Buyers ‘Wait And See’ If Bubble Bursts In New Jersey
A housing bubble report on New Jersey. “Last spring, Michael Segal put his Teaneck home on the market for $600,000, an asking price selected with the help of his Realtor. Buyers showed interest, but Segal said he decided it wasn’t time to sell. This spring, the four-bedroom colonial is up for sale again. The asking price: $529,000; $19,000 above his current’s agent’s recommendation.”
“What changed? North Jersey’s real estate boom, it appears, has gone flat. ‘They come. They see. They love. They like,’ said Segal, who put his house back on the market about two months ago. ‘But they don’t buy.’”
“Springtime is here, and ‘open house’ and ‘for sale’ signs are everywhere. ‘Sellers and the buyers are at a standoff,’ said James Collins, an agent in Alpine/Closter. ‘The sellers think their home is worth more than what fair market value is. The purchasers are thinking there’s a big real estate bubble that’s going to burst. So they’re … wanting to wait and see.’”
“The standoff means the supply of homes on the market is building. In Bergen County, there was a five-month inventory of homes as of March 31. By comparison, there was a three-month inventory at the same time last year. Inventory is also building up in Morris, Passaic, and Hudson counties.”
“More recent data from the New Jersey MLS show the trend is accelerating. On April 30, there were 6,268 home listings for Bergen County homes, 52 percent more than on April 30 of last year. But 26 percent fewer Bergen County homes sold last month than in April of 2005.”
“The increased supply is helping to prevent the sort of price appreciation that was common from the late 1990s through last year. The average Bergen County sales price was $539,245 last month, about 1 percent below the average price in April 2005.”
“The boom is ‘over, and we’re into a cycle that’s going to last three years with high levels of inventory and a slow pace of sales,’ said (appraiser) Jeffrey Otteau.”
“‘Buyers just don’t seem to be making moves,’ (realtor) Art Tassaro said. ‘Where it used to take a month to sell a house, the same house is taking several months and several price changes.’ He noted that last Wednesday 49 single-family homes sold in Bergen County, but 233 single-family homes were added to the MLS.”
“Barbara Weismann, also a realtor in Cresskill, said many properties languish on the market because they’re overpriced. ‘Price controls everything. If a property is not the best, price is the only cure,’ she said.”
“Meanwhile, Segal said that if he doesn’t find a buyer soon, he will take his house off the market. But he will do whatever it takes to sell it next spring because that’s when his wife plans to retire. Segal and his wife want to downsize and retire in a condo, probably in Hudson County.”
“‘I hope that next year maybe things will go better,’ Segal said. ‘I still believe that the market will come back.’”
I’m not sure what’s up with the link. Even the home page won’t load. If you are having problems, try it later.
Sounds just like the tech bubble….
“‘I hope that next year maybe things will go better,’ Segal said. ‘I still believe that the market will come back.’”
BTW, over at ziprealty, I now have my 3rd agent in 3months in las vegas, and Phoeinix is at a new record of 44898.
AAAAAAAAANND OVER IN SANDY EGO… 50% of that 20k inventory is CONDOS!!! sit there and say condos like beavis and butthead used to say fire… “condos..yeah yeah… condos condos.!”
LMFAO!!! Phuck…you are classic man. Keep em coming!
I say: “San Diego condos for everyone!”
Seeing substantial reductions in NJ, and this owner is selling at a $300,000 loss:
MLS 2261656, currently listed at $999,850, was listed under a different MLS # in September for $1.3M.
This is the first seller loss I’ve seen, and it’s a $300K loss, at least (add in closing costs, carrying costs, etc).
The house was bought in June 2005 for $1,300,000, and put on the market a few months later at the same price. No Greater Fools have shown up to hold the bag, and a few hundred days later, it’s listed at $999K.
Here’s the original MLS for the above house: 2204767.
Bought for $1.3 million in June 2005, put on the market in Oct 2005 for $1.3 million, now selling at a $300K loss. Been on the market for weeks at $999K, still no takers.
Maybe they split the house like they split stocks so it really is now selling for a split adjusted $1.999 — humor
I was in NJ during the last bust and saw most homes drop around 40% from their peaks in 89/90.
I’d say that seller makes a smart move to be the first one to cut the price that much. This bubble is way bigger than the last one, so we should see at least a broad 50% haircut all over the state this time around. A $300K loss now is better than a $700K loss in three years.
Does anyone know is this is happening on the Jersey Shore….Long Beach Island? Would love some guidance on this.
Cape May County is getting hit pretty hard. Inventory in Wildwood has skyrocketed. A number of hotels were purchased and plowed to build condos on spec. A number of the remaining hotels have went to “condotels”.
Cape May county currently has a 21 month supply of inventory, with 680 new listings for every 186 sales. This also probably doesn’t tell the whole story, since the inland towns of Cape May County aren’t all that bubbly.
http://www.otteau.com/The_Otteau_Report/2006.Q1.CapeMayCounty.pdf
One of my Wildwood buddies sold their hotel just before things went south. The new owner torn it down and I think now can’t complete the project so he’s left with a very expensive empty lot.
Also, I was told by someone knowledgable that Wildwood is a different market then your average vaction destination. According to this guy they have a lot of retired blue coller /
police / firemen typres who have tapped their 401’s to “invest” there and are now hung out to dry. Unlike some of the investors in the nicer shore points these guys can’t just dip into the “petty” cash drawer to tide them over.
Bear in mind this isn’t just a ‘price drop’ for some retirees selling after 20 years, it’s the seller coming to the closing with a check for $300,000 because they paid $1,300,000 in June.
Such a massive loss would devastate most for a decade at least.
A funny quirk of human nature. People will do whatever necessary to avoid admitting they were wrong. I’m waiting for people to start selling their stocks to carry their RE for just a little longer…
Oh come on. Is it possible for this guy to be any more retarded than this? 600K last year, some serious interest. 529K this year, little to no interest. Does that seem like the trend you want to follow into next year? Holy shit. I’ll tell you what, I don’t give a rat’s patootie about any of these morons that refuse to even TRY to get out of this disaster we are watching unfold. Fu*k em. See you in the soup line, moron!
That is one greedy SOB. I hope he ends up selling it for half of that.
(The house was bought in June 2005 for $1,300,000, and put on the market a few months later at the same price. No Greater Fools have shown up to hold the bag, and a few hundred days later, it’s listed at $999K.)
What do you think, based on the type of person who typically has lived in the area and a price of three times a dual income, the property is worth? Perhaps $750,000? $600,000?
“Meanwhile, Segal said that if he doesn’t find a buyer soon, he will take his house off the market.
Brilliant. This guy will languish in a house he doesn’t want to live in until next year, when he finds that the market price has fallen even more, and property taxes are even higher.
I wish that writers would give the highest offer on a house, so that we have a better idea as to how stubborn (illogical) these people are.
My favorite is his money quote “I hope the market will come back”. It seems their are tons of homeowners in the US who bought homes they wouldnt necessarily want to live in for the next 5-10 years.
I admit to buying rather high, but at least I bought something new, right near mass transit (no gas price effect for me), and something that I would be willing to live in for a long time.
Tons of people in NoVa seem to be like this NJ guy; buying a crappy house they want to get rid of soon or hoping they can get a market bounce to sell higher.
“Hope is not a strategy.”
Yep when I’m in the middle of a stock trade and I find myself “hoping” that the price gets back to [whatever], then I gotta grit my teeth, admit I blew it, and get out with my loss. It’s the hardest thing in the world but you gotta do it.
exactly…
why is the fact that inventory itself is up because of the bubble’s existence not really dealt with comprehensively? I mean, buyers have more choice now, sure. Buyers don’t have to move fast if they want to get in the game, check. Buyer’s don’t feel the need to pay whatever you’re asking because down the street or on the next floor is a place pretty much identical for 20K less, yeah, seeing that too. Buyer’s aren’t buying because prices are scary, worried about a bubble, got it.
But how about how the run-up was at least partly predicated on people buying expecting to sell in the near future (e.g., true speculators, but also just people buying for the sake of not getting left behind on the scene), so don’t worry about price,or suicide loans, because you’ll just sell in a couple years and reap the bennies.
I wonder how many people who are selling now *need* to sell. I’d love to see survey data on that. Why are you selling? because you figure this has gotta be the top of the market? Had you bought assuming you’d leave in 2 years? Is your mortgage getting unaffordable? Are you retiring and planning (gasp!) on *not* buying anything for a while now but living off the proceeds?
I know if I had bought anytime between 1997 and 2003, it would have been merely to avoid losing out on the scene. I would have had to have bought a PoS I would be itching to leave. I wasn’t prepared to play ARM roulette, so if it was suddenly too much it would have been that I was sick of macncheese 5 nights a week. Only in the last couple years have I found myself in the position to consider buying something I’d be happy to live in for at least a little while, and that (happily, I hope!) corresponded to things like finding this blog, the obvious becoming more and more well known…that the unreality can’t last forever. so now I wait til I can actually afford living in a place I’d like to live in…
Another relevant psychological factor I think was people playing the interest-rate game…ooh, look, the rates are at a historical low…wait, no, they’re up a notch…ooh, lookie, will they be lower next week?! yes…ooh, run out and find a property quick!
I swear I was doing that little dance for a while, logging into that mortgage watch page on bankrate.com….ooh, lock in this week folks…never mind prices, never mind whether you’d want to live too long in that place for sale, just lock in dammit!
Once that got old, once that got cold, I think a lot of non-speculative minded fencesitters said screw it, I think I’ll actually try to buy a house I can live in at a price I can afford.
Excellent post, Shel. I think you’re spot on!
And this so reminds me of the summer of 2000; sellers looking for a bounce, ANY BOUNCE, just to sell. A market comeback would be one where prices increased but people didnt want to sell. If people simply want a bounce to get out, we are in serious, serious trouble, because sellers are just going to dump on any bounce to get out.
If there is a bounce, won’t most sellers be too late? The bounce won’t be announced, it will just show up as data the following month. By that time, the sellers see it and all at once they jump in and flood the market, removing the bounce that was and potentially driving prices down even further.
still chasing in Seattle. Talked to a friend last night. He and his brother put an offer on a place for $509K at a new development. Similar built in phase 1 was sold for 359K last year. Saw the big gain and decide to buy one with his brother’s combined income. After a few conversations later, they were going with zero down, IO (wtf) and 7/1 ARMS. I almost dropped on the floor when I heard it. So I questioned as to why. The main reason is that they don’t have the cash for down, and it’s the ONLY way to qualify. I then told them that they’re not in a good position to buy now especially with rising interest rate environment. They said “don’t worry, we will sell them in 2 years and make $100K”. Again, I almost fainted. May God bless them.
Did a quick calculation of 509K principal with 5.7% IO is about $2400/month excluding property taxes and insurance. By the time all the expenses add up, it will be roughly $3500/mo. Good Lord.
What can you really say to morons like this? By this time next year you will hear the wailing from them over their loss of equity and being upside down on the loan. The bank will have fun making them it’s “bubble bitch” for the next several years into BK.
And they’ll be looking for someone to sue or bail them out.
This is what I’m worried about - that these fools will try to sue (victimless society!). Anyone know the past history on litigation resulting from past housing bubble busts? It will piss my off if lawsuits are filed and won when the underlying reason most people will get into trouble is because they’re greedy or too stupid to get all the facts.
They won’t win them unless the facts are egregious. Don’t worry.
I’ve just started to hand out this URL to anyone who’s thinking about buying a house right now. Y’all are much more eloquent than I. If they won’t read a couple of days worth of posts before handing over $500,000 than what can I do? (Ok, they’re not actually spending any money except gas to the closing. At least until the first payment, but you know what I mean.) OTOH, I don’t have to sit and listen to their ‘woe is me’ tales in two to three years since I can just ask why they ignored all the advice on this site!
Amen, Brother. I’ve sent the link to this site to every colleague, friend, and family member I know who is contemplating buying a house. Then I consider them forewarned. If they disregard my advice and go ahead and buy anyway, they alone will bear the consequences.
That’s why we don’t need a rate hike to cause the crash. When most recent buyers intend not to pay PITI they can’t afford to begin with for more than 3 years, the market just has to crash by its own weight.
Yeah. The damage is done. Any kind of pause is just going to give a big enough bounce to let the current holders flood the market with all they got before this continues down.
sorry, but these guys are RETARDED. if you care about them, you must save them. other wise, you will be feeding them in your garage in 18months.
Gawd if there is ANYPLACE that I’d like to see crash, it is NJ. These creeps from NJ are like ants. They’re like the blind leading the blind. See a new trend? Jump on it no matter what the cost. It takes just one of these parasites from NJ to destroy an entire area.
Yeah and they filter over here into my area in PA - keeping me out of the market longer and longer.
Yeah. I heard they’ve all but completely destroyed the poconos. I did a project in DEL and they’ve infested most of that state too. I’ve never seen anything like it.
Funny. It’s the Philly people that drove up the prices here on the coast. I guess the grass always looks greener…
Ah, yes, but you’re in the land of vacation homes. That’s the one market that I’ve maintained will fare better than most in all this as it’s usually those with big bucks who buy the shore homes (and rent to little folk like me :-))
East coaster to a certain extent you are right as there always seems to be somebody with the cash to buy a beach house. (Thank God as they pay my bills) But I think this time around things have gotten far enough out of hand to cause problems. There are just soooo many units that have come on line that just can’t possibly carry themselves with what you and other little folk (I mean that nicely) are willing to pay.
Had lunch with an older customer / friend the other day. This past winter he was offered a 1.5 million contract for his older beach house. I tried everything I could to lay out the numbers for him to sell. Yesterday he tells me the local realtors told him he “might” be able to get a million for it now.
“The purchasers are thinking there’s a big real estate bubble that’s going to burst. So they’re … wanting to wait and see.”
I know this obvious, but sometimes you’ve got to say it to feel sane… If this is true on a macro scale, it is a self fullfilling prophecy. The answer as to where things are going are simple. Pretty much defines how bubbles pop… a mass market change in how value has changed. I’m beginning to change my view on how quick this all could implode. The media is always looking for ways to make sensationalistic news that feeds on itself; they’ve got a great opportunity here.
BTW - Bearnanke sez I’m raising rates today and I’m not sayin what I’m doing next time… (but I’m raising’em). To bad I’m losing power affecting LT rates to international market forces.
PER SNOW- everything is ok. Dont worry about rising rates
Rising mortgage interest rates are natural at this stage of the economic cycle, and the impact on homeowners with adjustable-rate mortgages — including interest-only and payment-option ARMs — should be “relatively small,” according to Treasury Secretary John Snow
His salary = $175,700/year. That buys some insulation!
http://www.treasury.gov/education/faq/treasury/officials.shtml#q2
His salary = $175,700/year. That buys some insulation!
$175,700 buys a crappy 500K house in Northern VA . . .
Exactly what I was thinking Bearnanke- you beat me too it. If enough people believe this to be true, and “wait to see”- then it will be true. Once it starts, then where does it end? Dropping prices will only strengthen and re-enforce this position.
The bottom is likely to be at (or slightly past, on the overshoot) where fundamentals make sense again. When rent will cover carrying costs. When local incomes can support prices, at some reasonable multiplier.
Given current valuations, that’s a really frightening prospect (to current bag-holders) in a lot of areas.
An interesting twist to your comment of local incomes supporting prices. If you assume a credit tightening is coming, you get a double whammy, of local incomes + savings (i.e. down payment). This stunts the housing market turn-around time significantly as I don’t know how many have down payments these days!
A friend relocating from Atlanta has tried to sell his house there for a few months, lots of showings and no decent offers. Down from $330k to $319k, and he’s turned down a $298k offer, even saying once that he doesn’t want to “lose money”, even though he’d bought for under $200k.
He knows the Wash DC area s way overpriced and slowing like mad, but “It’s not like that back in Atlanta” — heard that before?
The comical thing is, once the listing ran out, he and his wife decided they’d just keep the house! Keep it? Yeah, empty. Or possibly rent it out, where he figures he can recoup *half* his monthly payment. I dunno about this deal, eh? And a more comical thing is this: a girl at work, hearing his plan to just keep the empty house said “Great plan! Really! That house will be worth so much when you retire…” Argghhhhhh!!!
So he’s convinced now that the market isn’t paying him what the house is worth, and he’ll never get another (commodity) house like that one again — yeah, a 1990’s two-story, a quarter acre lot, smack in the new Atlanta ‘burbs, rare and valuable find, my friend! So worth keeping (empty) for 15 years of mortgage interest!
The Lingus- shouldn’t you be chasing down a squirrel, it’s almost dinnertime.
Hey NJcoaster where are you at? Cape May county here.
nah… we use other things for target practice.
He Cunni is back. Nice to see you Linguist.
Fish Shooting, Vermont’s Quirky Rite of Spring, Is Endangered
May 3 (Bloomberg) — For Mike Vanslette, the arrival of spring is heralded by the crack of his rifle firing into Vermont’s Lake Champlain. If his aim is true, he’ll stun a couple of amorous fish, then jump into the water and grab them.
Vermont is the only state where the shooting of game fish is legal. Now, the sport is an endangered species. The fish shooters prowl the lakeshore, toting rifles, shotguns and pistols, studying the shallows for the telltale flip and splash of fins as the fish mate. Others plant themselves above the seasonal breeding grounds in trees or tree stands, wooden platforms that in some cases have stood against developers and environmentalists for generations.
Shoot to Stun
On shore or in tree, the trick is to fire off a round close — but not too close — to the fish, knocking them out. As the fish float to the top, their white bellies often emerging first, the shooter scurries into the water and retrieves his catch before it comes to. A good shot can stun the female and up to five or six of her male suitors at once. A bad shot can leave supper pulverized.
nah. we catch and release here. target practice is best achieved with yellow license plates.
LOL. That’s no way to treat a perfectly good car.
It’s looking like median prices are going to be down 10% year over year before the recession begins. When it is clear we are in recession Bernanke will pump like there is no tomorrow. But the dollar is already beginning to plunge on the anticipation that he will stop raising rates soon. So he will be forced to make a collapsing dollar worse. The Chinese, all of Asia, and the OPEC countries will be being beaten black and blue on their dollar investments. They will run.
Result: a financial catastrophe such as the world has never seen. This is a lot bigger than a real estate bubble. The real estate is only one of the components.
i am not sure how much he can cut, though, without risking a dollar collapse. The problem he has to deal with is the large deficit and debt; it has to financed by foreigners who will demand higher and higher rates. Furthermore, most people would use a bounce to just get out; I am not sure how much it could stabilize prices.
A pause is basically akin to a cut at this point; gold will skyrocket even more and bonds will fear the Fed is asleep and doing nothing.
All in all, a mess.
I agree completely. Bernanke is approaching checkmate in three moves. He can’t see it because nothing in his background has prepared him for a situation where the liquidity hose doesn’t work. We not only need foreigners to roll over all our debt continuously, we need them to lend us fresh cash at more than a billion per day.
We are living an experience like Gone with the Wind. I don’t want to be overly dramatic here, but what is getting ready to happen has few historic precedents.
Volcker’s hardass policies set the stage for Greenspan’s “brilliance”.
Bernanke’s choice is whether he will be an Arthur Miller or a Volcker.
I think that he is aware of Miller’s mistakes and wants a longer tenure than Miller.
price is everything / agents are nothing
kill the MLS and let’s go online
i think that’s the future.
I don’t see bernanke easing in the face of a recessison. Core inflation is rising and starting to creep into labor. With commodity prices continuing to escalate due to worldwide demand and speculative demand, risks to the general price level (inflation) will be the Feds #1 concern. They are falling behind on the infation from and may have to rate hike at .5 increments to catch up. This will crash the stock and housing markets.
Bernanke won’t ease until things get bad around Winter or Spring. Between then and now he will raise and hold, trying to get housing to go flat without falling, and trying to prevent oil prices from passing through into other goods. He will also be trying to control labor prices and commodities. But when the recession comes, roughly around Winter, he will begin to cut because that is the Nature of the Beast.
Hey Waaahoo I’m further north in Monmouth County. Sold the house on the beach in the summer of 2004 in one hour without a realtor. I downsized and moved a mile inland and was able to retire at 47 with the profits on the sale (bought the house in 1981). Now I have all the time in the world to go up to New England and bother The Lingus!!!!!!
Inventory is building up here like crazy!One house in nearby town has marked their house down from $799,000. to $549,900. and still not a bite. Of course the house is not worth more than $350,000. at the most. The houses by the beach are sitting with their $4-5 million pricetags.
The big story in Monmouth County is how a big real estate mogul who owns over 100 properties here deposited a bogus $25 million dollar check and had the bank clear it because he was such a great customer. He wired out all $25 million before the bank realised the check bounced and PNC bank is out the $25 mil. All his properties have been seized by the county judge. Should be one hell of a property sale!
great story
Real estate mogul tried to transfer sites
Sales linked to bank’s effort to recoup $25M check payout
Posted by the Asbury Park Press on 05/9/06
BY JAMES W. PRADO ROBERTS
STAFF WRITER
As Solomon Dwek repeatedly promised to pay PNC Bank for what it says was a $25.2 million bounced check, the real estate mogul attempted to transfer at least $40 million in properties, most to an apparent relative, according to public records.
http://www.app.com/apps/pbcs.dll/article?AID=/20060509/NEWS/605090309
LMAO! 33 YO mogul! I say 33 YO CROOK!
Congrats on the early retire. I’ve had a few friends step off this elevator at the top floor.
Funny cause if you tried that with a $25 dollar check you would have to wait a week for it to clear.
why is your moniker linked to the Orlando Biz Journal…?
I agree, I as others live in NJ because … we are forced to by our mean stepmothers. Then again why are so many people trying to get in here?
People are ‘trying to get in here’ everywhere. NJ is experiencing a relative outflow for all the usual reasons: it’s expensive, there are better opportunities elsewhere, and it’s major attraction is that it’s, well, a suburb.
Grow some balls and move out of that dump called NJ. Hey I know some parts are very nice, but it the state is DONE… like a burnt Thanksgiving turkey.
“‘I hope that next year maybe things will go better,’ Segal said. ‘I still believe that the market will come back.’”
Yeah, that’s the same reason I’m holding on to my Lucent stock.:-)
“I hope that maybe next year will go better”
Giving up on this year already, its only May 10th? its Spring ..school is out soon then school will be back in session again soon?
“buyers don’t seem to want to make moves?”
Answer:
1) homeowners can’t sell the dump they have for sale!
2) who is left to buy - last summer illegals were given loans!