel their homes.

I believe this was the real push behind the remodel surge in this area. While some of the activity we saw were flippers or builders, a large number of the work we have been seeing were homeowners "Investing equity".

Some of these folks went into the remodels with "skys the limit" mentality. And almost all of them thinking that the work would see a 100% payback on sale.

grim

3/27/2006 09:34:00 AM  
Anonymous Anonymous said...

Well as a Realtor I can tell you I am extremely slow...... but that is just me, there are plenty of agents in my office that are still doing really well, the reason's I believe I am not doing so well are twofold, I do not have a salesperson spiel, and I spend too much of my time reading this dang blog!!!! (-:
KL

3/27/2006 09:34:00 AM  
Anonymous Anonymous said...

The times have changed. Prices have peaked and to those in over their heads it will be a nightmare scenario. Those that do own and are in good financial shape better accept the fact that real estate ain't going to do all the heavy lifting for you in saving for retirement.

http://www.boston.com/realestate/news/articles/2006/03/14/sellers_literally_put_homes_on_the_block/

3/27/2006 09:36:00 AM  
Anonymous Anonymous said...

Adding to Grim's comment,

The other thing that amazes me in North Jersey, esp what I have seen in Scotch Plains/Westfield/Clark/etc are the number of homes undergoing major remodels by outside contractors, ie not by do-it-yourself homeowners.. I don't recall ever seeing so many homes in my life going through complete remodels....Again who can afford this? There must be a lot of HELOCs and refinaces...

3/27/2006 09:40:00 AM  
Anonymous Anonymous said...

Not to beat a dead horse too much, but these remodels are done to already ok homes in established communities and end up to look huge compared to the small neighbors' homes very close-by

3/27/2006 09:42:00 AM  
Blogger grim said...

Easy to afford it when you aren't spending your hard earned money.

HELOCs and Cash-out Refis.

grim

3/27/2006 09:44:00 AM  
Blogger grim said...

I believe the correct architectural description of that style is: Gaudy Jersey.

grim

3/27/2006 09:48:00 AM  
Anonymous Anonymous said...

Upgrades used to be normal part of homeownership - homes tend to decay (depreciate)over time so you need to update them to maintain the usability. This would include wiring it for cable/internet access, or upgrading an old house to include central ac.

Unfortunately, when people talk about returns on homeownership, most forget about these costs so as result, think they have made lots more money.

3/27/2006 09:54:00 AM  
Anonymous Anonymous said...

On remodeling, some people do have more money than they know what to do with.

I've seen many people buy houses for $800-900K, and then gut the whole place for months before even moving in.

The ubiquitous dumpster out front...

To do this before even moving in, takes cash.

3/27/2006 09:54:00 AM  
Blogger grim said...

A lesson in frugality from the 4th richest man in the world..

IKEA billionaire founder proud to be frugal at 80

IKEA founder Ingvar Kamprad, ranked 4th richest man in the world, drives a 15-year-old car and always flies economy class...

His fortune was recently estimated at $28 billion by Forbes magazine...

"People say I am cheap and I don't mind if they do..."

grim

3/27/2006 10:47:00 AM  
Anonymous Anonymous said...

Tearing down and rebuilding is the standard in shore towns. I spend a lot of time in Lavallette where people spend 800,000 to over 1,000,000 (which doesn't get you much there) tear it down and put up a new house. Unfortunetly they are often ugly and way too big for the 50x100 lot that they're built on.

dld

3/27/2006 11:22:00 AM  
Anonymous Anonymous said...

Richie,
Which town is that? I'd love to see a new house for $665 (not existent in Bergen County) and offer them $600 for it.
Thanks, K

3/27/2006 11:46:00 AM  
Anonymous Anonymous said...

The spinmeisters at work convincing the weak to sign up for financial slavery.
Don't do it just to say you owe the bank or mtg company your paycheck every month.

3/27/2006 12:15:00 PM  
Anonymous Anonymous said...

New New Jersey houses in a nutshell -

4000 sq ft on a .125 acre lot. Four different models to choose from, but all with a big stupid window over the door. No trees to be seen anywhere (looks like they're growing McMansions out of the ground).

Anyone have any baseball cards left from the late 80s? How about "special edition" cigars from the mid 90s? How about some internet stocks from the late 90s? You can file these eyesores in the same bucket. Ten years from now, people are going to look at these monstrosities and wonder what the hell we were thinking...

3/27/2006 12:25:00 PM  
Anonymous Anonymous said...

My father always said, you never know someone's situation. It could possibly be family money too that's helped this. I've seen it happen so often lately that an elderly person has no children and they leave the estate to a nephew (and he rents the 2BR house on busy street for $2500/month) or a favorite grandchild (bypassing the kids). Now here's someone who just inherited a big wad of cash, free money… and what do they do with it? Or well off families that are giving $$ to their kids to help them get started. I've seen this a lot, friends whose parents let them buy their houses substantially lower than market value.
This certainly has NOT happened to me, but I've been wondering the same thing for the past 5 years. Where are all these people getting this money to buy such big houses? Why is there such a big demand for housing which is driving prices past the clouds? My mother-in-law, a realtor, believed it was due to the low interest rates. But I just kept scratching my head saying, but for the average Joe, whose salary is only going up by about 5% a year, this doesn't make sense. And what about all those layoffs after 9/11?

It wasn't until I started reading this blog that it clicked… It's all these people, who I know many of, that take out interest only loans or only put 5%, or even 0% down. It's the loose credit standards that have made it so easy for people to get into such debt.

Same thing goes for cars, how can all these people afford giant Escalade or Navigator SUV's, or BMW's? They're leasing, not buying… anyone can lease. So, you never know someone's situation. They could be up to their eyeballs in debt just to keep up with the Jones'.

I also think this area is somewhat of an anomaly, being so close to NYC. There's such great wealth around here which is not quite the norm around the rest of the country.

3/27/2006 12:29:00 PM  
Anonymous Anonymous said...

To all of you renters waiting for the prices to drop... we're in the same boat. However, do you have any kids? My son is in kindergarten and I feel guilty when I tell other parents in town that I rent, since I don't pay property taxes and my kids takes advantage of the public school! We're hoping to buy in 2007 or 2008.

3/27/2006 12:40:00 PM  
Blogger grim said...

Boils down to two words in this area:

Monthly Payment

grim

3/27/2006 12:48:00 PM  
Anonymous Anonymous said...

Anonymous said...
To all of you renters waiting for the prices to drop... we're in the same boat. However, do you have any kids? My son is in kindergarten and I feel guilty when I tell other parents in town that I rent, since I don't pay property taxes and my kids takes advantage of the public school! We're hoping to buy in 2007 or 2008.

12:40 PM

Oh I am in that boat without oars because I have a son starting high school in the fall - We finally got our credit score up - got a downpayment together and truly feel there couldnt be a worst time to buy. )-:
KL

3/27/2006 12:55:00 PM  
Anonymous Anonymous said...

Anonymous said...
To all of you renters waiting for the prices to drop... we're in the same boat. However, do you have any kids? My son is in kindergarten and I feel guilty when I tell other parents in town that I rent, since I don't pay property taxes and my kids takes advantage of the public school! We're hoping to buy in 2007 or 2008.

12:40 PM

Oh I am in that boat without oars because I have a son starting high school in the fall - We finally got our credit score up - got a downpayment together and truly feel there couldnt be a worst time to buy. )-:
KL


Yup, wife and I have small $20k or so down payment, but I have not seen anything in the Parsippany/Rockaway/Little Falls area we can afford (that I would live in).
As far as renting and schools.
I have a 9 year old and I do not feel bad at all that he goes to a school where I do not directly pay taxes for.
They are paid indirectly thru my rent.
You better believe the taxes ar built into your rent.
Only thing I feel bad about is these house prices.

Just think I am beter off banking $2k a month now and renting for another year to see what happens with market, hopefully, be able to double my DownPayment next year and hope that $425k house now is $375 in a year or so.

3/27/2006 01:04:00 PM  
Anonymous Anonymous said...

"My son is in kindergarten and I feel guilty when I tell other parents in town that I rent, since I don't pay property taxes and my kids takes advantage of the public school! We're hoping to buy in 2007 or 2008."


Why do you feel "guilty"? Your landlord pays the property taxes for you.

There's nothing to feel guilty about...

3/27/2006 01:14:00 PM  
Blogger grim said...

Why feel guilty? Nobody forced them into buying. They could have easily rented as well.

Next time you see your landlord thank him for subsidizing your housing and the education of your child.

jb

3/27/2006 01:28:00 PM  
Blogger Metroplexual said...

This comment has been removed by a blog administrator.

3/27/2006 01:39:00 PM  
Blogger Metroplexual said...

Anonymous said...
To all of you renters waiting for the prices to drop... we're in the same boat. However, do you have any kids? My son is in kindergarten and I feel guilty when I tell other parents in town that I rent, since I don't pay property taxes and my kids takes advantage of the public school! We're hoping to buy in 2007 or 2008.

Don't feel guilty. As grim pointed out you pay through your rent. It is indirect but paid by your rent nontheless. That is why you are eligible for the homestead rebate.

3/27/2006 01:41:00 PM  
Anonymous Anonymous said...

As Grim said "Monthly Payment" are the two KEY words.

Has anyone else noticed the progression of debt of the typical American from fixed (or paid off in full) to variable over the last decades? give me a little slack on the timelines...2 decades ago, only paying the minimum monthly payment on a credit card became common (instead of buying with cash or paying in full). Last decade leasing a car, instead of buying it (cash or fixed loan) became common. Now this decade, buying a house based only on a monthly payment on a variable rate loan. What's next?

3/27/2006 02:13:00 PM  
Anonymous Anonymous said...

db,

I also agree that prices are a little crazy in Northern Jersey but wanted to give you a little reality check on your Summit comment.
Example- Two houses that went on the market in Summit this week. First $2.25 Million put on market Tuesday multiple offers on Thursday. Second, $2.55 on market to show Thursday, offer accepted Friday.

Your friends, I have to admit are right in some cases about Wall Street money. In this town there are people who are making $1 to 2 to 5 million a year- and for several years. People will pay for "name" streets and will have their two million dollar bungalow paid off in a couple of years, while sending all four kids to private school at $80K per year after tax dollars. Crazy money isn't it? But it is not uncommon.
Don't mean to bust your bubble but their are actually a lot of people who can afford an 800K townhome, especially if they are moving out of a $3Million dollar home to retire/downsize. You are not dealing with average income earners.

There is a very limited inventory(1 or 2 homes a year)on those most desirable streets in these towns and many purchasers just come in and pay cash when they come up- yes I know it doesn't seem fair, but when people question "Who is buying this stuff?" here is your answer. Last year a home was purchased for $2million on a desirable street and yes they are "tearing it down" to build a dream home.

People who think they are making alot of money by pulling down 100-200K are simply out of their league in towns like these.

I agree, prices are ridiculous and those lower end homes in less desirable locations may in fact be more elastic, as the "money is no object" buyers are not looking at those homes 500-800K. As these prices come down it will place downward pressure on the more expensive homes, but bottom line- you will always have some buyers at every level in some of these towns.

Disclaimer- although there are those who can truly afford this lifestyle there are also those buyers who leverage themsleves to the hilt to maintain the perception of wealth- sort of the "Anti-Ingvar Kamprad".

rw

3/27/2006 02:30:00 PM  
Blogger grim said...

Using exception cases to justify the norm is a very dangerous position.

3/27/2006 02:39:00 PM  
Anonymous Anonymous said...

I was specifically answering a question posed by a blogger about a certain market(Summit). Just because I am offering some evidence that the market is not necessarily slowing on certain properties does not indicate that most homes in the US are not overvalued. We are all in agreement that home prices are out of whack with median incomes, however in some towns the rules do not equally apply. Giving people a reality check on the dynamics of high end properties and incomes that sustain them is only to prove the point that NO at 100-200K you are not SUPPOSED to be buying an 800K house and especially not a townhome in an exclusive market.
RW

3/27/2006 02:51:00 PM  
Anonymous Anonymous said...

At the risk of starting a pi$$ing match, my friends & others that I know that work on wall street that make serious money (i.e. the kind that you are talking about) do not live in NJ. The people that I know that live in short hills, summit, etc that work on the street work in "back office" jobs, not making millions. Furthermore, if your example is the norm, then why is the average income for Summit so much lower? (i.e. for 2000 it was $92k...granted it went up in 6 years but not at the levels at which you are claiming....http://www.city-data.com/city/Summit-New-Jersey.html)

3/27/2006 02:57:00 PM  
Anonymous Anonymous said...

Insanity in Bergen County:
Check out MLS 2603463 on Realtor.com in Wyckoff, NJ. This house has water leaking into the basement in the front and the back. The price wasn't reduced at all and now its under contract.
And, get a load of the last photo of the bed with the lights - really shows you how big the bedroom is, doesn't it.!

3/27/2006 03:01:00 PM  
Anonymous Anonymous said...

"Giving people a reality check on the dynamics of high end properties and incomes that sustain them is only to prove the point that NO at 100-200K you are not SUPPOSED to be buying an 800K house and especially not a townhome in an exclusive market."


I think your posts are on the mark as far as 'high-end' towns go, because some people will pay whatever it takes, and have the money (real or not) to pay.

That said, how much do you think someone who makes $150K should be spending on a house?

3/27/2006 03:02:00 PM  
Anonymous Anonymous said...

Hey db, I'm going to post here what I posted to you on "Sunday Afternoon Open Discussion"

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.

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

I think the real reality check is 800k for a townhome anywhere in NJ (it looks like a generic apartment outside)...btw I was a bit off when I said average income...it is the median income according to the 2000 census and 117k for families (http://en.wikipedia.org/wiki/Summit,_New_Jersey) Last time that I checked, the median means 50% of the data points lie below it

3/27/2006 03:06:00 PM  
Anonymous Anonymous said...

I work in an investment bank, and we wonder where people are getting the money to buy all the 1.5 Mil condos..

It sure isnt us, or the people we work with..

3/27/2006 03:07:00 PM  
Anonymous Anonymous said...

Don't be a bagholder and try catching a falling knife.

Once the momo heads in a direction it tends to swing far the other way.

Down it goes and nobody knows where it will bottom. Probably way to early to even attempt to call one.

3/27/2006 03:13:00 PM  
Anonymous Anonymous said...

Yeah i am going to buy a house a be underwater in a year or two.
No THANKS!

CD

3/27/2006 03:14:00 PM  
Anonymous Anonymous said...

I have to agree with rw to a certain extent. Unless someone builds a huge wall between NYC and northern New Jersey, wall street and other big NYC paychecks will keep prices high in convenient train towns. I checked the paper today... no wall story.
Further, NYC offers an almost endless supply of buyers. If the NYC real estate market does not tank, then NNJ won't tank.

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

DB-
Guess we don't know the same people living in Jersey- Mostly know managing director types, head of fixed income types, traders, some sales people but not one "back office" actually.

You asked the question on who could afford the 800K townhome, but guess you already know them right?

I was not saying that these people are the "average" but that they exist and in greater numbers than six years ago. The Mid Town direct and 911 greatly changed the make up of these towns and I imagine currentlocal incomes have risen substantially during that time.

As it pertains to my example, average income from 6 years ago is irrelevant. There is much racial, religious and socioeconomic diversity in Summit, which is why we wanted our children to grow up here.

You assume you know more about the make up of this town even though you have never lived near here?
Then you throw off what are supposed to be condescending remarks about the "status" of the people you assume are in New Jersey? Have you ever even driven around and how many people do you actually know that live off the Mid Town direct?

Ya you're right... I am two years older than the guy in the article and already have my kids college education saved, could pay off my mortgage(we own a very small, modest 3 bedroom) and still pay cash for that 800K townhome. Yep--know a lot less than you do about who lives here.

RW

3/27/2006 03:38:00 PM  
Blogger grim said...

The premium for location was priced into these towns long before the bubble.

It will retail that premium over other towns post bubble, but they will decline the same.

grim

3/27/2006 03:38:00 PM  
Anonymous Anonymous said...

right... so... lets see if i have this correct... so, when wall street does well, north new jersey real estate goes thru the roof... sorry, people but it doesn't work that way. Remember, 1990-1997 real estate was in the gutter and no one wanted to buy? well, guess what? On Wall Street, pay and bonuses were huge back then too... they were excellent years... the bull run in stocks started in 1993... remember? so, did that help real estate? hhmmmm??? let me answer that one for you... NO!

3/27/2006 03:48:00 PM  
Blogger Metroplexual said...

This comment has been removed by a blog administrator.

3/27/2006 03:50:00 PM  
Anonymous Anonymous said...

Grim,
I agree that even premium towns are due for a drastic decline over the next few years. We also know many wall street first time buyers who could afford to get into this market but refuse.

The lower end starter homes are sitting on the market and the rest will follow. We have also seen that many homes are priced at what seems to be lower levels than they would have been listed last year, meaning although things are still high- you get more for your money.

Also sorry about going off on my personal financial tangent, reading it back it seems very "bragadocious". Many people who have the means to buy bigger are also not due to our belief that things are coming down and
losing 20% on a bigger ticket house is not prudent.
RW

3/27/2006 03:50:00 PM  
Anonymous Anonymous said...

RW, how much do you think someone who makes $150K should be spending on a house?

Seriously, what would be your guesstimate? $600K?

The online calculators say something like $375K, which will get a "cozy charmer" in Newark.

3/27/2006 04:06:00 PM  
Blogger grim said...

I don't know who is buying, but this site gets quite a bit of traffic from "wall street" domains.

I've had days were 20-25% of my traffic has come from well known financial firms.

grim

3/27/2006 04:17:00 PM  
Anonymous Anonymous said...

Anon,
I wouldn't suggest ANYONE buy ANYTHING right now! I have been a bubble blogger for almost a year now and I am amazed at how quickly things are turning and the psyche of realtors and the public has turned. Everyone we talk to has seemed to change their tune. A year ago people treated us like we were crazy when we would mention property values might go down.

Wait 12-18 months and you could give GRIM the ultimate lowball example!! I guestimate we could see some 30%-40%declines!
RW

3/27/2006 04:17:00 PM  
Anonymous Anonymous said...

Grim,
This does not surprise me as hubby works for one such firms and lead me to this site. Between listening to you, Ben Jones and David Roenberg we have made the decision to sit tight in our little tiny house, with our little tiny yard, and our little tiny mortgage! We know alot of people doing the same.....thanks for the informative blog.
rw

3/27/2006 04:28:00 PM  
Blogger Metroplexual said...

njresident286 said...

I meant to say what do you pay in rent and for what. Is it a house? I am interrested in the town myself.

3/27/2006 04:29:00 PM  
Anonymous Anonymous said...

"I wouldn't suggest ANYONE buy ANYTHING right now!"

We're not planning to buy now, but what number do you think is realistic, given a $150K income?

3/27/2006 04:30:00 PM  
Anonymous Anonymous said...

"A town like Union has taxes much cheaper than somewhere like Chatham. So you could buy a 600k house in either town and still have a wide swing in your payments."

So what would be a realistic monthly outlay for mortgage + taxes based on an income of $150K? $3,000?

3/27/2006 04:45:00 PM  
Anonymous Anonymous said...

Why will people who work in NY stop buying houses in nice towns on the train lines? How many first time buyers in NY and NJ are "waiting out" the bubble? There are plenty of buyers out there, they are just a tad more picky.

By analogy to DB's argument, if there will always be NY money ready to buy on the fancy streets in train towns, then there will always be NY money ready to buy in the train towns period. Nothing that has happened over the last 6 months has changed that. Less desirable towns may see double digit losses in the next couple years, but I think that realistically the best we can all expect from Summit, Chatham, Madison, Mendham etc is a leveling off and maybe reductions on the real garbage boxes in those towns. I'd absolutely love to be wrong, but NYC is not any safer, any less crowded or its infrastructure any younger than it was 6 months ago.

3/27/2006 04:46:00 PM  
Anonymous Anonymous said...

Anon,
It may sound crazy, but I might go with the antiquated 2.5 times annual income which is the same as your 375K? I know in the days of 0%-5% down I/O loans this may seem insane. The fact that this standard, which has been handed down by the lending industry for years, now allows you to buy nothing more than a shack in Newark should really drive home the market imbalance! Or we could go by the NEW lending standards and just figure out “How much do we want to spend a month?" OOHHH "We can afford $1.5 million if we go with the 60 year loan"

RW

3/27/2006 04:50:00 PM  
Blogger chicagofinance said...

My brother-in-law pulls in somewhere around $175K a year. His home is probably worth $1.3M.

How did he do it?

In 1992, bought a $190K starter with a $150K mortgage. In 2000, sold starter for $315K and mortgage was $120K.

Put $200K down on next home and took $400K mortgage.

In 2003, sold $600K home for $800K.

Took $400K down payment and bought $900K home [now $1.3M]. Mortgage is $500K. A little stretched, but he is not killing himself.

If he lost his job, they would lose the house though.

3/27/2006 04:53:00 PM  
Anonymous Anonymous said...

"It may sound crazy, but I might go with the antiquated 2.5 times annual income which is the same as your 375K"

OK, so we have $200K in cash, and will not buy a house without a $50K buffer, which leaves $150K down payment.

So, $375K + $150K = $525K price.

We've been looking at homes priced at $750K max, which we know are bubble-fied and too expensive, but we like the town.

So, looking 2 years down the road, saving some more, we will probably end up in a house priced at $600K, which was my gut guesstimate, but now I see the numbers.

It's going to be brutal staying in a lame apartment for 2 more years.

:(

3/27/2006 05:03:00 PM  
Anonymous Anonymous said...

You know, I think I screwed that math up.

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

annon
"It's going to be brutal staying in a lame apartment for 2 more years."

It is certainly not lame to rent an apartment and save 200K! If you are really frustrated, rent a nicer place. Your rent is still likely less than if you owned or purchased the same condo or house. You will still be saving money in the long run! Kudos to you for saving 200K and not just thinking you can automatically afford a million dollar home....."But I have the 20% down..which is the way many folks think."
I would sell my home and rent if I did not think it would do irreparable harm to my kids, speaking of those kids, where are they? Better stop blogging and start parenting!
RW

3/27/2006 05:19:00 PM  
Anonymous Anonymous said...

Right now realtors are selling Bayonne as a hot town. Its a blue color place but has great proximity to downtown Manhattan. What is really fueling the crazy prices (small townhomes at $550,000) are the three main banks. Bayonne Community Bank, Pamrapo Saving and Richmond County Savings are all trying to outdo each other with 100% financing, Interest only loans and low low rates. When people start handing their homes back becuase they realize their $550K town house is worth $300K after two years, then Banks will stop. It happened in the early 1990s with Port Liberte in Jersey city. THOSE WHO DO NOT REMEMBER HISTORY ARE DOOMED TO REPEAT IT.

3/27/2006 05:29:00 PM  
Anonymous Anonymous said...

Her are some current original Asking, reduced price and Sold price #'s of some house in Clinton Township ( Hunterdon County).

MLS 2094514
444.9
399.9
385.0

MLS 2206191
449
399
390

MLS 2072493
599.9
529.9
517.0

MLS 2203524
669.9
649.9
615

MLS 2085564
1.049 Million
999.9
999.9

Bill

3/27/2006 05:50:00 PM  
Anonymous Anonymous said...

wow some nice price drops and IT"S ONLY THE BEGINNING!!

BOOOOYAAAAAAAA!

3/27/2006 05:57:00 PM  
Anonymous Anonymous said...

I've been following a condo in the Charlton in Fort Lee. The sellers bought it for $440,000 in May of 2004 and put it on the market in July of 2005 for $660,000! The idiot real estate agent didn't tell them about a little thing called capital gains, so after cancelling one potential sale, they relisted on the mls under a new number in January. I just checked out the listing information for this unit and it has somehow grown from 1715 square feet to 1825 square feet! Amazing.

3/27/2006 06:01:00 PM  
Anonymous Anonymous said...

"I would sell my home and rent if I did not think it would do irreparable harm to my kids, speaking of those kids, where are they? Better stop blogging and start parenting! "
RW
Well I have been saying this,,, I have a teen ager starting high school in the fall. I had wanted to buy a home b4 he started because we dont want to stay in this town,,, I am having a hard time with this decision, although I wanted him to be settled I dont want be upside down in a mortgage a) twice &
b) when he starts college

KL

3/27/2006 06:03:00 PM  
Anonymous Anonymous said...

Hey db:
Yur said "At the risk of starting a pi$$ing match, my friends & others that I know that work on wall street that make serious money (i.e. the kind that you are talking about) do not live in NJ. The people that I know that live in short hills, summit, etc that work on the street work in "back office" jobs, not making millions."

How 'bout jon corzine, the new governor, he livied in summit on one of those streets in summit, his wife just moved and sold their shack for 3 point something.

3/27/2006 06:11:00 PM  
Anonymous Anonymous said...

John Corzine and Jim Cramer(CNBC mad money) are a few of the "back office" guys living in Summit, no big money guys would possibly live in Jersey.

By the way Corzine's house listed at $4.2 and sold for $3.7- talk about a LOWBALL! What's 500K to a billionaire anyway?

These are the type of guys I was referencing earlier. Want to get into a bidding war with either of them over a house they really want?

RW

3/27/2006 06:28:00 PM  
Anonymous Anonymous said...

Grim
just realized that the $2.550 million home I mentioned that sold in two days came down from $2.995 after not selling last fall.

Gosh- what a shock- lower your price by $350K and get an offer! Even big money has a certain sense for value....the market is changing.

RW

3/27/2006 06:35:00 PM  
Anonymous Anonymous said...

KL-
"Well I have been saying this,,, I have a teen ager starting high school in the fall. I had wanted to buy a home b4 he started because we dont want to stay in this town,,, I am having a hard time with this decision, although I wanted him to be settled I dont want be upside down in a mortgage a) twice &
b) when he starts college"


Is there no way to rent a place in the town where you would like to buy? Get your child started in the local high school? Rents are much cheaper than buying where we are and you get the benefit of the great schools and your landlord gets to pay the taxes and upkeep.

We rented when first moving to Jersey in a great town and knew a single mom who also rented so her kids would have the benefit of the wonderful school system. As soon as her youngest daughter graduated, she moved to a less expensive town.
RW

3/27/2006 06:44:00 PM  
Anonymous Anonymous said...

grimghost-
Yes Corzine divorced his wife and she was the one who sold the house. We are all very very well aware he longer lives here and is most likely shacking up with babes in Hoboken.

We were making a statement against DB's remarks that no one with money lives in Jersey. Sorry about the more recent specifics about where he resides in Jersey.

Also sorry about the exaggeration of his wealth, it was really for effect....I should have said "gazillionaire" so that it wasn't taken as a misrepresentation of the facts.

I am in total agreement that ALL prices in New Jersey are likely to decline. No one is impervious. In fact, the larger the home price, the larger the fall if things go up and down in percentages.

Corzine will add to the decline of the housing market as “property tax relief” is not in his dialogue. It is going to get even more expensive to live here!

RW

3/27/2006 07:35:00 PM  
Anonymous Anonymous said...

grimghost-
off topic
You are a smart guy. How do they come up with these numbers 500-750 million estimated personal wealth? How can a persons assets fluctuate 250 Million dollars?
Can you imagine calling your bank and having them say "Well Mr Grimghost you have around $500,000 or 750,000? If we have $250 million dollar deviation couldn't he in fact maybe be a billionaire?

I agree I'm not always the sharpest tool in the shed but I don't get it and kinda feel like they just don't want us to know.

RW

3/27/2006 08:03:00 PM  
Anonymous Anonymous said...

1) The people living in Summit, Short Hills, etc. are not "back office" people. They are Goldman and other Wall Street Banks exec's, hedge fund types, etc.
Granted, there are more people who choose to live in the city these days. But of those who do move to the suburbs, Long Island has fallen to the bottom of the list. NJ is a top choice, followed by Westchester.

2) Corzine now lives in Drumthwacket. Not Hoboken, Not Summit.

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

anon 8:21
Is he shacking up with babes in Drumthwacket? Sorry if this seems irreverent- trying to infuse a bit of humor in a fairly serious discussion tonight.....

Jersey gets a bad rap. We love our life here and think it is a great place to raise a family-although expensive. I predict a new sales tax on clothing in our near future.

I feel so badly for these people who have worked hard, saved, make great salaries and can not afford a nice place to live or to own. It makes no sense and there must be a wicked correction coming soon!


RW

3/27/2006 08:40:00 PM  
Anonymous Anonymous said...

Anonymous who thinks the good NJ towns won't decrease here. If NYers like NJ above LI and Westchester, then isn't that one more reason why the train towns will stay afloat?

3/27/2006 08:59:00 PM  
Anonymous Anonymous said...

there is alot of development going on and/or in the works in lower bergen county. the encap project in the meadows atop old land fills in north arlington and lyndhurst is going to add 4000 new residences. the old curtis wright factory in woodridge is being leveled in anticipation of a new transit village that is deemed to increase the towns population by a third. two luxury condo towers along the hackensack river where the old LT's driving range is currently situated. that's a sh*t load of inventory. every peace of light industrial properties in towns ranging from midland park to carlstadt is being swept up by developers with ties to local zoning officals and being rezoned for residential. a big time developer just bought majority of the land and abandoned factories in passaic along the river. ridgefield is talking about a redevelopment along overpeck creek. a luxury italian furniture designer just announced plans for a 41000 sqf renovation to an old textile factory. this is too much. i saw a two family in lovely garfield new jersey listed at 1.25mill... down the street a homeless person torched them selves in a make shift tent along the river. this is insane. before you know it people will be selling there sheds for a quarter mill. insanity!
-bobby

3/27/2006 10:58:00 PM  
Anonymous Anonymous said...

A Summit tale:

10 B Gates Avenue, Summit
MLS 2104957
$639K => $569K => Closed @ $549K
Days on Market: 181

http://pictures.gsmls.com/MediaDisplay/53/hr3207953-4.jpg

3/27/2006 10:58:00 PM  
Anonymous Anonymous said...

BOOOOYAAAAAAAAA!

Down it goes.

SELL SELL SELL!

3/28/2006 09:09:00 AM  
Anonymous Anonymous said...

njgal... Long Island has insane property taxes! My parents paid more for taxes there for lousy neighborhood than they paid for a McMansion here in NJ.

3/28/2006 12:53:00 PM  
Anonymous Anonymous said...

"I would personally rather move to LI, Westchester or CT, but only because NJ has disgusting taxes."

Have you seen the taxes on Long Island?

LI has more congestion, a worse commute, and higher taxes.

I grew up on LI, and wouldn't even think of buying there.

3/28/2006 02:37:00 PM  
Anonymous Anonymous said...

Wow, taxes in Maplewood are obscene! Why is that?

MLS 2255494
3BR, 2.5BA
$795K with taxes of $17K!
http://www.realtor.com/Prop/1056539545

3/28/2006 02:47:00 PM  
Anonymous Anonymous said...

Just posted this elsewhere but thought it relevent to your people are not as rich as we think discussion.

The 0% down people or highly leveraged exist everywhere, you'de be surprised.
A friend of a friend who bought a home in a neighboring town at $2.8 mil put 20% down yes, but then still relies on a ten year i/o loan to make the monthly payments. They have a $2.2 Million dollar mortgage--CRAZY!!

Truly wealthy people don't have those sorts of mortgages. It's all relative but if the housing decline reverberates into the rest of the economy these huge Wall Street bonus years will go bye bye too. NO ONE IS IMPERVIOUS!
LM

3/28/2006 03:32:00 PM  
Anonymous Anonymous said...

Yur said "At the risk of starting a pi$$ing match, my friends & others that I know that work on wall street that make serious money (i.e. the kind that you are talking about) do not live in NJ. The people that I know that live in short hills, summit, etc that work on the street work in "back office" jobs, not making millions."

Well - I work on Wall Street (a bulge bracket i-bank), and I can tell you that most of the MDs here do not live in NJ. They live in the city, Westcester, Ct, or the Island. I would say less than 20% live in NJ. Further, there are less big salaries on Wall St than you think. Its not all that big of an industry compared to some, and the vast majority make less than 1 million per annum. You just dont have enough 1 million dollar salaries running around to support the overwhelming # of multi-million dollar homes and apartments.

3/29/2006 10:21:00 AM  
Anonymous Anonymous said...

"Wow, taxes in Maplewood are obscene! Why is that?"

I believe they are in Essex Cty

3/29/2006 10:26:00 AM  

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