2009 Sep 16th

The Weekly Wednesday Wrap Up – Hoboken Condo Sales & Inventory for the Week of September 15th

Hoboken Condos Inventory & Sales – Week of September 15th

Here are this week’s numbers:

Here is the Weekly Wednesday Wrap Up from: September 8th, September 1st, August 25th, August 18th., August 11th., August 4th.

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Studio & 1 Bedroom Hoboken Condos:

19 new listings

175 total active

5 dabo. 89 average DOM.

5 sold

20 price reductions.

Two Bedroom Hoboken Condos:

19 new listings

268 total active

4 dabo’d. 121 average DOM

10 sold

21 price reductions.

Three Bedroom and Larger Hoboken Condos:

71 active

11 new listings

No dabos

1 sold

5 price reduction.

Hoboken Condo Open Houses

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Thanks for reading and, as always, we welcome your comments!
  1. jc

    Andy…where are you thinking of making your investment purchases? I have a 9 unit property in Rochester I may want to sell. cash flow positive 🙂

  2. jc

    Lori…I agree that owning feels a lot different then renting and adds much happiness to my life. I look at my place as my home first and foremost. When I sell I get my down payment and equity back plus if I see any appreciation I’ll take it too.

  3. stan

    “4. – What if you kept saving, paid down your mortgage, stayed in your home for a decade or two, saved even more, bought investment properties, became the landlord instead of the tenant and collected your rents and were able to retire? Would that not be nice? The idea of saving and building wealth has become an anathema to much of today’s society.”

    can’t disagree with this. My point is that the point at which you buy in the RE cycle, is just as important as if you buy at all, in regards to building wealth.

  4. Lori

    My point exactly in #1, Stan. Timing is important. Where you buy and where you sell in the cycle matters in real estate just as it does in the stock market.

  5. Fred Davis

    I think it will become much more difficult for owners to sell after regulations on bonuses take effect. Are sellers thinking about this? Prices are well correlated to income (historically speaking, except for the last 10 years or so), so if incomes move downward, all else being equal real estate should follow. What’s more, prices shot above what incomes could support in this “bubble era” so I would think that the fall would be more pronounced. I think it would behoove sellers not to look to squeeze the last 2 or 3% from the sale price because if they’re not successful, they will pay the price.

    Does anyone know if the market is starting to price in the compensation changes on Wall St? I would think it’s obvious that what was a huge driver on the way up would be so on the way down. How could it be any other way?

  6. Andy

    Hi Fred, What comp changes are you referring to? Nothing has been passed on to employers as of yet and from what I hear in DC Congress isn’t having much success w/ getting people on board for comp limits. Sure I think there will be some clawback provisions but total comp for Wall St isn’t going down. Many companies just gave hefty base comp raises which fixes a larger portion of compensation costs. I think it will impact the extreme upper management to a much greater effect(ie Manhattan and Greenwich CT) than the average buyer in Hoboken.

  7. Fred Davis

    Anybody who thinks comp in not going down is not reading the same newspapers I’m reading.

  8. Andy

    Fred, I’m not sure what you’re reading but would like to get on the same page. I have freinds who work both in the Treasury Dept and I personally work on Wall St. I can assure you that at some major companies the bonus structure is still very much in place and although pools may have shrunk the scary stuff you read about in the news is not in practice except at 2-3 firms. Many firms are making big bucks this year and have been paying back TARP funds. Thats in addition to putting away record bonus accruals. So long as the market doesn’t tank in October-December you’re looking at a very good bonus year on Wall St. It will be more hush hush but absolutely people will be getting paid this year. These firms can’t afford to stiff their good people for another year in a row or risk a mass exodus back into alternative investment funds. You’d be very surprised to see how much things are getting back to normal. Sure many are still unemployed but I think you will see an end to mass layoffs. Many places have already begun hiring again and not at reduced salary levels. If anything those still employed saw a net increase in wages mostly in terms of base salary. I know its contradictory to what you see in the papers but its very much reality.

  9. Fred Davis

    Trust me, a secular change is on the horizon, not a cyclical one. The political winds don’t care how much profits are this year. The G20, of which the US is part, will see to it that comp changes–downward. It’s been an arb for workers and as you know, all arbs come to an end eventually. Will people still get paid on Wall St? Yes, but not at the nonsensical levels of the past…And fewer will make very big money. Employees of firms were getting paid like business owners, except they didn’t put any of their capital on the line like a business owner. This secular change will filter through to the real estate market. If it affects Manhattan and Greenwich, it will affect Hoboken, indirectly.

  10. Laki

    Andy I too work on Wall Street, and Fred is absolutely right. I do not know a single person on wall street who believes the bonuses are back for good. People that did get a big bonus this year consider themselves extremely lucky. The profits we’ve seen during the bubble years were a product of 50-100x leverage in the financial sector. The firms took the profits during the boom years and distributed most of them to their employees. When the bubble burst, they simply offloaded the losses to the US government. If you somehow think that things are going back to normal, and you define the normal as a period between 2004 and 2007, you’re mistaken big time. Also please don’t talk of TARP as if this program alone defines the government intervention in the financial sector. As if paying back TARP means anything. Mainstream media doesn’t necessarily talk about this, but debt guarantees together with asset purchases and REPO lines extended to financial firms amount to several trillion dollars! If US government rescinded every single government guarantee and promised not to backstop any future losses in any of these financal firms, these companies would go under faster than you can blink. Just look at their balance sheets. They have trillions of dollars of assets and so much short term debt to roll and the only way they can do so so is if there is a non-disputed consensus that the US government is not going to let them fail.

    It is clear by now that US government will not do this. They will not let these firms fail. But, this backstop however comes with a price. The price to pay will most likely be 2 fold: 1. The Government will force the firms to deleverage themselves significantly. 2. The government will not tolerate the current compensation scheme. Even if the second one doesn’t happen, the forced deleveraging will ensure it. Once the firms are deleveraged, there simply won’t be enough profits to go around.

  11. Andy

    Laki, I mentioned that the upper ranks of management will not be getting 20+million$ bonuses and rightly so. But the bonus accruals at firms like GS and JPM and other firms are as large as the boom times or larger in the case of GS. How can you say that this money will not be paid out? Will it be in the form of different compensation Yes absolutely. Most likely in restricted stock w/ clawback provisions but will the $$ amounts be cut? I respectfully disagree. I think at the top yes there will be cuts. CEOs can’t command 150mm pay packages so there will be some trickle down but good employees can go work for hedge funds and get bonuses paid entirely in cash. Why would they choose to work at big banks if they can get hard cash at a fund? So the big banks strucutre something that looks to apease populist rage but still rewards its employees so as not to risk them fleeing to hedge funds/asset managers.

    Laki, the only firm that has come out saying it will revise its package was DB and they historically paid only certain areas well. The rest always got less than their peers. Goldman is trying to do the same thing but lets be honest, they have paid the most of any firm anywhere for decades. A small hit for them is a drop in the bucket.
    On the Tarp point, the entire compensation regulation discussion began because the government had an ownership stake in these companies and as such could regulate their compensation. Many have paid them back specifically so that the government could not impose compensation restrictions. Why do you think Goldmand and JPMorgan rushed at the oportunity to pay it all back?
    To your 2nd point, the govt forcing deleveraging I agree to an extent but again you discount the lobbying efforts of wall street. Our government is run by multinational corporations. They can’t and won’t put real changes into effect that hurt corporations. Obama is trying his best but I honestly doubt he’ll be able to tackle Insurance and Wall Street lobbys. As for the effect of deleveraging and lack of profits to go around this is capitalism at its best. Many of the 2nd teir banks needed to be absorbed and many have. Unfortunately this leads to many of our colleagues loosing their jobs. But its a reality of the situation at hand.

  12. Laki

    Why are you picking out JPM and GS? Why not compile the data for the entire financial sector? JPM and GS are only making money now because they can borrow at close to 0%, while half of their competition is out of business and the industry is in disarray. This will not last forever. Once the OTC instruments are standardized and pushed to the exchange, and once the 0% cheap money to wall street is gone, these firms ability to generate profits the way they’re doing right now will go away.

    Also, The hedge fund industry is contracting as well. The small funds are getting crushed and the big ones are consolidating. In order for hedge funds to absorb all the wall street people they would have to expand 100-fold in size. Is this realistic? Further, making money at a hedge fund is a lot harder than making money at GS. GS can borrow cheaply, and doesn’t have to mark to market. Hedge funds don’t have this luxury and the hedge fund money is not sticky either (i.e. run on a hedge fund results in a liquidation, unlike GS which simply borrows from the government). So the frequently used: If I don’t pay them they’ll go work for a hedge fund, is a false argument. 95% of people would not find jobs with hedge funds.

  13. Andy

    JPM and GS are #1 and #2 in the world. Why wouldn’t I pick them? Barcap/BofA/WellsFargo are tied for #3. The rest are small shops or poorly run(UBS/Citi).

    You seem to have a very negative view of financial services. They have always engineered new products and new business models over the years. Easy money is going away and I can reasonably agree with that since spreads will eventually disolve. The best thing that comes from this financial disaster is the consolidation in our industry. Many firms got what was coming to them w/ the exception of Lehman. It was not fair to bail out some and not others. As for consolidation of funds, 8000 at the peak was too many and needs to be cut in half. Many funds are making huge comebacks this year as are many banks. Also, many are hiring back people(citing the MS article on Bloomberg the other week). At the peak we had duplicate and triplicate positions. So many of these job losses were people who weren’t adding value to the organization except to pick up overflow when times were flush. I’ll state that those who are employed typically have a better shot of getting another job than those who are unemployed especially in financial services. Its an unfortunate reality. So its entirely plausible to say that if you don’t pay someone what they rationally think they are worth given some adjustments they will most definately move on to greener pastures. To say that the job market sucks so people have to just suck it up and be happy they have a job is not representative of the reality on the ground. To take no bonus last year for some people was a huge portion of their total comp. To ask them to do so again consecutively is not realistic. I’ll reiterate my point, the populist rage in this coutnry is strong but its too little too late with government regulation. Nothing will have teeth if it even makes it out of committee.

  14. Fred Davis

    Seismic changes are upon us. Populist rage is not just here, but abroad. Wall St and its lobbyists in the past have been able to take on all comers, but never all at the same time which is what they’re facing now. Wall St will not win the battle this time. GS knows they can’t pay out that money. One way (voluntarily) or another (legislation) they will not. Firms are slowly lining up to change so that change isn’t forced upon them, but I think it will be anyways.

    Andy, assume you’re right. That would mean we’re back to the old ways. That in effect would mean that all the upside goes to Wall St and the downside continues to go to taxpayers. Do you think: 1) governments will allow this again; 2) this is sustainable for society?

    There is one thing though that I could see happen. That is, after legislation happens, bankers find a way out of it somehow. But if that happens, the public isn’t totally stupid, and journalists, and all kinds of other people have their eyes fixated on this so it will not escape the examining eye. There would be backlash for any bank that tries this.

    Wall St. is in a corner now. It was bound to happen. It took advantage of an arb that last for two decades plus and it finally burst badly enough where I don’t think we’re going back there. If I’m right, this will see to it that real estate become lower. And I don’t see any substitute to make up for outsized Wall St comp packages. Also, there isn’t enough hedge fund capacity to take on sell-side people, even for the best ones who are qualified to work on the buy side.

  15. patk14

    I believe bonuses will be higher for the Hoboken type financial employee over what was paid after 2008 (whether it was paid in calendar year 2008 or during the 1Q09). But those bonuses will be paid to a reduced number of people who managed to survive the layoffs. As Laki pointed out, banks are borrowing at 0% and making loans at wide spreads due to market risk. Easy money while it lasts. 2009 results will be strong but significant liabilities remain on the balance sheet. Many executives say that they have to pay their stars big money to keep them from leaving. But where are all those “stars” going to go? Hedge fund opportunities are limited and there are less big banks with further consolidation likely.

  16. Laki

    Andy, responding to your comments:

    You looking at GS and JPM alone is what’s called a survival bias. Generating statistics by looking at the sample set comprised of winners alone will produce unrealistic numbers. Look at the entire industry. For every guy at GS that is making good money this year, there is a guy out there who lost his job because his firm went under or it downsized.

    On your other point that people will leave if you don’t pay them well.. In general I agree but the question is what does “pay well” mean and where exactly would those people go? Hedge funds cannot possibly absorb even a modest portion of them. Most hedge funds employ a handful of people – not more than that. You cannot fit an ocean worth of water into a swimming pool. It just doesn’t fit. For every guy working at a hedge fund there are 100s of people working on wall street.

    After you eliminate hedge funds as a place to absorb the wall street guys you’ll realize that there is no other profession that pays as well as finance. So there is nowhere for these people to go even if you cut their salaries in half. Where would a math PhD guy who works as a quant at Goldman go if his salary was reduced to 200K without a bonus? He wouldn’t get more than that at any engineering firm. Where would a bond salesman go if he didn’t get his ridiculous sales commissions? Where else would he be able to make sick money without really having any tangible skills other than networking?

  17. Andy

    I admit I do not have the answers on how to reabsorb the lost jobs in the industry. I don’t see that many coming back but I do believe that many companies got scared and cut too deep. But many who were unable to make it through this cycle w/out loosing their job may want to pursue other career options or accept a lower paying position working in another part of the country. From a revenue perspective the bar was set so low for these companies to meet expectations that many have exceeded their year estimates and were rewarded with stock gains(BAC/Citi/GS/JPM). These guys will definately pay out bonuses this year if they haven’t already. Many paid “retention” bonuses mid year. I think the key is that the compensation isn’t completely disapearing its morphing into something else or changing names to disguise the funds in the annual reports.

    I want to highlight something that Fred points out if major financial overhaul does occur I absolutely guarantee that Wall St will find loop holes around regulations. I hate to point out the obvious but the media in our country is typically late to the game or clueless and the educated public doesn’t fully comprehend the intricate nature of government meddling in the private sector. If people actually listened(read understood) to the media Paul Krugman would have another nobel prize. He’s been screaming from the rafters about financial overhaul as have many. I’m saying Tim is no better than Hank and will take care of his friends. These people need jobs when this administration is over. They will not bite the hand that feeds them and their friends.

  18. Andy

    Pat, just read your bit about bonuses being paid to less people but will be higher. I think that hits the nail on the head. These companies aren’t really increasing their total comp pools but are paying less people more. However, I do quote Goldman and JPM bonus pools as very real examples of companies that are rocking this year and will be flush with cash. They will do what the need to.

  19. lori

    Paul Krugman is my hero.

  20. homeboken

    Lori – Any reason why you love Krugman? Was it his weekly article in the Times? Or do you love his entire body of work?

    If it is a specific piece, please post.

  21. Lori

    I think the guy is brilliant and I agree with much of his philosophy regarding both social and economic issues. Here is one small gem taken from Wikipedia:

    On August 2005, after Alan Greenspan expressed concern over housing markets, Krugman criticized Greenspan’s earlier reluctance to regulate the mortgage and related financial markets, arguing that “[he’s] like a man who suggests leaving the barn door ajar, and then – after the horse is gone – delivers a lecture on the importance of keeping your animals properly locked up.”[96]

    There is a great write up of him there if you want to learn more about his views and accomplishments.

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