Sunday, June 04, 2006

If the gremlins wreak havok, all bets are off.

From the Asbury Park Press:

Real estate "bubble" might not be so thin

"Those of us who are bears on the housing market may be growling needlessly when it comes to irrational exuberance in the hottest areas."

"Maybe we're looking at traditional gauges in the wrong way, and there is indeed a "very orderly and moderate kind of cooling" going on and there won't be a huge crash in prices, as suggested by Federal Reserve Chairman Ben Bernanke on May 18."

"Proponents of the bubble theory claim that home prices in the most torrid markets — Boston, California, coastal Florida, Las Vegas and New York City — are inflated because they are outpacing personal-income growth."

"If this theory is correct, then the mass, herdlike psychology of a bubble keeps prices artificially high because buyers are willing to pay ever-loftier, unsustainable prices based on the myth of indefinite future appreciation."

"To gain some perspective, the researchers looked at housing data in various markets going back 25 years. While they concluded that Boston, Los Angeles, New York City and San Francisco were overvalued in the late 1980s — leading to price declines — they see prices in those cities as "reasonable" now."

"'Of course, just because the data does not indicate bubbles in most cities does not mean that prices cannot fall,' they add."

"Some 25 million home buyers have been priced out of the market due to recent increases in 30-year mortgage rates from the 6 percent to 6.5 percent range, according to the homebuilders association. About 1 million buyers drop out of the market for every quarter-percentage-point increase."

"Whether there's a bubble in the most overheated markets may be a moot point. The combination of house affordability and the health of local economies will decide the fate of real estate. If these gremlins wreak havoc, all bets are off."


Anonymous Anonymous said...

They are reasonable in the NYC Metro area including Northern NJ, Central NJ, Long Island, Westchester, Rockland, & Southern CT.

They are reasonable because there are still many people willing to pay asking price.

This is the highest income part of the country, wealthier than even California. Seems like everyone makes in the mid six figures and has not problems paying between $4,000 - $7,000 a month for monthly housing expenses (rent or mortgage)

I saw five condos in the Journal Square area of Jersey City. One Bedroom condos priced at over $300,000 with HOA fees & RE Taxes adding another $500 per month. All got multiple bids within a week and sold for well over asking price.

I see it all over, prices & rents still rising higher & higher and being bought by rich single yuppies under 28 who are somehow able to afford a one bed condo for $700,000 on the JC Waterfront, or $900,000 for a co-op in Manhattan.

6/04/2006 09:01:00 AM  
Blogger RentinginNJ said...

Seems like everyone makes in the mid six figures

Yes, everyone in the NY metro area including Northern NJ, Central NJ, Long Island, Westchester, Rockland, & Southern CT, makes in the mid 6 figures, except of course for the 76% of households (never mind individuals) that do not make over $100k/year. As for mid six figures, only 5% of households in the NY metro area make more than $200k/yr.

6/04/2006 10:44:00 AM  
Anonymous Anonymous said...

"I see it all over, prices & rents still rising higher & higher..."

Yes, you get to see the high prices a lot these days, because they sit unsold for months. Check out the inventory data in these areas compared to a year ago.

The changes in the overheated markets across the U.S. are just beginning. Rising inventories are the first phase. This will take some time (years) to play itself out. If prices continue to rise in the NYC Metro area over the next few years then you will be proven correct, but it's not looking good right now. IMO - if you're a potential first time buyer you may be wise to wait another year or two.

6/04/2006 12:10:00 PM  
Anonymous Anonymous said...

"...being bought by rich single yuppies under 28..."

Yes, and these people tend to be keen observers of markets, including real estate. They will be the first ones to postpone risky RE purchases. The people you mentioned buying $300K condos will be the last, IMO.

6/04/2006 12:26:00 PM  
Blogger minutesfromNYC said...

anon @ 10:01am: people who think the way you do is why everything here is over priced.

6/05/2006 06:43:00 AM  

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