‘The Golden Years Are Certainly Over’: New Jersey
The Asbury Park Press has this update from New Jersey. “Once red hot, the market for new homes in New Jersey has begun to cool. ‘The frenzy in the real estate market that we have experienced in the last three or four years is no longer in existence,’ said Tom Critelli, president of Danitom Development, which has offices in Holmdel and Paramus. ‘We are seeing good traffic, but not necessarily anyone overreacting to having to buy now (and) worrying about the price going up later.’”
“From 2000 to 2005, housing prices statewide were up 86 percent, O’Keefe said. But household income only rose about 15 percent, O’Keefe said. Higher interest rates worsened the situation. ‘Simply put, buyers can’t afford what’s on the market,’ O’Keefe said.”
“Meanwhile, buyers are uncertain whether prices will decline and fear purchasing at the top of the market, said economist James W. Hughes, at Rutgers University. ‘The golden years are certainly over,’ Hughes said.”
“So, O’Keefe said, home builders are reacting by: Not starting new construction until they have a firm commitment for a sale. Not increasing prices. ‘The builders have become price conscious as the customers have become price conscious,’ O’Keefe said.”
“K. Hovnanian Homes, the largest home builder in New Jersey, has not raised its prices for the past six months, said Barry T. McCarron, a division president. K. Hovnanian is making sure its own homes are priced right. It may include some discounting of upgrades or options on certain homes, McCarron said. ‘We are doing it a little more frequently than we have in recent years,’ he said.”
“East Brunswick-based Kara Homes, which has built several developments in Monmouth and Ocean counties, has also been adjusting to the market, owner Zudi Karagjozi said. The company started to see a slowdown in sales in October and November, he said. It had to cut costs, including laying off 20 to 25 percent of its work force over the past six months, he said.”
“The company also has given incentives to buyers, to help make a sale, he said. Kara Homes also has reduced the price of some of its homes, he added.”
Just a minor correction, it’s “Asbury” not “Ashbury”.
Thanks for the New Jersey coverage Ben,we typically see very little coverage on the North Jersey RE bubble in the press here.
grim
Northern New Jersey Real Estate Bubble
Is New Jersey a market in its own right, or is it basically driven by New York?
The NY market has a impact on what goes on here in lovly new jersey
WD in NJ
I find it interesting that Kara Homes in New Jersey has layed off 20-25% of its work force, yet WE HEAR next to nothing from the Nationals whose sales are down 30 to 60%?, and of course ALL these folks are wealthy or something and prefer NOT to file unemployment claims, south of the border!
Just my 2 cents!
NJ is actually a very fractured market.
Northern NJ is certainly well within the sphere of influence of NYC, but that influence peters out around the area typically known as the Jersey Shore (Monmouth and Ocean counties). South of Ocean along the coast Atlantic City is certainly the major player.
For Mercer/Burlington/Camden counties Philadelphia and the state capitol of Trenton are the main influences.
Pharma and Tech play big roles in the state though tech, particularly in Monmouth County where Lucent and AT&T have pulled up stakes in the last five years, has lost a lot of juice.
Do you know where Montville is in NJ?
My dad built a house there in 1960 on a couple of acres of land for ~20K. They moved away from it a few years later. Recently, I saw the place on a realtor site for over $1M!!!! Obviously renovated many many times but still . . .
I did some rough calculation on the inflation/appreciation effect of the original 20K in 60K, in today’s money it worth about :
@ 5% apy, it worth: $188K
@ 9% APY, it worth: $1.05M
@ 12% APY, it worth: $3.67M
So time is playing significant role in boosting the “value” of an investment..
Effect on inflation:
Time or the FED’s inescapable ability to make us plebes believe in their fiat money as dollar good , and its debasement is only minor!
As your estimated demonstrates.
In 1960 that $20k was backed by gold near $35/oz.
The sales price? well, it is only relevent until next year when we will speak in 2007 dollars.
(Is New Jersey a market in its own right, or is it basically driven by New York?)
It is basically part of the New York market. Although New Jersey has an independent economy organized around phama and chem, much of it is driven by commuters to and businesses that want to be near (but do not wish to pay to be in) Manhattan.
There is, however, a competition within the region as to which of the thirds (NJ, Long Island, Hudson Valley/CT) attracts the most rich suburban commuters. Hence the argument about whose rail tunnel gets built. City residents? Forget it. Everyone wants to screw them.
Thanks.
“K. Hovnanian is making sure its own homes are priced right. It may include some discounting of upgrades or options on certain homes, McCarron said. ‘We are doing it a little more frequently than we have in recent years,’ he said.”
Master of understatement? Or is this market just in the beginning stages of cooling?
They actually increased the prices in a community in Mendham, NJ. Can’t trust anything these guys say I guess.
This Greater Fool knows for certain that the NJ bubble “Golden Years” are over — to the tune of a $300,000 loss:
320 Lupine Way
Short Hills, NJ 07078
1) Sold June 2005 for $1.3M.
2) Put on the market 4 months later in October for $1.3M (MLS 2204767).
3) No takers, withdrawn after 62 days.
4) Put back on the market in March (MLS 2261656), several months, and several price drops later, they closed at $1M, or $300K less than paid 12 months ago.
Add to that $300,000 loss: closing costs, real estate broker fees, etc, and that’s quite a beating.
Oh, man. That’s got to sting. Except I think Short Hills is a ritzy area and the dude who lost the money probably won’t even miss it. Probably some hedge fund bozo.
Oops. Did I mention I have a hedge fund job? LOL Haven’t decided whether to take it or not though. It would involve another move.
To Flagstaff (in your dreams!) seriously, where would it be based?
Yesterday I was talking to someone in Short Hills who said their property taxes were $60,000 A YEAR!!!!! Somethings gotta give in NJ.
A gorgeous house just sold on 2.2 acres in Short Hills. Annual taxes? $112,000
House cost $5M.
1) Sold June 2005 for $1.3M.
4) Put back on the market in March (MLS 2261656), several months, and several price drops later, they closed at $1M, or $300K less than paid 12 months ago.
Wow! That’s a 23 percent decline. I wonder if the first sale could be considered representative. The second sale certainly is representative of what you get if you have to sell, given the decline in volume.
(Add to that $300,000 loss: closing costs, real estate broker fees, etc, and that’s quite a beating.)
Not to mention inflation, which added to the beating in the form of the interest paid during the year to offset it.
I went to look at a house at the Jersey shore (Monmouth county).It was priced much lower than any comps in the town. The owner was in chapter 7 and the house was being sold by the trustee. To our dismay the owner insisted on showing us the house of which he told a story in each room like ” here is where my twin grandchildren sleep when they stay here, and ” I put all the paneling in here by myself”. At the end of the tour the owner begged us to not put in a bid because his relatives were trying to get together financing to buy the house from the trustee. Much to the realtor’s dismay we didn’t bid on the house- bad karma.
After cashing in on our beach house in 2004, we have been patiently waiting to buy back in but I think I’m going to have to get Sammy Shadenfruede to do my bidding for me.
I agree with you. That would have been bad karma. I wouldn’t have bid on it either. I’m afraid that those of us who wait and buy from distressed situations like that will encounter this sort of thing. I looked at a house in Dallas in 1989 which had an owner about to go under. I wasn’t interested but they called and called and called, begged, pleaded, offered everything but their first born kid. It made me feel awful.
I hope you find something ten times better.
Damn right the golden years are over.
Too much to do in this world to be a slave to a mortgage.
As companies default on their pensions and health care obligations
and the dollar is obliterated, there will be plenty of low cost, “granny flat type apartments in decent neighborhoods as strapped boomers rent out portions of their properties, which will perfectly accommodate people on the go.
Been on a tour of Cape Ann on the northshore of Boston today.
POS roads and aging infrastucture everywhere.
Scores of “For Sale/Rent” signs. But nary a “sold” notice anywhere.
New England is economic toast…
The big dig fiasco has doomed infrastructure investment in Massachusetts for a generation.
California will be bouncing back long before Massachusetts hits bottom.
I note in the article Kara Homes will be laying off 20-25% of their employees, this will be a trend in the housing industry and since it is estimated 40-45% employed in the building end are illegal immigrants, where do they go?