2010 Jan 12th

Hoboken Realtor Speak

Did You Know  Hoboken Real Estate Hit Bottom Months Ago?

Hoboken Condo for Sale Sign

Just the other day I presented an offer to an agent in town on behalf of one of my buyers.  There was a very recent sale in the same condo building.  The active listing was listed at about $515 per square foot.  The sold unit was a little bigger, had essentially the same upgrades, kitchen and bath,  and included deeded parking.  The active unit was being sold without parking.  The comp sold earlier this year for about $450 per square foot.  Simple math ($450 per square foot of closed comp X  square footage of active unit) resulted in my buyer’s offer price.

When I presented the offer I made it very clear how we arrived at our number and was sure to mention that this unit had no parking. The listing agent presented the offer and came back with the response that the Hoboken market had reached bottom several months ago and now we were in a much stronger market so the closed comp didn’t matter.  I asked the agent if she had any actual evidence, statistical or otherwise to back up her assertion.  She told me that deals were falling apart all over the place before the holidays but now they are not.  So I guess her say-so makes it true.

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  1. thoughts

    i do not beleive that comps are the “be all end all”. something is only worth what someone else is willing to pay for it – not what a comp says it’s worth – that works for both seller and buyer. this is especially the case in hoboken where all of the condos are unique.

    further, there’s nothing wrong with a seller holding out for a certain purchase price – maybe they’re in no rush.

    sorry – not everything is so cookie cutter.

  2. chuck

    As a potential buyer I would consider what another similar unit sells for to be extremely important. Sellers can ask for whatever they want but they may be waiting a very long time until I or other buyers are willing to pay what they are asking.

  3. Craig

    I’m sure a lot of seller’s agents feel this way, and as a result won’t budge on the price much. Some think we are still back in 2006/2007. But reality will set in as the units sit for months, and the price will be lowered monthly as we’ve seen with so many other places. Hoboken has fared better than most of the country, but it has not reached the bottom yet. Only markets that never had bubble pricing to begin with are at bottom and could even post small gains this year like much of Texas and Albany, NY. I don’t think Hoboken will see the bottom until 4th quarter 2010 or perhaps sometime in 2011. I speculate that Hoboken has at least another 5% downward to go with no gains seen until 2012 at the earliest.

    Why do I think that? Well Hoboken’s market is unavoidably connected to the NYC market, which is predicted by many to be hit hard in 2010 with double-digit losses. Hoboken is going to get a piece of that if it happens. Plus, all those ARMs and other exotic mortgages so many people took out for places they couldn’t afford here around 2006 will be resetting with unaffordable payments soon and they will be unable to refinance because they are underwater. As a result I’m betting a flood of foreclosures and short sales are going to hit the Hoboken market soon, thus pressuring prices further downward. As a recent buyer I’m okay with a 5% or so hit. I’m sticking around for at least 5 years and I knowingly bought my condo more as a tax shelter than a profitable investment anyway.

  4. Josh

    While a lot of people discuss all of the subprime resets as a driver (of people), I don’t think the numbers bear that out. As the LIBOR currently hovers below 1, my ARM will be resetting soon down in the neighborhood of 200 bp. I will now enter repayment, which should help with the whole-at water level-thing, and my payment should go up by about $250, which includes around $1000 in actual principle. Compare that to the $600 a month payment bite that came in with the property tax increase (thank the escrow multiplier and overassessment), and this seems like a smaller hit (after reassessment, my monthly came back down to earth), certainly not going to get me to list my condo.

    Of course, the media will keep saying subprime will reset way up, forcing people out or to refi (which I have no desire to do given the LIBOR curve and my time horizon here) will drive people out of their homes, causing the aforementioned “flood of foreclosures and short sales.”

    My thought around here is one simple rule: Lose your job, probably a foreclosure, don’t lose your job, probably keep making your payments. I believe that’s what’s happened around town besides the sky club.

  5. senor

    as a buyer in the Hoboken condo market, i have seen some tightening up, but its mainly because there have been so few new listings since Thanksgiving. at some point, the pent up inventory is going to start trickling and in the spring possibly flooding back into the market, and it won be a pretty picture for sellers

  6. stan

    Judging from Lori’s recent sales updates, the decline has not ended. Most places seem to be trending lower and lower. Maybe the realtor should sign up for the links :)

    The agent probably got the property with an inflated listing price. Now her problem may be the unrealistic sellers. At some point they’ll come to Jesus. Comps are the only tool available to make a pricing judgement.

    Lori it would be great if we could follow this property, (i realize that’s unlikely, but it would make am imteresting case study).

  7. stan

    “an interesting”^^^^^

  8. Lori

    Without disclosing the identity of the property, I’d be happy to post a follow up.

    I believe comps are an extremely useful indicator of value and crucial to pricing a property for sale. They are an objective, realistic, timely indication of what a buyer paid for a similar property – or what the market will bear. What better indicates the true market value? What the realtor who wants the listing tells the seller it’s worth? The seller’s calculation of what he paid plus x% profit and a few more thousand added on to cover closing costs and commissions?

    Examining comps takes skill and experience. Of course, the seller, the realtor and the buyer must distinguish among the properties in the group – is the location really comparable? How does the condition of the units compare? What floors are they on (if a walk-up)? How long ago did the other sales take place and has the overall market changed significantly since that time? It is not just a matter of picking arbitrary units of the same size.

    Here, the sale was recent, the units were extremely similar but the sold comp included at least $20k worth of deeded parking. If anything, the pricing of the new unit should have been cut to reflect the lack of parking. This is especially important in a newer building. When everyone else in the building has parking except you it makes your unit that much less marketable. In an older row house type building, no one has parking so it’s a level playing field.

    With 47 new listings this week, the inventory trickle has begun. I suspect there will be more to come. What really irked me was the bald assertion by the other realtor that my buyer’s offer was too low because we’ve “already hit bottom”. I know that agents say that to prospective sellers in an attempt to get listings. I would have thought that one agent dealing with another might have a bit more respect for his or her market knowledge and experience. Instead this agent was clearly annoyed that I wouldn’t simply take her word for it and tell my buyer to up his offer.

  9. teaorcoffee

    Lori, just wondering what kind of an agent would behave this way? Is it a more experienced realtor, or someone relatively new to the scene?

  10. Lori

    Experienced.

  11. potential_buyer

    Couldn’t agree more with Craig above – my prediction is that the worst in Hoboken is yet to come. I could be wrong, but I certainly wouldn’t state that the area is already rebounding! I too am very curious to see how this property tracks and whether the seller’s realtor will continue to be so ignorantly bold in his/her statements…

  12. patk14

    Lori, not your style, but it would have to be tempting to give this agent a call a few months down the road after he/she has reduced the list price and say you told him/her so. Please keep us abreast of the situation. Don’t we all wish we knew when the market has actually hit a bottom!

  13. Tiger

    Yea and I’m the king of England…

    Next —>

  14. HobokenNative

    The selling agent sold his client this bag of lies and is simply not willing to tell them the truth now that this listing is in hand.

    And to address the comment by thoughts

    “this is especially the case in hoboken where all of the condos are unique.

    further, there’s nothing wrong with a seller holding out for a certain purchase price – maybe they’re in no rush.

    sorry – not everything is so cookie cutter.”

    If a seller is not ready to sell their place for what it is currently worth, please keep it off the market. You are wasting everyone’s time. And furthermore, most units built in Hoboken in the last 20 years are very much “cookie cutter.” The developers bought the same finishes and reused building plans to save on expenses because most buyers were not interested in making sure they were getting quality, they just wanted in on a piece of the rapidly appreciating Hoboken pie.

    Looking to sell a unit quickly in this market? Redo your floors, kitchens, bathrooms and replace your hollow wood doors. This should help. Also, be realistic about what your place is worth. Trulia and an educated agent can help you make it happen.

  15. angel

    Having been in the Hoboken market sporadically over the past several years as well as having my NJ License for over 20 years, basically, other then you and your husband, I have found the agents in the “Hoboken Big 10″ offices to be simple minded, transient in perspective, aloof and arrogant(not sure why), unreasonable, uninformed, ignorant as to process of transferring of title, obnoxious, unrealistic and I will not bring anyone of my clients there. Recently we have sold units in Weehawken and Jersey City where the listing agents and brokers are realistic, professional and helpful and frankly, my clients are much happier living there. No tickets, no boots, no attitudes, less traffic, plenty of parking, no low rent locals racing in the streets, no low income housing 2 blocks away. And 7 minutes on the light rail to the bars, if that is what floats your boat. Oh, and less corruption too.

  16. Lori

    Angel – to be fair I think there are good and bad agents everywhere just like I found there were good and bad lawyers everywhere and good and bad travel industry people, good and bad bankers, good and bad doctors, etc., etc. While I appreciate the compliment, my sincere wish is that somehow the bar could be raised and all Hoboken agents would be more knowledgeable, professional and better at what they do. It’s a field with very low barriers to entry and very high turnover. As an industry we should have (imho) continuing education requirements (and I don’t mean the buy-a-certification scheme that currently exists, much more stringent licensing requirments, and lots more transparency. Nonetheless, the cream still does tend to rise to the top. Consumers should learn to be be a bit more discerning than picking a realtor based on a photo on a shopping cart. Buying or selling a home is usually the biggest transaction of one’s life.

    As for Hoboken as a place to live, some of us love it here, problems and all, and wouldn’t move to Weehawken or Jersey City for all the money in the world. All the Hudson County cities and towns have very similar problems – budget deficits, crumbling infrastructure, corrupt local government, poor educational systems. The fact remains that Hoboken is a young, vibrant, convenient place to live with big city access and a small town feel. Could it be better? Of course. Rather than bad mouth our neighboring communities, I prefer to work towards that goal in whatever small way I can. We’ve been here for over a decade and we’re not going anywhere any time soon.

  17. teaorcoffee

    Angel, I think your statement is WAY too broad, and offensive to a lot of people. Your comment about “low rent locals” really says a lot about your own character. It also makes me question how much you really know about the places you consider paradise, Weehawken and JC. JC has no low income housing? No corruption? Plenty of parking?

    I enjoy living in Hoboken, as do many, many other people. If you don’t like it, fine. I’m not saying it doesn’t have problems, but your bashing everyone in town with such a broad brush makes me wonder why you have bothered coming onto this site about HOBOKEN real estate news.

  18. mona

    Just curious… anyone know what type of consruction is happening at the Skyline bldg? They have really high HOA dues. Wonder if they were hit with an assessment. A friend of mine was considering buying there once. Taxes were low but dues were too high.

  19. Lori

    The maintenance reflects the fact that it’s a full service building with 24 hr doormen. What type of construction? Don’t know what you means. The building has been completed for years.

  20. Tiger

    Oh don’t talk bad about my Hoboken! In fact over lunch (I’m in Greenwich, CT) my client brought up cake boss, and I was telling them how there are other nicer bakeries in Hoboken, and we started talking about Hoboken in general, they noted that I keep saying ‘our’ and ‘we’ a lot whenever I refer to it.

    Regardless of its troubles, some of its people (who look really good but need to smile more :-) ), and an array of issues, I don’t think I can live anywhere else. Let’s just say since I came to the states as a college student in 1998, till this day, 07030 has always been on address, and I don’t plan to change it anytime soon

  21. homeboken

    My feeling with the original post is this: when you are dealing with a seller or agent that thinks they seller has control over the buyer, then make it clear that they do not have the control.

    My offer would have been phrased like this: $450per square foot, this offer is good for 24 hours. If your seller doesn’t wish to counter, then fine. If I am still in the market and this condo is still for sale at the end of the month, my offer will be lower than $450. So Mr. Seller agent, you can let your buyer know that if they refuse to negotiate, that is fine. But I will not be at 450 psf when they come back.

  22. angel

    I think you all missed the point. All we were saying is that there are other very fine places to live where the real estate agents and the town fathers treat their residents and potential residents with respect, as really, we are all paying their salaries one way or another. Good luck and try to keep the market from crashing even further. Hopefully my cousin who paid way too much 5 years ago and who currently has his 2 bedroom uptown with parking on the market for 100k LESS that he paid does not loose any more out of his pocket.

  23. HobokenSeller

    Why would the market continue to go down with interest rates low, incentives to buy places, and all the finance people in NY back on the job?

    I do believe we have hit bottom, but I think if we get a 1-2% rise this year we are blessed.

    People’s mortgages that readjust right now will get a much BETTER rate than they had in 2006. So I doubt if they can still afford it today, they will have much trouble.

    Just my opinion… and people will always try to price higher than worth. Greed is always just around the corner when things start to pick up.

  24. homeboken

    Seller – Your reasons for a price increases are exactly the reasons that prices will drop.

    Rates will have to go up eventually – this negatively impacts prices.

    Incentive to buy places – (tax credits) will be abated in the spring (unless extended by the govt)

    Jobs – I would encourage you to read about the new compensation rules being handed down. Cash bonuses are going to be 5%-25% of what they once were, the rest is going to be made up with restricted shares (and subject to recapture). Unless Sellers are willing to accept restricted shares as part of their price to sell, these finance jobs will not be supporting the high-end market.

  25. thoughts

    homeboken –

    come on already, read the news – there was (and will be) large Wall Street bonuses.

    also, your tough talk to a seller doesn’t work most of the time – get real.

    you’ve been saying (and saying and saying and saying) that prices are continuing to decline. we’ve been flat for LONG TIME now!!!! no???

    thoughts

  26. thoughts

    here’s one of a million articles on the subject:

    http://www.latimes.com/business/la-fi-bank-fee12-2010jan12,0,6822520.story

  27. homeboken

    Flat? A review of Lori’s stats show declines holding steady for all of 2009.

    As for bonuses we will wait and see. I wish you were right, but since I know how my bonus will be paid (and I work at a Wall St) firm, I will be sitting on restricted shares for 3 yeas. Added bonus is that I have to pay cash taxes for these shares, so really, I am out $$$ this year. I may do great in 3 years, but this years bonus will not be used for a downpayment.

    As for tough talk with sellers, someone has to teach these folks what side of the fence they are on. Take a look at the stats Lori posts, how many times do we see a condo sit for 6+months, with a dozen price cuts before it closes? I blame the agent for not being up front and the Seller for thinking their condo is “different” or “unique”.

    Only time will tell, I could be wrong, if I am I will be up front.

  28. homeboken

    And here is one that was posted today:

    http://www.businessweek.com/news/2010-01-13/bank-of-america-said-to-reduce-cash-component-of-bonuses-to-15-.html

    Cash portion of the bonus to be 15% of the total. Happy Days!!!

  29. Craig

    “Why would the market continue to go down with interest rates low, incentives to buy places, and all the finance people in NY back on the job?” – HobokenSeller

    Interest rates are artificially low because the government bought up all the mortgage-backed securities to keep them low. Those efforts are being phased out and rates will be on the rise as a result when the private market is back in control. You can expect to see 6% or higher in a year. The homebuyer incentive ends in April. Guess what happens when the artificially created low rates and incentives are gone. NYC lost 50,000 finance jobs. You honestly believe they’re all back? I didn’t know Lehman Brothers and Bear Sterns were back in business, and all the banks that merged and laid off duplicate workers had unmerged.

    Those interest-only ARMs had teaser rates even lower than today’s prime rates. They can double payments when principal is finally included and they reset at the current prime rate. The NYC metro area is expected by most analysts to be take the worst losses this year and Hoboken is a part of that metro area. We won’t get hit as hard as NYC because Hoboken wasn’t as horribly overpriced as NYC to begin with. But we will get a piece of it. My guess is at least 5%.

  30. UPennAlaskan

    Hoboken bottom? Does anyone follow what is happening in downtown Jersey City? I consider this the closest like product. Real Estate is totally not fungible, but JC comes close. It seems like there is more overhang supply over there could put a ceiling on Hoboken.

  31. stan

    Thoughts-

    Prices have continued their decline in 07030. I don’t know what you are looking at, but Lori post’s evidence of it each week.

    Is the fact that you purchased recently leading you to believe that prices are flat?

  32. mona

    RE: Skyline Bldg. It’s had scaffolding and nets covering the entire building for over a month. Maybe two months now. On the Observer Hwy. side. (the doorman is only there during the day. It might be advertised as 24 hour doorman, but I heard that there is no one at night.)

  33. David

    I believe Lori’s counterpart is exactly what is wrong with real estate agents. The fact is, the agent gave a nakes assertion: we’re not at the bottom anymore. No evidence was provided, and no stats. Just her “expert” opinion. For which she has no reputation risk (to the extent there are repeat buyers, they wait long periods before the next sale; and as a seller’s agent, their reputation is not for sale, their access is).

    So, who cares about home prices going up, going down. What we need is to economically punish agents, and make sure they are on the hook for what they say.

    In some cases, the seller’s agent don’t even sell access: they don’t show up to even open the door. The question a conumer needs to always ask is their agent is “How have you proved your worth today?”

  34. thoughts

    wow! will this help homeboken?

    http://finance.yahoo.com/news/JPMorgan-investment-bankers-rb-737197061.html?x=0&sec=topStories&pos=1&asset=&ccode=

  35. homeboken

    thoughts- Do you read the articles you post? From your posting:

    Banks across the industry have changed their compensation plans to give managers more of their pay in the form of stock that must be held for multiple years. This sort of deferred compensation is meant to curb traders and others from taking short-term risks that could harm the investment bank several years late

    I am not arguing that the bonus numbers are going up. I am telling you that the amount of cash is way down. Wall St is paying in restricted stock shares, these shares will not be used to buy real estate. Keep trying though.

  36. JC

    homeboken….off topic for this thread but you said you work on wall street. Do you think giving equity for bonus will curb risk taking? Isnt that one of the core reasons behind equity bonus this year? Its one thing if stock must be held 10 years, but 3-5 years holding period one must take on risk in order to move stock up, no?

    If bonus is 100% cash or better yet, compensation raised and bonus reduced, their would be no backdoor incentive for additional risk. thanks

  37. TS

    Homeboken,

    My take was that the amount of cash being “way down” was restricted to, or at least hit hardest, managers (as the article stated). There aren’t many managers who own or are considering buying in Hoboken is my guess.

  38. homeboken

    TS – There seems to be a very common perception that the senior level wall st guys make bonuses in the 7 figure range, that is only for the very top. The media loves to present that the “average employee of bank x will bring home $Y hundred thousand dollars”

    Just like Lori’s data, looking at only the averages is mis-leading. You would be be better off looking at the median. The top level employees make huge sums, ridiculous sums. The guys that are Directors or SVP’s in operations (the Hoboken set) are getting 50-150k max, 75-85% of that is going to be in stock.

    The guys making millions of dollars do not even know where Hoboken is located. They are living in CT, LI, Westchester Coutny, or NJ sub-urbs.

    The “average” Hoboken Wall ST employee bonus will be nice. But it will not be enough to justify spending half a million on a 1100 sqft 2 br place.

    My thoughts on the affect of restricted stock and future risk taking to come tomorrow.

  39. TS

    Homeboken,

    I can’t say I know the answer to this, but the article stated “managers” – which would not include VP’s or Directors (or Analysts or Associates). So you’re saying that anyone from Senior VP and up is going to get 75-85% RSU payouts for their bonuses? Guess we’ll soon find out.

  40. Bill

    JC said at January 16th, 2010 at 1:12 pm

    “homeboken….off topic for this thread but you said you work on wall street. Do you think giving equity for bonus will curb risk taking?”

    You don’t want to eliminate risk taking. That is what IB guys do, assess risk reward trade offs and hopefully make the right decisions.

    You just want them to focus of long term profitability over the quick buck. Vesting periods of 3-5 years should accomplish eliminating most gimmicky short term profit centers that blow up down the road.

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