2009 Dec 4th

Hoboken Condo Sales – The November Numbers. Hoboken Buyers Get More for Their Money

Why Are Average Sales Prices Stable When Price Per Square Foot is Dropping?

The November sales results are very interesting.

Take a look at the bottom two charts.  I compared this year’s monthly results to the past 3 years and noted the year-over-year changes.   For the sake of simplicity, let’s just look at the yearly average figures at the far right.  The average sales price of a Hoboken condo has decreased only a little.  The price per square foot has decreased by much more.  Why might that be? 

To date this year, 588 condos have sold for a total of $295mil in sales so far.  Last year 800 condos sold for a total of $423 mil in sales.  That represents a 30% decline in gross sales but only a 22% decline in total space sold.  The average unit size sold so far this year is 1060 square feet versus 1000 square feet last year.  Of course, I’ll complete the chart when we have all the data at year end. 

So what does this mean?  Basically, that you now get more for your money in the Hoboken condo market.  Buyers who were spending half a mil for a 1000 square foot 2 bedroom can now get closer to 1200 or 1300 square feet for the same price.  That is my theory and my day-to-day experience in the market (having closed more deals in 2009 for buyers than any other agent in Hoboken) bears that out.  Any quants out there want to contribute an alternative analysis?  I’d love to hear your ideas.

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  1. stan

    great work Lori. Thanks.

  2. lori

    You’re welcome!

  3. rich

    Sure this is ‘Hoboken Buyers get more for their money’

    But really this is more ‘Hoboken buyers use decrease in per square foot costs to go bigger rather then cheaper.’

    I don’t have all the data in front of me since my work blocks google docs but could some of the decrease in per square foot cost be attributed to the fact that the per square foot cost for larger units has always been less? If you have the per square cost divided out to different size units above please forgive me.

  4. vreporter

    The stats are actually much more skewed than they would be otherwise since these are only annual numbers. By that I mean that the introduction of the super expensive properties on the waterfront has thrown it out of whack. Even ONE sale would blow it out of proportion for the majority calculation. We had more than one sucker closing this past year, I assure you. Their price/sqft actually blows the averages or medians to a much higher rate than has been experienced by the majority of the city. we are down much more than your results show for most of the town because of that wrench thrown into the gears.

  5. Kelly

    VERY interesting post.

    -Kelly Stevens
    Hudson Realty Group

  6. lori

    Vreporter – And your empirical support for your statements is????

  7. vreporter

    Remove the W or Maxwell or Harborside Lofts from your sales numbers for the year and see for yourself. No rocket science needed, just basic math. I stated long ago that the avg/sqft would be below $400 and it already is for most of the town as far as trends are concerned. The real damage comes when those sellers stuck with the “high end” stuff cycle into the picture. In the investment business, we call them “bag holders” for a good reason. The complacency about schools and taxes here is simply rubbish. And the big demographic trend hypothesis about fewer kids and closer to the city has 20 year implications. I think most developers will have disappeared if they’re waiting for that prayer to come through! Bob Toll is one of the smartest guys in the business. His buyers haven’t realized just how smart. I think we had this conversation before. The employment trends we have debated before are going to be the nail in the coffin. Great video posted by Reality on that issue. We are in for more pain on Wall Street this year, equal to past year believe it or not. Goldman’s windfall was not through Goldman’s own work, that’s a longer unrelated story.

  8. Tiger

    vreporter, I see what you’re saying. But by theory most higher-end condo buyers are related to Wall St in a way or another. Doesn’t it make sense that those buys would actually refrain from buying those super-expensive units altogether?

  9. vreporter

    Tiger,
    You’d be surprised how many finance wannabes outlive their means by depending on future hopes. Although they work on Wall Street they do not earn a sufficient income to live the high road. In Hoboken’s dust these past few years, there are very few buyers who would now “qualify” to buy the places they are in. They will lose them as time catches up with them. These developments were designed for them and now the liquidity has vanished. Hoboken was hooked on future tax revenue just as this country has been hooked on oil. The tax situation here is a giant sucking sound that few have exposed because it’s a time bomb. When a town gets into the hospital business there are too many things going wrong. When schools are converted into condos there are too many things going corrupt. When a 5-star hotel with no financing avenues is sold as a $2 million lifestyle concept for condos you can never own there are too many stupid people living here.

    How many of those developments that have closed this past year actually went to contract in the past year and a half? Follow that answer up with how many will close in the next year and a half?

    My favorite term… de-lev-er-ag-ing! I’d like to hear from all those hyper-inflation kooks now (if they haven’t commited suicide already)! That was their ultimate property motive.

  10. bz

    Vreporter – “Remove the W or Maxwell or Harborside Lofts from your sales numbers for the year and see for yourself.” W, Maxwell, and other high-end condos ARE part of Hoboken market. How can you take them out and still call your calculation accurate? If that’s the case, applying the same logic, I would say that taking all the far west and northwest low-end, short sale, and foreclosures out of calculation and you will get the true Hoboken value! By the way, the buyers of these properties aren’t stupid. They weigh all the tax, school, politics, and other issues as everybody else. A lot of them bought in all cash. Even if they bought using a loan, you have to be well qualified in order to get a jumbo loan nowadays.

    There are a million ways to interpret the data. One way or the other, you are always right under your own assumptions. It’s not easy to keep a level headed and see the data objectively especially if you have interests or even a stake in the market. That’s why there are always opportunities in this inefficient market, no matter at what stage of the cycle.

  11. vreporter

    bz,
    You don’t get it! This discussion began with Lori’s results on “trends” over a long period of time. The comment I made was to point out the “skew” because of the very recent entry of these properties. Not that they are not part of the market. And as those properties drop from the peak (more than any other types of properties in such conditions), the “norm” will show much lower numbers as all ships sink. All cash buyers are as stupid as financially literate buyers if they are expending cash at a time when borrowing is as cheap as it is. Their cash would have outperformed (by multiples) if it were in almost anything other than real estate. Not impressive!

  12. bz

    vreporter – Having high-end condo has become the norm for Hoboken since 2006. They didn’t just emerge yesterday. The high-end sales numbers in 2006/7/8 may not be as same as the numbers in 09, but they were way higher than that year’s average and they have powerful impact on values of properties surrounded them. If you compare each year’s average which includes all data points, then the trend is valid, although it may not reflect the trend of a certain price tier. If you just want a trend line for non-high-end sector, you certainly can do so. Then your trend won’t represent the whole Hoboken trend which was Lori’s analysis.

    All I wanted to point out was that the “skewing” is part of the trend every year in Lori’s comparison 2006-9; whereas your analysis is only for a certain segment of the whole market.

  13. TS

    vreporter: “And as those properties [high-end] drop from the peak (more than any other types of properties in such conditions)…”

    I going to repeat an ongoing theme with respect to your comments: Where is your empirical evidence for this claim?

    Just based on what I’ve seen in the Hoboken market in terms of what sold, the biggest % price drops have occurred on less-than-ideal parts of town, like the SkyClub. Perhaps you’re right, but let’s see the data.

  14. Tiger

    Thanks vreporter. I’d like to think that the mortgage crisis is at least limiting the number of individuals you’re referring to who are buying / living beyond their means. Yes, borrowing money is incredibly cheap but then again it is much harder to qualify.

  15. laki

    Median $ / square foot is the best SIMPLE methodology to look at for long term trends. It is not perfect, but many of the biases vreporter hinted at are less significant using this methodology. (Even better would be to exclude all the units from the pool that didn’t exist X years ago and then look at the median price per square foot of that reduced set over the X year time period). This is what I would do if I wanted a quick and dirty but decent indicator of the trend in prices.

  16. A

    For whatever it’s worth (which may not be much!), I have a couple of anecdotes of people leaving NYC and going back home (e.g. Texas, England) because they have lost their jobs and cannot afford the cost of carry living in NYC. I assume they can’t find replacement jobs here or they would stay. I’m not sure what effect this would have on real estate prices on the margin. These people did not own–they rented.

  17. vreporter

    I agree with laki.
    A – this is a huge demographic change. We have a net exodus for the first time in a long time while buildings are still being put up.

  18. TS

    vreporter: “We have a net exodus for the first time in a long time…”

    Where do you see that? ESRI data estimates show otherwise.

  19. Tiger

    I wouldn’t worry about demographic changes in the area anytime soon, for every person that leaves (and I have a couple of friends who moved back home) someone else moves in. We take this place forgrantted, but NYC is truly a dream for all youngesters out there, regardless of all its flaws.

  20. homeboken

    No Wednesday Wrap Up this week?

  21. Lori

    Yesterday was the realtors convention in Atlantic City. I spent the day studying what to do when you have a pair of 9s and the dealer is showing a 7. (Stand). One day was plenty for me so I’m back in Hoboken doing the weekly wrap up today. I’ll post it shortly.

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