Friday, May 12, 2006

Drowning In Debt

Interesting report from the Center for American Progress:

Drowning in Debt

America’s Middle Class Falls Deeper in Debt as Income Growth Slows and Costs Climb

"America’s middle class is drowning in debt. A typical middle income family earning around $45,000 a year saw its debt burden grow by 33.1 percent between 2000 and 2004, even after adjusting for inflation. Debt relative to income rose even more, to 33.9 percent, during this period for middle income families, according to the Federal Reserve Board’s tri-annual Survey of Consumer Finances. Personal bankruptcies among these households are rising steeply."

"The reasons for greater economic distress among middle class households are not hard to pinpoint. Slow income growth between 2001 and 2004, the last year for which complete data is available, has not kept pace with the rising cost of big ticket items such as housing and education loans, medical expenses and transportation. Family budgets have been squeezed."

"A common but misplaced assumption is that the growth in debt among middle-income families – those with incomes roughly between $25,000-to-$70,000 a year - is the result of over-consumption through increased credit card debt. Rather, growth in debt is primarily due to heavier borrowing for investments in homes or education, both of which saw dramatic price increases in recent years. The cost of a college education, for example, grew by 26.3 percent between 2001 and 2004, after adjusting for inflation."

101 Comments:

Blogger minutesfromNYC said...

Yup...I take PRIDE in driving a 12 yr old car with peeling paint! :)

I refuse to let my income be wasted on an impressive car or an IPOD lol. I was walking with my fiancee last summer and we saw one of her old friends younger brother driving an Escalade EXT (or something) keep in mind, the kid just graduated college. I asked if he was a doctor, or a lawyer? Turns out he is a temporary consultant doing data entry. hmmm, sounds like the rest of New Jersey youth. Keep leasing those cars, keep spending your money on new electronics, keep maxing out that credit card, keep suscribing to things like TiVo and satalite radio. We live in a modern world...much different from the way things were in the 1950s. There were less "monthly payments" then than there are now it seems. The only way to do it is to live month to month. It also has nothing to do with how much money you make, it is all about how you spend your money. So, with this long rant, save your money and don't buy into the excess mentality of Center Hall Colonial owners.

5/12/2006 06:56:00 AM  
Anonymous Anonymous said...

These statistics confirm what I have thought for years: things are just different for the Gen X and Y generations than their boomer parents. I have repeatedly heard boomers dismiss escalating education and housing costs with remarks like: "New Jersey has always been expensive," or, "We stretched to get into a house, you'll do the same and everything will be okay." If that's true, then why are their single kids still living at home into their 30s, and why is it that 30 years ago a single wage earner making the median salary support a family and own a home in a reasonable neighborhood, whereas now it takes two married professionals making a six-figure income to afford the same house?

The sad conclusion is that the Boomers' wealth is having a negative effect on their children's welfare. Their entitlement benefits and housing wealth have passed on a legacy of debt to the young generation.

I've been reading this blog for a while, but I think I'm going to start participating more.

And oh yeah...Booyah!

5/12/2006 07:13:00 AM  
Anonymous Anonymous said...

Be A fool Buy an Overpriced House.

Welcome to monthly slave payments.

Just what "IF" the prices of houses drop 25%-50% and you have to sell in 5 years?

BOYCOTT HOUSES!!!


Boooooooooyaaaaaaaaaa


Bob

5/12/2006 07:31:00 AM  
Anonymous Anonymous said...

Do NOT listen to anyone with a vested interest tell you to "JUST" buy a house.

The facts are house prices DO NOT compute. Prices are a RIPOFF!

BOYCOTT HOUSES!

Just say NO MAAS to monthly slave payments.

Lean times are a coming bloomers and realtors. You may have to save money outside the Housing ATM machine to fund that retirement now.

BOOOOOOOYAAAAAAAAA

Bob

5/12/2006 07:36:00 AM  
Blogger NJGal said...

"30 years ago a single wage earner making the median salary support a family and own a home in a reasonable neighborhood, whereas now it takes two married professionals making a six-figure income to afford the same house?"

Totally. My parents bought their 60K house with only my dad working (makign 16K a year). They also had to put 50% down, and a relative gave them that downpayment (depression era uncle with no kids - a saver, but hardly a rich man). Now, my husband and I cannot afford a house without having to make extreme (5K a month or more) payments between taxes and mortgage and we're both working professionals with those higher incomes. And we're not spending like mad either - old car, cheap rent (for Hoboken anyway) and we don't eat out often or do anything nuts with our cash. We squirrel away most of my salary and still don't have the 20% we want to put down. Everyone asks about us having kids, but how? Where will we find that 2500 a month for childcare that we need because we both need to work? It's just crazy.

5/12/2006 07:38:00 AM  
Anonymous Anonymous said...

http://money.cnn.com/2006/05/03/news/economy/realestateguide_2_fortune/index.htm

5/12/2006 07:44:00 AM  
Blogger grim said...

10Y up to 5.18% this morning.

5/12/2006 07:59:00 AM  
Anonymous Anonymous said...

I think the critical issue is when the Gen X and Y generations will decide "enough is enough" and make a break for cheaper metro areas. The NY metro area will always attract a certain amount of young professionals, especially in law and business, among others, simply because it is a Mecca for that kidn of talent. But when will it get so bad that those who don't have to be here will leave? There are a lot of grumblers, and true, there is a negative outflow of population, but when will the exodus begin? Or has it? I think retiring boomers will be in a for shock in 10 or so years, assuming prices don't recede or stagnate, when they find a lack of youngsters willing to finance their retirement by forking over $800,000 for a 3BR that seriously needs a paint job.

5/12/2006 08:53:00 AM  
Blogger Shailesh Gala said...

NJGal: Right on the point.

The main difference in my opinion has been the fact that 30-40 years ago, most towns allowed suburban development, which gave the supply to meet demand. Today, most towns in NJ don't allow development of houses for middle class. The NIMBY movement of California is strong in NJ for last 2 decades. There is significant shortage of supply of houses that people want and can afford.

Now before everyone jumps on large inventory piling up and there is no shortage argument, read the word AFFORDABLE. Yes there are houses available, but not affordable at the prices that is being asked. Just see how many towns are approving either ADULTS ONLY or only McMansions. You don't see many new single family suburban home.

The 101 of economics is if Demand increases, Supply also increases to cope with that. When you restrict supply, but demand keeps increasing, what else do you expect !!!

5/12/2006 09:07:00 AM  
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5/12/2006 09:11:00 AM  
Anonymous Anonymous said...

Gluts & Gluts & Gluts of Insultingly priced inventory piling up Daily.

GSML Listing

5/12/2006 28,820

5/10/2006 28,660

5/08/2006 28,471

Everyday relentless overpriced supply piling up

BOYCOTT HOUSES!

BOOOOOOOYAAAAAAAA

Bob

5/12/2006 09:37:00 AM  
Anonymous Rich In NorthNJ said...

You’re contradicting yourself.

Whether it’s McMansions, starter homes, condos or whatever you define as middle-class housing, the prices would still be high. Even if towns allowed for more building (which we do not need) the prices would still be high no matter what type of housing. If existing homes that fit your definition are priced high, new ones of this “type” would be too.
Hell, the Phoenix area has tons of room to expand and housing boomed there. Did prices stay level? No they boomed beyond affordability as well.

Yes, there IS a lot of inventory. Yes, it’s still not affordable. But prices WILL come down. It just won’t happen tomorrow. This is a market, but it moves MUCH slower.

You and NJGal talk about 30 years ago. Well maybe you should review what happened to the housing market about 20 years ago. But don’t stop there; look at the market about 15 years ago. And while doing this pay attention to what interest rates during those times.

5/12/2006 09:39:00 AM  
Anonymous Anonymous said...

I think the Harper's "The New Road to Serfdom" article absolutely nailed the central issue of the housing boom: Why in the blazes are middle class citizens racing to go into hundreds of thousands of dollars of debt? The two main justifications, capital appreciation and fear of not being able to afford in the future are strong reasons. But I think the Boomers are way overrating home equity. Expensive houses take money out of your pocket every month, provide no positive cash flow, and obligate your future earnings to pay for interest. So many Boomers say their house was the best investment they ever made, but what good is an investment like that if you have to sell and move to North Dakota (no offense) to capitalize on? And what if, heaven forbid, you actually want to stay in the house you labored to pay off all those years? Most Boomers can't as their house is their nest egg.

5/12/2006 09:45:00 AM  
Anonymous Anonymous said...

15 years ago during the last bubble bust home prices fell 25% and condos fell 50% in the face of lower interest rates 9% down to 6%.

another RE myth busted.

5/12/2006 09:45:00 AM  
Blogger Shailesh Gala said...

Rich In NorthNJ: There is something called as AFFORDABILITY INDEX, which takes into account many factors such as Income, Interest Rates, Employment etc.. This index for NJ has been going down steadily in at least last 10 years.

If new houses become available, they will not be starter houses. Many folks living in starter houses will upgrade to better houses, and they will become available for most others.

if towns allowed for more building (which we do not need) the prices would still be high no matter what type of housing.

I start to question, why do they even teach DEMAND & SUPPLY in econ 101?? Isn't it so simple to understand that if population increases (remember you have folks moving in NJ and kids growing up in NJ), you need more houses. That is called DEVELOPMENT.

READ ECON 101 first.

5/12/2006 09:46:00 AM  
Anonymous Anonymous said...

Boomers are toast if they think housing is going to bail them out in the next 5-10 years. I expect massive price deflation in next 3 years.

Housing is expensive. Between the taxes the interest payments the upkeep, insurance....and now as it is dropping in price it doesn't look like such a good deal anymore.

5/12/2006 09:48:00 AM  
Anonymous Anonymous said...

There is a NET outflow of people leaving the state of NJ.

Another RE myth busted.

5/12/2006 09:50:00 AM  
Anonymous Anonymous said...

Review this again BUBBLEHEADS!

http://www.youdovoodoo.com/80sbubble.htm

BOYCOTT HOUSES!

Booooooyaaaaaa

Bob

5/12/2006 09:52:00 AM  
Blogger Shailesh Gala said...

RichinNJ: To help you understand affordability, read the article here at,

Housing Affordability Hits 14-Year Low

Bergen County, N.J., where most starter homes are priced above $400,000, "prices have gone up to a point where it's pushing the first-time home buyer out of the market," says Margaret Foudy, manager of the Weichert Realtors office in Tenafly. That creates a "domino effect" as people who already own a home find it tougher to move up, says Ms. Foudy.


Anonymous: 10:50 AM.
There is small outward migration, but the net population growth is still 3% or so. This growth came down from 4% or so. The population growth is not negative. In fact many recent studies are indicating that the trend now in Retirement is not to move out of state, but live near the community where you have friends & family. Banking on large scale retirees moving out of state is not realistic as well.

5/12/2006 10:00:00 AM  
Anonymous Anonymous said...

Review this again Bubbleheads
http://www.harpers.org/MostRecentCover.html

See the serf carrying the load. That's you fool if you pay these ripoff prices.

BOYCOTT HOUSES!

Booooooyaaaaaaa

Bob

5/12/2006 10:01:00 AM  
Anonymous Anonymous said...

Yes, but I've heard more than a few Boomers lament they can't stay in NJ due to property taxes, income tax, etc.

5/12/2006 10:07:00 AM  
Anonymous Anonymous said...

Yeah and right now their retirement Housing slush fund is dropping in value.

Don't be a serf/fool and bail out these bloomers.

BOTCOTT HOUSES!

Booooyaaaa

Bob

5/12/2006 10:09:00 AM  
Blogger chicagofinance said...

"READ ECON 101 first."




grrrrrrrrrrrrrrrrrrrrrrrrr......

5/12/2006 10:18:00 AM  
Anonymous Anonymous said...

"READ ECON 101 first."

We're way past ECON 101. The prices are being driven by madness. People think that a quick buck can be made by flipping. We'll need to read up on PSY 101 and SOC 101.

5/12/2006 10:41:00 AM  
Anonymous Anonymous said...

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5/12/2006 10:42:00 AM  
Anonymous Rich In NorthNJ said...

Shailesh Gala,

There is something called as AFFORDABILITY INDEX, which takes into account many factors such as Income, Interest Rates, Employment etc.. This index for NJ has been going down steadily in at least last 10 years.

I’m not disagreeing that affordability of housing has been going down. Well, for the last 5 years, not 10 (see below). But since you said it yourself above, tell me how you think more available housing is going to correct high property taxes, lost high paying jobs (due to corporate taxes), income, etc.?

I start to question, why do they even teach DEMAND & SUPPLY in econ 101?? Isn't it so simple to understand that if population increases (remember you have folks moving in NJ and kids growing up in NJ), you need more houses. That is called DEVELOPMENT

READ ECON 101 first.


You’re quite condescending when someone disagrees with you.

This will always be a densely populated area and housing will always be higher in this area, period. Does that justify prices in this area for the past 4-5 years, no.
Population growth for Bergen County from 2000 – 2004 has been 2%, for all of NJ 3.4%. The US national average was 4.3%. New housing in this area has kept up with growth.

The market is not a two-sided coin, Supply and Demand. There are many other factors involved, i.e. interest rates. But if you believe it all boils down to Supply and Demand, explain then how prices have increased in Arizona and inland-California what with all the land and new housing available? (Please don’t answer affordability again, see above.)

You’re not the first young person in this state to be priced out of the market. Did you look at the history of the market in the mid-80s to late 90s? The same thing happened then.
It takes time grasshopper.

That goes the same for you baby-boom bashers. They did not create this market either. Take the emotion out of the equation.

5/12/2006 10:48:00 AM  
Blogger NJREFUGEE said...

There is a NET outflow of people leaving the state of NJ.

Many of those who are leaving NJ are coming to the Lehigh Valley here in PA and pushing up prices here. Over the last 5 years, there's been a huge influx of people here like me fleeing insane auto insurance, real estate taxes and home prices in NJ.

5/12/2006 10:49:00 AM  
Anonymous Rich In NorthNJ said...

Anon 10:45

15 years ago during the last bubble bust home prices fell 25% and condos fell 50% in the face of lower interest rates 9% down to 6%.

That's my point exactly.

5/12/2006 10:51:00 AM  
Blogger Richard said...

in the process of buying a house. i asked for a rate quote middle of last week. as of today, 3 business days later rates are up 25bps. wow! luckily i locked in already.

the market is finally waking up to the fact that inflation is here. my advice for potential homebuyers? if you plan on using for shelter, staying somewhere at least 5-7 years and have the financial means to get a fixed rate loan it's ok to buy today IMO, as long as you're paying at or below market rate.

interest rates are only going to go up and if you're banking on an inverse ratio to home prices you might not see it.

5/12/2006 10:53:00 AM  
Blogger RentinginNJ said...

…”interest rates are only going to go up and if you're banking on an inverse ratio to home prices you might not see it.”

Richard,

Interesting point. The NAR and most other RE cheerleaders are pointing to rising interest rates as an excuse for a slowing market. I actually think the opposite is true. Rates are still low by historic standards. In the past few years, mortgage applications have typically risen when rates head up. As Otteau Appraisal Group points out, “rising interest rates bring some urgency back into the home buying equation”. In other words, rising interest rates may actually be providing some support to the market. The underlying spring market may actually be weaker than the numbers imply.

5/12/2006 11:06:00 AM  
Anonymous Anonymous said...

That goes the same for you baby-boom bashers. They did not create this market either. Take the emotion out of the equation.

I take major issue with this. It was precisely the Boomers' overleveraging that created this problem. Always working harder for bigger and bigger houses, going into more and more debt to do so. The boomers were the generation that taught us to perpetually "trade up" to better houses.

5/12/2006 11:13:00 AM  
Blogger Grim Ghost said...

FWIW, I think a lot of the census numbers for 2001-2004 for NJ, especially for Hudson, are likely inaccurate. The census bureau does an actual enumeration every 10 years, but the intermediate numbers are done via projections and modelling. They were wrong in the 1991-1999 period too. There is just no way that Hudson county is loosing population

5/12/2006 11:23:00 AM  
Blogger Grim Ghost said...

Richard -- there are still some banks that I think haven't increased rates (although they will likely do so soon). Hudson City Savings is still at 5.875 % for 15 years.

The best 15 year rate (5.75%) I've seen is at

http://www.hsh.com/lshow/fortlee_federal.html

I don't know anything else about this bank though -- its a very small, one branch bank.

5/12/2006 11:28:00 AM  
Anonymous Rich In NorthNJ said...

It was precisely the Boomers' overleveraging that created this problem. Always working harder for bigger and bigger houses, going into more and more debt to do so. The boomers were the generation that taught us to perpetually "trade up" to better houses.

I don't believe it's just the boomers. People in their 30 - 40's have also moved up to bigger homes. And I don't feel its "bad" to move up. There are people of ALL ages who do not research the market and have a “must have” personality with housing. It’s this “person” that will have issues with retirement no matter if it comes in 5 years or 50 years.
So I agree that keeping up with the Jones and McMansions is not a fiscally responsible thing. But I believe it was easy available money that caused this, not a certain generation of people.

Besides, I can easily generalize the Gen-X & Yers by saying they have a “want it now, MTV short-attention span mentality”, but I know that’s not completely true.

I’m kidding!!! Now go have a juice box and relax. Kidding again!

5/12/2006 11:28:00 AM  
Anonymous Anonymous said...

I'm actually only four-years-old, and part of the New Silent Generation. True to my generation, I am unusually tech savvy for my age.

While you make a good point about "trading up" and overleveraging not being solely a Boomer phenomenon, they nevertheless are the generation that practiced this in a widespread manner. Your Depression Era ancestors did not leverage their houses like the Boomers did (well, maybe they did in the 1920s, but believe me, they learned their lesson)

5/12/2006 11:51:00 AM  
Anonymous Anonymous said...

An interesting point about generations I heard awhile ago, that adds to our discussion here: People of a generation are often "defined" by the major economic trends of their generation. Many of the depression-era generation have never forgotten what happened to them while younger, so thus their reluctance to take on any debt during their lives and their distrust of the stock market. The baby boomers on the other hand never experienced this, but instead experienced the inflation of the 1970s and thus some of their behavior might be attributed to that.

5/12/2006 11:57:00 AM  
Anonymous Anonymous said...

I cannot access the harper article. Can somebody put it on the web? Thanks.

5/12/2006 12:03:00 PM  
Anonymous Anonymous said...

Exactly! The Boomers and subsequent generations have been immune from disastrous economic events, such as the Depression. This has led to the "I'll quit my day job to flip houses because real estate is the only guaranteed, sure fire get rich investment" mentality of today. If you've never lived to see a market crash, why would you ever think a housing downturn was anything to worry about?

5/12/2006 12:06:00 PM  
Blogger Shailesh Gala said...

rich in NJ: Similarly, I also agree that supply & demand is not only the part of equation, all other factors are as well. But, Supply-Demand is also a contributor. Too much neglect over long period of time, along with other factors, excurbated the issue.

You asked: explain then how prices have increased in Arizona and inland-California what with all the land and new housing available?

Two different reasons. California has significant restrictions. There have been large number of studies done on that. This is true even though there is lot of land in central CA. If not, read the article in this link,

Regulating California's Housing Crisis

For Pheonix, Money poured in from all over the country, especially from over-priced housing markets in California and Las Vegas, thereby driving homebuilding to record levels and sending home prices soaring. This is mainly investment playground for Rich folks.

Arizona report

In NJ, there is investment activity, but not as much compared to destinations like AZ & FL. In NJ, it is mostly people buying a house to actually Live in. RE Bubble is not same across all of US, some parts more than others. NJ is a part where prices increased much higher than national increases.

5/12/2006 12:08:00 PM  
Blogger RentinginNJ said...

OT, but worth the read:

Stupid Investment of the Week
A 50-year mortgage is just too much of a stretch
BOSTON (MarketWatch) -- Take the worst problems of one stupid investment and mix it with the biggest concerns of another and you wind up with a Stupid Investment of the Week to the second power.


http://tinyurl.com/l9lqd

5/12/2006 12:12:00 PM  
Anonymous Anonymous said...

As a homeowner a 50 year mortage is silly but an an investor, it's really not so bad.

As an investor, presumably you will have tenants occupying the space and so you basically want to use them to leverage your debt. If your monthly payments are smaller, it is easier to do this. And you figure prices have to rise gradually over a period of far less than 50 years. (although probably not in the immediate future given the so called bubble we're in).
Personally, I think a 50 year mortgage is a stupid idea for banks to administer, more so than for the investor to take.

5/12/2006 12:20:00 PM  
Blogger Richard said...

to the board, what are the lowest 30-year fixed rates you're seeing out there today? this excludes teaser rates and other funky terms. thanks.

5/12/2006 12:25:00 PM  
Blogger transmissionfluid said...

I am with you NJgal.
So if you want a starter home in a decent area, figure $450,000 will buy you something very small, very ugly, and on an odd lot, close to a busy road. So that means that you would need $90,000 cash for a downpayment (20%), $10,000 in closing costs, and hopefully at least $10,000 available for move-in expenses and to get yourself set up with the basics. THEN, you hopefully don't have $0 left in the bank.

I know plenty of 2 income people in their late-20s to mid-30s, who do not have $110,000+ sitting in a bank account. Especially considering what you get for that kind of money.

And to NJgal's point - don't even think about kids. Heck, we only have one car!

So, like many of you, we save a huge percentage of our paychecks, enjoy life while we are renting, and wait.

5/12/2006 12:43:00 PM  
Blogger Richard said...

"So, like many of you, we save a huge percentage of our paychecks, enjoy life while we are renting, and wait.

you've been waiting 5 years. how much longer are you going to wait? prices were out of whack 3 years ago and they've only gotten worse so the prudent waiting approach has put you further behind the affordability curve. now i'm not saying things will get further unaffordable, but who knows? the only thing consistent about this market is it's been inconsistent. as i said earlier, if you need shelter, plan on staying in this area for the foresseable future, can stay put in the house you buy for 5-7 years minimum and can afford a fixed loan and want to of course spend your dollars on a residence, then please buy.

for those of you thinking we'll see 40% price declines in the near future, i have a bridge to sell you. i could be wrong, but it's highly unlikely.

5/12/2006 12:52:00 PM  
Anonymous Anonymous said...

Hey Richard go ahead and buy.

Prices are going down.

You be a serf and sign up for monthly debt slavery.

BOYCOTT RIPOFF HOUSE PRICES!

Boooooooyaaaaaaa

Bob

5/12/2006 12:57:00 PM  
Anonymous Anonymous said...

anon 1:52

I couldn't agree with you more. The consensus seems to be that "since prices shot up 100%, why can't it come down 40%"
as if the market is that predictable and logical.

5/12/2006 12:57:00 PM  
Anonymous Anonymous said...

Bob, what's a serf?

5/12/2006 12:58:00 PM  
Anonymous Anonymous said...

You are FULL OF IT RICHARD.

The people that bought back in 1988-1989 at the last bubbleheads peak took 10 years in most cases to BREAKEVEN. so between year 1 and 10 if you had to sell you LOST!

Just say NO MAAS to RE pumpers.

BOYCOTT HOUSES!

Booooooyaaaaaa

Bob

5/12/2006 01:00:00 PM  
Anonymous Anonymous said...

here's a stupid question - how do you create tinyurl's?

5/12/2006 01:00:00 PM  
Anonymous Anonymous said...

serfs are small blue creatures that live in the woods

5/12/2006 01:01:00 PM  
Anonymous Anonymous said...

Okay then 50% drop!!!

Either way dey deny deny prices are going down.

Ba ba ba ba ba ba ba BOYCOTT HOUSES!

Send them starving realtors & sellers a Message NO MAAS slavery!

boooooyaaaaaa

Bob

5/12/2006 01:02:00 PM  
Anonymous UnRealtor said...

Note: "The Center for American Progress" is a partisan political organization, and not an objective source of information.

More info here:

Short link:
http://tinyurl.com/g4gvn

Long link:
http://en.wikipedia.org/wiki/Center_for_American_Progress

5/12/2006 01:04:00 PM  
Anonymous Anonymous said...

transmissionfluid,

Just quibbling on the details - $450K does get you something better than a "small, ugly, starter home" in NNJ. Let us not get carried away here.

No disagreement otherwise.

CNS

5/12/2006 01:09:00 PM  
Anonymous Anonymous said...

Bob, what's a serf


serfs are small blue creatures that live in the woods


I was trying to see if Bob was going to admit it.. ;)

5/12/2006 01:10:00 PM  
Blogger Richard said...

on the market today is a 3 bedroom, 1.5 bath colonial on a small plot in the prestigious tall oaks section of new providence (bordering summit) for $550k.

5/12/2006 01:11:00 PM  
Blogger Metroplexual said...

UnRealtor said...
"Note: "The Center for American Progress" is a partisan political organization, and not an objective source of information."

But do you argue with their data, or interpretation?

Or is it tainted goods just because of the affilition. Remember, it is well nye impossible to find anything that is not partisan in DC. I find both sides of the spectrum make good points time to time.

5/12/2006 01:15:00 PM  
Blogger chicagofinance said...

This comment has been removed by a blog administrator.

5/12/2006 01:16:00 PM  
Blogger chicagofinance said...

Booya:

"No más." has only one "a".

Ask Roberto Durán.

;)

5/12/2006 01:17:00 PM  
Anonymous Anonymous said...

here's what 375k will get you..it's in montclair too.
isn't this "affordable"?
http://newjersey.foxtons.com/search?md5=0db23b4354a783b0d4f33c48ad867cf2&search_form=map&search_type=SS&inst_ref=112015&submit_type=search

5/12/2006 01:17:00 PM  
Blogger chicagofinance said...

"Kevin Maas" has two.

Must be a Yankee fan.

LET'S GO METS!

5/12/2006 01:18:00 PM  
Blogger Metroplexual said...

Let's go, Mets go!

5/12/2006 01:21:00 PM  
Anonymous Michelle said...

Congrats, Richard, and welcome to the "Everybody Thinks I'm A Goddamned Idiot" Club.

5/12/2006 01:21:00 PM  
Blogger Grim Ghost said...


to the board, what are the lowest 30-year fixed rates you're seeing out there today?


Richard -- try hsh.com for NJ, if you haven't. It gives a list of banks and rates for today. I've found the best rates (although I was only looking for 15 years) come from Penn Fed (0.5% fee for locking, though), Hudson City Savings. Also look at some small banks mentioned on hsh.com like Gladstone Peapack or Fort Lee Bank.

I used Mountain Mortgage once. Good rates, very low fees, but they are a very small shop.

5/12/2006 01:22:00 PM  
Anonymous Michelle said...

Why the heck would you look for "affordable" in Montclair anyway?

Here's a house for $405K in Randolph that's a heck of a nice starter IMHO:

http://tinyurl.com/oal3w

That's like bitching about the lack of affordable housing in Beverly Hills. Ya don't jsut arrive in LA and move to the west side; ya gotta slum it in Hollywood first.

5/12/2006 01:27:00 PM  
Blogger RentinginNJ said...

"$450K does get you something better than a "small, ugly, starter home" in NNJ. Let us not get carried away here."

Depends on how far west you are willing to go. $450K goes a lot farther in Jefferson than it does in Glen Rock:

Glen Rock:
http://tinyurl.com/nhey3
(Note: original kitchen from 1950's is listed as a selling point)

Jefferson Township:
http://tinyurl.com/ohuro

5/12/2006 01:28:00 PM  
Anonymous Anonymous said...

Prices will recede, there is no way the market will continue to sustain the current prices. We I think now can say with a fair bit of certainty that prices are not going up anymore. Therefore they are either stagnant or declining. The truth is NJ is a payment economy, ie. everything comes down to whats my payment. With rising intrest rates the payments grow higher thus causing the amount of cash spent on houses to go down. This will slow the market even more, right now we are at a standstill because buyers want lower prices because it is what they can afford and sellers want higher prices because their neighbor got $x six months ago. Now if an economic event occurs that will force a few sales than the ball will roll prices will fall, otherwise we will see stagnation in the RE markets until the wages catch up with the housing costs.

5/12/2006 01:31:00 PM  
Anonymous Michelle said...

???

"NJ is a payment economy..."

Why do you think this is any different from any other state in the union?

5/12/2006 01:33:00 PM  
Anonymous Anonymous said...

Re the whole Gen X and Y thing, I would say right now, my generation is a bit of a catch-22. While the cost of living is higher, and moving would be cheaper in the long run, you need to remember that 1) it costs money to move and 2) you need to find a job wherever you move to. The problem is for a lot of people sponge off of Wall Street one way or another, and those easy jobs don't exist elsewhere. In addition, wherever someone is, they have to be able to pay the bills where they are. If they're living out of their parent's house as is, how are they going to cobble together the money to move elsewhere?

5/12/2006 01:39:00 PM  
Blogger Richard said...

"Congrats, Richard, and welcome to the "Everybody Thinks I'm A Goddamned Idiot" Club.

lol. thanks michelle. unfortunately with such topics the majority of people gravitate more towards the booyah bonehead bob philosophy than anything else.

i have no problem buying today if i can afford it using a traditional loan product, and if my house drops 10% you can be sure other properties will drop similarly so aside from transaction and closing fees the difference might not be that great. for me i don't plan on going anywhere for at least 7 years so.

5/12/2006 01:44:00 PM  
Anonymous Anonymous said...

Because people in NJ are comfortable with the idea of borrowing insane amounts of money as long as they have the income to make the payments. People elsewhere are much more hesitant, much more fearful of debt and over extending themselves. People in NJ see a house for 1m dollars the thought is not that a million dollars but its $7000 a month. People elsewhere look at it as spending a million dollars on a home.

If you really look at our economy here we buy more on payments here than almost anyplace else. We are a huge credit society, people live beyond their means and have huge debt.

5/12/2006 01:45:00 PM  
Anonymous Michelle said...

"If you really look at our economy here we buy more on payments here than almost anyplace else."

Would love to see data on that.

5/12/2006 01:58:00 PM  
Anonymous Anonymous said...

Michelle -

my point is people seem to think that 450k would get you nothing but a crappy old house in some crummy neighborhood.
that's obviously NOT the case which is why I posted something from Montclair.
sorry for the confusion, I'm not bitching about the price. I was trying to point out that 375-400k will still get you something decent.

5/12/2006 01:58:00 PM  
Anonymous Michelle said...

Oops!

Sorry, my bad! That friendly fire can sure come unexpectededly! ;-)

5/12/2006 01:59:00 PM  
Blogger grim said...

Richard,

We'll meet for drinks sometime in the Summer of '08. Whoever comes closest with their predictions buys.

I stand by my guns with my prediction of 30% off peak prices when we hit bottom.

grim

5/12/2006 02:08:00 PM  
Anonymous Anonymous said...

Bottom line, I think even with a price drop of 10 to 20, housing in Northern NJ will remain unaffordable to most people. Those making the median household income of 45 - 50k will still be unable to afford anything 300k+, unless they trek out to the Lake HopatcoMuscaNetcong area. A price drop of 30% or more would be needed to really open things up to the true middle class. This is unlikely to happen, at least not until many years of stagnation and decline occur.

As to the "it costs money to live anywhere" argument, many are living in their parents' houses in NJ driving nice cars and leading otherwise materially successful lives, with the exception of a house. "Cost of living" is a myth: salaries in expensive cities never pay enough to live like you would in Dallas, etc.

5/12/2006 02:09:00 PM  
Blogger chicagofinance said...

grim:

where's that weekend thread?

5/12/2006 02:17:00 PM  
Blogger RentinginNJ said...

"Whoever comes closest with their predictions buys."

Are we using Price Is Right rules?

Summer 2008 - 20% lower (nominal$). I expect to be greater once inflation is factored in.

5/12/2006 02:26:00 PM  
Anonymous Anonymous said...

hey grim, have you been keeping track of your blog traffic as well ;)
78 comments and counting on this topic alone. looks like a bubble to me.

5/12/2006 02:34:00 PM  
Anonymous UnRealtor said...

Metroplexual wrote:

UnRealtor said: "Note: 'The Center for American Progress' is a partisan political organization, and not an objective source of information."

But do you argue with their data, or interpretation?



Didn't look too closely at their data, or their commentary, as the source is 'polluted' from objectivity. Are they presenting half the data? I don't know.

I don't mind a partisan source of information, but such should always be labeled.

Not bashing Grim, or this "CAP" group either, just pointing out that it's a highly partisan source.

In the link a posted above earlier, there's a quote from the Atlanta Journal Constitution:

"Former Clinton Chief of Staff John Podesta has launched a liberal policy institute, the Center for American Progress, to drive the message for Democrats."

Again, the data may be correct, I don't know, I'm just pointing out that "CAP" has a very specific agenda.

5/12/2006 02:36:00 PM  
Blogger NJGal said...

"if you need shelter, plan on staying in this area for the foresseable future, can stay put in the house you buy for 5-7 years minimum and can afford a fixed loan and want to of course spend your dollars on a residence, then please buy.

for those of you thinking we'll see 40% price declines in the near future, i have a bridge to sell you. i could be wrong, but it's highly unlikely."

Ok, let me say I don't expect a 40% decline. But I don't agree with your advice to buy. Why wouldn't I wait it out at least through the summer? Inventory keeps rising, people will keep reducing prices. And yes, so interest rates go up - for me it's not a tremendous hit to my pocket whether I pay 6.5% or 7.5%. It matters way more to me that I don't end up underwater on my house and I just think that buying right this second gives you a better chance of that than waiting it out a bit.

Having admitted that you're buying a place, it sounds more like you are trying to justify your own decision, which is fine, but in so doing, you have to accept that it's not the right decision for many people. And like transmissionfluid said, I am of of those who will keep saving, rent for a bit longer and buy when I think it's the right time to do so, which is certainly not now. If I'm wrong, I'm wrong, but my gut tells me to wait a bit more.

5/12/2006 02:36:00 PM  
Anonymous UnRealtor said...

"Why the heck would you look for 'affordable' in Montclair anyway?"


The taxes in montclair are simply OBSCENE. I would live in Ridgewood first, or another nice town with similar architecture, before giving away $20,000 in property taxes every year.

5/12/2006 02:39:00 PM  
Anonymous Anonymous said...

..."$450K does get you something better than a "small, ugly, starter home" in NNJ." I agree! In the zips where are children go to school 08742,08730,08736,08735 -you're lucky to get heat in these over priced shacks.

5/12/2006 02:43:00 PM  
Anonymous UnRealtor said...

here's what 375k will get you..it's in montclair too. isn't this "affordable"?

http://newjersey.foxtons.com/search?md5=0db23b4354a783b0d4f33c48ad867cf2&search_form=map&search_type=SS&inst_ref=112015&submit_type=search


Actually, a newer 2BR condo for $375K, and $6,235 in property taxes isn't bad for Montclair.

5/12/2006 02:43:00 PM  
Anonymous Anonymous said...

30% by mid-2008 seems very reasonable considering all factors, but I am expecting 40% by end of 2008.

Babababababababababa BOYCOTT HOUSES!

Boooooyaaaa

Bob!

5/12/2006 02:44:00 PM  
Anonymous Anonymous said...

who cares what you think bob...you're just a serf ;)

5/12/2006 02:59:00 PM  
Blogger RentinginNJ said...

NJGAL Said "If I'm wrong, I'm wrong, but my gut tells me to wait a bit more."

I agree with you. I look at it this way:
If I'm right and prices come down, I buy.
If I'm wrong and prices don't come down, I leave.

Either way I'm not overpaying for a POS.

By the way, we are going to visit Raleigh\Cary NC this summer. We are seriously thinking of relocating. We are willing to pay a premium to stay near friends and family and keep our jobs, but with houses at current levels (plus property taxes) enough is enough.

We are in contact with a Realtor® down there. Check out the listings she sent us:

http://tinyurl.com/pbeau

5/12/2006 03:02:00 PM  
Blogger Richard said...

njgal, i hope you aren't drinking the koolaid thinking i'm justifying my purchase of a home. every situation is different so general advice is really suspect from any of us. if you started waiting 5 years ago for prices to get more in line with fundamentals you look like a big retard right now. year 2 will be different, than year 3 will be different, etc. etc. until you start sounding like the jehovah witnesses predicting the second coming of christ.

my point is no one knows the future and as such you can use all the logic you want but you need to remember people aren't always rational and neither is the market.

waiting a few more months might not be an acceptable option for some. as i said every situation is different. if people have the means and want to put down roots somewhere, by all means they should do so with comfort.

as i said before if the house you just bought drops 10% it's likely others have as well so unless you're cashing in your chips you're still in the game and none worse the wear except for commissions and closing costs (if you decide to move again). now if you're a first time buyer then you are better off.

there, justified ;)

5/12/2006 03:10:00 PM  
Anonymous Anonymous said...

RentinginNJ

I hear more and more stories about people here in NJ considering a move to NC than anywhere else. what's going on down there? How's the job market?

5/12/2006 03:11:00 PM  
Blogger grim said...

I have no affiliation with CAP.

Nor do I particularly trust anyone who feels it necessary to cover their documents in an American flag (that isn't the Federal Government or the Military).

Like most other topics, it was selected as a jumping-off point for discussion.

This is the most active weekday thread this blog has ever seen.

5/12/2006 03:15:00 PM  
Blogger Richard said...

"I agree with you. I look at it this way: If I'm right and prices come down, I buy. If I'm wrong and prices don't come down, I leave.

there are some that won't leave regardless of prices, so if you wait, prices don't go down and rates continue to go up, things will be even more unaffordable.

one thing no one should do is feel compelled to buy because you'll be priced out. that's just plain stupid. you also shouldn't buy if you can't afford to. in today's market you need to pick an amount you can afford and find areas where you can get something you're ok with for that price. many here look at towns they want to live in, see that prices are out of their reach and decide there's a bubble and will sit tight until prices come to their level. sorry, it doesn't typically work that way.

5/12/2006 03:19:00 PM  
Anonymous Anonymous said...

Finally, a real conversation without truly bashing anyone and talking about INXS, I mean Depeche Mode.

Thanks to all of you for the restraint.

5/12/2006 03:20:00 PM  
Anonymous Anonymous said...

"I hear more and more stories about people here in NJ considering a move to NC than anywhere else. what's going on down there? How's the job market?"

I travle to the RTP area quite a bit and the anecdotal evidence seems to be somewhat true - there are a lot of Northeasterners moving down there. As for jobs, it's certianly growing, but you won't find the diversity of opportunities that one would find in the NJ/NYC area. It seems to be good for science/enginerring, some finanace and insurance, not sure what else.

If you can find a good job in NC, the cost of living and quality of life standards (in my opinion) are much, much better. The weather is much better, as you get at least an extra month or two of outdoor time a year. The golf is fantastic, Raleigh airport get you most places in the US non stop, and the girls are pretty good looking. But if your looking for NYC excitment, it doesn't hold a candle (I know, few places do).

5/12/2006 03:30:00 PM  
Blogger rymingrealtor said...

here's a stupid question - how do you create tinyurl's?

go to tinyurls.com

KL

5/12/2006 03:34:00 PM  
Anonymous Anonymous said...

Michelle in response to finding numbers. One does not need numbers to support this when the driving force in the economy in NJ for the past 5 years has been Residential Construction and Consumer Spending which is the conclusion drawn in the 2006 NJ Econ Forecast and basically every publication comming out of trenton.

Also do you think it is a coincidence that Paramus NJ as a market for retail has the highest sales per sq. ft of anyplace in the country. Also NJ ranks #7 in consumer debt per person. I would say both statistics and ancedotal evidence supports my claim. I do not lie, speak with a midwesterner look at their demands for material goods. Look at how much they earn and what they spend and you will see their cashflow is different from ours.

5/12/2006 03:47:00 PM  
Blogger chicagofinance said...

Anonymous said...
Finally, a real conversation without truly bashing anyone and talking about INXS, I mean Depeche Mode.

Thanks to all of you for the restraint.

4:20 PM

You know me too well.

5/12/2006 04:21:00 PM  
Blogger RentinginNJ said...

"hear more and more stories about people here in NJ considering a move to NC than anywhere else. what's going on down there? How's the job market?"

This week in Forbes
Top 10 metro's top live and work
2. Raleigh, North carolina

Population: 934,000
Job Growth: 1.3%
Income Growth: 0.6%
Big Employers: North Carolina State University, WakeMed Health & Hospitals, SAS Institute, Rex Healthcare, Tri-Arc Food Systems.

People continue to flock to Raleigh--100,000 since 2001. Unemployment is low, 4% in 2005, even with the added bodies. Employers like the low business costs and educated workforce.

5/12/2006 04:59:00 PM  
Blogger RentinginNJ said...

The golf is fantastic, Raleigh airport get you most places in the US non stop, and the girls are pretty good looking. But if your looking for NYC excitment, it doesn't hold a candle (I know, few places do).

True, but I am married at this point and looking to start a family, so my priorities have changed. 5 years ago I never would have considered Raleigh, but my days of walking out of a club at 8:00 am are long over. For the anount of times I go to NYC, it isn't worth paying a premium to live close to the city.

5/12/2006 05:01:00 PM  
Anonymous UnRealtor said...

"many here look at towns they want to live in, see that prices are out of their reach and decide there's a bubble and will sit tight until prices come to their level. sorry, it doesn't typically work that way."


Are you saying there's no bubble, and these prices are normal?

5/12/2006 06:22:00 PM  
Anonymous Michelle said...

Sorry, I just can't believe that NJ is any different from anywhere else in the country in terms of having a "payment" mentality.
It's no different anywhere else, unless you're talking about farmers, and hey, we have those in NJ too.

There are plenty of people in plenty of states for whom coming "down to whats my payment" is a way of life. No reason to knock NJ for it specifically. Frankly, CA has it beat hands down.

5/12/2006 06:51:00 PM  
Blogger Metroplexual said...

From what I have read, there are the two prices, the buyers price and the sellers. The buyers is based on the monthly payment, the sellers are in the real world (at least until they buy again).

5/12/2006 07:42:00 PM  
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5/18/2006 06:37:00 PM  

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