Saturday, December 24, 2005

To Warren Boroson and Dominick Prevete

Many of my readers will be familiar with the name Warren Boroson, a local journalist. Warren has written some real gems in the past year, many of which try to entirely discount the fact that there is a speculative bubble in residential real estate. Warren has defended his position so vehemently, one wonders what vested interests he has in it. Warren is at it once again, with his pal Dominick Prevete (regional vp of Weichert) who like clockwork appears in every one of Warrens articles to offer up expert opinion. Warren, why do you continually quote Mr. Prevete in every real estate article you write?

Perhaps I'm being too critical of the duo, the most recent piece at least concedes some possibility there is a bubble, however, the article ends with the usual pro-real estate spin..

Here is the most recent gem:

Real estate shifting to a buyer's market

So, what do real-estate people think about the suggestion recently made by James Hughes that people not buy a house now -- unless they are planning to live in the place for 10 years?

Hughes, a real-estate expert, is dean of the Bloustein School of Policy and Public Planning at Rutgers and believes that house prices are very high.


Also commenting on Hughes' advice, Maureen Doyle, broker-manager of RE/MAX Properties Unlimited in Morristown, said, "I don't agree. I think we'll see continual appreciation, but it will be more reasonable. Just not the 7 to 12 percent a year appreciation we've seen over the past four or five years."

Her arguments:
• Interest rates remain relatively low.
• New Jersey doesn't have much land on which to build new houses.
Doyle concedes that the inventory of houses for sale has increased -- up 20 percent in the past year, while sales have increased only 6 percent.


Also in disagreement with Hughes: Dominick Prevete, regional vice president of Weichert, Realtors in North Jersey. "Prices won't decline significantly, but we will return to single-digit appreciation next year," he predicted.

The big change next year will be: Buyers will have more choices and less competition. There also will be fewer bidding wars.

He also predicted that interest rates will stabilize at a high 6 percent or at 7 percent -- still reasonable for most buyers, he said.

Buyers who wait for the bubble to burst will learn that there was no bubble -- and they may miss out on good purchases while waiting fruitlessly for prices to decline, he said.

As for sellers, Prevete said they will be more sensitive to marketing plans in view of the greater competition.


Mr. Prevete, the fact that you continue to discount the mere possibility of a speculative bubble in real estate prices locally is incredibly reckless. As an industry insider, you know people are reading your comments and acting on them. However, you continue to make the same irresponsible comments and peddle them out to the press through your pal Warren. Dominick, even the NAR has conceeded the fact that home prices are out of line with fundamentals, yet you continue to disagree. Well Mr. Prevete, you are certainly as entitled to your opinion as I am mine. I will continue to get the word out to New Jersey. Each reckless bubble-inflating quote you make only serves to further motivate me and to show my readers the bias within the media and industry.

What I couldn't understand about the duo, is why Mr. Boroson continued to write such pieces in the face of overwhelming evidence. So I decided to dig a bit deeper on who exactly Warren Boroson is. Fortunately, he made it quite easy for me:

The Warren Boroson Website

Turns out Warren Boroson is the author of this fine literature:

How to Buy a House with No (or Little) Money Down


Pick Stocks Like Warren Buffett

Wonderful, so it turns out that we have just another speculator masquerading as a journalist providing an "unbiased" view to the public. It's amazing how much sense things make when you become privvy to all the information that surrounds the situation.

Just another example of how the media and real estate industry colluded to create the largest speculative bubble in history.

Caveat Emptor,

Friday, December 23, 2005

Lagging growth in N.J. tied to housing costs

Thanks everyone for bringing this one to my attention:

Lagging growth in N.J. tied to housing costs
by Robert Gebeloff

The high cost of housing is increasingly cutting into in New Jersey's demographic bottom line.

With more and more residents leaving the state, and the rate of international immigration decreasing slightly, population growth has slowed to crawl, according to Census data released yesterday.

The Garden State grew by just 0.4 percent in 2005, according to population estimates, the second consecutive year of minuscule population growth. In the 1990s, New Jersey typically grew by a modest but steady 1 percent each year.

The slowdown was so stark that New Jersey nearly dropped off of the nation's population Top 10 list.

While I'm not sure I agree with his hypothesis, the fact of the matter is NJ demographic growth has been anemic. There has been no new influx of buyers driving home prices upwards. Realtors and other media cheerleaders love to use population growth and housing shortage as a justification for high prices. The stratospheric jump in demand that drove prices upwards was not due to population growth or a shortage of housing, but from speculation and easy money. Realtors and media cheerleaders will continue to be unmasked for what they are in the upcoming months.

Caveat Emptor,

New Home Sales Plummet in November

New Home Sales Plummet in November

Sales of new homes plunged in November by the largest amount in nearly 12 years, providing the most dramatic evidence yet that the red hot housing market over the last five years is starting to cool down.


Last month's decline was even bigger than the 8.7 percent drop-off that Wall Street analysts had been expecting. While sales of both new and existing homes are still on track to set records for a fifth straight year in 2005, analysts are forecasting sales will decline in 2006 as the housing boom quiets down.


Some of that price moderation was evidenced in the November report, which showed that the median price of a new home sold was $225,200 last month. That was up just 0.3 percent from November 2004, the weakest year-over-year price change in two years. The November median price was down 4.1 percent from the October median sales price of $234,800.

Caveat Emptor!

But.. But.. Prices Always Go Up.. Don't They?

I've waited a long time to see this in print. I even doubted the fact that the media would ever acknowledge the fact, but they did. This piece ran in the Voice of San Diego two days ago on Dec 21st.

Supply Surplus Symptoms

This increase in inventory, coupled with the drop in home sales, means sellers have had to wait longer to sell their properties, and may have to settle for profits that are substantially less than they expected. Some sellers -- albeit a small minority -- have even begun to sustain losses on their property.

Sustain losses on property? The unthinkable? But prices never go down? Right? Has anyone else seen the media reports that are already reporting a soft landing? Amazing, the market hasn't even begun to collapse on itself yet, but we've already landed? Already landed? I'll leave you with a quote..

"Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months."- Irving Fisher, Ph.D. in economics, Oct. 17, 1929

Chart of Pompous Prognosticators

Caveat Emptor!

Thursday, December 22, 2005

Walk-Through - New York Times Real Estate Blog

Came across a new blog this morning that I haven't seen before. I noticed some traffic coming in so I decided to take a peek. Seems like real estate blogging is becoming popular!

The Walk-Through - A Real Estate Blog From The New York Times

I always appreciate links from other blogs and sites. It helps to get the word out by bringing new faces to the blog. In return for the favor I'm going to ask the usual readers to stop by the NY Times blog and take a look.

Caveat Emptor!

Personal Savings Rate Negative.... Again

Can this be considered news anymore? Seems the American Consumer has no need to save money anymore.

U.S. Nov. Personal Spending Rises 0.3%; Core Prices Up 0.1%

Because the rise in spending matched the increase in incomes, the savings rate held at a minus 0.2 percent for a second month. A negative rate suggests consumers are dipping into savings to maintain spending.

Why bother saving? You'd be a fool. Save for a home down payment? Don't need one anymore. Save money for a car? No money down lease! Save money for retirement? Nah, we'll just sell our house and retire on the gains. Save for college expenses? Let the kids take out their own student loans.


Personal Savings Rate
April -0.2%
May 0.0%
June -0.6%
July -1.4%
August -3.4%
September -0.5%
October -0.2%
November -0.2%

By the way, past months numbers are being sharply revised downwards. The preliminary for August was something on the order of only -0.7% when it was initially released as a preliminary number. It's since been revised downward, first to -2.2% and again to -3.4%. So if the last two months numbers are starting to look benign, I'd wait to see whether or not these are significantly revised downward in the future as well.

Eight months most certainly makes a trend.

Caveat Emptor,

Wednesday, December 21, 2005

Lowball 12/11-12/21

Welcome to another edition of Lowball!

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 reason for 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. This week I tried to grab listings that were more affordable than many I've posted in the past.

Since I was away last week, I opened the window to include more listings than the usual weekly list. Let me just say that it's been a fantastic month for the lowballers in Northern NJ.

MLS# 2104655 - Chatham, NJ
Asking Price $2,350,000
Selling Price $1,800,000 (23.4% Lowball!)

MLS# 2109519 - Franklin Lakes, NJ
Asking Price $1,299,000
Selling Price $999,999 (23.0% Lowball!)

MLS# 2077400 - Bedminster, NJ
Asking Price $1,195,000
Selling Price $937,500 (21.5% Lowball!)

MLS# 2100818 - Paterson, NJ
Asking Price $289,900
Selling Price $230,000 (20.7% Lowball!)

MLS# 2109752 - Hopatcong, NJ
Asking Price $289,900
Selling Price $230,000 (20.7% Lowball!)

MLS# 2043432 - Newton, NJ
Asking Price $250,000
Selling Price $200,000 (20% Lowball!)

MLS# 2095896 - Butler, NJ
Asking Price $209,000
Selling Price $175,000 (16.3% Lowball!)

MLS# 2204182 - Scotch Plains, NJ
Asking Price $399,900
Selling Price $335,000 (16.2% Lowball!)

MLS# 2095318 - Lake Mohawk/Sparta, NJ
Asking Price $329,900
Selling Price $278,000 (15.7% Lowball!)

MLS# 2100851 - Sparta Twp, NJ
Asking Price $1,175,500
Selling Price $999,999 (14.9% Lowball!)

MLS# 2097357 - Ridgewood, NJ
Asking Price $470,000
Selling Price $400,000 (14.9% Lowball!)

MLS# 2111484 - Clark, NJ
Asking Price $800,000
Selling Price $685,000 (14.4% Lowball)

MLS# 2101435 - Randolph, NJ
Asking Price $599,900
Selling Price $515,000 (14.2% Lowball!)

MLS# 2203563 - West Caldwell, NJ
Asking Price $369,000
Selling Price $320,000 (13.3% Lowball!)

MLS# 2071462 - Millburn, NJ
Asking Price $639,000
Selling Price $560,000 (12.4% Lowball!)

MLS# 2109190 - Elizabeth, NJ
Asking Price $479,000
Selling Price $420,000 (12.3% Lowball)

MLS# 2068426 - Bridgewater, NJ
Asking Price $1,199,900
Selling Price $1,060,000 (11.7% Lowball!)

MLS# 2075936 - North Caldwell, NJ
Asking Price $1,375,000
Selling Price $1,215,000 (11.6% Lowball!)

MLS# 2107610 - Franklin Twp, NJ
Asking Price $556,345
Selling Price $499,000 (10.3% Lowball!)

MLS# 2102931 - Florham Park, NJ
Asking Price $589,000
Selling Price $530,000 (10.0% Lowball!)

Caveat Emptor!

Monday, December 19, 2005

Price Reduced! 12/12-12/19

Welcome to another edition of Price Reduced!

For all the newcomers to this blog, Price Reduced! takes a look at a handful of significant price reductions across Northern NJ. The purpose of this exercise is to serve as proof that the Northern New Jersey real estate market has long since been overvalued and has started the long hard decline back to the mean. These listings are in no way an endorsement by myself, nor do I believe they are a bargain or a value. Even reduced, I still believe these homes are still grossly overpriced. With that, the listings please!

MLS# 2225267 - Franklin, NJ
Asking Price $379,900
Reduced Price $259,900 (31.6% Reduction)

MLS# 2094887 - Washington, NJ
Asking Price $380,000
Reduced Price $299,999 (21.1% Reduction)

MLS# 2205767 - Roselle, NJ
Asking Price $339,900
Reduced Price $289000 (15.0% Reduction)

MLS# 2075967 - Hopatcong, NJ
Asking Price $1,175,000 (Originally $1,295,000)
Reduced Price $999,999 (14.9% Reduction, 22.8% from OLP)

MLS# 2220194 - Roxbury, NJ
Asking Price $995,000
Reduced Price $880,000 (11.6% Reduction)

MLS# 2213716 - Roseland, NJ
Asking Price $484,900
Reduced Price $429,900 (11.3% Reduction)

MLS# 2107696 - Kinnelon, NJ
Asking Price $2,195,000
Reduced Price $1,950,000 (11.2% Reduction)

MLS# 2209082 - Glen Rock, NJ
Asking Price $459,900
Reduced Price $409,900 (10.9% Reduction)

MLS# 2203247 - Bloomfield, NJ
Asking Price $399,000
Reduced Price $360,000 (10.0% Reduction)

Now, to all the potential buyers reading this blog, I am not posting this information for you to drool over thinking these are great deals. These are not great deals. These are the first price reductions along a very long road downward. If I threw a knife up into the air, would you try to catch it on the way down? No, you'd wait until it hit the ground and then pick it up. The same rule applies here. Alot of people lost alot of money buying on the downside of the stock market after the Nasdaq crash in hopes of a fast recovery. There will be no fast recovery here. Sit tight, grab some popcorn and enjoy the ride.

Caveat Emptor!

Sunday, December 18, 2005

Upcoming Economic Calendar

Looks like I came back to a rather full economic calendar for next week.

Tuesday 20th - Housing Starts & Building Permits
Tuesday 20th - PPI & Core PPI
Wednesday 21st - GDP & Chain Deflator
Thursday 22nd - Personal Income, Spending, and Savings
Friday 23rd - New Home Sales

Last week was rather busy as well, I'm sure you've all read up on the Fed rate increase and the changes in statement wording. Also as important was the 0.2% jump in the Core CPI.

I'll be posting up a new edition of Price Reduced! tomorrow and Lowball! on Tuesday.


Home Again

It's good to be back home again!

The past few months have turned me into a plugged-in news junkie. I can't go an hour without checking the newswires, looking for updates on economic reports, or keeping an eye on the stock and bond markets. Let's just say the withdrawl set in late on the first day of vacation, shortly after I found out internet access would cost me some $45 an hour.

By the second day, I was hunting for internet cafes, anywhere I could plug in for cheap, no dice. Was able to sporadically get CNN, but that didn't quench the thirst. They barely even covered the fed rate hike on Tuesday (or maybe I just missed the piece). Either way, TV was a poor substitute for what I was used to.

It's great to be home, and not just because I'm an information junkie. Is it just me or does anyone else get tired out on long vacations? Seems like the last day or two I just can't wait to get back home. Time to get back to blogging!

Caveat Emptor!