2009 Aug 17th

What Sold Where Revisited

Here is a map of what Hoboken condos sold and where they were located.  Fill out the little form to see the map:

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It’s broken down as follows:

These are sales prices for deals that closed since Jan. 1, 2009.

Here’s what I notice:

There are very few “dots” (higher priced units) west of Adams between 2nd & 7th but lots of solid bubbles.

There are “dots” along the water but also solid bubbles – all those older walk up buildings mixed in with new renovations.

There are “dots” all the way back to Jackson Street along the southern end of town (Newark, Observer, 1st & 2nd Sts).  Lots of new, high-end construction.

There are “dots” but very few solid bubbles around the 9th St. corridor on the west side and along  Adams, Grand and Jefferson above 9th St.  Again, new construction concentrated here.

The eastern half of midtown is a mix as the condition of housing is a mix.

So my take is that people will travel away from the water and the PATH – if it is worth the trip in terms of quality, but with limits as to how far they will go.  It’s uncertain how much the presence of the light rail stops at 2nd and 9th help but they sure seem to matter.

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  1. Chili

    Looks like the projects are a big deterrent to the sale of luxury condos.

  2. Bill

    oh you think so doctor?

  3. Chili

    It’s interesting because in some cities – like Old Town, Alexandria VA, have found creative ways to redevelop. http://alexandriava.gov/planning/info/default.aspx?id=9814 I would love to see something like this take place in Hoboken.

  4. bz

    The trends are not obvious. I see more 2b 500k+ condo in downtown and around Garden in midtown, whereas more 1b 350k+ condos are in midtown and uptown. You really can’t say which blocks are “hot” in Hoboken. Sales are all over the place, even on Jackson. As many of us have said before, the diverse nature of housing here has provided many options for the residence with different needs. It’s a good thing about this town.

  5. Andy

    BZ, thats true. Thank god we’re not all living in the exact same type of condo. Diversity of options brings all types of people to town.

  6. Fred

    A couple of questions for anyone:

    1) Of those you know who have bought a $500k to $700k condo, how many times do you think their income is to the price?
    2) Is that income stable or volatile (e.g. Wall Street)?
    3) Did they have the ability, if they wanted to, to pay for the whole purchase with no loan?

  7. lori

    A few answers based on my years of experience in Hoboken:

    1 – Most of my buyers who buy 500k to 700k condos are couples making in the 200K plus range per year.

    2 – Some work in finance but many don’t. Of those who do work in finance, not all are dependent on bonus money for the bulk of their income. Of those who don’t work in finance, they tend to work in sales, marketing, law, engineering, or own businesses.

    3 – I would say none.

  8. homeboken

    Lori – Based on your last Wed. wrap up there are 277 two bedrooms with an average asking price of $609k.

    Based on your interactions with buyers, do you think there are enough buyers in Hoboken that can afford this pricepoint for a 2 bedroom condo? Based on your comment above, most buyers at this price point make over $200k per year. The latest census estimates say that the median income for a family in Hoboken is around $106,000 (loose estimates). I contend that the average price point is still about 2 times the income level needed to support it.

  9. JC

    I think tight lending is more of a deterrent to buying than income. (along with confidence of job security and afraid to buy on the way down) I’m not in the mortgage business and would be curious if anybody was and can shed more light on this but I would argue the increase in down payments needed, PMI hard to come by, and restrictions on condo building that dont have a certain % of units closed and owner occupied is the real cause for lack of purchases.

  10. homeboken

    JC – I think it is all the items you mentioned, PLUS, banks will no longer lend $500,000 to someone making $100,000 a year. The banks have no appetite for risk, you will need to show a real ability to repay the loan. No longer can you rely on future appreciation and refinance to take out the debt.

    I also think that the very low-interest rate environment we are in will end in about 9 months (per the fed’s comments last Tuesday). If rates start to rise, I can’t see the “average” Hobokenite procuring a mortgage that gets them to the $600,000 average list. The numbers just don’t make sense.

  11. lori

    No question – there is a huge problem with buyers not having 20% for a downpayment – thus the recent popularity of the FHA loans. That is where the number of units, number of owner occupied units and percentage control of the building comes into play. For an FHA loan there must be at least 10 units in the building, no retail, no more than 49% tenants, and no more than 10% ownership in any 1 entity. From what I’ve been told by my mortgage lenders PMI is no longer a real option. But many buyers are getting FHA spot approvals and are putting down as little as 3.5%. I wonder what will happen when those buyers find themselves underwater?

    There are many units over $600K but there are also plenty for under $600k. In my experience, the financial position of the $600k buyers is very different than that of the buyer looking for a 2 br for under $500k.

  12. TS

    Homeboken,

    You can’t draw a conclusion from median HH income alone to appropriate pricing as there is often quite a disparity between the incomes of (potential) owners and renters in a given neighborhood.

    If you took the median HH income of certain nabes in Manhattan and then compared the median selling price you’d have to draw radical conclusions. For instance, Tribeca’s median selling price in May-June 2009 was over 2MM (actually 2.4mm, Trulia data). The median HH income is $113,595, and the median income is $146,293 (taken from NY Times Data Report). I don’t think you’re going to try to argue that Tribeca is set to see it’s median sales price drop 85%. Then again I could be wrong about what you believe.

  13. Recent Buyer

    Totally off topic, but thought you guys may be able to help. My tiny condo association is having major drama and the president has now roped me into it. Perhaps you can offer some insight. Does anyone have experience with Sacci Management or LaBarbera? Our president wants to step down if we don’t switch from LaBarbera to Sacci and the rest of us are a little wary with the sudden change. LaBarbera tells us that Sacci is only a maintenance company and not licensed to manage condo funds…

  14. homeboken

    TS – I am speaking on a very macro level. No I don’t see prices falling 85% in Tribeca or anywhere else in the NY metro for that matter. I am trying to get my head around the economics of the housing market. Specifically how it HH income relates to purchase price and mortgage approvals. Clearly I don’t have a good enough handle on it yet. That’s why I post, getting a conversation started leads to information discovery.

  15. Recent Buyer

    On topic, we put 10% down and pay PMI. Purchase price was $395K. HH income is in the low 200K range, but with tremedous student loans.

  16. Katherine

    Recent Buyer, don’t know the circumstances, but you really have to watch management companies. You need to have a system in place with regular monthly meetings and review of the association financials to make sure things are getting done correctly and in a timely fashion.

  17. lori

    Keep in mind that while there may be 250+ 2brs with an AVERAGE price of $600k plus that’s a bit misleading. The average is skewed by the expensive Maxwell Place & other units. The bulk of the 2br condos are under $600k. Many of them are in the low $500k range. So the question is: can a family making, say, $200,000 with a 20% down payment afford a mortgage payment of about $2,300 plus taxes ($650), maintenance ($250) and insurance ($100) which would bring the monthly payment to around $3,300? That’s just under $40k a year on a $200k salary. Plus the family now gets to shelter a good chunk of that $200k thanks to the mortgage deduction. I know this brings up the whole rent vs. buy discussion but leaving that aside for now, it seems like this is a no brainer. If you can’t afford $3,300 a month on that kind of salary there is something questionable about your lifestyle and money management skills. But then, how many young people today have saved $100,000? Or have any savings, for that matter? How many pay cash for a car? Don’t carry debt on credit cards? Don’t live beyond their means?

  18. Andy

    I’m a big proponent of people putting down 20%. It really forces you to dedicate to your home search/purchase as you are making an investment. Thats what we did and I’m actually glad I put it into my house instead of leaving it in the market given recent trends. I think the other factor to look at is people taking out adjustable mortgages or more exotic mortgages. We were 30 yr fixed at a great rate. My sister and her husband did the 5yr arm w/ little money down and they got screwed when they lost equity and couldn’t refi. I think while it gave people an entry into an otherwise high barrier to entry marketplace it really put people in homes they should never have bought in the first place.

  19. Andy

    Lori,

    I do it on less than 200k and am very comfortable. I did put 20% down so perhaps that helps some.

  20. Bill

    Andy – why did they have to refi

    Any ARM I’ve done just floats after the fixed period and the floating rate is probably lower then the fixed right now

  21. stan

    “But many buyers are getting FHA spot approvals and are putting down as little as 3.5%. I wonder what will happen when those buyers find themselves underwater?”

    The FHA is troubling because it has become a dumping ground for people who have not been able to save a 20% downpayment. The chance of default obviously increases if people have less skin in the game. Ultimately we as taxpayers are on the hook.

    If you can’t save the 20%, should you really be buying. That’s not to say, if you have the 20% and can buy a place with putting as little down as 3.5%, why wouldnt you if rates are similar.

    why be punished for saving more, might as well have that cash in reserve.

  22. JC

    I agree with Stan regarding keeping the cash in reserves. Of course those that put down 20% have more skin in the game and could alleviate any pain down the road if somebody loses their job etc…but if given the opportunity and if I could afford the carrying costs I would put 3.5% down.

    The opportunity cost is different with everybody. I know plenty of very wealthy individuals who would much rather keep their down payment in hedge funds and put down as little as possible. I also know plenty of others that would rather keep their monthly payment lower and put down as much as possible. Different strokes….

    Its unfortunate what is happening all over the country and that folks who put very little down are not dedicated to their home/community and dont care about the results when walking away. These folks have value/ethical issue and I think that needs to be addressed as well.

    20% forces folks to care and I’m all for that. But if we lived in a world where everybody was morally ethical and wouldnt walk away i dont see anything wrong with putting 5% down if the carrying costs were not a problem and the bank underwrote it as such.

  23. Recent Buyer

    I imagine that a majority of buyers in Hoboken are young first time buyers. It’s pretty difficult then for to come up with 20% for a down payment.

  24. bz

    Recent Buyer—“Sacci Management or LaBarbera”

    Our condo association switched from LaBarbera to Redbridge. LaBarbera was horrible. They would charge us a fee every time they step a foot on the property and saying that the fee is for managing a project or inspecting things. But these jobs are the reason we paid them management fee every month. They charges us $2500 for 1.5 years worth of snow removal which we now pay only a few hundreds. They also not very responsive when there are problems need their attention. We all got fed up and switched to Redbridge. We are much happier now. I don’t know Sacci though. But I think your association president should communicate with all the owners regarding the issue. If not, you should reach out to the president or anyone on the board and learn the situation. Hope my experience helps.

  25. Andy

    I personally think if you can’t save the 20% down you shouldn’t be buying a home. If you have the cash in reserve and want to put the 3.5% down because you would rather invest or hold onto your cash then thats fine and a reasonable choice. However, if you have no cash reserves and can’t come up w/ 20% down why are you rushing into buying a home?

  26. Andy

    We have Redbridge and Peter and Richard are amazing. They take care of everything and are good at getting competitive bids for work that needs to be done. They also know the ins and outs of the city departments. I’m not sure if they only handle large buildings though.

    Bill, this was 1-1.5yrs ago related to their refi. They had never build equity because they had an IO ARM. So renting from the bank w/out knocking down any principal. Those are the types of loans that are deadly because many people who are now deep underwater are screwed as no one wants to refi them unless they can come up w/ 20% down. Rates back then were 250bps over the fixed or higher.

  27. Recent Buyer

    Andy – Because you’re tired of paying rent? Because you have a stable job. Because it makes fiscal sense overall.

    We could not have afforded 20% right now. We could have afforded 15%, but chose to keep the money in reserves. However, we also put about 70% of what our mortgage payment is in savings every month. So, that makes us feel “safe”. It’s all about the plan, I think, not just a numbers game. If you are putting 3.5% down and have little cash reserves and cannot save monthly because of a mortgage, yes, that’s a risk and you should not buy unless you can stomach that risk.

  28. Helping Hoboken Moms Sell Their Condos » FHA update and how appraisals have been dealt a body blow

    […] are approved to put down 3.5%, it used to be the whole building had to get approved). Apparently to qualify in Hoboken, a building needs to have at least 10 units, no retail, no more than 49% tenants, and no more than […]

  29. Recent Buyer

    Andy – thanks for the info. Someone else also referred Redbridge as well. I will call them.

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