2009 Jun 1st

The May Numbers – Hoboken Condo Sales Results

 Hoboken Condo Inventory Continues to Grow

The problem in a nutshell:  not enough condo sales.  Numbers can be interpreted many different ways but one thing here is pretty clear.  There is a stark difference in the number of sales per month over the past few months (in the 35 to 40 condos sold per month range) compared to what had sold in prior years (about 65 a month in ’08; 90 a month in ’07 and 60 a month in ’06).   Take a look at the current numbers (in red below) compared to the busy season of past years (highlighted in yellow).

This slowdown in transactions has caused a real buildup in Hoboken condo inventory.  Which brings us to the basic laws of supply and demand – when supply goes up, prices must come down until the market regains equilibrium.  The good news is that while transactions are at less than half what they were in prior years and inventory has soared, prices have come down from the peak by almost 10%.   Here is the full picture:

Please note – as some properties are not entered as “sold” in a timely manner by the listing agent, I will be updating this periodically to include any of those late – entered sales.

Hoboken Condo Sales Prices Still Have Room to Move?

May doesn’t appear to be as bad as April was but if  you look at the year 2009 to date, Hoboken condo prices are down compared to the past 4 years.  Even with a drop in sales prices, the days on market (DOM) number is still rising.  The bottom line is that unless sellers price their properties aggressively, the chances of selling are slim.  As for properties with significant flaws or terrible locations, they simply won’t sell unless the price is too good to be true.  As always, though, the true “cream of the crop” sells quickly.

A few years ago, I can remember when first-time buyers would come in and ask for a nice 1 bedroom for $300,000 and I would ask them how they felt about Jersey City Heights.  Now that same buyer has his or her choice of units for under $300,000.  The bargains are definitely out there.   As a long-time realtor I’ve probably seen thousands of properties and can tell pretty quickly on a very intuitive basis if a condo is priced right.   As I tell all my clients, though, a buyer needs to be able to assess value.  How does this particular property compare to others in the same price range?   Buyers need the experience to make the value judgment and the only way to do that is by looking at lots and lots of units.   That’s where my job comes in – not only in taking a buyer to see all those properties but in pointing out what differentiates them and what justifies a given price. 

Sellers must also put on their ‘buyer’s hat’ when pricing their own properties.  Simply calculating what they paid in 2005 plus a commission and pricing their condo so they don’t lose money will not work yet that is precisely what too many sellers continue to do.  As a result, their condos continue to languish on the market.  Eventually, as you can see every Wednesday, when enough price reductions are made, the unit may eventually sell.  I think it will take a bit more pain and lower prices until we start to turn the Hoboken condo inventory picture around.

Enjoy reading, feel free to comment, and don’t forget to contact us if we can help you with your real estate needs.  My cell is 201 993 9500 and I’m always happy to speak with you or you can email me at [email protected].

 – Lori

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  1. Bill

    I’m curious how much of the volume during the heights was driven by flippers / investors?

    5%? 10%? 20%?

    I wonder what the percentage is now?

  2. Willy

    When all is said and done, buyers will only begin to step into the market when employment brings confidence to a big expenditures like a home. That’s why sellers are chasing the spiral downward, waiting for the “turn.” The few buyers that ARE available can demand a bargain rather than perceived market value. Despite the current (leading) optimism in the stock markets, property sales are a lagging indicator. And if/when the stock markets get ahead of themselves and retrace again, the next wave of real estate weakness will likely commence. This has a long time to go and that’s what the inventories are telling us.

  3. lori

    If I understand you, Willy, I have to say I pretty much agree with you. A full recovery is going to take quite some time.

  4. stan

    Thanks Lori.

  5. Tiger

    Thanks Lori!

    I think the numbers look good, of course we all wish there were more transactions, but guys, it was/is a jungle out there! Remember a few months ago how many expected free fall in prices / economic disaster / famine / great depression II? Granted things are less than ideal, it is really not that bad. Just hang in there!

    Money is a relative concept afterall :-)

  6. patk14

    Income remains the key. Many of us have no idea what our bonuses will be at the end of 2009. Will they improve from the disaster in 2008? Goldman is accruing a very large amount in their bonus pool and they have less employees than last year. If the banking sector pays better than expected at year-end, people will feel more secure in their jobs and be more likely to dive in and purchase a condo. That would stabilize Hoboken pricing and reduce the huge inventory.

    It is very clear that real estate prices have risen much faster than incomes over the last decade. Prices increased something like 400% during that time period (doubling twice). Incomes did not keep up and every economist worth his salt is of the opinion that real estate prices closely track income in the long-term. It is much easier for someone to stretch themselves and pay a higher %’age of their income for housing in a rising market because they feel they can sell at a large profit if they need to. The opposite happens in a falling real estate market coupled with falling incomes. People become insecure. Eventually capitulation will occur and you’ll see a significant downward movement in prices.

  7. Tiger

    ptk14, I agree with you but where did you get the 400% from? My understanding is that Hoboken prices went up 200% or so over the past decade, meaning that a condo purchased in 2000 for $200K peaked at $400K in 2007. still high, but not as much as your number indicates

  8. JC

    Lori, you mentioned prices are down 10% from the peak. When was the peak and what metric are you looking at to come up with 10% thanks

  9. Lori Turoff

    JC – You can go back and look at the 10 year quarterly figures I compiled. If you don’t have access, send me an email and I’ll add you to the google doc to view it. The peak was at the end of ’07 when prices per square foot were up around $550. Of course, the percentage you calculate will vary depending on whether you look at that, median price, average price or days on market & transactions. But as a ballpark figure I think 10% is about right, no?

  10. Mike

    Lori,

    How has the Maxwell development factored into people expectations for a current prices of condo’s elsewhere in Hoboken?

    Also I here that the sales office continues to say they sold 93% of the condo’s in 1125, but yet if you take a walk around the development it looks less than 93%. Are my eyes correct or is the Maxwell sales office?

    thanks

    Mike.

  11. patk14

    Tiger, I think 400% was more like 12 years instead of a decade. Prices doubled between 1996/1997 and 2000 and then again between 2001 and 2007. Looking back, units were unvalued coming out of the harsh recession in the early 1990’s. Many people had vivid memories of being extremely underwater on their condos and were hesitant to dip back into the water. Some of 400% is explained by increasing incomes and the average unit is much upgraded over what was avail in the mid-1990’s. But I still believe we have some more downside (more than the 10% Lori points out).

  12. JC

    yes, 10% based on your google spreadsheet. thnx. I cant help but think Maxwell, garden lofts, and W hotel have artificially inflated these prices. You have said before units offered by the developer dont make the MLS and are not included in your numbers. Is this correct?

  13. leafgreen99

    There is always great information in this site. Thanks for all your work!.

    You often refer to location and how this relates to price. Is it possible to create a map showing where sales happen and at what price? It would be interesting to compare price and location, and to see which areas move more quickly than others. Obviously the waterfront is desirable, but after that, where are sales happening? Do you see a high correlation between location and price, or do the units differ so much in quality that location does not actually drive price as much as other characteristics?

    Thanks again,

    An avid reader

  14. Lori Turoff

    Leafgreen99 – A map would be wonderful, that’s a great idea, but there is no way I can spend the time it would take to put it together. In my experience, demand is first for waterfront, followed by units east of Willow, units very near the PATH (bet./ Observer & 2nd east of Clinton) and units along 9th street. There is a ‘dead zone’ in the center of town that’s not near the PATH, too far from the bus lines an the light rail that makes properties less valuable.

  15. Bill

    curious – why units along 9th?

    Gotta think the high school would be a deterrent

  16. leafgreen99

    Proximity to light rail?

  17. Tiger

    Speaking of lightrail how cool would it be if they add a 15th or 16th street station? If I was one of the developers of the NW area of Hoboken I would push for it. There is already a track they need to put a stop.We have a theater on 14th between Garden and Adams, plus several condos (which I hope won’t be too crazy or two high. VOTE PEOPLE!)

    I think a hotel would be good there too.

  18. Lori Turoff

    High School – negative
    Light Rail – positive

    A new light rail stop would be great. As would some more parks, shops, community facilities.

    Look very carefully at where the mayoral candidates are getting their backing $$$. If it is from developers, you can forget all of this and expect more too-dense high rises with no give backs to the city. Your vote is more important than ever. If you own property or plan to own property or have had it with Hoboken and want to sell your property you need to vote to protect your interest and your property value. Government waste, corruption, patronage & favoritism, over development, not enough open space, secret deals, rising taxes to pay for it all are not good for real estate values.

  19. MCD

    Mike,

    People are still moving into the 1125 Maxwell building, and will do so for the next few months – I am a resident. About 80 of the 376 units are still unsold – I can imagine many of those are part of the 93% quoted that backed out of their original contacts.

  20. Tiger

    Not to change the topic, but I agree Lori. I urge everyone to vote, and take a good look at the two candidates we have. Where did their money come from? What’s their voting record as council members? This city needs change more than ever. Year after year developers screwed us over, building massive building and never holding their end of the deal (Tarragon, I’m looking at you). We were promised a community pool, a city center, none of which was delivered.

    We have two main areas in question:
    1- The NJ Transit terminal; plans for SEVERAL 40 or 50 condo stories.
    2- NW Hoboken: We have massive blocks of untouched territory, plans for 50 or 60 story buildings (for the view).

    We need a mayor who holds development companies responsible. I am all for responsible developing, but I don’t want Hoboken to turn into another Jesey City waterfront / No offense, just not what I signed up for.

    Vote carefully. To me, one candidate looks at Hoboken as only a step in his political career, he will probably use it to build more connections and move up in the NJ political scene. The other seems to genuinely care for Hoboken; she has been a voice for change, took a lot of slack for it but she never changed her course. To me the choice is clear, but I urge you all to do your research and vote.

    Looks can only take you so far…

  21. stan

    hopefully the candidate you are alluding to wins, she has my vote. She is not perfect, but does truly have Hoboken’s interests first, as opposed to self interest.

    The amount of money pouring in to his campaign from outside sources, developers and the old hacks that are circling the wagons around him tell the whole story. The machine wants the status quo.

  22. Tiger

    I agree stan, I was a junior in college when Roberts was first elected, I remember his tacky ads, he was ‘the face for change’ and he was ‘outraged’ with the amount of spending, he was marketed as the mayor that would fix it all and ‘outside the machine’. We should have had the insight to know who was sponsoring his campaign.

    Now we know, now we have a choice, now we have knowledge. Everything is one click away, check their financial reports, see their views, and make your own decision.

  23. TS

    What’s wrong with the “too-dense highrises”? Why is it that many of you are against more supply (which would occur down the road, not right now), which translates into affordability for potential new home owners in Hoboken? I don’t get it, although I suspect it’s just self-interest – you want to protect your condo values.

    That said, and for other reasons such as fiscal responsibility, I also support Zimmer.

    And Tiger: The NJ Transit terminal is owned by the PA of NY-NJ I believe, so Hoboken has little to now say as to what will be developed there.

  24. stan

    TS- Planned development is good for a city and is inevitabl.

    I think most have the problem with unrestrained development, no planning, pilots that cost the city money, no developer give backs, (ie one pet peeve of mine, after a year of huge cranes 18 wheelers, earth movers etc, and the building goes up, why is there no demand for the construction company or developer to redo the road that they destroyed.)

    The roads, especially on the far side of town are like a rally race in baja california.

  25. TS

    Planning is one thing, and I agree that it is important. But what do you mean by “unrestrained development”? Who should restrain it? Shouldn’t the free market (which is voiced through developers’ decisions whether or not to build) dictate how much development should occur? Why should the government control supply and new development (aside from feasibility, safety, and quality issues)??

    Lori speaks of “too-dense high rises” in Hoboken. As far as residential developments in Hoboken, there are only a few. I don’t consider a 12 story building a high-rise, and neither do most people.

  26. Lori Turoff

    Zoning laws are what restrain development. Here’s a basic explanation: http://en.wikipedia.org/wiki/Zoning but there are books written about zoning, urban planning, community development and Supreme Court cases upholding the principal. You can read in these why and how development might be restrained for the good of the community.

    What has been proposed at the Observer Highway site are not 12 story but 72 story buildings. That’s right, 72 stories.

    Hoboken absolutely has a right to have a say in what is built on the land. It is our community.

  27. TS

    Lori,

    As I said, what good is government restraint “aside from feasibility, safety, and quality issues”? (That’s an honest question as I’m sure you have much more insight than I do, and not a rhetorical question.)

    And the 72 story buildings proposed are not on Hoboken land, so why should Hoboken have a final word on the matter? Obviously getting feeback from the surrounding areas is important, but it’s not Hoboken’s property to make any decision on the matter. In my mind, the only issue with the proposed developments on Observer has to do with “feasibility, safety, and quality” issues. In your mind, what’s wrong with those towers?

  28. Tiger

    TS,

    Hoboken’s population is already 40K+, not to sound grose but are you aware of the sewage problem we have? it is disgusting. The city infrastructure is already operating beyond capacity. Do you honestly think we can afford hundreds or thousands of condos coming our way?

    More condos will not make Hoboken more affordable; This is what they want you to think. It will actually increase overhead, increase spending, and make it even harder to afford a place here. All the buildings will be ‘luxury’ buildings. Most of them will be PILOTS, and then GOOD LUCK with affordability.

    Give me the name of ONE ‘affordable’ rental or Condo building built in the past 10 years?

    BTW, like I said I would LOVE to have more condos (to a limit), more parks, more shops, even another hotel in the NW area. That would be fantastic!

  29. Tiger

    Heck, if I win the lottery I would do it (build a hotel in the NW area). I will call it Hotel ‘El-Tigre’, and it will be a fancy Hoboken-inspired boutique hotel, with whole floors dedicated to Hoboken Native Indian, Italian, Sinatra and Baseball heritage :-)

    W and Hyatt aint’ got nothing on me :-)

  30. TS

    Tiger,

    The sewage problem falls under my “feasibility, safety, and quality” issues. And if I remember correctly, though I’m certainly not 100% on this, didn’t the Port Authority propose to alleviate that problem? In any case, solving that problem would be a condition on the development in my mind.

    As for this: “More condos will not make Hoboken more affordable; This is what they want you to think.”
    No, it is basic economics and the reason why prices in Hoboken are dropping right now.

    One affordable condo: SkyClub originally sold for 300+/sqft, which is affordable by my standards. So were the original Upper Grand prices for the first building. So why didn’t they stay cheap? Not enough supply and competition at the time.

    More condos => lower prices (or downward pressure on prices at least) => people can spend less of their income on housing. Plus with more competition, developers won’t be able to rake in as much, unjustified, money as they are now from their subpar developments.

  31. Tiger

    Skyclub is also known as shortsale town.

    If we are talking about the same condo, it was actually a shortsale. Skyclub is the poster child of bad timing.

    Forget Hoboken for now, take a look at Pavonia Newport, it is full of subpar condos (cookiecutter is an understatement) and I wouldn’t call any of them affordable. Is there a lack of supply in Jersey City? No, but the fact of the matter most developers (in good economic times) can afford to sustain their prices.

    Again I say it’s a fallacy. Think about your monthly TV bill. It is almost the same whether you use Cablevision, FIOS, Dish or DirectTV. Don’t you think competition would drive the cost of one of them? What about your cellphone bills? What about airplane tickets? How come Continental and Delta would quote you almost identical prices for trips between their hub airports (Say Cincinatti and Newark)?

    It is almost like big corporations struck a deal with each other to oscillate their prices within a certain range.

  32. TS

    I have no idea what you’re talking about with regard to SkyClub. It was sold by Toll years ago after they bought it from a local developer mid-way through construction. The original prices were around 300/sqft.

    There is a lack of supply in Newport because there is only one condo building. However, you are correct that there is no lack of supply in (downtown) Jersey City as a whole – and that is why Jersey City has tanked in prices, much more so than Hoboken.

    You can point to your TV bill or airline tickets to try to prove your point. I will just point to HOUSING PRICES in the area. And the supply shock that has hit Jersey City has had drastic consequences on prices.

  33. Tiger

    TS, which condo building in Newport are you referring to? I know of at least three condo buildings, one of them being Trump NJ. A couple of my friends recently bought a condo in Newport, and they had plenty of choices.

    You are taking an example from years ago regarding skyclub. Take a look at their recent offerings.

    I guess we can agree to disagree on this one. I still hold my position that thousands of new condos in Hoboken will not make it any more affordable, neither in terms of renting or owning. It will only make it look ugly and disproportionate.

  34. Lori Turoff

    Why is it a bad thing for homeowners to want to preserve the value of their homes? If prices plummet, won’t there be many owners ‘under water’ who might potentially abandon their units or go into foreclosure? Is this in any way good for the community? Look at Detroit – is that what we want to happen in Hoboken? With an excess of inventory already on the market, how can adding more high-end inventory do anything positive from an economic point of view? I haven’t heard of any proposal that these proposed buildings include low or moderate income units.

    There are many condo units in Newport – the A Condominimiums; 77 Hudson, The Shore Club – just to name a few. None of them are ‘affordable housing’. They are market rate.

    Toll Brothers never owned the SkyClub. It was built as a rental project and converted to condos mid-way but never by Toll.

    I used to live in Rosslyn VA – just over the bridge from DC and Georgetown. The area was known for the USA Today tower and many other similar high-rises. It was widely criticized among urban planners for it’s lack of street life and unsafe streets. The reason was basically that when you build canyons of skyscrapers with parking lots on the street level there is no pedestrian street life – just empty streets and dark parking lots. I have nothing against big buildings – I lived in one in Manhattan for many years – but personally, I don’t care to walk down an alley of tiered parking with buildings that start 3 & 4 stories up. There are some significant safety issue in my mind that need to be addressed.

    Where will residents of these buildings shop, go to school, get health care, park, put their trash, drain their waste, get their cops and firemen/women? Who will pay for it and how? These are all feasibility issues.

    Finally, one of the basic principals I learned in law school is that the realm of local government is dealing with local issues and nothing is more local than real estate. The ‘government’ is supposed to represent the will of the people; in this case our city council should be representing the will of the citizens of Hoboken. Why shouldn’t they express our will in their rulings?

  35. TS

    Trump, 77 Hudson, A Condominiums are not in Newport. The Shore is, as well as one other older building (I just remembered now).

    As far as SkyClub, Toll took the project over and finished it up. http://www.skyclubliving.com/

    Lori: “Why is it a bad thing for homeowners to want to preserve the value of their homes?”
    Nothing wrong with it I suppose, but let’s call it for what it is then. These people’s primary concern is their own personal property value, and only secondarily with the quality of the area itself. So when people throw their arms up in the air about the Port Authority’s proposed development, it’s really about the impact it will have on their home prices. And, therefore, I think there is another group of people, potential buyers, who have every reason to have more development so that prices will come down to levels reasonable for them. If you want to cast it in terms of selfish interests of owners vs selfish interest of potential owners, so be it. At least we’ll reach a level of honesty lacking as of now.

    And my point was not to argue for affordable housing in terms moderate or low income housing, but to let affordability (generally construed) happen naturally through competition.

    But I agree with you on the feasibility issues – as I said it should, and will, be a condition on their proposed towers.

  36. Lori Turoff

    How do you separate the value of personal property from that of the community? If all properties in the area were to be devalued how can that not hurt the community? Here is an article from the New Yorker this past Feb. about what happened in Tampa, FL because RE prices plummeted: http://tinyurl.com/cvjh3z I would not want that for myself nor for Hoboken. Bad for me, bad for the community.

  37. Lori Turoff

    Also – if ‘affordability’ is measured by home price as a percentage of income, why isn’t it the income side of the equation that needs to change? I can’t afford to live in Palm Beach or on Sutton Place – should prices in those areas be forced down so that I can or should my income have to increase to be able to afford the price? Isn’t people wanting to live above their means the cause of so many of our economic problems today? There are other places I can afford to live just as there are plenty of neighborhoods in Hudson County with housing prices much lower than Hoboken where potential buyers who may not be able to afford Hoboken can buy. These prices have been set by the market.

  38. TS

    I think that a plummet in prices would be bad for the community. Better to ease it in slowly through either 5 years of stalled prices or a moderate, prolonged correction. But that’s easier said than done.

    Additionally, I think skyrocketing prices are also bad for the community as a whole as it prices out people with an intention to buy, or stretches them financially, and also gets passed on to renters. I didn’t hear any alarms sounded, however, when prices were jumping 10-20% per year.

  39. TS

    “These prices have been set by the market.”

    This is the core issue I have. These prices have not been naturally set by the market. By putting the supply side in the hands of government officials, you refuse to play by the rule of free markets.

    Great discussion, however I can’t do this all day. Thanks for everyone’s feedback, has given me a lot to think about.

  40. Trumpinator

    Horrible news, absolutely horrible. Hoboken will have three year’s of inventory by the close of this year.

    There is no silver lining, there is only one thing left to do – go through the five stages of death, and face the fact that everyone is going to lose money in Hoboken… unless you’ve owned your condo for 7+ years.

  41. Tiger

    Trumpinator, I work in a windowless office, but I just checked after reading your post and it looks like… oh yea, the sky hasn’t fallen.

    I refuse to be entirely defined by money. Yes, a job, income, place to live are all important and are essential, but dude just because we lost / about to lose money does not mean the end of it all.

    And I disagree, there is a silver lining. If you are selling to buy somewhere else in the country, you are still realizing significant savings, especially if you are upgrading.

    Relax man, it’s all good. Smile to the world and the world will smile back at’ya!

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