Stepping Onto The ‘Real Estate Bandwagon’
Some housing bubble reports from the northeastern US. “During the past several years, many homeowners secured disposable income to cover their bills or make purchases by refinancing or taking home-equity loans. That money translated into new cars, new decks and extra lines of credit. New housing statistics released this week have some North Jersey bankers worried.”
“‘The equity line was very helpful in driving a purchase market,’ said Tom Cosentino, who oversees mortgages for Greater Community Bank in Totowa. ‘Now people are coming back saying they spent all that money and didn’t realize it would stop.’”
“Mercedes Pedrick, who oversees mortgages at in Elmwood Park, said that luxury homes are still getting snapped up, but sales of single-family homes generally have sagged in Passaic and Bergen counties. ‘They haven’t been moving as much,’ she said.”
“Local bankers say that new mortgages, and the refinancing of existing ones, have dried up, especially over the past several weeks. ‘It has been quiet, unfortunately,’ said Steve Hoogerhyde, a lending officer.”
“Pedrick says that prospective homebuyers, especially those in the single-family home market, will continue to sit on the sidelines until the situation stabilizes. ‘Those people are riding the wave to see how low values will go,’ she said.”
The Home News Tribune. “The number of homes for sale in Central Jersey is up 20-to-25 percent from a year ago, said (realtor) Marc Laurano in Highland Park. Fewer speculators and investors and banks and appraisers making stiffer reviews have contributed to it taking longer for homes to sell, according to Laurano.”
“Bill Hanley, president-elect of the New Jersey Association of Realtors, said the ratio of homes available changed from 10 buyers for every house a year ago to 20 houses for every buyer this summer.”
The News Transcript in New Jersey. “These days it seems like it’s just not enough to put a house on the market if you’re not willing to throw in a little extra incentive for a buyer; perhaps a Mercedes-Benz. Thino and Susan Cacciolo, of Manalapan, have decided to take a more unconventional route, mainly due to the increasing difficulty in selling a high-end house in the current real estate market.”
“‘It’s called marketing. We’re going to do whatever it takes,’ said Thino Cacciolo. ‘The lack of traffic is because of the tremendous inventory increase in larger, more expensive houses,’ he said.”
The Daily News Transcript in Massachusetts. “The MetroWest housing market has bucked national trends for months, but figures from June indicate the region has stepped onto the residential real estate bandwagon. Sales dropped in 12 of the 16 communities tracked by HomeFind, while prices dropped as buyers sought out lower-priced properties in 10 of those towns.”
The Cape News. “Home foreclosures on Cape Cod, and in two Upper Cape towns in particular, have increased at a dramatic rate according to a new report. Statewide, 4,292 foreclosure notices were filed in land court between April and June 2006, up from 2,585 filings during that same period last year.”
“The increase is being blamed in part on rising interest rates and utility costs, but also on the housing boom of the 1990s, when prospective homeowners took out interest-only loans and no-down-payment mortgages in order to get into large houses. That perhaps explains why Cape Cod, known for its lavish seasonal and retirement homes, is recording record-high foreclosures.”
The Bridgeport News in Connecticut. “According to second-quarter statistics, single-family home sales in Bridgeport dropped almost 27 percent from 2005 to 2006. Local real estate agent, J.J. Garamella, agreed the market isn’t as strong as a year ago. Garamella said he worries that too much new construction is taking place, leading to excess inventory if the economy slows down. ‘That’s when everything will hit the fan,’ he said.”
“Too many young people today purchase expensive homes without thinking about what could happen if the future isn’t as bright as anticipated, according to Garamella. ‘They over-extend themselves,’ he said.”
I just don’t get the incentives. What’s the point of spending 50K to buy someone a car? Just knock that 50K off the price - it’s the same thing for a seller.
If you’re a buyer the incentizes are a better deal - because once you own its in your interest to keep comps high
Yeah. Right. And don’t forget the wonderful privilege of being able to provide an additional $500 of taxes to the county each year. I’ve a got a bridge I’d to sell. Call me.
“‘It’s called marketing. We’re going to do whatever it takes,’ said Thino Cacciolo.
Silly me. I thought doing whatever it takes was called desparation.
Proof enough that only the last of the idiots are buying now.
If you’re a flipper it’s in your interests to keep comps high starting the day you bought. If you want to live in the place, you won’t care about comps until you sell several years later.
Actually the car is worse… If you knocked 50k off the house rather than take the car you have to pay less taxes, and cover less house price for insurance.
You can’t ever change the purchase price of a home… but you can always refi, buy a car, remodel kitchen, etc etc…
All these incentives are crap if you ask me… I want a lower price!!!
Not to mention you are effectively buying a car with a thirty year note. Archeologists will be studying its remains before you pay it off. Go figure.
The car helps keep your and your neighbors’ homes market values on a permanently high plateau, as the value of the car does not factor into the official sale price.
I assumed part of the reason sellers do this to keep sale prices artifically high. The new car doesn’t get factored into the sale price, therefore, the it doesn’t appear that home prices are falling as far and fast as they really are.
Exactly - it is the same as giving someone a bag of cash after the closing - a con job to keep the price looking high - should be considered a criminal act.
Seems like a reasonable point. But why should the seller care if comps go down? He/she has already sold.
The seller cares if it is a homebuilder with lots of new homes to unload against a backdrop of deteriorating demand conditions.
Good point.
… and this also explains why you don’t see used-home sellers offering cars as incentives to move their overpriced pre-owned domiciles.
Exactly–then you’re trying to sell someone a house and a car. What if they don’t want your Benz? It’s not like they’ll get $50K selling it.
I think this guy was just looking for some press. This was a stunt, and obviously it worked.
As for the realtor from Middlesex Cty saying inventory is 20-25 percent higher than last year, take that with a few pounds of salt. I don’t track Middlesex, but I do track neighboring Monmouth County and Ocean and the Realtor.com site MLS for both of those counties are more than 50 percent higher than they were in Sept. 05 when I started.
BTW, I am a former News Transcript employee.
So you get to pay higher taxes on your house and you get to pay property taxes on the car too [we pay property taxes on cars in NH]. I have a 2000 Toyota with 115K miles on it and the property taxes on it are under a hundred bucks. I think that the taxes were about $800 when it was new. I can’t imagine spending $50K for a car but I guess a lot of people wouldn’t give it a second thought.
(Mercedes Pedrick, who oversees mortgages)
I think more people will talk about the car than the price reduction.
“I think more people will talk about the car than the price reduction.”
I agree. The homebuyer who’s drawn to a “free car” has a mind more comfortable with gameshows than complicated financial math.
Orlando condo project.. Sales will start in Sept.
http://tinyurl.com/q7hn4
This should end well, great business plan ,and timing.
Unbelievable. Reed says “The faster we can stick a shovel in the ground, the better off we’ll be”.
I think there’s a much better place for him to stick that shovel.
“The faster we can stick a shovel in the ground, the better off we’ll be,” said David Reed, president of the Reed Cos. of Altamonte Springs and a partner in the project.
Sounds like they are very concerened for the quality of the project. “Just get it built”
Pay attention to that iceberg. Full steam ahead!!
Pay no attention to that sloppy commenter!
“During the past several years, many homeowners secured disposable income to cover their bills or make purchases by refinancing or taking home-equity loans. That money translated into new cars, new decks and extra lines of credit. New housing statistics released this week have some North Jersey bankers worried.”
Hmmm… I am wondering if there might be any connection between homeowners securing disposable income to cover their bills and a used-home inventory flood driven by stubborn sellers unwilling to lower their list prices to a level where their homes will sell?
Can anyone tell how much Thino (Thino? Really?) paid for that place? I’m curious. And innately suspicious of a 12 year old car with only 12,000 miles on it!
That is because an S500 MB has about the same quality as an early Hyunday, or yugo. That means that in 12 years of ownership, the mileage reflected the multiple trips to and from the dealership for urgent, costly, and very slow repairs….
LOL but true.
They bought the house in 1999 for $610,000. and are selling it for $999,000. which really isn’t so bad here in Jersey. Most people are adding 100% markup to homes bought between 2000 and 2002!
‘Now people are coming back saying they spent all that money and didn’t realize it would stop.’
‘In his most remembered statement, (Herbert Stein said,) “If something can’t go on forever, it will stop.”‘
See what else Alan Greenspan had to say about this clever economist here:
http://www.nabe.com/am2000/grnspnvid.htm
Note “James Hughes, a Rutgers professor and dean of the Edward J. Bloustein School of Planning and Public Policy” cited in the first article. I credit his graduate school course on housing markets with my decision NOT to rush to buy a house during the 1980s housing bubble.
THANK YOU PROFESSOR HUGHES!
(Everyone else had to wait for this and other blogs).
THANK YOU PROFESSOR HUGHES!
(Everyone else had to wait for this and other blogs).
Actually most of us possessed common sense which proved adequate enough to notice that trees don’t grow to the sky.
“Pedrick says that prospective homebuyers, especially those in the single-family home market, will continue to sit on the sidelines until the situation stabilizes. ‘Those people are riding the wave to see how low values will go,’ she said.”
It is more like “those people” are sitting on the beach waiting for the cresting wave to crash…
A story on NPR this morning re the housing market in Mass. It sounds pretty bleak, but of course contains the obligatory statement that “most experts don’t expect a crash.”
http://www.npr.org/templates/story/story.php?storyId=5588690
“most experts don’t expect a crash.”
Most experts habitually whistle when walking past a graveyard.
I posted this too, over on the Bits Buckets thread. I was actually amazed at how bearish it is. The piece ended with the advice that if you’re thinking of buying, you might as well wait, because prices are only heading down over the next year (I paraphrase.)
Yes, but what do the experts really know?
http://tinyurl.com/ezjec
“The Heavy Odds Against A Soft Landing
…The consensus of leading economists has never predicted a recession, while the consensus of leading strategists has never predicted a bear market…We therefore have a choice between a sensible list of indicators that have been correct on 8 of the last 9 recessions and 9 of the last 9 bear markets, as opposed to a group of pundits that have been wrong all 9 times…”
That is a great article. Concise and informative. The only way we get a “soft landing” is if it is different this time. It isn’t, and we won’t.
“‘The equity line was very helpful in driving a purchase market,’ said Tom Cosentino, who oversees mortgages for Greater Community Bank in Totowa. ‘Now people are coming back saying they spent all that money and didn’t realize it would stop.’”
1). Where the heck is this place so I can avoid it?
2). Someone quick reassure me that these village idiots and their collective gene pool have been confined to this region/city!
Village idiots will soon become the town drunks…I predict a run on thunderbird soon
Better get into a long position on the thunderbird manufacturer!
“but figures from June indicate the region has stepped onto the residential real estate bandwagon”
I love the blues.
“Garamella said he worries that too much new construction is taking place, leading to excess inventory if the economy slows down. ‘That’s when everything will hit the fan,’ he said.”
A race to build leading into an economic slowdown sounds to me like a perfect storm scenario. I can say from my past experience in waiting out the last of the late 1980s bubble and not buying a home until after the recession in 1990-1991 that home shopping is a far more pleasant experience when everyone is afraid to buy and there is a huge number of homes for sale at the same time, than when there are ten buyers lined up for each home on the market. But one needs to be very patient, and keep his powder dry, in order to enjoy these ideal home shopping conditions.
I bought in ‘99 which was close to the price nadir in the DC area. Things were REALLY starting to pickup, and I did have a house I was putting an offer on go undercontract. I suspect that the theoretical BEST time to buy is as prices approach the bottom and there’s still a fair amount of inventory to choose from. You may lose a little equity, but you’ll have lots of choices. Inventory is of course higher as prices go down than when they’re going up.
I also think this is very true. Remember those median prices are not reflective of actual value. So when prices rise you aare already getting a lot less for your money.
Can someone please explain the spike in Cape Code foreclosures being blamed on the housing boom of the 1990’s. Is it a situation where people took out 10 year io’s that are now converting??
I believe it is realtor gobbledygook. The frigging houses are unafffordable, taxes, loss of income, speculation all play parts but 10 yr old loans is BS.
Now people are coming back saying they spent all that money and didn’t realize it would stop.
Bwahaha!!!
This was the “money quote” from that article. How long were perma-bulls telling us this couldn’t possibly happen?
Too long, it was sickening wasn’t it?
Mort,
Way to find the gem in the article. What are the lenders thinking? Were there any lenders that had some caution or are they all as dumb as the people asking for the money.
Banks looking for loans to hold for themselves are usually more careful. The rest of the lenders just wait for the garbage truck to come every week and take away the trash.
Just think about the economics of Cape Cod. Vacation homes for a state that is ageing and losing population rapidly. What population remains is in fact the substituting of poor young uneducated for rich elderly. Traffic is a nightmare and gas is expensive. One helluva crash is coming.
And also driving out potential employers with dumb decisions to tax those employers into oblivion to pay for the miriad of “social” engineering projects. I swear that they make it nearly impossible to drive into Boston precisely so that you use their outdated MBTA trains!
Boston is a great city, but I would not live there…. I need my space!
I lived on Cape Cod year round for almost 3 years. I was in good company. At the time I believe there were 250k of us year rounders. When I left in 2002 I wasn’t pushed out by escalating housing, but many around me were.
That being said I wanted to mention an insight into the Barnstable county numbers. 100 of the foreclosure/FSBO/tax liens are in Hyannis (which is actually 1 of 5 townships in Barnstable county) Although the bay/route 6 side of Barnstable county is well to do vacation homes, Hyannis is considered blue collar, low income, with a huge year round Brazillian population. Most homes in Hyannis are only about 1300 - 1800 sq feet. Of the 3 homes on the shared driveway of our previous property, one is on the tax lien list. I’m thinking its the home that belonged to the man who remarried, moved in with his new wife in Centerville, and left his 3 teenage boys from his previous marriage in his first home to fend for themselves. I can’t help but notice that many of the street addresses on that foreclosure list were in high crime areas. Perhaps they’re vacation industry workers affected by the 25% downturn they’ve seen this season.
“1 of 5 townships in Barnstable county”…..Sorry I said that wrong. There are 5 townships in the town of Barnstable which is located in Barnstable county.
S’okay. I knew what you meant. I still got relatives owning in Ptown and Falmouth along with Rockport on the North Shore and Framingham inland. Frying clam strips at the Dairy Queen won’t cover the mortgage and 2 hour commutes won’t attract too many professionals. I was born in MA but I just don’t have any affection left for a place that so agressively dissapates natural advantages and tries so hard to suppress success.
“I just don’t have any affection left for a place that so agressively dissapates natural advantages and tries so hard to suppress success.”
I take it you’ve never lived in Upstate NY.
“Too many young people today purchase expensive homes without thinking about what could happen if the future isn’t as bright as anticipated, according to Garamella. ‘They over-extend themselves,’ he said.”
Well I’m heavenly blessed and worldly wise
I’m a peeping tom techie with x-ray eyes
Things are going great, and they’re only getting better
I’m doin’ all right, getting good grades
The future’s so bright I gotta wear shades
- Timbuk 3 -
“‘The equity line was very helpful in driving a purchase market,’ said Tom Cosentino, who oversees mortgages for Greater Community Bank in Totowa. ‘Now people are coming back saying they spent all that money and didn’t realize it would stop.’”
I think that sentece right there sums up the whole bubble mentality.
“Too many young people today purchase expensive homes without thinking about what could happen if the future isn’t as bright as anticipated, according to Garamella. ‘They over-extend themselves,’ he said.”
Right there, my wife has a frind who’s son went out and bought a McMasion in La Dera Ranch, and witht his heat he just got his first real summer electric bill, the kid is having a S**t Fit, it was $565, oh well, wait till winter when you gotta heat the place.
Also my wife wife is a lab tech in a lab, has a lab assistant that works with her $15.50 an hour her boyfriend works at wallgreens $16 an hour, now htey have a condo (overpaid), he a a nice Gaz Guzzling Escalade and her a nice Gas Guzzling Hog of a Hummer. The girl asked my wife to lend her a $100 2 nights ago when she asked why, she replied she has no gas to get home, and pay day isn’t for another few days. Turns out this girl has doen the rounds the last few weeks borrowing money from just about anyone for gas.
When my wife asked why they just don’t get rid of the Hog Guzzlers, answer was simple, who is going to buy them?
Just like the houses people who bought these hogs are going to find they will not be able to unload them, at least not anywhere near what they purchsed for oh hum another delemar.
I would have made her spend the $100 for a nice pair of sneakers! The long walk would give her time to think about the dumb a$$ decisions she has made!
One fact of the recent credit bubble which I believe will be of historical note: The past eight years may prove to be the most advantageous time ever in American financial history for stupid people to financially self-destruct.
How on earth can two people with their income have two ridiculously expensive vehicles and and overpriced house????!!! WTF
Huh.
Maybe Hog Guzzler recyclers will be the next great investment opportunity.
This couple illustrates precisely why we should NOT allow Congress to bail out these stupid, irresponsible fools! Why should MY hard-earned real money go to pay for this reckless idiocy? They can and should be forced to feel the pain from their own bad financial decisions. In the long run, they may even benefit from it –IF they’re capable of learning from their mistakes (unlikely, I know).
The government expressly guarantees $2 trillion worth of MBS. They imply Fannie & Freddie may get a bailout if necessary as well. You don’t have any choice, in the event of a massive failure they will simple inflate it away. Sorry.
what is this express guarantee of which you speak?
Good lord, I don’t spend $100 a month on gas and she needs it to tide her over for the next few days?
“Too many young people today purchase expensive homes without thinking about what could happen if the future isn’t as bright as anticipated, according to Garamella. ‘They over-extend themselves,’ he said.”
Well, duh! But I’ll be he wasn’t dissuading any of them from “over-extending themselves” so long as he got his commission check.
I have a friend who just bought a $530K home in Renton, WA with his brother. Their combined before tax income is about 100K. Their monthly PITI is around $4300 since they didn’t have a lot of downpayment. He happens to work for Countrywide as an underwriter. With the looming news of cost cutting at CFC, I pray for them. Young people trying to getting into homes where they shouldn’t have to start off. This could be very serious problems.
“… said the ratio of homes available changed from 10 buyers for every house a year ago to 20 houses for every buyer this summer.”
that says it all. eventually — no, much sooner — the equilibrium between supply, demand and price will be restored.
That same tidbit caught my eye. Would this translate to 200 x’s more houses per person? (Perhaps someone better with numbers can confirm this.) Doubt it could be true, but if it were, what an amazing stat.
bandwagon?- report calls for a hearse
big STAGflation numbers today
(And also driving out potential employers with dumb decisions to tax those employers into oblivion to pay for the miriad of “social” engineering projects. I swear that they make it nearly impossible to drive into Boston precisely so that you use their outdated MBTA trains!)
Uh, I believe the city’s transit system was allowed to fall to ruin while all the money went to the Big Dig and suburban commuter rail projects.
The big dig was designed to get people through Boston, not into it. If you look at the way it was designed, It has around the same number of lanes as the original overpass, but with a lot less offramps. It makes no difference for those that need to get off of the big dig and actually find themselves in the same old broken pavement, confusing streets and no parking situation that has plagued Boston for over 30 years.
The MBTA also comprises those commuter trains, that I have in ocassion taken into Boston, and they are old, smelly, and slow. The T is not even wel maintained, and some lines (the green line) are a joke if you have any disability whatsoever…
The money is not spent in the big dig, but in parties, overtime for employees that are not there, the Bulger retirement pension, and for the Social Services Gestapo that will take your kid, make your life miserable, and make another orphan, if your neighbor sees him running out of the house in diapers, but will not touch a kid in a crack house that is beaten every day!
The Big Dig (CA/T) was and is primarilly an urban renewal project. Only about a third of the costs are attributable to roads infrastructure costs.
Thino and Susan Cacciolo bought their home in 1999 for $610,000 according to New Jersey Property Search records
“Thino and Susan Cacciolo bought their home in 1999 for $610,000 according to New Jersey Property Search records”
but they probably heloced/mtg’d it up to $900K and were expecting to retire on the $300K after selling it for $1.2M.
they may end up with an empty piggy bank, except for a $300K iou to the bank sitting in it!
The Monmouth County records search site is running slow today so I can’t view their mortgage but it does show they refinanced in 2002.
Thanks NJ! I’m nosy, can’t help it…
Statewide, 4,292 foreclosure notices were filed in land court between April and June 2006, up from 2,585 filings during that same period last year.”
wow - 4k foreclosure notices in 3 months - guess that’s for the whole state of MA (?), but still…not a tiny number!
During the past several years, many homeowners secured disposable income to cover their bills or make purchases by refinancing or taking home-equity loans.
When the f*ck did debt become “disposable income”???
When you were unknowingly transported into bizzaro world. :p
Sadly, I have a bad feeling that Bizzare World is where we are all going. If the government does not let this play out and instead bails it out and inflates it away, the results would be a disaster (at least for anyone who expects the dollar to be worth something). If the bill never comes due, than what good is the money? Time to invest in gold, perhaps… I just have a bad feeling that the idiots who got us into this mess will find a way out and the honest folks will be the ones who suffer. I hope that’s not the case, but we’ll see.
Confused,
I was telling people here to buy gold last year. Many said it had “already ran up.” LOL Fools ain’t seen a run-up yet, but they will. Then they’ll be saying, I woulda, coulda, shoulda bought gold and buried it.