Million Doesn't Go Far In Jersey
From the Star Ledger:
What $1 million will buy in N.J.
By Sam Ali
What $1 million will buy in N.J.
By Sam Ali
Walking past the vacant house at 10 Nottingham Road in affluent Short Hills is like stepping onto the set of that animated horror movie "Monster House"; except the neighbors here insist this place does not devour stray kites, basketballs or people.
The droopy slate roof is brittle and cracked. When two underground oil tanks were removed earlier in the year, the temperature inside the house plummeted and the pipes froze and burst, real estate agents said. And then, of course, there's that nagging problem of mold in the basement.
So much for lifestyles of the rich and famous.
While the phrase "million-dollar home" can conjure images of stately Georgians or grand, rambling Victorians, the definition is rapidly changing in New Jersey.
In a state where home prices have climbed 87 percent between 2000 and 2005, seven-figure homes including the one at 10 Nottingham Road are becoming more common with a heavy emphasis on the word "common."
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Just how much "house" a million bucks will get you these days might surprise you.
You can get anything from a stately colonial in Chester on four acres with oodles of charm overlooking a pond to a shopworn, one-bedroom cracker box in Sea Bright that looks like a garage. In a number of towns, like Montgomery, East Brunswick and Montville, $1 million will get you a brand new 6,000-square-foot house with a three-car garage.
"The reality is that most of these million-dollar homes are very ordinary," said Arthur Tassaro, a sales agent with Friedberg Properties & Associates in Cresskill, which specializes in selling luxury homes in Bergen County. "A million dollars really doesn't get you a lot."
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Jeffrey G. Otteau, who runs an appraisal firm in East Brunswick, believes a number of shifts are under way that will lead to a glut of luxury houses in the $1 million to $2.5 million range in the coming years, particularly as Baby Boomers start trading in their trophy houses for smaller condominiums or age-restricted housing.
In addition, the lack of growth in the highest-paying job sectors in New Jersey, as well as the scarcity of buildable land and its high cost, does not bode well for this segment of the luxury housing market, Otteau said.
In the 18 New Jersey counties his firm covers, the inventory of million-dollar homes is already much higher than homes in the lower price ranges. There is a 13-month supply of houses priced at $600,000 to $1 million, and an 18-month supply of dwellings listed between $1 million and $2.5 million.
"This weakness in the luxury market has been developing slowly for several years now and will likely continue for the foreseeable future," Otteau said.
9 Comments:
How will this effect the poor folks, like myself, looking for a 500-600k home in the near future?
jr
"priced-in" is going to become the new buzzword. sit tight. cross off 2006.
'Exotic' mortgages seen losing their allure
"Joe" is a homeowner who did not want to give his full name for this story because he’s ashamed to admit that he soon won’t be able to afford his monthly mortgage payments.
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Now these cheap mortgages that fueled the real-estate boom are beginning to hurt the homeowners they once helped. Higher interest rates and the end of honeymoon periods for too-good-to-be-true teaser rates are increasingly causing payment shock for borrowers.
In order to get the $800,000 house he bought early last year in California’s Silicon Valley, Joe got an “option ARM,” an adjustable-rate loan that lets him choose from a variety of payments every month. The smallest payment included no principal and less than 100 percent of the interest due. The unpaid interest was tacked onto the principal, creating “negative amortization.”
This let Joe trade lower payments now for higher payments later. He initially thought his salary would rise along with his home’s value — he was a marketing executive for a small software firm he was confident would be successful. But when a lost deal closed the company and “For Sale” signs popped up — and stayed up — in his neighborhood, a now-unemployed Joe is wondering how he will afford those higher payments when his rates adjust.
HA!
I think the funniest thing about this article is the discussion of the Lustrons. I LOVE Lustrons, but any Lustron enthusiast knows that the US Marine Corp has literally been trying to GIVE AWAY LUSTRONS FOR FREE!!!
http://www.washingtonpost.com/wp-dyn/content/article/2006/07/14/AR2006071401936.html
Granted to disassemble, move, and reassemble them is $100K - but still, that makes the value of the lot in Alpine have to be $900K. Lustrons were considered too small for military families to live in - but evidently the owner and agent of this one in Alpine think it's worth 7 figures nonetheless.
One other thing this article doesn't mention is the additional NJ State Bend Over Because You Have Too Much Money tax. Any house in NJ that sells for over a million gets an additional 1% tax egregiously discriminatory tax slapped on it.
Note that the taxes on that house are $19,000, and will go up this year due to school upgrades, in addition to a 7 point tax increase. They'll be over $20,000 a year in 2007.
That's $1,666 a month in property taxes alone.
Buying that house today would entail:
Down Payment: $200,000
Monthly mortgage: $5,057 (30yr fixed @ 6.5%)
Monthly taxes: $1,666
Monthly utilities, maintenance, etc: $1,500
-------------------------------------
= $8,223 per month
= $98,676 per year
Don't forget that that 98K is seriously offset by the tax deductions, especially for a high income family. I have also wondered to what extent the change in the tax code that now allows you to exclude $250K in capital gains from sale of a primary residence multiple times (instead of once in a lifetime) encouraged people to flip houses every two years and added to the bubble.
"Don't forget that that 98K is seriously offset by the tax deductions"
True, but you still need cash flow to pay the bills before the tax return check arrives the following year. Oops, forgot to mention the few hundred thousand $$$ in repairs needed in my calcs!
Anyone with the cash flow to buy one of these places isn't waiting for a refund check, they are probably making estimated tax payments and have adjusted that to reflect the tax benefits of home ownership But I'll grant you that any way you cut it these are mind blowing numbers to someone who makes the state median income, like me And I think you have seriously understimated mantenance. In my neck of the$600-700 month on lawn care, 7 months out of the year is not unusual.
--CJ Sell-out
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