Now, You Don’t Have To Be So Rich
A report from the New Hampshire Business Review. “John Rice, president of the New Hampshire Association of Realtors, said things are really picking up on the Seacoast, where a ‘popularly priced’ home sells for between $200,000 and $400,000. If it is good shape and in a good location, it is going to get multiple offers, he said. ‘Today’s buyers have confidence in the market,’ Rice said. ‘I can’t say everything is over, but it’s nice not to worry about when the next paycheck is coming and that Realtors can actually make a living doing this.’”
The Record in New Jersey. “With typical prices below $400,000, and mortgage rates south of 4 percent, homes in Bergen County in 2011 reached their most affordable levels in years — just about at the point where a majority of households can afford the typically priced home, an analysis by The Record has found. ‘There was a point a few years ago where you had to be pretty rich to afford a house in this area. Now, you don’t have to be so rich,’ said David Blitzer, a housing economist at Standard & Poor’s.”
“‘If interest rates were any higher, there’s no way we would have been able to buy our house,’ said Joshua Baris, a Coldwell Banker real-estate agent who bought a three-bedroom Dutch colonial in Tenafly last year. He and his wife locked in a rate just below 4 percent and a price — $660,000 — that was down dramatically from the earlier asking price above $800,000.”
“For its analysis, The Record adopted the federal government’s benchmark for affordability, assuming that housing payments (including mortgage, property taxes and insurance) total no more than 31 percent of a household’s gross income. It assumed a mortgage interest rate of 4 percent and 2011 median home prices: $392,000 in Bergen County and $288,000 in Passaic County, as well as incomes averaging $87,400 in Bergen County and $59,600 in Passaic.”
“The analysis also assumed a 20 percent down payment, a longtime benchmark — though, admittedly, one that is difficult for many households to achieve.”
“Peg and Don Cordes spent $30,000 to upgrade their Mahwah, N.J., condo before putting it up for sale. Just weeks after the condo hit the market, they accepted an offer of $375,000. But then the appraiser for the buyer’s mortgage lender valued the place at $365,000, which, said Peg Cordes, didn’t take into account all the improvements.”
“As the Cordeses discovered, even when a buyer and seller agree on a price, appraisers often take a more skeptical look at values, especially since the housing bust left many lenders stuck with mortgages larger than the value of the homes they cover. Eager to move to Florida, the couple reluctantly cut their price. ‘When your back’s against the wall, you have no choice,’ said Peg Cordes.”
The Journal News in New York. “With local real estate prices at decade-long lows, agents have been scrambling around the Lower Hudson Valley to close a stunning amount of deals. ‘I’m probably having the busiest quarter that I’ve ever had in my 10-plus years in real estate,’ said Michael Graessle, a Realtor in White Plains and former president of the Westchester Putnam Association of Realtors. ‘I’ve never, never been this busy. I’m mystified by it.’”
“Attributing much of the increase in buying activity to the record-low interest rates, Graessle said these price increases could spill into the suburbs as homebuyers get priced out of the city. However, that movement could take awhile to develop because so many homes are on the market in the Lower Hudson Valley.”
“Data for the second quarter are expected to show more sales but similar low prices, Graessle said. One of his clients, Dr. Joan Priestley, took over her mother’s home in White Plains after she died in 2010 and put a lot of work into it to get it ready for sale, she said. Since January, though, she had to come down in price almost 20 percent to make it attractive for buyers. The three-bedroom colonial built in 1955 is currently listed at $449,900, and only now is it generating interest from potential buyers, Graessle said.”
“Priestley said her mom’s estate might have been worth as much as $700,000 around 2006 when the real estate bubble was at its peak.”
The New York Daily News. “Fast sales aren’t everything. Slow and steady wins the real estate race, too. Selling since summer 2010, just 10 of 62 apartments are left at the Santorini, a new mid-block condominium in Astoria that rises above the two-story brick homes around it. Starting in the low $300,000 range for 460-square-foot studios, some apartments sold right away.”
“In recent months, prices have increased. Studios start at $339,000, with an 875-square-foot, one-bedroom penthouse on the market for $595,000. The larger 1,573-square-foot, three-bedroom apartments are available for $799,000, with 1,115-square-feet two-bedrooms listed at $654,000. Santorini is FHA and Fannie Mae approved, so first-time homebuyers can put as little as 3.5% down.”
“Harold Valestin, VP of the real estate company in charge of marketing and selling the building reports that nearly 10 apartments have already appraised at higher figures than their purchase price. ‘There’s a reason Astoria keeps going up in price,’ says Valestin. ‘Yes, it’s close to Manhattan, but there is so much here. Culture, bars, parks, museums, all kinds of foods and a wealth of diverse people. This will always be a great New York City neighborhood, but the chance to live here at this price won’t last.’”
From WPRI in Rhode Island. “Home prices are steadily rising in the Ocean State. Prices are up in 19 out of 20 major cities, and Rhode Island looks to be moving in the right direction. ‘Year over year we didn’t rise, but we certainly didn’t fall short of transactions closed, so in actuality we’re doing fairly well,’ said Karl Martone of RE/MAX Properties. ‘Rome wasn’t built in a day, as they say.’”
“According to Martone, 25 percent of Rhode Island’s market was foreclosure-driven this year, down 2 percent from the previous year. He describes our current housing market as ‘peppy,’ and said that sellers must be firm and price right if they want to be successful.”
The Boston Herald in Massachusetts. “The developer of Millennium Place is giving passers-by a tool to envision how the luxury condo high-rise will take shape in downtown Boston. New York-based Millennium Partners will set up a sign at the lower Washington Street site tomorrow that displays a QR Code that people can scan with their smartphones and connect to a 3-D digital simulation of the 15-story building’s construction.”
“The tower will have 256 units — one-, two-, and three-bedroom units along with 14 penthouses with private terraces. Asking prices range from $550,000 to $2 million. ‘Whenever we begin a new project, we like to start by listening closely to sophisticated residents in Boston and other great American cities about how they want to live, work and partake in all that the city has to offer,’ said Joe Larkin of Millennium Partners, in a statement.”
From WWLP in Massachusetts.”The Warren Group says May foreclosures doubled in Massachusetts compared to May of last year. In Springfield, banks are at odds with the city over whether two new ordinances are the solution. The anti-foreclosure group No One Leaves protested in front of the U.S. District Court, where a federal judge is deciding if the city’s new foreclosure ordinance is legal.”
“The first ordinance requires banks secure any abandoned properties which are in the process of being foreclosed on. Banks must give the city a $100,000 bond that they hold to make sure the property is boarded up and maintained. The second ordinance requires banks mediate with mortgage holders before foreclosing on any property.”
“The Massachusetts Bankers Association claims the ordinances conflict with state laws and may even violate the constitution. The judge didn’t rule on the case Wednesday, he is expected to make a decision soon. It’s a move those in real estate are anxiously awaiting because preventing foreclosures is always good for home values, but the city’s ordinances and the legal issues surrounding them have caused some banks to hold back on lending.”
“Kevin Sears of Sears Real Estate in Springfield told 22News, ‘If banks aren’t lending because of ordinances in the city then that’s going to drive down the value of properties in the city because it’s going to be more difficult to get more financing the less attractive the properties become so it’s a Catch 22.’”
“Imogene Jones of Springfield faced foreclosure, she said, ‘Why not help the community out, why not help the people who have been here for years, I’ve been here since 1959 so help me and my children.’”
Underwater before the is ink dry. Suckers.
Today’s underwater buyers, tomorrow’s foreclosure victims…
“…because it’s going to be more difficult to get more financing the less attractive the properties become so it’s a Catch 22.”
Making foreclosure more difficult makes getting a loan more difficult….that’s reality.
But isn’t this where government financing comes into play (FHA / Fannie Mae / Freddie Mac securitization)? So long as Uncle Sam is securitizing with a subsidized guarantee of principle, where is the difficulty?
The difficulty is where it usually lies with the government. For every hoop they make the borrower jump through, there are 3 more around the corner. Is it impossible? Is it as bad as the real estate industry makes it out to be? No. Is it more difficult than a traditional 30 year mortgage with 20% down? You better believe it.
“‘If interest rates were any higher, there’s no way we would have been able to buy our house,’ said Joshua Baris, a Coldwell Banker real-estate agent who bought a three-bedroom Dutch colonial in Tenafly last year…The analysis also assumed a 20 percent down payment, a longtime benchmark — though, admittedly, one that is difficult for many households to achieve.”
Basically, price decreases and the Fed have managed to get prices down to affordability by traditional metrics GIVEN ULTRA LOW INTEREST RATES. In order to maintain affordability when interest rates rise, prices will have to fall some more.
“The Warren Group says May foreclosures doubled in Massachusetts compared to May of last year.”
Those who bought or refinanced at the peak are still screwed. Rising interest rates will create a new set of bagholders and foreclosures, but with all the extending and pretending we will have lots damage from the old set yet to come.
If interest rates were HIGHER - the price on houses will be LOWER
If interest rates were HIGHER - the price on houses will be LOWER ??
Or, you could say, “when” interest rates go higher, the price of houses will be lower…
Add to that, tax reform that is “inevitable” that, IMO, will not be friendly to home ownership, particularly in high cost, high real estate tax area’s…
‘Or, you could say, “when” interest rates go higher, the price of houses will be lower…’
Actually, this depends on the reason interest rates go higher. If the long-term bond rates are kept low for long enough, we could see rates chasing up inflation for a while, as they did during the 1970s, until the point of near-currency collapse, when Volcker took over in 1979. In this case, housing prices could increase at the same time as interest rates.
In this case, housing prices could increase at the same time as interest rates ??
With due respect Pbear, I strongly disagree…When Volker took the prime rate to 18% in 1981, it “crushed” the real estate market….
‘When Volker took the prime rate to 18% in 1981, it “crushed” the real estate market….’
That was the end game. What I referrred to was the runup — roughly from 1975-1979. Long-term rates were chasing up inflation, while housing and gold prices were skyrocketing, as everyone was trying to buy real assets as an inflation hedge. You can read about it in Greider’s Secrets of the Temple if you are interested.
Okay…Yes they did go up slowly but there was also an oil embargo thrown in there in the late 70’s…But clearly, Volker taking the prime rate to 18% was the action that crushed the real estate market and small business…He did not do it slowly either…It caught millions of small business people by surprise and basically wiped them out…Yes, he crushed inflation, but he also crushed 10’s of millions of unsuspecting people with his draconian action with the prime rate…
Yes, he crushed inflation, but he also crushed 10’s of millions of unsuspecting people with his draconian action with the prime rate…
I can well remember my own difficulties in finding a decent job during that time period. Which is why I find the current idolization of Volcker to be puzzling.
What’s puzzling about it? Volker SAVED THE CURRENCY. If he didn’t save it… what would be the point of having a job? You would be paid in rapidly depreciating paper money… there would be no incentive to work for anything other than hard assets (gold, etc.). At this point, the economy would’ve collapsed. No employment, mass riots.
Luckily the Fed has promised to keep rates low, basically forever.
Martin Feldstein: The impotence of the US Fed
Long-term interest rates are now so low in the US that we may be looking at a bubble in bond and stock prices
Martin Feldstein / Jul 03, 2012, 00:37 IST
The United States Federal Reserve’s recent announcement that it will extend its “Operation Twist” by buying an additional $267 billion of long-term Treasury bonds over the next six months – to reach a total of $667 billion this year – had virtually no impact on either interest rates or equity prices. The market’s lack of response was an important indicator that monetary easing is no longer a useful tool for increasing economic activity.
The Fed has repeatedly said that it will do whatever it can to stimulate growth. This led to a plan to keep short-term interest rates near zero until late 2014, as well as to massive quantitative easing, followed by Operation Twist, in which the Fed substitutes short-term Treasuries for long-term bonds.
These policies did succeed in lowering long-term interest rates. The yield on 10-year Treasuries is now 1.6 per cent, down from 3.4 per cent at the start of 2011. Although it is difficult to know how much of this decline reflected higher demand for Treasury bonds from risk-averse global investors, the Fed’s policies undoubtedly deserve some of the credit. The lower long-term interest rates contributed to the small four per cent rise in the S&P 500 share-price index over the same period.
The Fed is unlikely to be able to reduce long-term rates any further. Their level is now so low that many investors rightly fear that we are looking at a bubble in bond and stock prices. The result could be a substantial market-driven rise in long-term rates that the Fed would be unable to prevent. A shift in foreign investors’ portfolio preferences away from long-term bonds could easily trigger such a run-up in rates.
Moreover, while the Fed’s actions have helped the owners of bonds and stocks, it is not clear that they have stimulated real economic activity. The US economy is still limping along with very slow growth and a high rate of unemployment. Although the economy has been expanding for three years, the level of GDP is still only one per cent higher than it was nearly five years ago, when the recession began. The GDP growth rate was only 1.7 per cent in 2011, and it is not significantly higher now. Indeed, recent data show falling real personal incomes, declining employment gains and lower retail sales.
…
“With typical prices below $400,000, and mortgage rates south of 4 percent, homes in Bergen County in 2011 reached their most affordable levels in years — just about at the point where a majority of households can afford the typically priced home, an analysis by The Record has found. ‘There was a point a few years ago where you had to be pretty rich to afford a house in this area. Now, you don’t have to be so rich,’ said David Blitzer, a housing economist at Standard & Poor’s.”
This is progress in the conversation on what is right or wrong with the housing market. Would it be going too far to suggest that this increase in affordability represents an improvement?
I don’t buy it.
A $400,000 home STILL requires around $130,000/year job to afford the the P/I.
Property taxes in Bergen County are past insane. The average nothing special house is in the $15,000/year range for property taxes (hey - public union goons gotta eat and retire after 20 years too…).
So you are going to need at least $150,000/year in income to “afford” the AVERAGE house there.
Bergen County is a wealthy area - but no where near that wealthy.
There is no logic with these boosters anymore. From the Record:
‘Home prices in the New York Metropolitan area are still, on average, about 58 percent above their levels in 2000, according to the Standard & Poor’s/Case-Shiller index.’
‘But now that more households can afford to buy homes, experts say, the steep price slide of the last six years may ease.’
OK, then this: ‘assuming that housing payments (including mortgage, property taxes and insurance) total no more than 31 percent of a household’s gross income…The analysis also assumed a 20 percent down payment, a longtime benchmark — though’
So they use some ‘traditional’ measure, but leave out that pesky down payment!
“So they use some ‘traditional’ measure, but leave out that pesky down payment!”
R.A.L.
31% is crazy. I put 33 1/3 down and piti is 19.4% of gross and I find that high. Just old school I guess!
I agree with you totally
There’s nothing wrong with being ol’ school!
You are much more likely to not get crushed.
Here were go with that goon-bashing meme. Again.
Mr. Dual Bananas, I think it’s time for you to find something new to bash. Like a drum set. At least that could result in music.
“…goon-bashing meme…”
It’s pathological.
There are not goons - just sweet old ladies and mothers…
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U.S. munis face $2 trillion in unfunded pension costs
REUTERS | Mon Jul 2, 2012 7:03pm EDT | By Joan Gralla
U.S. states and localities have more than $2 trillion of unfunded pension liabilities, Moody’s Investors Service said on Monday, citing data on plans offered by 8,500 local governments and over 14,000 individual entities.
The total liabilities for fiscal 2010 were more than three times the amount reported by local governments. “Pension liabilities are widely acknowledged to be understated,” Moody’s Managing Director Timothy Blake said. Most state fiscal years end on June 30.
The rising cost of public pensions has strained finances for cities around the country. Stockton, California, which last week became the biggest U.S. city to file for Chapter 9 protection, plans to cut employee compensation and retiree benefits by $11.2 million to help close its deficit.
Public pension benefits have become a flashpoint in elections around the country. Since 2009, at least 43 states have tried to rein in costs. But many states spread the savings out over long periods.
Cities and counties are likely to see downgrades, Blake said.
Massive underfunding of pensions, and then downgrades will create constriction of the bond funding mechanism. Any way you slice it, municipalities are going to tax the bajeezus out of everyone. It’s coming: The Tax Revolt. Americans are too strapped to let new and higher taxes confiscate what little discretionary money they have. A few new taxes will get passed but then Americans will start screaming. And vox populi is going to be a lot louder than local politicians ever anticipated.
requires around $130,000/year job to afford the the P/I ?
Key word; “afford”… have enough money to pay for.. money available or to spare….
Pretty common practice around here to allocate 30% or more of gross for PITI….In your example that would be $39,000 or about $3300. per month…Easily doable on a $400,000. purchase with todays interest rates…
31% of my gross income is 72% higher than my rent. My rent includes a place to live, all utilities (heat, hot water, electricity, sewer, trash/recycling pick up). It also includes a 24 hour doorman (who can let in guests at my request and takes in packages), all repairs, a pool with a life guard in the summer, and an exercise room.
Good point. There’s a huge difference between gross and net income.
My landlord qualified me for my current apartment based on gross income, I think. Easier to read off the pay stubbs I brought and I guess they didn’t want to have to try to figure out how much of my lack of “take home” pay was because I was putting it into retirement savings. But the metric they used to qualify was well below 31% (I think it was 25%, maybe as high as 27%). And, as I said, the rent includes a lot of other stuff. Some of it is nice - like the person on the door being able to let a guest into your apartment for you. Some of it is real money - like the utilities and the repairs. I found a leak uner my sink the year before last on Labor Day. There was a guy under my sink in 40 minutes and it only took that long because the shift was changing and he got stuck in holiday traffic.
So you are going to need at least $150,000/year in income to “afford” the AVERAGE house there.
No, you need a husband and wife with $75K income each. Don’t forget that the price of everything has been raised to suck up that second income. Single income earners are screwed.
I dont know what planet someone is on to afford a $400,000 home on $150,000 gross income?? Even at 30% PITI not even should consider it unless you dont like family vacations, food, hobbies etc. Not to mention all the expenses that come with heating cooling and fixing the sucker.
What numbers would you require? Less than three times income is a pretty traditional metric.
I dont know what planet someone is on to afford a $400,000 home on $150,000 gross income ??
Planet Silicon Valley….
What numbers would you require? Less than three times income is a pretty traditional metric.
Used to be a pretty traditional metric.
With outsourcing and student loans, you are definitely pushing the envelope with very little room for error.
Plus, with higher incomes, the chance of getting laid off is higher (at least in non-governmental jobs.)
$80k downpayment, $320k mortgage at 4%, PITI payment would be approximately $1600/month. Are you seriously arguing that someone earning a $150k salary can’t afford $1600/month? That’s the typical going rate for a one-bedroom rental apartment in Silicon Valley.
The $150K salary is not guaranteed over 30 years!
No, $1600 would be just PI. Taxes and insurance would add about $450 more a month.
No, $1600 would be just PI. Taxes and insurance would add about $450 more a month.
You’re right, my mistake. So, say $2k/month. This is still easily affordable on $150k/year.
No, the salary isn’t guaranteed over 30 years. There aren’t any guarantees in life.
BTW, the above numbers don’t apply to Silicon Valley anyway. The $150k salary is not so uncommon, but $400k houses are nowhere to be seen. More like $600k for a basic crapbox in San Jose, and $800k+ as you move up the peninsula. Definitely not within reach with a $150k salary unless there’s a large downpayment in the picture.
My dumbass $150k-earning officemate bought a $900k house in Sunnyvale in 2008, with 0% down. (Two mortgages.) He’s bitching about his inability to refinance from his 7%-ish interest rate. I think he might have already stopped paying his mortgage, as he seems to have more money to spend lately.
“….but $400k houses are nowhere to be seen…”
So true jb. If you found one you would have bars on your windows.
This country is all about making you feel rich because of easy credit. If companies and the people really had to live on what they make or real time profits then you really separate the men from the boys.
The smoke and mirrors of WALL STREET would disappear in a week?
“The Record in New Jersey. “With typical prices below $400,000, and mortgage rates south of 4 percent, homes in Bergen County in 2011 reached their most affordable levels in years — just about at the point where a majority of households can afford the typically priced home, an analysis by The Record has found.”
Until people stop buying based on howmuchamonth and go back to a more conservative 3 times income (or less) this madness will never end. We’ll get one mess (2003 - 2008) somewhat cleared up, but interest rates will rise and the next wave of (now current) buyers will be unable to sell when they have to.
All things considered I wished we had just ripped the band-aid off!
but interest rates will rise and the next wave of (now current) buyers will be unable to sell when they have to ??
And the hope is they won’t “have to” because, I believe many buyers today, at least around here are in for the long haul…They aren’t going anywhere if at all possible…They surely are not going to walk away from a 3% loan to go get one for 6%…There could also be an argument made that inventory may remain quite low for a extended period of time just due to the fact that everyone has these ultra low rates and they not moving…Could also be encouraging for the remodeling business in the future although that could be limited by the fact that the HELOC’s have gone bye-bye…
And scdave, one of the problems that I experienced with great frustration in the past (and it’s been going on for quite some time in Silicon Valley) is parents helping out their kids with as much of a down payment as necessary to make the home affordable for their kid.
It is tough to compete on buying when the next guy over has a 50% down because his parents want their grandkids nearby.
And the separation of society into tiers continues…
Carl, if you couldn’t see that stratification of society coming, what were you doing otherwise? It will continue to operate, driving most of the middle class into the “working poor”, and most of the current lower part of the middle class into outright poor. We cashed out everything just to mint a few thousand more millionaires, and then the era of petroleum starvation is right on its heels. America’s heavy dependence on petroleum was going to doom our civilization anyway; so it was sooner or later, and the dotcom bubble then the housing bubble just moved it to a sooner “sooner” than just “later”.
One of the young guns at work wants to buy a house in 2-3 years (he’s 24, got married last year). He asked me what price range I was looking at. I told him, and then said I couldn’t afford that much down. He asked if my down payment included “family money.” I just wanted to stab myself.
What stopped you?
Overconfidence in your opinion about housing?!?
I am seeing a lot of condos being sold on the beach. There is also very little inventory. I talked to a realtor this week and he is seeing the same thing. Dont flame me, I am just reporting what I am seeing in the New Smyrna Beach/Cocoa Beach and Melbourne Beach areas.