Saturday, March 11, 2006

Buyer sentiment rapidly changing, Sellers feeling pain

I came across this bit in Realty Times this morning, just more examples of the rapidly changing real estate market:

Ask Realty Times

Question: We purchased an ocean-front condo in south Florida last May. We've decided we want to sell. However, according to our real estate broker there have been few to no showings because people are just not coming to look and if we do sell at this point we'll loose anywhere from $75,000 to $100,000 or more. We understand that the real estate market is flat right now, but how shall we understand that (a) no one is looking and (b) we will be suffering such a large loss?

Answer: If you're a short-term speculator you have a lot of risk in selected markets and with selected projects. There is a belief among some buyers that in certain areas of the country condo units have been grossly oversold to investors and speculators. There is little reason to buy -- if this theory is true -- while prices are still declining.


Anyone else think that buyer sentiment isn't changing incredibly quickly? And before you start to rationalize why the Northern New Jersey market is 'different', you should go back and read this piece, Northern New Jersey Among Riskiest Real Estate Markets, which found Northern New Jersey to be just as risky (or more) than Southern Florida.

Even the realtors are changing their tunes (From Realty Times Market Conditions Report for NJ):

"There were more homes coming onto the market this month and about the same going under contract as in January but much less actually being sold. The average asking price is about the same.

The Spring Market is here and more and more homes are being listed for sale. We have passed the time of the double digit rise in home values and now is the time for Sellers to realize this and begin to rethink the market position of their homes. If Seller's continue to list their homes at Yesterday's Prices…more and more homes will remain on the market as buyers have more to choose from."
- Leonard Klein, Realtor

"The Luxury market has leveled off. Rising interest rates, and double digit increases, are already "OLD" news." - Edward Meyers, Realtor

"For those Sellers who wish to market their home in this Spring Market, I recommend pricing aggressively, and make sure you are represented by..." - Susan Laskin, Realtor

"...sales activity in January ran 12% less than January 2005 indicating that the weakness in the residential market which began in October has carried over into 2006. Further evidence that the market has softened comes from the continuing increase of unsold inventory which grew by more than 2,000 homes in January and now stands 46% higher than 1 year ago. Home buyers will clearly have much more to say in determining the selling price of a home in 2006 than was the case last year." - Spring Otteau Report

(emphasis added)

Caveat Emptor!
Grim

Friday, March 10, 2006

Hoboken Bubble Sitters Sit Pretty

From ABC News:

Should You Buy or Rent?

Bubble Sitters' Sell High and Rent Low

Jordan and Linda Celkupa were first-time homeowners who got into the real estate market at the right time. The young couple sold their apartment of four years for a 65-percent profit, and since then, they've been renting and waiting for the housing market to cool down.

"If you look at the amount of money we spend every month, it's just substantially cheaper to rent than own this place," Jordan Celkupa said.


The Celkupas are among a small number of "bubble sitters," who sell their homes for a high profit and rent, hoping the market will come back down when they buy again.

Video of this piece is available as well:

Homeowners Who 'Bubble Sit'

Caveat Emptor!
Grim

Northern New Jersey Housing 30% Overvalued

Global Insight and National City Corp. released a joint analysis of the pricing of metro housing markets this afternoon.

U.S. overpriced housing markets grew in Q4 - study

The number of very overpriced housing markets grew in the last three months of 2005 from the prior quarter despite slowing demand and rising mortgage rates, a study released on Friday shows.

In the latest joint analysis by Global Insight and National City Corp., 42 percent of the top 299 U.S. metro housing markets were considered "extremely overvalued," making them vulnerable to price declines.
...
"While the incidence of overvaluation clearly increased, we are beginning to see the pace of price appreciation slowing, with the lowest increase since the third quarter of 2003," National City's chief economist, Richard DeKaser, said in a statement.

The full report can be found here:

House Prices in America (PDF)

Northern NJ Metro Areas in 2005 Q4:
Edison, NJ 31.9% Overvalued
Newark, NJ-PA 29.6% Overvalued
New York-White Plains, NY-NJ 28.6% Overvalued

Other NJ Metro Areas in 2005 Q4
Atlantic City, NJ 59.6% Overvalued
Ocean City, NJ 49.5% Overvalued
Vineland, NJ 23.7% Overvalued
Camden, NJ 19.4% Overvalued
Trenton, NJ 18.2% Overvalued

Caveat Emptor!
Grim

Lowball! 2/24 - 3/10

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.

The purpose of 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.

On to the list!

MLS# 2099727 - Vernon, NJ
List Price $189,900
Sales Price $115,000 (39.4% Lowball)

MLS# 2108329 - Washington Boro, NJ
Original List Price $279,900
Reduced Price $239,900
Sales Price $160,000 (33.3% Lowball, 42.8% off Original Price)

MLS# 2213025 - Washington Twp, NJ
List Price $174,900
Sales Price $125,000 (28.5% Lowball)

MLS# 2216364 - Newark, NJ
List Price $235,000
Sales Price $170,000 (27.7% Lowball)

MLS# 2217470 - Springfield, NJ
List Price $570,000
Sales Price $417,500 (26.8% Lowball)

MLS# 2104023 - Verona, NJ
Original List Price $589,900
Reduced Price $535,000
Sales Price $415,000 (22.4% Lowball, 29.6% off Original Price)

MLS# 2227420 - Harding, NJ
List Price $1,999,000
Sales Price $1,560,000 (22% Lowball)

MLS# 2204553 - Elizabeth, NJ
List Price $450,000
Sales Price $355,000 (21.1% Lowball)

MLS# 2107785 - Hillsborough, NJ
List Price $399,900
Sales Price $320,000 (20% Lowball)

MLS# 2217059 - Jefferson, NJ
List Price $259,000
Sales Price $210,000 (18.9% Lowball)

MLS# 2067228 - West Milford, NJ
List Price $249,900
Sales Price $205,000 (18% Lowball)

MLS# 2111526 - Summit, NJ
List Price $1,200,000
Sales Price $999,999 (16.7% Lowball)

MLS# 2223465 - Kearny, NJ
List Price $359,900
Sales Price $300,000 (16.6% Lowball)

MLS# 2097679 - Morristown, NJ
Original List Price $2,400,000
Reduced Price $2,199,999
Sales Price $1,850,000 (15.9% Lowball, 22.9% off Original Price)

MLS# 2221729 - Teaneck, NJ
Original List Price $409,500
Reduced Price $369,900
Sales Price $317,950 (14% Lowball, 22.4% off Original Price)

MLS# 2088558 - Chester, NJ
Original List Price $1,299,000
Reduced Price $1,150,000
Sales Price $999,999 (13% Lowball, 23% off Original Price)

MLS# 2094115 - Harding, NJ
Original List Price $2,690,000
Reduced Price $2,640,000
Sales Price $2,300,000 (12.9% Lowball, 14.5% off Original Price)

MLS# 2079360 - South Orange, NJ
Original List Price $800,000
Reduced Price $600,000
Sales Price $525,000 (12.5% Lowball, 34.4% off Original Price)

MLS# 2076294 - Franklin Lakes, NJ
List Price $1,249,000
Sales Price $1,057,500 (12.3% Lowball)

Caveat Emptor!
Grim

Thursday, March 09, 2006

McMansions Get Thumbs Down

From the Star Ledger:

Homes Sweet Homes: Sizable questions

Real estate professionals said buyers should love the house they intend to buy, but also look around at the other houses on the block or down the road. Being king of the block isn't always the smartest move in the real estate world.

Big houses cost big money, both to buy and to maintain and just think of the landscape and utility bills.

And as investments, big houses aren't always that great either, which is something that will come as an immense comfort to your neighbors who look up longingly at your McMansion from behind the cheap white shades of their tiny three-bedroom Colonials.
...
Two years ago, Jeffrey Otteau, president of the Otteau Appraisal Group in East Brunswick that analyzes residential real estate trends, said his advice would be to "buy as much house as you can."

Not anymore. Times have changed.
...
"Essentially, you're taking on more debt, more financial burden and more risk in a market not likely to have the big payoff we've seen over the last five years," Otteau said.
...
"You always want the least expensive house on the market," he said. "You never want the largest and most expensive house."

----

I should note that I don't necessarily agree with the points made in this article. However, I'm posting it as further evidence of the change in market psychology.

Caveat Emptor!
Grim

Wednesday, March 08, 2006

Northern New Jersey Housing Market Weakens In First Quarter

The first quarter is shaping up to be the worst in more than five years for the Northern New Jersey residential real estate market. The decline in residential single family home sales is a trend that began late last summer and is showing no sign of reversal.



(click to enlarge)


Home sales for the first two months of 2006 showed significant declines compared to prior years, January sales saw a year over year decline of more than 15 percent, and February saw lows not seen for more than six years.

January
Median Home Sales (2000-2005) - 1976
Current Home Sales (2006) - 1705
(13.6% below median)

February
Median Home Sales (2000-2005) - 1585
Current Home Sales (2006) - 1395
(12% below median)

Caveat Emptor!
Grim

Northern New Jersey Weekly Inventory Update

GSMLS
Single Family, Condo, Coop
(Bergen, Essex, Hudson, Morris, Passaic, Somerset, Sussex, Union, Warren Counties)
2/22 - 12,597
3/08 - 13,094

NJMLS
Single Family, Condo, Coop
(Bergen, Essex, Hudson, Passaic Counties)
2/22 - 6,078
3/08 - 6,415

MLSGuide
Single Family, Condo, Coop
(Hudson County)
2/22 - 2,078
3/08 - 2,100

* Since I was away last week I did not get data for March 1st. The data above represents a two week change.

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).

Northern New Jersey Among Riskiest Real Estate Markets

The PMI Group's Winter 2006 Economic Real Estate Trends Report has been released and is available at:

Winter 2006 Economic Real Estate Trends (PDF)

Northern New Jersey again ranks among the Top 20 Riskiest Real Estate Markets..

Top 20 Riskiest Metropolitan Statistical Areas (MSAs)
1 - San Diego-Carlsbad-San Marcos, CA
2 - Santa Ana-Anaheim-Irvine, CA
3 - Boston-Quincy, MA
4 - Nassau-Suffolk, NY
5 - Oakland-Fremont-Hayward, CA
6 - Sacramento-Arden-Arcade-Roseville, CA
7 - Riverside-San Bernadino-Ontario, CA
8 - Providence-New Bedford-Fall River, RI-MA
9 - Los Angeles-Long Beach-Glendale, CA
10 - San Jose-Sunnyvale-Santa Clara, CA
11 - San Francisco-San Mateo-Redwood City, CA
12 - Cambridge-Newton-Framingham, MA
13 - Edison, NJ
14 - New York-Wayne-White Plains, NY-NJ
15 - Las Vegas-Paradise, NV
16 - Fort Lauderdale-Pompano Beach-Deerfield Beach, FL
17 - Newark-Union, NJ-PA
18 - Washington-Arlington-Alexandria, DC-VA-MD-WV
19 - Detroit-Livonia-Dearborn, MI
20 - Miami-Miami Beach-Kendall, FL

Caveat Emptor!
Grim

Tuesday, March 07, 2006

Northern New Jersey Residential Home Sales Fall In February

Residential Single Family Home Sales fell in again in February. This drop marks the sixth consecutive monthly decline seen in the Northern New Jersey region, a trend which began late last summer. Home sales this February (1395 Sales) were down 12% from February of 2005 (1578 Sales), and down 18% from January (1705 Sales). The February sales numbers were in line with our previously reported estimates. February traditionally marks the lowest point of the Northern NJ sales season, so we should see sales volume pick up from this point forward, however it's likely the trend will continue with volume being approximately 15% lower than what has been seen over the past 3 years.


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

Back in warm and sunny New Jersey

I just wanted to let everyone know that I'm finally back home. I was in Krakow for the week taking care of some business. It's good to be back here, mostly because of the weather. It really has been a rough winter for Eastern Europe.

The housing market is booming in Krakow and Warsaw as well, just like here. They've seen 25% YOY increases in top areas. They've got more variations on Home Depot than you can shake a stick at, and they are everywhere. They've got whole 'malls' dedicated to building and remodeling. The parallels between the boom there and here were really eye opening. New construction popping up everywhere. The locals seem to think that they are running out of buildable space near the town centers (centrum), but they've got a long way to go.

Updates and data should be back to their usual schedule this week.

Caveat Emptor!
Grim

Monday, March 06, 2006

Goodbye Boom, Hello Bust

This morning I bring to your attention 3 different articles on 3 different real estate boom areas.

First off, let's get the update on the US Real Estate Market:

America's most dangerous 'housing bubble'

Several good points are made here.

... Yet while everyone has watched this bubble-that-was-never-a-bubble, a more menacing bubble sits on the horizon. This is the bubble of future mortgage payments.

Ironically, the homeowners who have been watching prices soar in their neighborhoods have felt house-rich: Thanks to the dizzying escalation in sale prices, their net worth has been doubling, maybe tripling. But this is a paper gain, to be realized only if the homeowner sells and moves to a less expensive region (from California to Oklahoma, for instance), or scales down to a smaller house. For most people, the increase in net worth has been almost fictive.

PAPER GAIN?! What! Can this be true? I thought paper gains were only in the Stock Market!!

That's nonsense. Real estate never goes down. Let's goto China to see how they are doing.

Shanghai's housing bubble bursts, causing some panic

WTF?!@

"The entire industry is scaling back," said Mu Wijie, a regional manager at Century 21 China, who estimated that 3,000 brokerage offices had closed since spring. Real estate agents, whose phones wouldn't stop ringing a year ago, say their incomes have plunged by two-thirds.

Shanghai's housing slump is only going to worsen and imperil a significant part of the Chinese economy, says Andy Xie, Morgan Stanley's chief Asia economist in Hong Kong.


Nonono.. This can't be happening, there's a shortage of land, people need a place to live!

...Wang was thrilled to come away with two apartments, one for $110,000, about the average price for a new home in Shanghai, and another for $170,000. They were among Wang's four investment properties.

And for a short period, Wang believed she was raking in hundreds of dollars a day for doing nothing, as property prices in the city kept soaring.

But today, prices at the apartment complex have fallen by one-third, and the lines of frenzied buyers are gone. Wang is among dozens who are fighting the developer to take the apartments back.

On a recent morning, she stood in a line herself with about 40 other buyers outside the builder's headquarters, demanding that it negotiate a deal to return their money. The company, Da Hua Group, invited Wang and other homeowners inside, served them hot tea, then told them to forget it.


Noo!! I want my money back! You promised us real estate never goes down!!

Ok. So it can go down, but everything will rebound back up right? Well, let's check in with Australia.

Housing market about to take off again - in your dreams

Even Sydney house prices rose by 1 per cent, ending a long run of falls since the boom busted in late 2003. Yippee.
...

What's more, since prices remain so far out of line with wages and rents, [he] continues to expect a long period in which prices are on a flat-to-down trend until they achieve the usual decline in real prices seen in the aftermath of a house price bubble.



Sorry I can't elaborate on the articles more; but that's just a glimpse of what *could* happen. We are on the verge of a bust, China is IN a bust, and Australia is trying to recover from a bust.

-Richie