Wednesday, July 05, 2006

A 'Loud Pop' Is Coming,

From the Wall Street Journal:

Surviving a Real-Estate Slowdown

The real-estate market shows signs of slowing. Is there deeper weakness ahead? Fewer questions are more important to mutual-fund investors. Many own funds with real-estate-related shares -- not to mention homes and vacation properties. And many economists believe a slowdown of the housing market could hurt the overall economy.

To get a lay of the land, we tracked down Kenneth Heebner, who since 1994 has managed the $1.2 billion CGM Realty Fund. It has the best 10-year record of all real-estate-focused mutual funds, according to fund tracker Lipper Inc., up an average of nearly 22% a year during the past decade, well more than double the broader market. The fund also has one of the best one-year records, up 32% through June 30.
...
Mr. Heebner, 65 years old, is better positioned than many real-estate fund managers to speak about prospects for the housing sector. His fund has viewed its mission more broadly than most rivals, so he isn't shy about ditching real-estate stocks. Among big holdings for CGM Realty during the past year: coal-company stocks, a hot category that qualifies in Mr. Heebner's view because coal companies own a lot of land. He also runs three other mutual funds, including CGM Focus Fund, so he spends a lot of time looking beyond houses and hotels to other parts of the economy. These three funds have among the best five-year records in their categories.
...
WSJ: How is the housing market?

Mr. Heebner: A significant decline in prices is coming. A huge buildup of inventories is taking place, and then we're going to see a major [retrenchment] in hot markets in California, Arizona, Florida and up the East Coast. These markets could fall 50% from their peaks.

WSJ: What has you so concerned?

Mr. Heebner: I'm worried that more people will default on their mortgages. Risky mortgages such as interest-only and pay-option adjustable-rate mortgages require no principal amortization and in some cases payment of only a fraction of the interest due, have been widely used in the last two years. Some people got 100% financing for their homes. It made the tech bubble look like a picnic. When housing is going up rapidly and you can buy far more than your income can support, some people are eager to make big profits by extending themselves financially.

As housing prices fall more people will be under water, and these people are just going to walk away from their homes. They are going to say, 'I'm outta here.' You're going to see increasing foreclosures over the next several years. As [home] prices come down, it will create a difficult environment for home builders.
...
WSJ: More than 25% of homeowners don't have a home mortgage because they own their property outright. Won't this keep problems in check?

Mr. Heebner: Most people won't have problems and much of the country will be fine. I don't think anything will go wrong in places like Texas, Iowa City or Minneapolis. ... But prices are being set by a minority of participants in the market, [those who have borrowed the most and used the most aggressive types of mortgages]. There will be a loud pop in inflated markets. It's where prices were artificially inflated by people buying houses with risky mortgages that we'll see problems. ... The person who feels the pinch is the person who used an aggressive mortgage and is struggling to meet the mortgage payments.

119 Comments:

Blogger Metroplexual said...

I agree with this guy. This time is different from last due to the "creative" financing. All the resets on arms by the end of next year will total over 20% of all outstanding mortgage debt.

7/05/2006 08:59:00 AM  
Anonymous Anonymous said...

50% retrace,,, now that's thats
a number.

7/05/2006 09:00:00 AM  
Anonymous Anonymous said...

look out below.

7/05/2006 09:00:00 AM  
Blogger Mr. Oliver said...

"Could fall 50% from their peaks" is a scary sentence.

7/05/2006 09:09:00 AM  
Blogger grim said...

Factory Orders data came in much stronger than expected at 0.7%, consensus was 0.1%. 10 year yield up to 5.22%..

grim

7/05/2006 09:15:00 AM  
Anonymous Anonymous said...

ken lay drops dead

7/05/2006 09:16:00 AM  
Anonymous Anonymous said...

Holy Cow.

Ken Lay just died.

That bastard.

SAS

7/05/2006 09:17:00 AM  
Anonymous Anonymous said...

See the movement on the metals??
Maybe $700 with in the week?

SAS

7/05/2006 09:19:00 AM  
Anonymous Anonymous said...

out come the grave dancers

7/05/2006 09:29:00 AM  
Blogger X-Underwriter said...

Lay got off too easy. I'd rather see him rot in prison for at least 10 years and then croak

7/05/2006 09:31:00 AM  
Anonymous Anonymous said...

When will housing Amway end? The multi trillion dollar housing will make Amway founders proud.

7/05/2006 09:41:00 AM  
Anonymous gary said...

But....but.... Suzanne did the research?!?

7/05/2006 09:42:00 AM  
Anonymous dl said...

Hellelujah!
Now where are all the bulls to say this guy has no idea what he is talking about?

7/05/2006 09:44:00 AM  
Anonymous Anonymous said...

Grim, only a quick note from abroad from a family looking to return to our hometown (likely to wait by the looks of things!)... great site. great info. thx.
GONE

7/05/2006 09:50:00 AM  
Blogger chicagofinance said...

grim:

Do you want to start blocking [e.g., 72 hour time out] some IP addresses? I am a little fatigued by having to read trolling commentary by people using foul language.

Check the end of some of the buried threads from a few days ago.

7/05/2006 09:55:00 AM  
Blogger Richie said...

It will not be a loud pop, it will be a muted pop from a slowly deflating bubble in a cup.

7/05/2006 10:02:00 AM  
Anonymous Anonymous said...

@richie
what cup are you referring to? or who do you think will be the cup holder? Do you mean there will be more bag holders??

7/05/2006 10:11:00 AM  
Blogger InvestorDavid said...

50%?

That's the price during 1999, 2000 and 2001.

I was thinking 25%-30% from the peak price.

I guess ARM & IO will do the trick.

I know plenty of people who bought several million dollar properties using ARM, IO with no or little money down.

7/05/2006 10:17:00 AM  
Blogger grim said...

A 50% decline would put prices back to the 1998-1999 timeframe (roughly).

grim

7/05/2006 10:24:00 AM  
Blogger Metroplexual said...

When the psychology turns to panic it will get ugly.

7/05/2006 10:30:00 AM  
Blogger grim said...

Went back and deleted a handful of inappropriate comments. It's tough keeping an eye on those older threads.

I think I'm just going to start turning off comments on older threads.

grim

7/05/2006 10:32:00 AM  
Blogger chicagofinance said...

Be careful. Just because the subject of the interview is in:

1. Print
2. The WSJ
3. Agreement with some of your most bearish instincts

..does not make his opinion any more valid, or accurate as a forecast. Collectively listen to all of the talking heads, and draw your own conclusions. Don't just point to one person and assume they have "THE ANSWER" [except me of course ;-)]

chicago

7/05/2006 10:35:00 AM  
Blogger patient homebuyer said...

good day all

when i speak of the bubble some people think i am nuts because i live in nyc well we shall see

some people are just in denial

7/05/2006 10:47:00 AM  
Anonymous Anonymous said...

Grim,

What do you think about including a "report" based on facts identified on this blog in any offer readers make. So, if you are going to place an offer at 30% to 40% off asking, give them the facts to back it up. I'm thinking portions of your study on the last RE bubble and choice recent articles and then a section where the reader customizes to that particular property - domania, zillow, tax search, etc.

Or is this too much work for something that the buyer is going to be too ticked off to read?

Just a thought

7/05/2006 10:59:00 AM  
Blogger skep-tic said...

"prices are being set by a minority of participants in the market"

this is what most people have failed to understand.

take away the crazy financing and you're left with ordinary folks with ordinary purchasing power based on their ordinary income. prices must come down to meet them.

7/05/2006 11:16:00 AM  
Blogger chicagofinance said...

BTW:

Out of this entire article, in my opinion, THE most pertinent comment is "... prices are being set by a minority of participants in the market, [those who have borrowed the most and used the most aggressive types of mortgages]...."

It effectively refutes the arguments and data regarding the status of the majority of homeowners. The majority does not matter. What matters is the selected group that plan to transact in the near future and become an active part of the pricing equation in the market.

chicago

7/05/2006 11:17:00 AM  
Anonymous UnRealtor said...

On the fence about a foreclosed property. To lowball, or not to lowball, that is the question.

It's still fargin' expensive, lowball or not.

Outside that, it's 2007 or later before we even look at a house.

7/05/2006 11:23:00 AM  
Anonymous Anonymous said...

Was in Bucks County many, many
for sale signs out.

7/05/2006 11:29:00 AM  
Blogger skep-tic said...

check out this interesting piece on changing demographics of major metropolitan areas (warning: PDF):

http://www.brookings.edu/metro/pubs/20060622_middleclass.pdf

NYC-area is the second worst place to live in the country if you're middle class.

Newark-area is 6th worst (out of 100 areas surveyed).

This area is beginning to look like a 3d world country

7/05/2006 11:31:00 AM  
Blogger Richard said...

next spring should be quite interesting. my feeling is it'll start with would-be sellers asking for prices equal to this past spring. you'll get a decent initial selling period in march and then the bottom will fall out. rates by spring on 30-year fixed will be at least 7%. that's going to put enormous pressure on any houses over $550k.

my wife and i haven't yet decided whether we'll wait until then but the market may decide that for us as sellers are still mostly in denial about what their properties will fetch today.

7/05/2006 11:41:00 AM  
Anonymous Anonymous said...

do you guys know of an investment vehicle though which you can invest in a bucket of currencies and at the same time earn interest?

7/05/2006 11:48:00 AM  
Anonymous Anonymous said...

this is anon @ 12:48

i'm sorry this is off topic but i couldn't ignore all the experts that visit this site :)

I found one called MERKX but morning star doesn't rate them as of yet.

7/05/2006 11:56:00 AM  
Anonymous Anonymous said...

{{NYC-area is the second worst place to live in the country if you're middle class.}}}

Because many Ny'ers are completely tapped out on credit cards in order to buy the latest 'must have' fashions. Like Premium Denim, IPODS & Cell Phones are really essential items (especially with a $3,000 monthly rent payment).

Or you can just live at home with parents / siblings, drive a BMW 7 series, wear designer clothing & spend $200 a night on clubs / drinks.

Middle class is probably a single person making between $75,000 - $150,000 a year.

Affordable housing by is defined as housing for families making $150,000 a year in the NYC metro area. Someone making less than $100,000 a year wouldn't qualify for most of the rental property or co-ops on the market today under the criterion landlords & co-op boards use.

7/05/2006 11:58:00 AM  
Anonymous Anonymous said...

Grim..that's why I asked you to start putting 1/99 (or closest date to) purchase prices where available, on your list of price drops. Many re fund mgrs think 50 off high. Not just Heebner.

Pat

7/05/2006 12:02:00 PM  
Anonymous Anonymous said...

So anyway, Wachovia is going to have to start dealing with the sobbing victims, and is putting 40+ professionals into Philadelphia to mop up the mess.

Who's looking for a job?

Pat

7/05/2006 12:09:00 PM  
Anonymous Anonymous said...

As per Bloomberg, 10 year yield up to 5.23%

7/05/2006 12:16:00 PM  
Anonymous Anonymous said...

Hi fellow posters... just a quick question... i realize that this is a new jersey blog... but my sister is looking to move into the philly area... and i wanted to help her out... so... is there a web-site anyone knows of for looking up tax records/property records in the philly? kind of like the one that Grim has posted on this blog for new jersey... many thanks in advance for your help!

7/05/2006 12:18:00 PM  
Blogger grim said...

It effectively refutes the arguments and data regarding the status of the majority of homeowners. The majority does not matter. What matters is the selected group that plan to transact in the near future and become an active part of the pricing equation in the market.

Well said.

grim

7/05/2006 12:22:00 PM  
Anonymous Anonymous said...

From what I can see NJ has turned
the corner and is on target of
being 3rd world like.

go to the malls, stand their and
watch.

go to the milk stores stand and watch.

go to the food stores stand and
watch.

If you can find the english speaking your in luck.

7/05/2006 12:36:00 PM  
Blogger NJGal said...

Seriously, $300 jeans/I make 75K a year so I'm poor guy is more annoying than Bob. He posts the SAME THING on every thread.

7/05/2006 12:42:00 PM  
Blogger grim said...

Hot off the wire from the CBOE. One can only assume they read this blog..

The CBOE Futures Exchange (CFE) announced today that it plans to launch Jeans Sales Median Price futures contracts. Through a licensing agreement with Bloomingdales, CFE has created five new futures contracts designed to track the median price of jeans sales nationally and in four distinct regions within the United States. CFE plans to launch the new contracts in the third quarter of 2006, pending regulatory approval.

"With the jeans market valued at nearly $5 trillion, jeans are not only the hottest topic of conversation, it is an asset class unto itself that is arguably one of the most important segments of the U.S. economy," said CBOE Chairman and CEO William J. Brodsky. "CBOE gave careful consideration to the development of this contract to ensure that it had practical application for hedging as well as speculating, offering a chance to participate in the jeans market to a wide range of investors -- whether your outlook is regional or national, bullish or bearish."

7/05/2006 12:55:00 PM  
Anonymous Anonymous said...

NJgal, I'm thinking maybe a little Asbergers Syndrome going on there, so keeping quiet myself.

The repetitive focus on jeans, together with the social interaction style, is nailing it for me.

I'm feeling bad for pigeon shooting the guy for his credit card debt, now.

7/05/2006 12:55:00 PM  
Anonymous Anonymous said...

But grim, that's pretty funny.

Pat

7/05/2006 12:56:00 PM  
Anonymous Anonymous said...

"CFE has created five new futures contracts designed to track the median price of jeans sales nationally and in four distinct regions within the United States."


Can we get a regression analysis going here of the "short" jeans in those four areas, aggregating Shillers home price index?

7/05/2006 01:00:00 PM  
Anonymous Anonymous said...

Wow, Skep-tic. Just wow.

From what I gather, though, there's no QUALITATIVE measure of the metro areas, just a stastical ranking of the percentage of families in each metro area that falls into the "middle income" bracket.

Oddly enough, I grew up in the area with the highest percentage of middle-income households--Scranton/Wilkes-Barre, PA. Gotta tell you, it's an unimaginable sh#thole. Yes, you can get a great home for under $200k, but the schools suck, there's no culture, and, unless you're got an advanced professional degree (MD, LLD, CPA), the opportunities for secure employment are few and far between.

If Scranton is the picture of an everyman's paradise, I'd rather suffer the deprevations of life in the shadow of NYC. Of course I CAN say that, since I bought my house in 1998...

Jamey

7/05/2006 01:10:00 PM  
Anonymous Anonymous said...

I also grew up in Wilkes-Barre.

Would NEVER do that to our child.

Pat

7/05/2006 01:18:00 PM  
Blogger lisoosh said...

NJgal - don't forget the IPOD and the $200 a night for drinks!

7/05/2006 01:22:00 PM  
Blogger chicagofinance said...

ahhhhhhhhhhhhhh

I have achieved NYC metrosexual NIRVANA!

We now have the bar!

http://tinyurl.com/fo5tx

7/05/2006 01:33:00 PM  
Anonymous Anonymous said...

Who wants to bet, end of week we might see $80/barrel of crude? now I am thinking gold $700 end of next week?

Come labor day weekend, $100/barrel of crude?

If I am wrong, and whoever is hits it head on. The steak and beer is on me.

Better hope to hell there are no hurricanes.

7/05/2006 01:34:00 PM  
Anonymous Anonymous said...

Who wants to bet, end of week we might see $80/barrel of crude? now I am thinking gold $700 end of next week?

Come labor day weekend, $100/barrel of crude?

If I am wrong, and whoever is hits it head on. The steak and beer is on me.

Better hope to hell there are no hurricanes.

7/05/2006 01:34:00 PM  
Anonymous Anonymous said...

Sorry Grim,

I did it again. The multiple posts. I just hit this mouse so hard I guess.

SAS

7/05/2006 01:35:00 PM  
Blogger NJGal said...

Lisoosh, funny you should mention it - I am listening to my Ipod right now and was planning on how I can spend my nightly $200 on drinks. I have to run home and get my $300 jeans though - I feel like a nobody without them:)

7/05/2006 01:39:00 PM  
Blogger chicagofinance said...

SAS said...
If I am wrong, and whoever is hits it head on. The steak and beer is on me.
7/05/2006 02:34:31 PM


The payment must be at Alexus Steakhouse, and a toast must be given in honor of Warren [not NJ].

7/05/2006 01:40:00 PM  
Blogger Metroplexual said...

CF,

$506 for a pair of jeans?




SAS,

There is most definitely going to be hurricanes.

7/05/2006 01:56:00 PM  
Anonymous Anonymous said...

Hi this is anon 1:18,

i guess this means that no one knows of a tax board web-site (ie Monmouth county tax board) for the philadelphia area/mainline... well... if someone does run across it... can you post it some time?

7/05/2006 01:58:00 PM  
Anonymous Anonymous said...

Anon 1:18 you don't need a tax board Website in PA.

The listings have it in PA.

Go to kw.com, drop down Pennsylvania, click on Bryn Mawr or Exton, pick any of the Mainline school districts, and the tax amounts are on the listings.

They are also on Zillow if you have a particular street address.

Pat

7/05/2006 02:04:00 PM  
Blogger skep-tic said...

Jamey,

If you are middle class and live in the tri-state area you are probably either

(1) very old and have lived here for a long time;

(2) a recent immigrant;

(3) or under 35 and single.

We may all laugh at the $300 jeans guy, but he has a point. It is next to impossible to live a comfortable life with a family in the NYC-area unless you are what most people would consider upper class in the rest of the country.

Many young people live here for a while to have fun, but unless they are making major bank, they leave once they decide to start a family. The smart immigrants do the same once they are established.

7/05/2006 02:14:00 PM  
Anonymous UnRealtor said...

I'm looking at a house that was sold for $1 (yes, $1) decades ago, probably to family. But it recently foreclosed, likely for failure to repay a home equity mortgage.

Is there a way to look up this information?

(Town hall doesn't have the info.)

7/05/2006 02:22:00 PM  
Anonymous Anonymous said...

Hi Pat... this is anon 1:18... thanks for the info... i'll check out Zillow... i was also looking for previous sales history of specifics homes... is that on zillow too? Many thanks for your help!

7/05/2006 02:23:00 PM  
Anonymous Anonymous said...

state lien look-up, maybe

7/05/2006 02:23:00 PM  
Anonymous Anonymous said...

There will be a loud pop in inflated markets. It's where prices were artificially inflated by people buying houses with risky mortgages that we'll see problems. ...


Anyone have any idea how NJ measures up in the use of risky mortgages compared to other areas?

7/05/2006 02:28:00 PM  
Anonymous Anonymous said...

Skep:

I'm over 35 (not by much)--but have lived in my Bergen Co. community only since 1998 (moved from Manhattan); the missus and I earn gross WELL below $200k; I was born in the USA; I don't have family money.

Despite all this, we DO live comfortably, as do many of our friends in the same income bracket. It helps that we bought when the house market just started its climb toward the stratosphere, but other factors contribute: Wife works at home and I commute to work in NYC either by NJ Transit Bus or by bicycle; I own my seven-year-old car outright; we don't follow fashion; we eat at home; we make liberal use of public services, like Bergen Co.'s incredible library system, and our town's rec center and swim club. The secret is, and I really shouldn't be spilling it, lest it fall into the hands of al-Qaeda: I don't try to live like a wealthy person when my means don't support it. Wow!

BMWs? Lucky Jeans? Dining by the Guide Michelin? Travel with first class accommodations? I simply refuse to borrow to fill my driveway or closet. Hey, I have a COSTCO card, but I guess I'm just not the bulwark of the American consumer society.

That Brookings Inst. study? Just remember what Twain wrote about statistics.

Of course, all this goes out the window when the little ones are off to college...

7/05/2006 02:40:00 PM  
Anonymous dl said...

"Farm program pays $1.3 Billion to people who don't farm'

www.washingtonpost.com/wp-dyn/content/article/2006/07/01/AR2006070100962.html?nav=most_emailed_emailafriend&sub=AR

Stupid country.

7/05/2006 02:51:00 PM  
Anonymous UnRealtor said...

"I'm over 35... I don't try to live like a wealthy person when my means don't support it... Of course, all this goes out the window when the little ones are off to college."


Couldn't your kids attend in-state universities with student loans?

I'm not convinced parents should be burdened with paying for a kid's college bills, per se.

As you utilize the local library, etc, there is also an abundance of value in utilizing in-state universities and the financial programs they provide.

Thoughts?

7/05/2006 02:51:00 PM  
Anonymous Anonymous said...

Unrealtor, I'm with you.

Forced to pay my own (State Univ) college tuition, I learned. Never asked a dime of anyone.

I suppose some kids would somehow magically learn the value of hard work, and the dollar, even if their college was paid for.

Maybe the lesson just comes later and much more painfully.

7/05/2006 03:00:00 PM  
Anonymous Anonymous said...

50% seems heavy. I think the market will normalize back to its historical gain of 5ish%, which implies a 30-35% selloff. However, in the midst of the panic we could see 50%.

7/05/2006 03:00:00 PM  
Blogger skep-tic said...

Anon @ 3:40,

I'm glad (seriously) that you and your family manage to live a nice lifestyle on a relatively middle class budget.

My comment was directed more toward people who are just starting out in the area today, many of whom try to live the same cost-conscious lifestyle you lead and still find it very difficult to get by on what seems a decent salary.

You probably already understand that you lucked out to a degree to get into a house on the upswing of this market, so I won't beat the point to death. But just try to imagine yourself 10 yrs younger, with houses like yours more than double in price and you looking in from the outside wondering whether it could ever be possible for you.

7/05/2006 03:02:00 PM  
Anonymous Anonymous said...

anon 1:18, Zillow has recent sales.

If you or a friend are geeky enough, you can do courthouse records look-ups:

http://mway.montcopa.org/mway/cwp/view,a,3,Q,10564.asp

http://www.buckscounty.org/government/departments/PublicAccess/index.aspx

7/05/2006 03:13:00 PM  
Blogger RentinginNJ said...

Anyone have any idea how NJ measures up in the use of risky mortgages compared to other areas?

Here is one measure

WaMu’s Option ARM Portfolio as of 12/31/2005
(millions of dollars)

California $ 33,875
Florida $7,253
New York/New Jersey $7,043
Washington/Oregon $2,615
Illinois $1,972
Texas $735
Other $16,698
Total $ 70,191

7/05/2006 03:15:00 PM  
Anonymous Anonymous said...

take away the crazy financing and you're left with ordinary folks with ordinary purchasing power based on their ordinary income. prices must come down to meet them.


Man, what a great line...how can you get more common sense than that???

7/05/2006 03:29:00 PM  
Anonymous Anonymous said...

I'll bet 90% of those option ARM stats from NJ are from the shore points alone. Everyone I knew had one for their shorehouse so they could afford to pay $1 million. Now that rates have adjusted back to normal, property values have to be down at least 30%, maybe 50% by the end of this debacle.

7/05/2006 03:33:00 PM  
Blogger lisoosh said...

Rentinginnj - Wow, NJ is as bad as Florida. Now that's a surprise although I agree with anon that the Shore probably makes up a big part of it.

7/05/2006 03:39:00 PM  
Blogger RentinginNJ said...

Everyone I knew had one for their shorehouse

I was in Cape May and Wildwood this weekend. Wildwood probably has the greatest concentration of "for sale" signs I have ever seen in my life. New condos under construction everywhere. I thought it would have slowed this summer.

Who is going to absorb all of this inventory?

7/05/2006 03:44:00 PM  
Anonymous Anonymous said...

Skep:

That's the point; it's why housing prices have to come down--because the markets won't bear the burden, especially when stripped of "creative financing" options. Some industries can fold their tents and quit NYC for places with more affordable housing. However, unless they want to risk straying from their respective fields' symbolic roots (e.g.:publishing, advertising, the media in general), they can't quit the tri-state area entirely.

As for college, I consider it a privilege to send my kids to a good school, in-state or out-of-state, as my folks had done for me. Sure, we'll have to borrow, but I'm keen on the idea of my kids starting off with a relatively clean slate, debt wise.

But all this is academic (heh), as my wee ones are both geniuses; colleges will surely be bidding for their favor (double-heh).

7/05/2006 03:54:00 PM  
Anonymous Anonymous said...

Oops.

Skep, I meant to write the following:

"...because the markets won't bear the burden, especially when PROSPECTIVE BUYERS ARE stripped of "creative financing" options."

7/05/2006 03:55:00 PM  
Anonymous Anonymous said...

My kid is entering K-garten and can't even skip.

I think she's going to community college, so we won't have to worry..triple-heh.

7/05/2006 03:58:00 PM  
Anonymous Anonymous said...

When will this decline in prices begin? I have seen a few houses listed and then "new price" $20k higher a week later! I am so fed up with the market that I stopped looking for the past few months - I took Boycott Bob's advice. I probably won't be looking again until after September. Should there be a shift in pricing beginning by then? I don't condsider small price reductions on over priced homes a bargain either.

jj

7/05/2006 04:33:00 PM  
Anonymous Anonymous said...

I interact with a lot of ivy league grads on a daily basis - not very impressive. "Can't see the forest through the trees" fits nicely.

They say 95% of Harvard students were valedictorians, do you remember your valedictorian in HS? Sure, people grow, etc, but many (most?) are poorly adjusted individuals.

7/05/2006 04:36:00 PM  
Blogger grim said...

I believe the best time to purchase in NJ, from a buyers perspective, is the November/December timeframe.

Can any of the agents chime in on this?

grim

7/05/2006 04:39:00 PM  
Blogger Richard said...

grim, last year the nov/dec timeframe was an excellent time to buy as i know a few that did and the prices they got were a good 5-8% below spring prices which were equal to or slightly below the peak peak last year.

the problem with buying then is all that's left is the trash and not much of that to choose from. then again this year might be different because prices are so high.

7/05/2006 04:46:00 PM  
Blogger Richard said...

i'm starting to see houses move that have been sitting for a few months. last rush before the dead summer months or just stupidity? probably both.

7/05/2006 04:47:00 PM  
Anonymous UnRealtor said...

Richard, some fence-sitting buyers probably succumbed to get the kiddies registered for the 2006/2007 school year.

7/05/2006 04:56:00 PM  
Anonymous Anonymous said...

Good day fellas.

So whats the skinny? What will the price of crude be come labor day?

Steak and beer offer still stands.
lol...I should throw in a $300 pair of jeans too.....he he....

"Ich bin ein Berliner"
SAS

7/05/2006 06:33:00 PM  
Anonymous Anonymous said...

This is a good bit off the wire from the communist news network.

http://www.cnn.com/SPECIALS/2006/fueling.america/

Whats this have to do with NJ RE bubble? alot.

"Ich bin ein Berliner"
SAS

7/05/2006 06:38:00 PM  
Anonymous Anonymous said...

Look at $1 Million+ home market in certain formerly "hot" areas, i.e. Chatham... man is it ugly. A while ago a bland, average 4 BR colonial anywhere there would easily fetch 7 figures within a couple of days. Not any more. I pity anyone who bought in the last two years.

7/05/2006 07:43:00 PM  
Anonymous Anonymous said...

"China, Russia resist North Korea sanctions"

http://news.yahoo.com/s/ap/20060705/ap_on_re_as/un_north_korea;_ylt=Apcnvl6tyeVq6SLspFzgE.Ws0NUE;_ylu=X3oDMTA2Z2szazkxBHNlYwN0bQ--

The geopolitical climate is getting interesting.
All these commies want their glorys days again. "return to the motherland"

In the 60s, we proved Russia was a paper tiger. But Putin is a pretty tough guy. And this time around, we depend on red china to buy our T-bills.
And who the hell do you think are buying all the MBS? The god damn chinese. China has helped finance this RE bubble.

North Korea is nothing but a puppet for China. China and the japs don't like eachother. Don't believe me, call a china man a japanese. He will clean your clock. This animosity between the China and the japs goes all the way back to WWII. Those feelings run deep out there.

I remember when I was in Korea. I was hired by QCOM as outside contractor to help with an assignment. We left a big rift with the Koreans that you don't really hear about........

Take out your cell phone, flip it over and look at the back or inside near the battery. you will see these little letters....CDMA.

There is a reason for that. And that reason came at the exspense of the Koreans. If it wasn't for that reason, that stadium in San Diego would have another name and nobody would of ever heard of QCOM.

Think about all the cell phones that are out there? How much you pay for that phone or for service/month? Who gets the cut? and who doesn't?


SAS

7/05/2006 07:45:00 PM  
Blogger confused said...

I am getting pretty anxious myself. have been sure of the bubble since 2004 and prices keep going up ( live in Miami). Yes there are price reductions but they are meaningless as the asking price is still higher than what the same unit woould have gone for last year. Rentals are few and are very very pricy compared to last year. Most rentals have converted to condos and many of those were bought up by second home buyers or wealthy foreigners. I have been adicted to the bubble blogs for nearly a year and am getting very concerned..

7/05/2006 08:16:00 PM  
Anonymous Anonymous said...

SAS, could you stick to RE ?

7/05/2006 08:25:00 PM  
Anonymous Anonymous said...

NJGal said...
"Seriously, $300 jeans/I make 75K a year so I'm poor guy is more annoying than Bob. He posts the SAME THING on every thread."
7/05/2006 01:42:19 PM

Bob is rational...nothing personal but you, I take it are female, therefore it is genetically impossible for you to be rational...but females can be annoying :)

7/05/2006 08:33:00 PM  
Anonymous Anonymous said...

"Mr. Oliver said...
"Could fall 50% from their peaks" is a scary sentence."
7/05/2006 10:09:57 AM

Mr. Oliver; I loved reading this post, sometime ago we were all taking stabs at where we thought prices will go, at the time I said and still say 98 prices...you at the time went wild, now you read it in the WSJ and now it's true. Independent rational thinking will set you free.

7/05/2006 08:37:00 PM  
Anonymous Anonymous said...

Confused: I have a business in Miami and can tell you with a high degree of certainty that it will be as ugly as Cali, NY or NJ...maybe even worse.

7/05/2006 08:40:00 PM  
Anonymous Anonymous said...

Anonymous said...
take away the crazy financing and you're left with ordinary folks with ordinary purchasing power based on their ordinary income. prices must come down to meet them.


Man, what a great line...how can you get more common sense than that???

7/05/2006 04:29:23 PM

great post! repetition is the mother of learning.

7/05/2006 08:44:00 PM  
Anonymous Anonymous said...

SAS, could you stick to RE ?

sure, it your old hat to the game, you will see that its all connected, sometimes with a dotted line, and not necessarily with a solid line as some of you boys like to see it.

Besides, ya know what a MBS is right?
You think that didn't have anything to do with RE? You think China hasn't had anything to do with RE? Are not Korea and China connected at the hip? You think people will be buying RE when they can't even afford to put petro in their vehicles? Hell, if gas gets up to $10/gal, thats going to be pretty damn tough for everyone, better stay home. Hell stay home, thats going to pinch the economy a little.
If the economy gets pinced, what do you think helicopter Ben and the boys will do to interest rates? How does rates effect the metals? What does China love more than USA dollar? The metals. What if China likes it so much that it diversifies out of dollars and picks something else..say euros? Euros,mmm....middle east would like that....ala Iraq.

oh wait, I forgot, you wanna talk only about RE. ok. Sorry.

Guess I will go out and get some Bazoka joe bubble gum too while I am at it.

360 baby.

"Ich bin ein Berliner"
SAS

PS- and I left politics out and remember, economic bombs can be worse than nuclear bombs.

7/05/2006 09:02:00 PM  
Anonymous Anonymous said...

SAS, I read these for the RE commentary.

But your comments are good and valid as well.

Go to KOS, you'll get some answers to your questions and your thoughts.

7/05/2006 09:43:00 PM  
Blogger grim said...

What is this I hear about the sales tax increase being off the table now? Did I hear right?

grim

7/05/2006 09:50:00 PM  
Anonymous UnRealtor said...

RE: Corzine / taxes

NJ decides to skip $1.3M in daily tax revenues by closing down casinos:

http://cnn.com/2006/POLITICS/07/05/nj.budget.ap

7/05/2006 10:01:00 PM  
Anonymous UnRealtor said...

OK, some property tax questions:

1) If a room in the existing house was once a garage, and that room is converted back to a garage, does this lower the property taxes? (Less heated / finished living space.)


2) If one of the bedrooms in a 4BR house is converted to a den, does that reduce property taxes? (I've seen several old ladies do this, and I don't think they needed an extra den.)


Any other ways to reduce property taxes?

7/05/2006 10:06:00 PM  
Anonymous Anonymous said...

Can any of the agents chime in on this?


I'd love to chime in but I think my chords been cut....ooooooohhhhhh

KL

7/05/2006 10:28:00 PM  
Blogger Grim Ghost said...

SAS

I would like your commentary if it were more coherent. Yes, we know everything is connected but we're largely interested in first order effects and not whether the flapping of a butterflys wings in Shanghai is going to impact real estate prices in Carlstadt.

7/05/2006 10:33:00 PM  
Blogger Grim Ghost said...

Unrealtor

The best person to ask these questions might be your agent, if you have one. He or she should know more about assessments in the town than people here who dont know the town. Or see if you can get some answers at your town hall.

In general, I think 1) is correct, but you have to consider that you're also lowering the house value when you sell. As for converting a bedroom into a den, the general definiction used is that anything with a closet and a window is a bedroom. Unless you plan to remove a closet, I don;t know how it would become a den. And again, this could be removing your nose to spite your face.

The best way to reduce property taxes is really to challenge the assessments rather than "de-improving" the house, IMMHO

7/05/2006 10:39:00 PM  
Anonymous UnRealtor said...

Thanks Grim Ghost, just wanted some feedback based on the experiences of others, etc.

The house in question is a good size, but doesn't have a garage. I think a house without a garage is actually harder to sell.

As for removing the closet, I would add it back for a minimal cost when it comes time to sell, but if removing a closet saves $1,000 a year (random guess) for 20 years, that's quite a savings.

I've called the tax department at the town hall, but they're not great at returning calls, and I have little time to head down there.

As for relying on a realtor, check my name. :-)

7/05/2006 10:51:00 PM  
Blogger Grim Ghost said...

Unrealtor, if your house doesnt have a garage, then your suggested change may work. However, bear in mind that the foundation of the would-be-convert room needs to be able to support a car.

As for heading to town hall, I agree that it can take a lot of time. Nonetheless if you';re really serious about the house, then it would be necessary. This is probably one of the biggest purchases you will make, after all.

I would not make an offer on a house without at least going to town hall to see the flood map and wetland map for the town (to see if your house is there), look at the zone it falls in and what is and is not permissible there, look at the tax map for easements (the surveyor will probably check later, but you should do so anyway). I would also look at neighboring lots in the tax map and ask about possible development on commercial lots or at paper streets and ask if there are any plans to develop them.

Finally, some towns have sites that have hazardous chemical dumps. I would check to see if there is one near the house.

7/05/2006 11:06:00 PM  
Anonymous Anonymous said...

Grim ghost,

Its the flapping of a butterflys wings is what determines if you can even pay for your RE.

But I like how you say first order...thats a good point.

Its the flapping of a butterflys wings that gave the RE bubble the seeds to sprout.

Am I the only one who knows what a MBS is?? Surely, I am not.

SAS

7/06/2006 07:44:00 AM  
Blogger Grim Ghost said...

No, I know what a MBS is and I even used to trade them at one point.

7/06/2006 08:09:00 AM  
Blogger delford said...

richard: Not sure I understand your logic, if we did not have a decent Spring this year, what amkes you think next year will be any different, I also think we will be over 7% by next Spring, in fact there are lending institutions quoting 7% now.

7/06/2006 08:31:00 AM  
Blogger delford said...

50% decline, WOW, and I am called doom and gloom, I do not hinkw e will see that, but my 25 to 30% correction is I believe in the bag.

7/06/2006 08:36:00 AM  
Blogger grim said...

Heck, even I don't believe we will see a decline of 50%, or even 40%.

I think a decline of 30-35%, in real terms, is a much more likely scenario.

grim

7/06/2006 08:43:00 AM  
Anonymous Anonymous said...

Grim ghost,

nice, your credability just went up 10 fold....he he...

take care,

SAS

7/06/2006 08:43:00 AM  
Anonymous Anonymous said...

Even if only 5% decrease will put many upside down.

Thats the danger of nothing down, which has helped fuel the bubble.

SAS

7/06/2006 08:46:00 AM  
Blogger chicagofinance said...

grim said...
Heck, even I don't believe we will see a decline of 50%, or even 40%.
I think a decline of 30-35%, in real terms, is a much more likely scenario.
grim
7/06/2006 09:43:01 AM

"real"? I don't think you are going out on a limb with that one. Considering where inflation is going, and peoples' focus on nominal figures, it seems entirely doable.

7/06/2006 09:08:00 AM  
Anonymous Anonymous said...

I still haven't seen any considerable price reductions. The houses that come on the market are still overpriced. How painfully slow is this market going to stand still?

7/06/2006 09:42:00 AM  
Anonymous Anonymous said...

If you had to bet cash/coin/whatever on a decline, wouldn't you say even odds on 50% decline on both coasts?

At this point, it doesn't even seem like a risky bet.

Rather conservative, actually, if you limit the drop zones to MA down to VA (DC), and WA down to San Diego.

7/06/2006 09:43:00 AM  
Anonymous Anonymous said...

...50% decline on both coasts"... I am not so sure. I would like to hope so, but I am not seeing it. The homes I am looking at are still over priced and some are still selling ( I am not sure if they are being sold for asking price). I am feeling like I will be unable to buy anytime soon at this point, or have to settle for a crappy house.

7/06/2006 10:04:00 AM  
Blogger grim said...

The market, as it exists right now, has got a tourniquet wrapped around it.

I don't mean tourniquet as a life saving technique to stop bleeding, but as a torture device.

The tourniquet is being tightened. Currently the tightening is due to both an increase in mortgage rates and a shift in psychology.

It's getting tight, but there is still no pain. You won't begin to see steep nominal declines until something begins to tighten that tourniquet further.

grim

7/06/2006 10:32:00 AM  
Anonymous Pat said...

Grim, there's a lot of collar-pulling going on with flippers. Maybe not pain yet, but as close as it gets.

I'm waiting for a listing to reappear today (dropped off yesterday) that I've been watching since 2004.

Three reductions. I'm waiting.

7/06/2006 11:02:00 AM  
Blogger chicagofinance said...

Cross off 2006!

If you can't wait it out, you will not see things that will set your world on fire. There will be discounts for sure, but the economy is clicking along just fine.

No Pain = No Pain

Pain? job loss, pay cuts

The day to go into contract is about 12-16 weeks after Wall Street firms whack a couple 10,000 heads.

Thems the rules - sorry.

Sounds like 2007-08 to me.

chicago

7/06/2006 12:39:00 PM  
Blogger delford said...

chicagofinance: I think you are putting far too much emphasis on Wasll Street, and its impact on the real estate market, Wall St is not the only influence on the real estate market in the tri-sate area.

The boom and the manaia affected all, and in every endeavor, with most of these people having nothing to do with Wall St.

As far as teh econom hummong along, I do not see it, yes jobs are being created, but I always ask what kind of jobs. High paying jobes with benefits pensions etc,nope not happening.

In NJ the number one job categrory fro teh fourth quarter of 05, and the first quarter of 06 was restaurant worker.


I think it is happening now, and I am amazed at the house I am seeing offered in the mid 400's today, that last year were selling for over 500k.

7/06/2006 01:50:00 PM  
Anonymous Anonymous said...

Grim... what things do you think "could tighten the tourniquet"?
We have stopped looking and have no intention of buying until after the new year...if prices start to really come down. It seems like it is going to take longer than we had hoped for this to happen, but we are not in a rush to spend an extra $200k for a house now.

7/06/2006 02:37:00 PM  
Blogger confused said...

Any ideas of when the prices will start to get lower in Miami? I hear from so many people that it will happen but so far nothing is happening except for the interest rates going up. The average days on the market is 103 days, not really that long..
I am trying to see the light at the end of the tunnel ..

7/06/2006 09:08:00 PM  

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