2009 Feb 4th

The Weekly Wednesday Wrap-Up: Hoboken Condo Sales & Inventory for the Week Ending February 3rd

Research, analysis & post by Lori Turoff

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What does it take to sell a Hoboken condo today?  Price reductions!

If you are in the market for a Hoboken condo, don’t forget to check our Hoboken Open House Google Map on Friday, Saturday & Sunday to see if any of the new listings (or old ones) are having open houses this weekend.

Here is the overall picture of Hoboken condo market activity for the past week:

As in past weeks, inventory continues to rise.   The price reduction activity is interesting. As you’ll see, the price cuts are not single reductions.  In order to get units under contract and sold, prices are being reduced on a single property again and again and again. I guess many sellers are still a bit in denial about what it takes to sell in this market.  While there is no way to know, I wonder how differently these sales would have gone had they been priced lower initially rather than chasing the market.

Studio & 1 Bedroom Hoboken Condos:

161 total active – average asking price $466,989. DOM 97

The average here is again skewed by the presence of 21 units at Maxwell, Harborside and Garden Street Lofts.   What is interesting is that there are 12 units under $300,000,  something rarely seen in the past.  Some “need work”, meaning a total renovation (that there are no photos is a good sign), some are in less than ideal locations but a few are cute and a good deal for the money.

1 Dabo after 21 days on the market.

Note – If there were intermediate price reductions for a property to be “dabo’d” (placed under contract) or sold, they are noted here. You can check what all the others sold for by clicking the link to the listings. Each listing states the list price (LP) and the sales price (SP).

6 sold in an average of 74 days for an average price of $402,333

16 price changes

8 new listings – average list price $381,070.

Two Bedroom Hoboken Condos:

270 total active – average asking price $668,136. DOM 113 so far.

2 dabos – after 117 days on the market on average (“DOM”)

Intermediate Price Changes:

1 sale – at $440,000.  DOM 151.

27  price changes

25 new 2BR listings – average list price $732,007.

Three Bedroom and Larger Hoboken Condos:

54 active 3BR condos – average asking price $1,141,663. DOM 147!!!

1 dabo after 70 dom.

None Sold.

2  price changes

4 new 3BR listing – average list price of $1,185,404.  147 DOM.  Again, quite a few very high-end units at Maxwell Place and Garden Street are pulling the average up.

What Next?

If sales continue to slow, but listings continue to increase the result is even more unsold inventory.   This week it may look like inventory is actually down from the past few weeks but that is due to the many units at MetroStop which have ‘expired’.  Since that’s a new construction building, those units will be put back on the market, probably at a lower price.  The bottom line is that the market is in a very, very deep rut.

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  1. Tiger

    Thanks Lori, and thanks for including the expired and withdrawn properties :-), really appreciated!

    Obviously the market is building up with unsold inventory, but what I’m noticing that one bedroom market is doing relatively better than two bedroom, (three+ is in alomst in standstill status). Over the past few months, it always seemed that two bedroom market is doing best among all. I guess we can never tell from the MLS, but could it be that most buyers are first time buyers? Or are those willing to buy minimizing their investment?

  2. DKzzzz

    I would venture a guess that people with high enough incomes/savings to buy 2-3 br condos in Hoboken are usually more intelligent/better educated people and thus staying away frm the market that is bound to crash…
    Just a guess.

  3. Lori Turoff

    OK – so here is my opinion to add to the mix: In my experience, the 1 bedroom buyers are first time buyers and they are choosing to buy over renting. If they can get a nice little place for $300K, have the down payment and plan to stay there for 5 years minimum, they seem to be alright with that choice. They need the tax write-off. They don’t want to deal with a landlord. They are at the very beginnings of their careers with hopes of bigger and better salaries and promotions down the line. So for them, it makes sense. The 2 and 3 bedroom buyers have to sell to buy (often) and may not want to do that right now when they could possibly stick it out a bit longer where they are. Or they think if they wait a while, prices will rebound.

  4. stan

    great site as always Lori

    I also think that as appreciation stops, the one bedroom owners cannot move up in apartment size. In the past the appreciation would allow them to buy a larger place when they traded up. You need support at the lower levels to keep the higher priced units moving. so on and so forth.

    As the one bedrooms have been dropping in price significatly, as I think we all can recognize, so will the larger apertments. In percentage terms it will be the same, obviously in dollar terms the losses will magnify on 2 and 3 bedrooms

  5. Tiger

    Thanks all. Interestingly, when it comes to rental it seems two bedroom units are still doing better (roommates splitting rents). To me this indicates that people are no longer buying properties for investment purposes, they are buying them to live.

    On a related note, I was reading in yesterday’s USA Today that the bad economy is focing some adults to move back in with their parents (i.e. lost a job and foreclosed), but on a positive note divorce rate has dropped 37%; people are sticking together and staying in ‘separate bedrooms’ :-)

  6. Jon

    Love your blog. Always look forward to your Wednesday wrap-up. Question – why isn’t Maxwell new construction condos listed in the MLS? I see Metro stop, but no Toll Brother properties. I can’t imagine the new building being sold out. Are people selling units for less then the developer as with the case at 700 Grove St?

  7. Lori Turoff

    Thanks Jon. Toll Brothers has its own sales office on site at Maxwell and Hudson Tea. They sell their units directly and don’t list most of them with the MLS. Occasionally they do. At 1025 Maxwell, of 139 listings on the MLS, only 1 was listed by Toll (and a few which expired). The rest were resales. At 1125 Maxwell, the newer building, 25 of 114 were listed by Toll. As for what individuals are pricing them at versus Toll, we would have no easy way to know that. If they are not on the MLS the number is made known until after the deal closes. Hope this answers your question.

  8. Lori Turoff

    Very funny, Tiger. Thanks!

  9. patk14

    No one is buying for investment purposes in Hoboken right now. All are people who are going to live in the apartments (or their parents buying for little Jonny or precious Jane) because they need a place to live. No investor is going to fight the downward momentum. They’ll be back once prices stabilize. No one knows exactly when that will happen.

    I think there are people who can afford larger places who are settling for 1 bedrooms to ride out the storm. As was pointed out above, if they pay $400,000 and it goes down 10%, they have only lost $40K. Meanwhile, the $600,000 2-bedroom drops the same 10% ($60K). They will come out $20K ahead if they trade up after the decline. Of course, if they rented, they would be able to buy the 2-bedroom for the full 10% discount but they don’t get the tax deduction.

  10. Willy

    There is no question what the outcome would have been if sellers had cut asking prices appropriately and earlier. But that is typical human nature after the market we all experienced over the past few years.

    The result is the dog chasing its own tail – all the way down. Sellers have not (yet) come to the conclusion that 2006/2007 peak asking prices will not be seen again for a very long time (my guess is a decade!).

  11. jeff

    Hey Lori, Love your blog. Question- Banks are imposing higher appraisal standards because the secondary market for mortgages is virtually non-exsistence; thus requiring the bank itself to hold the loan a lot longer than in years past. As the price per sf comps used in 2007 to end of 2008 are no longer valid,I would assume that this would put downward pressure on prices here as the spread between the LTV and asking prices require the buyer to, in some cases, put down 25% to 30% to make up the difference.

    If you have to put down more money to cover the spread of a property that does not comp out..is it worth it?

  12. Lori Turoff

    Thanks Jeff. I’m not sure I agree with your statement about comps. Look at today’s post. The prices haven’t moved much. There are plenty of comps out there to support today’s prices. I have not learned of or experienced any more rigid appraisal processes than previously. If they exist, I’d love to hear about them. I was clerking for a Federal judge on a bunch of savings & loan siezures during the mid-80’s S&L meltdown. That mess was very much thanks to crooked appraisal standards so I have a bit of an interest in it. Please, fill me in.

    I do agree that banks are requiring better credit and that borrowers cannot get PMI any more. So yes, first time buyers in particular must come up with the cash. Thankfully, many have family willing to help. Lets face it folks – Hoboken is an affluent area. The kids buying starter condos here tend to come from at least upper middle class families and Dad is often willing to gift the kid some cash. It helps with his tax situation as well.

    What I believe will put the downward pressure on prices is inactivity, pure and simple. Thanks for your thoughts.
    – Lori

  13. MShafir

    Thanks for the compilation of info, these are great data points on the Hoboken real estate mkt. I would like to go back to a buy vs. rent example that was used for a basic 1 bedroom condo priced at about 300k. While I agree that the rental payment and monthly mtg. payment are similar, the issue is the value of the condo.

    When looking at multi-family properties banks look at a basic equation to value properties Value=NOI (net operating income)/Cap Rate

    Using this basic example we look at an $1800 monthly pament (cash flow) or $21,600 annually, we subtract taxes of $4000 annually and $3000 in maintenance for an annual NOI of $14,600. When property values were going up Cap rates were in the 5-6% range, now things have slowed and cap rates are 7-8% implying lower values. Using a 7% cap rate and 100% occupancy rate (because person is living there) $14,600/7%=$208,571.

    This implies a potential 30% downside in the 300k property. Basicly if you put 20% down now and market continues to drop you could lose your whole downpayment. This is why I remain negative on the Hoboken real estate mkt.

    Great site thanks

  14. Lori Turoff

    You can crunch numbers until you get what ever answer you’re happy with.
    I would argue you should use a cap rate that reflects today’s cost of money – 1 or 2% I would argue that you neglect to take into account the accumulation of equity over time. I would argue that the rental equivalent for 1,200 a month in Hoboken (taken from your NOI) is an unlivable dump. And so on.

    Bottom line is still, in my opinion and I know we don’t all share the same opinion, when you buy and live in your own property, your life is materially different than when you are a tenant. Not everything can be measured with numbers.

    Glad you enjoy the site. Thanks for your contribution.
    – Lori

  15. MShafir

    Let me quickly respond, I used a $1800 a month from your example a couple of postings ago, not $1200. That is what you stated was the going mtg. payment and rental rate for a basic 1 bedroom condo. When you multiply $1800 for 12 months you get $21,600 which is gross income, to get to NOI we subtract $4000 in annual taxes and $3000 in maintenance to get to NOI of $14,600. Not to mention that my annual tax number is generous. I just want to make sure you understand that I am using your $1800 a month rental rate (not $1200).

    To use a 1%-2% cap rate would imply massive property values and these cap rates from a historical standpoint are non-existant and 1% or 2% cost of money applies to banks not individuals.

    Finally, you are right not everything can be measured by numbers, but no one wants to catch a falling knife.

    Thanks

  16. Lori Turoff

    I appreciate your clarification. There are certainly several ways to analyze the rent v. buy decision. Yours is a valid one but I would still say it disregards all the non-numeric benefits that come with ownership. I suppose those have a different value for different people. At the end of the day, I would always buy over renting merely so that I don’t have to answer to a landlord. That freedom and power to me is priceless. But to each his or her own ; ) I certainly respect your point of view and am always willing to post it. Nothing like a good discussion!
    Thanks again for your comments.
    – Lori

  17. jc

    Would a cap rate be used for a single condo even if it is an investment property? I would argue cap rates should be used for multi family dwellings (5 or more units). Using your cap rate the condo would be below $200k, as you stated the taxes are generous, but taking into account expenses the bank would use like general maintenance, advertising, and 5% vacancy rate. Do the math and we are down to $175k which just isn’t realistic.

    Maybe gross rent multiplier would be used for this specific condo? Mshafir do you know for a fact banks use cap rates fir a 1 bedroom investment property?

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