Home Prices Do Fall - A Look At The Collapse Of The 1980s Real Estate Bubble

It's been a while since I did an original piece. Going through some articles today, I decided everyone needed to relive the collapse of the 1980's real estate bubble. For those that don't know, the NY Metro area saw spectacular gains in real estate during the 80's. It, like all bubbles that came before it, collapsed just as spectacularly.

Please, take the time to read the following link:



Home Prices Do Fall - A Look At The Collapse Of The 1980's Real Estate Bubble



When you are done, ask yourself, "Is it really different this time?"

Caveat Emptor!
Grim

January Northern New Jersey Residential Home Sales Fall

We've finished gathering the January 2006 Residential Home Sales Data (from GSMLS). This data is ours, gathered by my team. As soon as the prior months statistics are available, we gather that data and compare it, YOY, with the 2003, 2004, and 2005 sales data to determine trends within the current real estate market.

(click to enlarge)

The January numbers were slightly below even our preliminary estimates. Total sales for the counties monitored in January came in at 1705, approximately 15% under January 2005 and 25% under December 2005.

This data is not seasonally adjusted and consists of sales of GSMLS listed properties in Bergen, Essex, Hudson, Morris, Passaic, Somerset, Sussex, Union, and Warren counties. This data does not include sales from other listing services (NJMLS or Hudson MLS) nor does it contain FSBO sales. However, GSMLS is the largest MLS service in Northern NJ, thus we're confident that the data provided is representative of the market.

Caveat Emptor!
Grim

Inventories Quickly Rising In Bubble Markets

From the WSJ:

Finding a House Gets Easier

Inventories Rise Sharply In Many Major Markets As Some Buyers Hang Back

By RUTH SIMON and JAMES R. HAGERTY
Staff Reporters of THE WALL STREET JOURNAL
February 8, 2006; Page D1

With the key spring selling season about to get under way, the inventory of homes on the market is climbing sharply in a number of major cities.


Nationwide, there were 2.8 million existing houses and condominiums on the market at year end, according to the National Association of Realtors. That is down slightly from November's 2.9 million listings, but up 26% from a year earlier. Adjusted for seasonal variations, inventories have climbed 38% since April, according to Goldman Sachs Chief U.S. Economist Jan Hatzius, the largest eight-month increase on record.

The changing climate is particularly noticeable in once-hot markets such as Miami, Phoenix and Washington, D.C., and in areas such as Detroit, where price increases have been modest but the job market is weak. Some brokers report that traffic has increased in recent weeks. But with plenty of properties to choose from, buyers have become more selective.
...
Economists and real-estate experts are watching the inventory numbers closely for signs of whether the housing market is poised for a soft landing -- or something worse. When inventories are tight, buyers competing for scarce properties bid up prices. As the supply of homes on the market increases, price increases slow and buyers gain negotiating power.
...
With the number of listings rising and the pace of sales slowing, there is now a 5.1-month supply of existing homes on the market, based on the current rate of sales, according to the National Association of Realtors, compared with a record low of 3.8 months in January 2005. Historically, a 5.5-to-six-month supply has been considered a balanced market, says NAR Chief Economist David Lereah. But with the Internet making shopping for a home easier, he says, it is no longer clear just what a balanced market is.
...
The supply of unoccupied condominiums is also climbing in many areas. In New York's Westchester County, the number of condos on the market jumped to 617 at the end of 2005 from 397 a year earlier. In the Boston area, the number of condos listed at the end of January was 5,114, up from 2,876 a year earlier. In the Washington, D.C., metro area, new-home inventory climbed by more than 900% to 2, 413 in the fourth quarter over the same period a year earlier, largely because of the completion of several condo projects, according to Hanley Wood.

Caveat Emptor!
Grim

Northern New Jersey Weekly Inventory Update

The North NJ weekly residential inventory update is back on track. Inventory stats will be posted every week, prior to noon on Wednesday. The numbers will include all 3 of the Northern NJ MLS systems, GSMLS, NJMLS, and the Hudson MLS. If someone would like to provide me with numbers from the FSBO systems, I'll gladly include them as well. These numbers do not include multifamily homes, only SFH, Condos and Coops. Realize that this does make an impact in certain areas of North Jersey with high densities of multifamily (Hudson, Passaic, etc).

GSMLS
Single Family, Condo, Coop
(Bergen, Essex, Hudson, Morris, Passaic, Somerset, Sussex, Union, Warren Counties)
09/01/2005 - 11405
01/01/2006 - 11010
02/08/2006 - 12233

(Updates should be back on schedule now)

NJMLS
Single Family, Condo, Coop
(Bergen, Essex, Huson, Passaic Counties)
09/01/2005 - 4981
02/01/2006 - 5769
02/08/2006 - 5868

MLSGuide
Single Family, Condo, Coop
(Hudson County)
02/01/2006 - 1609
02/08/2006 - 1990

Caveat Emptor!
Grim

Lowball! 1/24 - 2/7

Lowball! takes a look at home sales over the past week from a very different perspective. For those new to Lowball!, a lowball offer is when a buyer offers a significantly lower bid than asking in hopes that the seller accepts the offer. We take a list of home sales over the past week and pick out the sales that have the highest percentage difference between asking price and selling price.

Lowball! is to show buyers that the market has changed and buyers now have considerably more leverage than sellers. Just a short time ago, lowball offers would have been laughed at and discarded, however, not any more. The fact that so many under-asking offers are being accepted is clear proof that the market is changing.The list does not contain all sales, I hand-pick the most interesting sales from the list. These listings might be the highest dollar drops, biggest percentage reductions, or sales in towns that are thought to still be 'hot'. Please note, even with double digit percentage reductions, these homes are still incredibly overpriced.

I'm sure many readers did a double take when they saw this title. Well, what can I say. We're back in business. Please excuse any errors and point them out in the comments so that I can correct them.

On to the list!

MLS# 2201697 - Hillside, NJ
Asking Price $289,999
Selling Price $190,000 (34.48% Lowball!)

MLS# 2222842 - Vernon, NJ
Asking Price $224,900
Sales Price $168,000 (25.3% Lowball!)

MLS# 1697901 - Union, NJ
Asking Price $250,000
Sales Price $190,000 (24% Lowball!)

MLS# 1687244 - Kinnelon, NJ
Asking Price $2,500,000 (Originally $4,350,000)
Selling Price $2,000,000 (20% Lowball!, 54% off OLP)

MLS# 2099356 - Bridgewater, NJ
Asking Price $299,900 (Reduced from $309,900)
Selling Price $245,000 (18.31% Lowball!, 20.9% off OLP)

MLS# 2089638 - Andover, NJ
Asking Price $795,000 (Reduced from $825,000)
Selling Price $650,000 (18.24% Lowball!, 21.2% off OLP)

MLS# 2222050 - Warren, NJ
Asking Price $629,900 (Reduced from $659,000)
Selling Price $520,000 (17.45% Lowball!, 21.1% off OLP)

MLS# 2213524 - Millburn, NJ
Asking Price $5,000,000
Selling Price $4,150,000 (17% Lowball!)

MLS# 2213051 - Bloomingdale, NJ
Asking Price $299,999 (Originally $325,000)
Seling Price $250,000 (16.67% Lowball!, 23.1% off OLP)

MLS# 2212484 - Knowlton, NJ
Asking Price $349,900
Selling Price $292,000 (16.55% Lowball!)

MLS# 2105298 - Long Hill, NJ
Asking Price $575,000 (Originally $699,000)
Selling Price $490,000 (14.78% Lowball!, 29.9% off OLP)

MLS# 2111088 - Mendham, NJ
Asking Price $2,095,000
Selling Price $1,800,000 (14.08% Lowball!)

MLS# 2095331 - Mount Olive, NJ
Asking Price $359,000 (Reduced from $399,900)
Selling Price $310,000 (13.65% Lowball!, 22.5% off OLP)

MLS# 2213052 - Hanover, NJ
Asking Price $989,000
Selling Price $860,000 (13.04% Lowball!)

MLS# 2205837 - East Side Park, Paterson, NJ
Asking Price $389,900
Selling Price $340,000 (12.80% Lowball!)

MLS# 2200532 - Morris Plains, NJ
Asking Price $429,900 (Reduced from $439,900)
Selling Price $375,000 (12.77% Lowball!, 14.7% off OLP)

MLS# 2058076 - Hopatcong, NJ
Asking Price $999,900 (Reduced from $1,299,999)
Selling Price $880,000 (11.99% Lowball!, 32.3% off OLP)

I'll cut it off here, the list was rather long given the date range. Just to give you a feel, approximately 160 homes sold will a 5% or greater Lowball!

Caveat Emptor!
Grim

A Glimpse Into Our Future

Sellers juggle mortgages in tough market

Bonnie Cordy, who sold her Apple Valley town home last summer after it was on the market for nearly eight months, agrees. "The Realtors keep saying what a good market it is, but it is changing," she said.

Cordy and her husband moved to Tennessee last year for his job. They rented an apartment until their new $325,000 house was ready in June. All the while they were making a mortgage payment in Minnesota.

The Apple Valley town home they'd originally listed at $329,900 in December 2004 wasn't selling, even after they dropped the price more than $20,000.

"I felt nervous as we were finishing up the house down here," she said. "There was no way to swing it all."

They dipped into retirement savings for the month or two they had double mortgage payments and taxes.

Then they switched to another agent, who slashed the price another $30,000. It finally sold at the end of August for $291,900, which was about $35,000 less than what they paid in 2003. She figures they lost another $5,000 in retirement savings.

"It's money we'll never get back again," said Cordy, 48.

Home sellers making a leap of faith with St. Joseph statue

After their $540,000 house in Prior Lake had been on the market for three slow months, Holly and Sean Ploeger were willing to do anything to sell it.

So in December, they pulled up soil at the base of their For Sale sign and buried a little statue of St. Joseph in a plastic bag upside down and looking away from the house (the direction they want to go). [Ironic.. Is the statue upside down? Or is it their mortgage? -jb]

"At this point, nothing can hurt," Holly Ploeger said. "It gives us something to hope for because nothing else was working."

Default notices are on the rise

It took less than eight months for Dustin Suposs' "American Dream" to become a nightmare.

He and his girlfriend, both in their early 20s, got caught up in the better-buy-now mentality that fueled the Sacramento area's housing market last spring. They bought a $365,000, 1,550-square-foot home in Elk Grove with no money down. The result: A $2,300-a-month payment that was more than 2 1/2 times the rent they were paying.

By December the couple were drowning in bills and debt. Now they're two months behind on the mortgage.

Decline in housing sales grows steeper

The drop-off in Massachusetts home sales last year just got worse.

The Warren Group, a Boston real-estate services firm, reported yesterday that sales of single-family homes declined 7.6 percent last year. That is much larger than the 3.5 percent drop in 2005 sales reported recently by the Massachusetts Association of Realtors in its year-end report.

Caveat Emptor!
Grim

Star-Ledger New Jersey Forecast 2006

The Star Ledger is running a forecast series for '06, some of it interesting some not. Today's edition featured a number of articles on real estate. I picked out a handful of the most interesting pieces, worth a few minutes of your time to skim through. Like always, take everything with a grain of salt and be critical about what you read..

You may pay a price for that non-standard mortgage

The scary news, however, is that some buyers have used these loans to buy more house than they can really afford. They're living with no margin for error. When interest rates rise, the economy slumps or the homeowners finally have to start repaying principal, they may find themselves stretched to the breaking point, unable to pay for the roof over their heads.

In short, said Keith Gumbinger of HSH Associates, a Pompton Plains company that follows the mortgage market, a lot of buyers "jumped into the pool and don't know how to swim."

Smaller homes begin to make a comeback

The large homes are not without their critics.

"To me it has to do with conspicuous consumption," said Anthony Schuman, graduate program director at the New Jersey School of Architecture at the New Jersey Institute of Technology in Newark.

"It has a negative impact on the environment and the quality of the towns the homes are built in. People are building large houses on small lots. And the proportion of the building to the size of the lot has an impact on the neighborhood scale."

"We're finding the beginning of a trend for smaller, more intimate spaces," Skea said. "I think practicality will start to rule."

Mixed-use projects won't combine business, pleasure

North Jerseyans can expect in coming years to see thousands of new homes, plenty of fresh spots to eat and shop, new hotels, an enormous new multiplex and even an indoor ski slope.

But what most of the area's biggest new mixed-use projects won't feature -- at least not anytime soon -- is office space.

House prices returning to earth

Lower sales will mean less pressure on prices. Already in late 2005, there were some hints of slower growth as builders began "rolling out sales incentives" to lure buyers who are resisting high prices for new homes, Seiders said.

A slowdown in price hikes will be good news for young would-be buyers, who have watched in frustration as the prices on even starter houses raced ahead of their incomes.

Even in red-hot market, this coast is still golden

Even in North Jersey's scorching real estate market, the condos along the Hudson River Gold Coast have stood out for their relentless pace of appreciation.

But as the 2006 spring buying season approaches, sellers from Fort Lee to Jersey City appear to be a bit more willing to negotiate. Realtors say condos are taking longer to sell as buyers have become a bit more cautious with mortgage rates trending upward and talk of a housing bubble growing louder.

Caveat Emptor!
Grim

... And They're Off!

Welcome to the kick-off of the spring real estate season!

For those that don't know why, it's because of the Super Bowl. Why? Who knows really, it's just a trend that has been seen over the years. Of the data I've seen for North Jersey, February does mark the beginning on the listing season, however it is most definately the bottom of the selling season.

Anyone out driving yesterday surely noticed the open houses. I've never seen so many balloons floating around North Jersey. Every major intersection I drove through had at least one open house sign.

So here is my message to prospective buyers this spring season:

Wait.

Take your time. Visit one more open house. Wait a week before you decide to commit to that offer. It should be obvious to you now that you didn't miss the boat. In fact, the boat is turning around and heading the opposite direction. I'm not saying to boycott the market, I'm not saying "Don't buy", I'm saying wait. Throw your down payment into a short term CD and just sit back. The market is no longer going up, and any short term bump we do see is just a "dead cat bounce" on the way down. Take a deep breath. Inhale.. Exhale.. Instead of visiting open houses take the dog down to the beach, go to the driving range, start your spring cleaning or take up a new hobby. Do anything you need to do to get your head out of real estate.

Caveat Emptor,
Grim

Agents Wanted

I'm sure many of you have noticed the lack of hard statistics lately, as well as the missing Lowball! and Price Reduced! articles.

The sad truth is that I've lost my sources, they no longer work in the real estate business, and thus, I have no access to GSMLS data anymore. Which is why I am posting this message.

This is an open call to any licensed New Jersey Real Estate Agent with GSMLS access.

In exchange for statistical information I will provide you with referrals from readers who are seeking that information. That's right, and if you've been in the business more than a few years, you'll know referrals are gold in a slow market. This site receives over 2000 unique visitors a day. I estimate that at least half of those visitors are likely to buy in the near future. Agents.. You can't buy this kind of advertising at any price.

Spread the word. If anyone knows a licensed agent or broker willing to cooperate, let them know. As always, any information or communications will be kept in the strictest of confidence.

Caveat Emptor!
Grim