2010 Feb 24th

The Weekly Wednesday Wrap Up – Hoboken Condo Sales & Activity for the Week of February 23rd

Inventory continues to rise. Sales and dabos hold steady. The New York Times reports today that despite gains made in December, another 600,000 homes are underwater for a total of practically 25% of all homes! Here is the graph for the New York market. Meanwhile, recently reconfirmed Ben Bernanke continues to assure us that interest rates will remain “near zero” for an extended period. Now the interesting thing will be whether the first time home buyer’s credit is extended past the April 30 deadline.

What strikes me about the properties that have gone under contract or sold this week (with few price reductions, I might add) is that they are pretty nice units. The one at Harborside Lofts was my favorite – a great floorplan, tons of light and what a view! They are mostly good renovations, good locations and good value. So I still say, the good stuff sells when it’s priced right. The junk sits until it becomes a bargain too good to pass up. Maybe buyers are becoming more discerning as to what it “good” and what is “junk”.  Of course, they have lots more to choose from.  The days when they would buy anything are clearly over. There is a flight to quality in the Hoboken condo market.

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Here are this weeks numbers vs. a week’s ago numbers:

Studio & 1 Bedroom Hoboken Condos:

26 new listings.

220 total active – $378,624 average asking price. Average 75 DOM.

6 dabos. Average 62 DOM

5 sold for an average sales price of $361,500. Average 70 DOM

16 price reductions.

Two Bedroom Hoboken Condos:

18 new listings

250 total listings. Average list price $573,646. Average 97 DOM.

5 dabo’d. Average 120 DOM.

9 sold. Average price $568,555. Average 48 DOM.

16 price reductions.

Three Bedroom and Larger Hoboken Condos:

4 new listings

49 active listings. Average price $953,578. Average 122 DOM.

2 dabo’d. Average 105 DOM.

3 sold. Average price $836,666. Average 62 DOM.

3 price reductions.

Hoboken Condo Open Houses

If you are in the market for a Hoboken condo, our Hoboken Open House Google Map is your single best source for locating every open house in Hoboken. It’s posted on Friday every week. The info is updated weekly. If your google search seems to pull up an older version, click on the title link to get the most current map. Like this report, due to MLS regulations, to receive the map with the actual links, you will have to request it using the request form on the post. It only takes a second.

Want to Receive New Listings & Price Reductions Daily?

If you would like to be emailed the new listings and price reductions each weekday in either 1br, 2br or 3br categories just email us at info@hobokensbest.com letting us know which size(s) you would like and we’ll add you to the daily email list.

A word about that – if you have an ongoing relationship with another agent we are not going to email you listings. You can ask your own agent to do that. So what is an ongoing relationship? Is that not up to you? Have you been working with another agent on a regular basis? More importantly, are you happy with that agent’s service? If so,we respect that relationship.

If all you did is attent an open house or you’ve seen several properties with several different agents, that’s not an ongoing relationship. Despite what some agents in town would like to have you believe, simply showing a buyer a single property, or even a few, does not a relationship make. You are the consumer – you get to decide with whom you wish to work. If you think the agent who hosted an open house or showed you a property is incompetent or does not meet your needs why would you ever use that person as your agent? Unless you’ve signed a “buyers agency agreement”, which is highly unusual in Hoboken, find an agent you like, trust and whose advice you respect. It’s your money, no?

For more information you can always contact us at 201 993 9500.

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

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  1. shortsequalmarket

    Another sale at Sky Club. Evidently these “short sale discounts” are the only 2/2 people want to buy. Equity sales better change their prices to match Sky Club.

  2. shortsequalmarket

    BTW Ben Bernanke said the Fed will stop buying mortgage securities soon. So while the Fed Funds rate may remain near zero mortgage rates are likely to rise depressing prices.

  3. thoughts

    shortsequalmarket – no way – people hate the sky club – i wouldn’t live there even if it were free….

  4. jc

    ShortsequalMarket:

    It has been known for sometime now that the fed will stop buying mortgages. However mortgage rates have not been able to hold any increase we’ve seen lately. Markets anticipate future events and IMO the mortage market is not too concerned right now. There is an article on cnbc.com front page right now about how mortgage rates may stay flat in spite of the fed exiting the market.

  5. shortsequalmarket

    JC Maybe. However that is a different statement than Bernanke saying he will maintain the Federal Funds rate at zero. Lori’s first statement was the latter.

    Efficient markets anticipating maybe. However, with the Federal Funds rate at zero crazy things happen when floating money at zero percent. I would not be surprised with any change in mortgage rates.

  6. FAP

    Last I checked the Fed’s mortgage buying program was around 96% complete. When complete the Fed will have bought around 1.25 trillion in mortgage backed securities.

    For people not familiar with fixed income interest rates are set by the market. The more buyers of a product the lower the interest rate needed to sell all of the supply, the reverse is also true. When the Fed leaves the MBS market mortgages bond rates will have to rise to attract new buyers and the rates on new mortgages will increase to pay those higher yields.

    So while the fed funds rate may remain unchanged mortgage rates will rise. April would be my guess.

  7. Confused

    Thoughts, I know 2 people who live at the SkyClub who love it.

    You’d live there if it were free, don’t be some arrogant, its very unbecoming.

  8. shortsequalmarket

    FAP

    I agree once the Fed stops buying mortgages it will be interesting. There is so much new Federal Debt with the various “Stimulus” measures it is hard to conceive of mortgage rates not rising as free money is becoming scarce.

    On the other hand if you can borrow near zero and the government has said they will backstop FNM and FRE losses perhaps 5% for mortgages can be maintained.

  9. shortsequalmarket

    Thoughts: while you might not be willing to live in Sky Club there seem to be plenty of people buying there. I believe because these units are selling at market price while other units are listed at dream prices. Interesting the “difficult to close” short sales at Sky Club are closing but equity sales near the PATH seem to sit on the MLS.

  10. Lori

    It’s not like there have been hundreds of short sales at the SkyClub. It’s a huge complex with maybe 500 or more units? So if there were 10 short sales, that’s still only 2% and I’m not sure there were even 10. The units vary greatly depending on the view and location in the building. There is also a significant difference in finishes – carpet vs. hardwood, formica vs. granite. So prices vary as well with the ‘no view’ or ‘bad view’ units likely to lose more value.

  11. Craig

    That unit at Harborside Lofts is gorgeous and offers better value than neighboring Hudson Tea because you get amenities such as central a/c and wood plank floors that HT does no offer. That being said, $1.2 million for a 2 BR in Hoboken 15 avenue blocks from the PATH? That wouldn’t work for me. If I’m in that price range, I’m buying in Manhattan where I won’t be paying an insane $18k in property taxes, but rather more like $3k. That’s a big difference in your monthly payments, thus giving you more buying power across the river.

  12. Lori Turoff

    Actually if you buy a newly renovated unit at Hudson Tea from Toll Bros. they are doing work very similar to Harborside (re: kitchen, bath & floors). Of course you’re still stuck with the crummy heat/ac units. The Harborside unit was hardly a “2br”. It was huge and the views were amazing. Not everyone cares to live near the PATH. I liked it very much. It was, in a word, elegant. 1.2mil in Manhattan gets you a very run of the mill smallish 2br in a decent neighborhood but nothing nearly as nice as this. Agreed, taxes here are an issue.

  13. shortsequalmarket

    Of course if you keep that $1.2MM place in Manhattan as your primary address you can add in 4% income tax. If you can afford $1.2MM for a home then $300K in income is not a stretch. In other words $12,000 in income tax. Way to save.

  14. Craig

    “1.2mil in Manhattan gets you a very run of the mill smallish 2br in a decent neighborhood but nothing nearly as nice as this.” – Lori

    True. But my point was if you are paying $3k instead of $18k in property taxes, your increased buying power allows you to spend more than $1.2 million in Manhattan to get something a bit more comparable and yet still have a similar monthly payment. Even if the unit is not as nice, you’re living in Manhattan, not Hoboken. Location, location, location. Hence why I’d start considering Manhattan if my housing budget goes into the 7 figure mark – even if it means taking a lesser unit. I don’t mind high taxes as much if I get excellent public services and public schools in return. But for $18k a year, Hoboken offers neither to the buyer of that unit.

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  16. Confused

    Speaking of taxes, has there been any news about this in Hoboken lately? I haven’t heard anything, but I also haven’t really looked.

  17. Tiger

    Confused, no no news.

    It looks like we are sticking with what we have, for now, which to me is good news. I never expected taxes to go down, I will be happy if they don’t shoot up again.

  18. shortsequalmarket

    Excellent schools in NYC. Excellent Services. Those are two of the most funny things I have ever seen posted. What is the graduation rate in NYC, 50%? Have fun walking out your door to see homeless people collecting those excellent services digging through garbage for deposit bottles.

  19. shortsequalmarket

    and BTW your total tax bill (income, property, sales, etc) is still higher.

  20. Lori

    Where do you think is an ideal place to live Shorts? Iowa? Nebraska? Just curious since you’re so down on both Hoboken and Manhattan.

  21. Craig

    Good one Lori. Both Hoboken and NYC have their issues. But those of us that live here are here for a reason despite those issues: because there’s no place we’d rather be. I too wonder where Shorts lives or prefers to live.

  22. Tiger

    shortsequalmarket; no need for this attitude here. Most of us enjoy and care deeply about both Hoboken and NYC. If you don’t know how to live a good life and/or have fun in either one of them, that’s your problem.

    And next time you see a homeless person digging through the garbage, please thank your lucky stars it’s not you and wish him the best, you don’t have to say hello to him (cause that would be asking too much) but just wish him well in your mind and hope his life turns around.

  23. shortsequalmarket

    Hoboken and NYC are great. I never said otherwise. The real estate issues that Hoboken and NYC are having are no different than anywhere else in the country. I would be happy renting in either place.

    My issues, and why I post, is that there is always some desire to push aside the information which indicates the market is in continuous free fall.

    I also have issues with people ripping on Hoboken in favor of NYC.

    BTW places likes Aspen or Fiji I think are great places to live.

  24. Lori

    Oh, please, someone send me to Fiji right now!

  25. Craig

    “My issues, and why I post, is that there is always some desire to push aside the information which indicates the market is in continuous free fall.”

    Actually, the data establishes that Hoboken and NYC are holding up quite nicely compared to the rest of the country. If you want to see a market that’s really in a free fall, check out places like Las Vegas, Miami, or Phoenix where real estate is down as much as 50%. Now that’s a free fall. I’m confident in where the local market is headed in the long run, otherwise I wouldn’t have purchased my first home in Hoboken last month.

  26. thoughts

    shorty:

    “….the market is in continuous free fall.”

    it’s already fell! yes, some sellers are still holding out, but they won’t get what they’re asking. in other words, the FMV is at the bottom – not the listings. the FMV (based on sales) have been steady for at least (AT LEAST) 6 months now.

    thoughts?

    by the way –

    Confused – for many reasons – i wouldn’t live in the SkyClub even it were free. trust me. and, even if i wanted to, my wife wouldn’t, which is more important!!!

    in regard to NYC, the HOA charges are 5x what they are in Hoboken – no???

  27. thoughts

    Craig –

    Congratulations!!!

    How much off of the estimated high to did you get on the purchase price? 10%, 15%, 20%….?

    Thoughts

  28. Craig

    Thoughts – thanks! I got it for about 12% less than the original list price after it sat on the market for 5 months and underwent several price reductions. Before I bought it, I looked at all the tax records for my building in search of comps. If you consider the height of the market to be 2007, it’s hard to say how much off the high I got as there was no sale of an identical unit for that year. What I can tell you is that I bought it for $10k less than the seller paid for it in 2004.

    As for NYC HOA fees, it’s more like 3x higher than Hoboken – sometimes more depending on the amenities like 24/7 doormen, etc. But keep in mind that 80% of the housing stock there is co-ops and co-op maintenance is always going to be much higher than condos.

  29. Lori Turoff

    Well no, co-op maintenance is not higher because it is a co-op. It is higher because it includes your proportional share of the real estate taxes on the building. In a condo you pay that separately.

  30. shortsequalmarket

    Curious to know why you feel it is going up. Here are the facts I have seen occurring in 2010:

    *Labor force participation at a 30 year low (ie fewer two income households to make payments)
    *Unemplyment at a 30 year high (Despite 30 year low in labor force participation)
    *The Federal reserve ending purchases of MBS
    *Higher mortgage delinquency even versus last year
    *Home buyer credit coming to an end in April
    *In NYC/NJ, worldwide disdain for the regions industry (Greek fake numbers are similar to Enron fake numbers) yielding fewer financial jobs going forward
    *Public employee layoffs or pay cuts

    On the bright side I think the actions of Christie could be a strength if he controls property taxes

  31. shortsequalmarket

    One more thing many additional listings each week without corresponding increase in Dabo’d

  32. thoughts

    shorty –

    i said that it bottomed out – not that’s it’s going up right now….

    i agree with must – the recover is L shaped….

    the “corner of the L” was around a year ago….

    thoughts

  33. shortsequalmarket

    Lori good point on HOA including property taxes on a Co-op. If you add in city income and sales taxes it really starts to add up. The buyer better love the location over Hoboken cause they are going to have much less disposable income for enjoying everything else in life.

    In addition, if HAFA takes off that could increase inventory a lot as the government promotes short sales.

  34. Lori Turoff

    I confess to being born in Brooklyn and a native New Yorker who came to NJ kicking and screaming. Having lived about a decade in each of Manhattan and Hoboken I have to say that while they certainly have different costs they each have something great and unique to offer. I’m very glad I got to do both! The best part, and what I think is so important yet we tend to gloss over, is that now I get all the advantages of living in Hoboken and have such easy access to NYC that I really don’t miss it (much). Overall, I think it’s easier to spend less money in Hoboken and still enjoy life. There’s too much pressure in Manhattan to show off by living large, at least for me.

  35. shortsequalmarket

    Thoughts those reasons were more for Craig and to understand his “local market confidence”. However, that being said with the facts I stated why do you believe we are in an L versus a step down?

  36. Lori Turoff

    Maybe Thoughts is just more of an optimist?

  37. thoughts

    i believe that we would have seen some real price difference between the quarters, but, from what i see, we really haven’t. prices have been holding steady (give or take) for a substantial period of time, except for some limited circumstances. i’ve had about 10 or so really good friend purchase over the past 12 months. the “average” purchase price off of the high was around 15% or so – i personally think we are closer to 20% off of the high. also, one friend and some other acquaintances have totally stolen places (i.e. 25%) from really distressed sellers in the suburbs – but they got VERY luck to find them….

  38. shortsequalmarket

    Do you look forward at the future economic fundamentals? That is what I am doing. Current prices, even at 20% off, are only that high due to substantial government subsidies. What happens when those subsidies disappear? What happens when people stop believing they will, “make equity” simply buy buying. That is a large reduction in demand with a large supply waiting.

  39. Lori Turoff

    Just my 2 cents but very, very few of my Hoboken buyers (and I work with a lot of buyers) have taken advantage of either the first time home buyers credit or FHA loans. Maybe 10% of them. So how much affect might it have here when those subsidies go away?

  40. thoughts

    i agree with lori – i don’t anybody who received the tax credit.

    the people i know – want their own place to make a home in Hoboken, beleive that the market has bottomed and want to lock in 5% or so on the rate….

    despite what some people say, its cheaper to purchase a 2 bed in hoboken than rent for 3K. yes, the negative is you tied up $$, but, if you stay, i (personally) beleive its worth it and so do most of the people i know….

    if prices kept declining, then i would say wait – they have held. will things get worse? they were so bad at one point – i doubt it – there’s always an indicator for an indicator….

  41. shortsequalmarket

    FNM and FRE are government loans too. The processors currently sell 95% of their loans to these two government organizations. The Federal Reserve then buys those loans. This is a huge subsidy for every buyer with a loan under $729K.

    I see buildings with multiple listed units on either the south or north side of town have only price reduction activity (or new listings). A few examples are Capella, Observer Plaza, and Cypress Point.

    I also see a lot of 2/2 units with nurseries which I interpret as parents needing to get to a yard and a good school district. I know you believe people want an urban lifestyle in NJ but they certainly are not moving into vacant towers in Jersey City. They also seem to buy NJ magazine and are interested in the top 10 High Schools.

    I agree it is cheaper to own after income tax deductions on a monthly basis. However, in a neighborhood where most are unwilling to send their kids to the public school the inevitable selling costs reverse that statement.

    If there is no expectations of higher prices but an expectation of large commissions two years down the line prices have to fall. Otherwise people will choose to not lock themselves in.

  42. stan

    “i’ve had about 10 or so really good friend purchase over the past 12 months.”

    Thoughts, two questions:

    #1 did you send any of the buyers Lori’s way?

    #2 Did they purchase in the 1/2 block area near you condo that constitutes “the best neighborhood” in Hoboken?

  43. Lori Turoff

    :)

  44. homeboken

    FTHB credit is a phantom subsidy, espicially in Hoboken. The effect is nil.

    But shorts is correct, the real subsidy is the fed guranteeing and puchasing mortgages. If you don’t understand the impact that MBS purchase program has on mortgage rates, you should read up on it before buying. The demand for RMBS/CMBS is close to zero in the private market. Remove the US Govt (who is currently the only player buying) and the rates have nowhere to go but up.

    FTHB credit gets a lot of media play, but the that is not the real subsidizing force in the market.

  45. shortsequalmarket

    While I agree FHA and buyers credit have a small impact in Hoboken due to Hoboken’s high prices. Lori states it is about 10%. I think a 10% drop in demand is a big deal. Especially considering there is already about one year of inventory in Hoboken.

  46. Lori

    No – I said fewer than 10% of MY buyers – I don’t know about the overall number or percentage. Also, that does not necessarily correlate to a 10% drop in demand. Most of my buyers who will or have used the FTHB credit tell me they would have bought even without it – they just used it to pay for their closing costs, essentially.

  47. thoughts

    #1 did you send any of the buyers Lori’s way?

    *they used this site – some (not all) used Lori

    #2 Did they purchase in the 1/2 block area near you condo that constitutes “the best neighborhood” in Hoboken?

    *mostly, some are still looking in that area. it’s not the “best” in all respects – it’s the most valuable because of the PATH….

  48. shortsequalmarket

    I guess that is where we will agree to disagree. I believe there is only a limited amount of money available to purchase Hoboken condos. Each little drop (Tighter FHA, End of credits, higher FNM rates, etc) will hurt demand in an already oversupplied market.

  49. Lori

    I don’t disagree, I just don’t know that it’s a direct correlation.

  50. shortsequalmarket

    On a different note, does anyone here think Toll, Fields, or Metro Homes will ever be smart enough to conduct the equivalent of a reverse auction to sell their units? If they announced they were going to drop prices $5K every other week until sold buyers would be tempted to move.

    It would also benefit them but I guess they prefer to pay interest, taxes, and maintenance on vacant units in completed buildings. Instead they hold on play rent to own games and eventually announce large drops in price.

  51. Lori

    The head of MetroHomes spoke at our office meeting a week ago about MetroStop. His sales director told us the area was the “Tribeca of Hoboken”. Not kidding.

  52. Andy

    I love clueless execs.

  53. homeboken

    Tribeca 1988 perhaps.

    Lori – You touch on an interesting variable though. The number of units held off-line by Toll, Metrohomes, Fields. Do you have any guess as to the number of units that are being held off the market by these developers. I am throwing a “minorly” educated guess out there and say there are another 200 units available that are not part of the MLS.

    Any other guesses? Too high? Low?

  54. Craig

    I purchased using an FHA loan – I got a spot approval right before that program was terminated on 2/1/10. There was no other option as my girlfriend and I were first time homebuyers who didn’t have the six figures in cash needed for a 20% downpayment in this town. As for the tax credit, much like Lori’s buyers I would have bought in 2010 without it. But it did move up my timetable to the first quarter of the year so I could meet the deadline to get the credit. I’m not one to walk away from free money. It thus served its purpose by getting us into the market immediately rather than later.

    With spot approvals eliminated, FHA is now dead in Hoboken unless more buildings get project approval – there are only about a half dozen with it now. Hence why new construction like Vesta went and got FHA project approval. It makes the property more marketable to more people. I expect more to follow as 20% downpayments required by conventional loans become more and more out of reach for many.

    MetroHomes thinks that MetroStop is in the “Tribeca of Hoboken”? Funny, but the last time I was in the Tribeca of Manhattan I don’t recall there being any low-income housing projects located nearby. If you don’t mind that area, Ava’s Court is nearly as nice for about $100k or more less than MetroStop.

  55. thoughts

    stan my man –

    query – in your opinion, what area of hoboken held up the best in this devaluation?

    thoughts

  56. homeboken

    Craig – You just outlined perfectly the problem with FHA. If you can’t save 20% down, then you CAN’T afford the home. I know this is a harsh reality to most folks, but someone please explain to me how giving mortgages to fokks with 3.5% down is any different from sub-prime?

    If we assume Craig and his girlfriend make at least $166,000 combined (which equates to $500k at 3x income multiple) then you should be able to save $100,000 over the course of a few years to purchase your home and have some skin in the game. if you can’t, then you shoudln’t be a home-owner.

    Let me ask it another way. How much of a drop in your home value is needed before Craig decides, this isn’t worth it and just walks away? This is a strategic default and it is happening all over the country. You can say “That will never happen here” I disagree.

    My main point, which has been my only point from my first post on this board. If someone needs FHA, and 3.5% down payments to afford the average home in the area, then homes cost too much.

    Someone (or couple) making $166,000 per year should not need to get a govt assisted, low dp mortgage to live in this area.

  57. stan

    thoughts-

    Only way I can gauge is through tax records, resales etc. Much more volume has moved to the western edge, with significant discounts as you have pointed out.

    On the north end, which is more akin to the luxury label, we have seen many discounts as well. Hudson Tea, Constitution etc. Not to mention 1300 grand street and the other nw developments. I know garden street lofts and maxwell is discounted, but they are new construction so its more difficult for me as a layman to see.

    In the path vicinity, say willow west to 4th street north, there are relatively few transactions in comparison. The reason for this could be people are holding out for their price, or its less affected. I tend to believe people havent sold yet b/c they are not getting the price they want, this cannot go on forever.

    Six month tax records search has many nice buildings in walking distance, say 70 adams(although a bit further west) for example that are down 20% from their 2006/2007 levels. However willow/east 4th street south has much fewer sales posted.

    But the declines are there:

    159-161 NEWARK ST #4a (16%):
    More Info 07/15/05 570000
    More Info 01/15/10 8711 977 480000

    163-65 NEWARK ST (18%)
    More Info 03/10/05 8057 166 721500
    More Info 07/15/09 8678 908 587100

    82 CLINTON ST (16%)
    More Info 06/06/06 7957 59 650000
    More Info 12/15/09 8709 118 545000

    72 GARDEN ST (10%)
    More Info 10/16/09 8695 681 505000
    More Info 03/14/07 8172 160 550000

    205 PARK AVE(10%)
    More Info 09/24/09 8692 157 380000
    More Info 08/02/06 7990 261 415000

    I dont think any area in Hoboken has been spared. Western edge may be down 20+ but the rest of Hoboken is still considerably lower.

  58. thoughts

    stan –

    except for the large buildings near newark/observer (82 clinton, 163 newark, etc.), it seems (based on limited sales) the decrease in the 1/2 mile semi-circle is 10% – not 20%.

    i beleive that’s what i’ve been saying! 10% v. 20% is a huge difference!

    in regard to “this cannot go on forever” – it’s going on bra!!! and it ain’t changing! i wish it did – it would help some of my friends who are still looking.

    and by the way, my nyc friends still think Hoboken is cheap!

  59. Craig

    Homeboken – not that I have to explain myself to you, but my girlfriend and I earn more than $166k combined and can easily afford our new home. After the tax breaks (which we opt to get up front thanks to adjusted W4 witholding), the monthly cost of our condo is the same as our previous rental was. Our monthly housing costs are under 28% of gross income – the standard required by conventional underwriters.

    Your statements are based on several incorrect assumptions. First, who told you we only put down 3.5%? That’s the minimum FHA requires, but you can put down more if you want. We put down more than that and had enough cash left to buy all new furniture, upgrade both bathrooms, install a glass tile backsplash in the kitchen, and buy a 58″ plasma TV. That’s all paid for in cash with no credit card debt, and I still have 5 figures in savings left.

    Second, I’m not sure what your money-saving expectations are based on, but neither of us get annual bonuses and have only been making really good money the last couple of years. We saved the old-fashioned way instead of relying on annual bonuses as many do in these parts. I may not have had 6 figures in cash as a down payment, but I still had a lot of money saved that I used as I saw fit. So spare me the diatribe about what I can and cannot afford.

    I’m not worried about a short-term drop in home values. Why would I walk away and be homeless? I’m not an investor. I bought for the primary purpose of having shelter – both from the elements and from income tax. We will be in the unit for the long-term – at least the next 5-8 years. I’m confident the market will have rebounded by 2018.

    You need some perspective. An income of $166k a year makes you wealthy in Kansas or Iowa. But it’s not a lot in a place were nice 2 bedroom homes start at $500k and head well over 7 figures. You act like I’m on gov’t welfare. Meanwhile, the gov’t is simply insuring my loan (with premiums paid for by me).

  60. thoughts

    Craig –

    Who did your bathrooms? We’re looking for a contractor for our bathroom….

    If you liked him or her, maybe we can chat, as I may have some questions regarding tile, fixtures, etc.

    Thanks,
    Thoughts

  61. JC

    Craig…good reply. $166k gross is certainly not the take home pay.

  62. Lori

    First, this is not directed at you Craig. I would not presume to know of your personal situation or finances. I have had several buyers planning on securing an FHA loan with the minimum 3.5% down payment approach me about Hoboken properties. They told me they needed a seller’s concession to pay for closing costs. Just this week a young girl was interested in the “bottom of the barrel” properties in the 200k to 250k range. When I inquired as to whether she considered other, less expensive area like the Heights or the new FHA approved condos in Union City she said no – she wants to live in Hoboken. Well, there are no FHA approved building with units in that price range that I know of. She was going to try to get the entire building approved. Of course, the types of condo building with the least expensive units usually are not professionally managed, don’t keep adequate books or records, don’t have separate operating expense and capital reserves accounts, have only 3 to 8 units, often have tenants in place – in short, getting FHA appproval would be difficult at best. I suggested she save more money for a down payment and keep renting. I couldn’t help but wonder what would happen should a buyer on such a thin wire buy the property only to be laid off or get sick or face other financial issues. What motivation (or option) do they have but to walk away? Maybe nit everyone should buy or at least not with so little or no financial cushion and no real ties to the community. I tend to agree that this is a borrower with a high risk of default and while the FHA program may be self funding is it? Is not the taxpayer usually the one on the hook in the end? What about the delinquent maintenance payments that the condo association may have to forgive at the expense of the other unit owners. The question is really a societal one of whether it benefits us to support home ownership under any circumstances. Maybe recent history indicates that we should not?

  63. homeboken

    Craig – I sincerly apologize, if I offended you. I was simply trying to make a point about the affordability factor vis a vis income in Hoboken. We are all anonymous and even if we were not, I couldn’t care less about your personal situation, nor you mine.

    Congratulations on your purchase. But my point remains the same, 20% was (and IMO should be) the industry standard. If you can’t save that amount, then buy less home or keep saving. The years of getting what we want now, just because we want it, are behind us.

    The fact remains, if the govermnet was not offering subidized mortgages to buyers such as yourself (that put less than 20% down) you would not be in your new home.

  64. homeboken

    pardon the numerous spelling erros above, terrible.

  65. stan

    “in regard to “this cannot go on forever” – it’s going on bra!!!”

    This is where I believe you are incorrect, we’ll see over the next few months. All the data Lori posts shows continued weakness and price declines. Nothing I have seen shows any stabilization in prices.

    “except for the large buildings near newark/observer (82 clinton, 163 newark, etc.),’

    if my aunt had gonads she’s be my uncle.

  66. homeboken

    By the way this paragraph

    “You need some perspective. An income of $166k a year makes you wealthy in Kansas or Iowa. But it’s not a lot in a place were nice 2 bedroom homes start at $500k and head well over 7 figures. You act like I’m on gov’t welfare. Meanwhile, the gov’t is simply insuring my loan (with premiums paid for by me).”

    Illustrates my point exactly. When did we start determining what is wealthy by only comparing it to the homes we can afford? Do you realize that the area median income for Hudson County is 56,300? (http://www.huduser.org/portal/datasets/il/il2009/2009summary.odn?INPUTNAME=METRO35620MM3640*3401799999%2BHudson+County&selection_type=county&stname=New+Jersey&statefp=34&year=2009)

    And yet, here is Craig, making more than 3 times AMI, and he can’t afford the commercially required 20% downpayment of a first home.

    I stand by my statement, home prices as compared to incomes, are too high in this area.

  67. shortsequalmarket

    If there were not 3.5% FHA loans homes would not be so expensive. Kind of a catch 22. Whatever the government tries to make more affordable (education, homes, health care, etc) they end up making more expensive.

    On the bright side without government pushing up prices builders might not be able to add in expensive items like granite and we would really suffer.

    Lori good answer with regards to the FHA, not usually the answer I expect from a realtor.

  68. shortsequalmarket

    Craig

    What do you plan to do in 5 – 8 years. Are you planning to move to the ‘burbs for better schools? Thoughts said your demographic is not considering suburban living.

  69. Shortsgetsit

    Shorts said “If there were not 3.5% FHA loans homes would not be so expensive. Kind of a catch 22. Whatever the government tries to make more affordable (education, homes, health care, etc) they end up making more expensive.”

    That sums up our economy in a quite. Unfortunately, the general populace, including many on this board, can’t appreciate this. As Craig said earlier, “I’m not one to walk away from free money”. Little does he know he just overpaid $8k for his apartment; when the government takes the credit away, median home prices should drop by a similar amount, all things equal. He was conned, the value accrued to the seller, not the buyer. The government put the credit in place to help the banks and homebuilders, not Craig. Think it through.

  70. Shortsgetsit

    That sums up our economy quite well, is what I meant to say.

  71. Craig

    Thoughts – I did my own bathrooms. It wasn’t a complete gut renovation as the building is relatively new. I painted, replaced the vanities, faucets, mirrors, and lights with higher-end stuff. I bought my fixtures at outlet prices here: http://www.homedesignoutletcenter.com. I did use a contractor for the glass tile in the kitchen: Ken’s Custom Tile, (973) 633-7785. He does brilliant work.

    Lori – I agree that people should not buy homes that leave them with little financial cushion. But I surely hope you don’t judge your buyers that have less than 20% down as all being in that category. Have you ever sold single-family houses in the burbs? I assume you know that 20% down is a requirement for condo purchases, but you can get conventional loans for houses with less down.

    Do you own your home Lori? If so, I find it curious that you would question if it benefits taxpayers to support home ownership under any circumstances, meanwhile you enjoy your mortgage interest deduction each year. What do you think that deduction is? You guessed it, taxpayer-funded support of home ownership. It was intended as a temporary stimulus package that the gov’t never ended.

    Homeboken – No offense taken. Just giving you the facts. The gov’t did not subsidize my loan. Do you know what that term means? The gov’t merely insured my loan and I pay premiums for that insurance. The cost to taxpayers is zero. You and Lori will counter that it will cost taxpayers if I default. This is true. But I counter with that by saying that the defaults of all those conventional mortgages the last few years have cost taxpayers far more in bank bailouts than all FHA defaults in history combined ever have. We could have came up with 20% if need be by using all cash reserves and raiding our 401k accounts. But FHA financing made much better financial sense.

    I think it’s funny that my finances are being questioned because of how much I put down on my condo. Let’s see: I own my own home worth over half a million dollars that costs me monthly the same as my old rental, I remodeled and newly furnished it, I drive a brand new luxury vehicle, my 401k is untouched, I have 5 figures cash in the bank, no credit card debt, and just got a promotion and $11k raise last month. Yeah, I can’t afford my place and I’m a huge foreclosure risk because I put down less than 20%. Whatever.

  72. Craig

    shortsequalmarket – in 5-8 years I will be in a bigger home. The Mrs. is bound to want kids and they will necessitate more space. No flight to the suburbs here. She was born and raised in Manhattan. Hoboken is as “suburban” as she is willing to go. We are city people – whether it’s this city or another one. The kids will go to private schools like I did.

    Shortsgetsit – you haven’t been paying attention. No value accrued to the seller. I bought my condo for $10k less than they paid for it in 2004. I don’t care if the place depreciates $8k this year. I’m not going anywhere, so I’ll make back any small loss and then some 5 years or so from now. Any depreciation is merely a paper loss unless I sell anytime soon, which I’m not. The cash in my pocket is liquid.

  73. Lori Turoff

    Craig – you assume I have a mortgage.

  74. Craig

    Lori – if you own your home outright and don’t have a mortgage, that’s impressive. Kudos to you in that case. But if the mortgage interest deduction was eliminated, I’m pretty sure the result would have a devastating impact on your profession, and thus your livelihood. So even if you don’t have a mortgage, you still personally directly benefit from government support of housing.

  75. shortsequalmarket

    If the mortgage deduction were eliminated the price of most homes would fall 15% immediately. If you take an average price of $500K that is a $75K drop or a $4,500 reduction in commission for each place sold.

    Craig you also pay closing costs coming and going in addition to a price which is at this point likely inflated due to government intervention. At this point you are counting on $50K in appreciation just to break even. That being said if you are absolutely certain on where you will be and what you want it is not too high a price to pay. But if one thing does not go according to plan, ughhhh.

    Thanks for the name compliment, “shortsgetsit”

  76. shortsequalmarket

    Thoughts

    So the market is down no more than 10% except:

    On Large building near the PATH
    On units out west
    On most 4 family units not within 1-2 miles of the PATH
    On luxury buildings in the north
    On tax abatement buildings in the NW
    On short sales
    On foreclosure sales

    For the record statements like that, are exactly why I post

  77. shortsequalmarket

    oops not within 1/2 mile of the PATH

  78. Shortsgetsit

    Craig is very emblematic of the problem. He boasts that he paid over $500k for a condo with less than 20% down, and claims to have only 5 figures in the bank. Plus, he is going to send kids to private schools!! WTF? If you lose your job, how is 5 figures going to pay a multi-hundred thousand dollar loan and private school bills, with a likely depreciating asset for the next couple years. That said, Craig is probably better prepared than most, which tells me this crisis is far from over. Some people are going to learn hard lessons.

  79. laki

    Craig is doing what he thinks is best for himself. Whether he is right or wrong time will tell. But this is how people behave, they consider all options and choose what they think is best for them.

    So I don’t have a problem with him. I have a problem with the government policy. First of all i think ALL subsidies should be removed (mortgage interest deduction, tax credits, government buying mortgages, FHA, etc etc). Ultimately this would create a much more realistic market and homes would become affordable to those who save and they would be able to put 20-30-40% down. After 10 years of pain (and pain is coming one way or another) we would have an extremely healthy market priced based on fundamentals and poised to prosper again.

    But taking this point aside, and knowing full well that all kinds of subsidies are here to stay, I have another question: If Craig has all this money saved up (as he claims) and his household income is way higher than median – then in what universe does he qualify for an FHA loan? Wasn’t FHA set up to provide loans to low income folks? Where is the rationale in that?

    Craig your point that you’re not being subsidized via FHA is just totally incorrect. Because of FHA you’re able to:

    1. Put less money down than you would have otherwise
    2. Get lower interest rate than you would have otherwise

    You claim you pay an insurance premium for this and hence it is not a subsidy, but the insurance premium you pay is NOT at market rate. It is a government rate that is determined by politicians more or less and this rate underprices the risk MASSIVELY. Take away all government subsidies and 50%+ of FHA borrowers would default no doubt (Already 20% are delinquent on their payments today even with unprecedented government intervention and subsidy).
    If this “insurance” was a pure market rate FHA borrower with low income with 3.5% down would be paying AT LEAST around 4-6% annual premium as opposed to 0.50% or so that they’re paying today.

    Losses in the FHA pipeline are HUGE. And taxpayers are footing the bill to keep the scheme afloat. So yes you are being subsidized via FHA (in addition to being subsidized through tax credit, through govt buying mortgages and pushing all the rates down, and through interest payment deductions).

  80. thoughts

    shortsequalmarket –

    that wasn’t my list – but, a nice two bed near the path is only down 10%.

    query – why do you really post? if this is a hoboken real estate website and you’re not interested in purchasing or selling in Hoboken (in other words, you’re not in the market), why are you here? if the market dropped, would you purchase in Hoboken?

  81. stan

    “except for the large buildings near newark/observer (82 clinton, 163 newark, etc.), it seems (based on limited sales) the decrease in the 1/2 mile semi-circle is 10% – not 20%.” –Thoughts

    “On Large building near the PATH
    On units out west
    “On most 4 family units not within 1-2 miles of the PATH
    On luxury buildings in the north
    On tax abatement buildings in the NW
    On short sales
    On foreclosure sales” –shorts equals markets

    He is referring to your argument. What he brought up is what I have been bringing up. You limit your argument to “nice two bedroom except the ones just pointed out within a 1/2 mile of the path.”

    and secondly, a 1/2 mile? beautiful building here, with beautiful 2 bedroom apartments. One of the nicer downtown IMO .5 miles away

    70 Adams
    More Info 11/02/09 8698 38 615000
    More Info 06/21/06 7931 99 730000

  82. shortsequalmarket

    Stan you read my post correctly, thanks for the answer.

    Thoughts:
    Hoboken is my home and if the real estate bubble had not pushed prices to unsustainable levels I would buy. I also hate the gibberish that there are long term exceptions to the declining market.

    So I will post, prob too much (but not as much as you), need a better hobby, when someone says this particular unit was only 10% off when most everything surrounding it is 20% plus off. Even worse many times that 10% off claim is based on listing not selling prices. Today’s prices are also more likely to have concessions that are not available by looking at sales thereby understating the decline.

    Did you claim sellers are winning cause they are not lowering their price? How can a seller win if s/he does not sell? Does a buyer really lose staying in a less expensive apartment waiting for sellers to get a clue? BTW, while Craig may stay urban most people in my office, have the kid and go right to the burbs. I can think of 3 in the last three months who have fled urban living after having a kid. In conjunction with all the listings with nursery rooms makes me more convinced then ever people move to the burbs with kids.

    I also think it is good to post on boards and make people aware of the fundamental weaknesses they could be buying into. Why wouldn’t I post this information?

    FHA has no max income requirements it is open to all.

  83. shortsequalmarket

    Stan

    What site do you use for previous home prices?

  84. thoughts

    shorts:

    1. there are little, if any, concessions in NJ residential real estate – stop watching house hunters – this in not the mid-west.

    2. you can look at all of the data you want – try and find a nice 2 bed 1/2 mile from the PATH at 20% or more off of the high. please try. and, one or two doesn’t make it true….

    3. if sellers had to sell – they would lower their price – they don’t. sorry for you.

    4. buying in hoboken right now is cheaper than renting a nice place (i.e. shipyard is over 3K a month plus parking).

    5. most of the burbs are much more depressed than Hoboken – if everyone is moving there – why is that???? no seller is locked in to hoboken. if they sell for a loss here – they will make it up on the purchase in the burbs big time!!!! yes, they still need the down payment – i’ll give you that.

    examples of the burbs – at least my friends – (i)bought in west orange at 560K – can’t sell for 400K, (ii) just bought it livingston – list was 625k – bought for 425K – a f-en steal, (iii) just bought in denville for 540K – seller bought for 705K a few years ago, and (iv) just bought in smokerise for 550K – was purchased for over 750K 5 years ago!

    opposite you, i have more friends buying in NYC, Hoboken and Brooklyn than the burbs – despite your contention, urbanization is the trend. a NJ lender will not even touch a residential development that’s not in an urban or downtown area.

    *stan likely uses the tax records:

    http://tax1.co.monmouth.nj.us/cgi-bin/prc6.cgi?&ms_user=monm&passwd=data&srch_type=0&adv=0&out_type=0&district=0905

  85. shortsequalmarket

    How about I just use Stan’s six examples on this thread? Really in Hoboken people are not asking for closing casts from the seller. News to me. Really Toll is not offering additional upgrades versus 3 years ago. news to me.

  86. thoughts

    toll and options are totally different than sellers paying for closing costs – i guess it’s news to you b/c its few and far between in NJ and Hoboken. period end of story – you’re wrong on this one.

    in regard to the six examples – the two places he could find that were not on newark, etc. – we’re only down 10%! ya?!? where’s the major discounts??? please – we all know we’re down something – just not 20% or more – like on jackson.

    lastly, you can find plenty of steals in the burbs, but very few in the urban areas….

  87. shortsequalmarket

    Interesting for someone who knows of all sorts of people moving to the city all the purchasers are in the ‘burbs.

    Lori gave an example of someone who wanted closing costs in this thread.

    I used to post in another thread and someone (who bought multiple properties so different than you) used to argue that the high end luxury in the best neighborhood would not be affected. Long story short he does not post anymore is delinquent on his taxes and is requesting a reduction in the assessment.

    Oh yeah an I agree there are few steals but many listings coming on the market, that is why I wait.

  88. Lori

    How do I give you an example of someone who wanted closing costs? I’m not going to divulge my clients financial info. You have to take my word as an agent who closed more deals with buyers last year than any agent in Hoboken that many of my first time buyers ask the seller to pay for closing costs.

    I’ve also seen Toll Bros. offer to do very nice upgrades for buyers at Hudson Tea which they didn’t always do in the past.

    Now no more commenting for me today – I have to go to work.

  89. thoughts

    Lori – Yes, toll gives nice upgrades – but closings where sellers (not developers) pay for closing costs are few and far between – no? I would say less than 1% in NJ and Hoboken! Let us know your thoughts tomorrow. A friend of mine is a residential real estate paralegal in NJ (@150 to 200 closings a year), she says that it’s SO SO SO rare.

    Shorts – I was giving examples of steals – they’re mostly in the burbs – where my friends are killing themselves with the commute. I also know a lot of people. Your example was an investor – take my advice – anybody becoming an investor in real estate should be very VERY wealth! the cash flow can kill you! I think we can both agree on that??? In regard to waiting, I can totally understand your position b/c at this point Buyers are not generally winning in Hoboken. I bet once you buy – you’ll love it! Good luck – just don’t miss the bottom and the great interest rate. Things change quickly either way my friend! What are you looking for in particular? location, size, parking, etc.

  90. shortsequalmarket

    Thanks for the update. It was the young woman who wanted closing costs and only wanted to be in Hoboken. Thank you for the information that many (most?) first time home buyers want the seller to cover closing costs. That is quite the opposite of what Thoughts says is occurring. Thanks for also backing me up that upgrades preciously not included are now included.

  91. thoughts

    Shorts – We are agree that Toll is giving upgrades. In regard to wanting and GETTING are two different things. It just does not happen in NJ and Hoboken. Less than 1%! I would put any amount of $$$ on it.

  92. thoughts

    sorry – “all” agree

  93. Lori

    Correct – they ask for it but sellers usually say no because they don’t know what the number will be. The negotiations go back to the sales price. But sellers either ask because they have no cash to pay the closing costs (the problem I described yesterday) or just because buyers ask for everything nowadays.

  94. thoughts

    Lori – correct – you really know what you’re doing – i’m totally impressed!!! It’s so hard to determine what the closing costs will be that it’s almost un-negotiable or can kill a deal.

    Shorts – it’s okay to be wrong – a bigger person would admit it. also, enjoy your wait in someone’s else little box.

  95. homeboken

    Craig – Was just catching up on this thread and wanted to respond. Yes I understand what is considereed a subsidy . I don’t beleive you do.

    A subsidy does not always take the form of cash. In your case, your terms were subsidized by the government. You stated yourself, that you did not have the 20% downpayment that a private lender would require. So you went with a federaly subsidized lending arm (the FHA) and received a mortgage with a downpayment that is less than commercially accepted.
    The fact remains, that if the goverment was not backing FHA loans, a private lender likely would not have qualified you for your home purchase. Therfore, you were the beneficiary of a government subsidy.

  96. Craig

    Homeboken – You misunderstand what FHA is. A subsidy is defined by Merriam Webster Dictionary as a grant or gift of money (don’t take my word for it – look it up yourself). That said, I received no money from the gov’t. FHA is not a lender. My lender is Wells Fargo – a private lender. FHA merely insures the mortgage issued by Wells Fargo. So instead of paying for private mortgage insurance, I pay premiums to a public mortgage insurer – Uncle Sam.

    I’m not sure how you figure I got a subsidy when I am paying for the service I am receiving. I had to pay 1.75% of the principal at closing as an up front mortgage insurance premium and will continue to pay .55% of principal annually (divided in monthly payments) until I have 20% in paid down equity in the property. Unlike with PMI, I don’t get to eliminate my insurance premiums by reaching 20% equity via mere appreciation. So if I got a subsidy, it’s an awfully expensive one.

  97. patk14

    Not to beat a dead horse (or Craig in this case), but if he ends up 20% underwater on his mortgage (much more likely given his lower than 20% down payment, shall we guess he put down a robust 10%?) and wifey gets pregnant (and decides to stay home), that he’ll be posting about what the implications of walking away from his mortgage are? There is a reason that 20% was considered the bare minimum down payment for mortgages. Asset values have been and will remain volatile. A relatively small correction after a long period of rapidly rising prices would put the lender at great risk.

    He brags about how rich he is, how he drives a nice luxury vehicle, projects forward to the days that his little brats will attend private school “like he did”, yet he needs a subsidized govt loan to buy the condo that meets his lifestyle expectations? These are the same types who feel no remorse walking away from their mortgages when things go bad. He’ll blame the FHA for giving him the loan. A government conspiracy. How about waiting a few years until you can afford the condo with a conventional loan and have a better handle on your long-term income prospects?

  98. Craig

    patk14 – you are another person who doesn’t have a command of the facts. I can now see none of you knows what FHA is or what it does. Once again – I do not have a subsidized gov’t loan. My loan is from a private lender (Wells Fargo) and I received no money towards that loan or my closing costs. The gov’t merely insures the loan instead of a private insurer and I pay premiums for that insurance just as someone would pay for PMI on a conventional loan. I went throught the same Wells Fargo underwriting standards to qualify financially for the loan as everyone else. If WF felt I couldn’t afford the monthly carrying charges with less than 20% down, they would not have approved me. I wonder if you equally scorn those who get annual financial asistance from the gov’t via the mortgage interest deduction. 20% is considered the minimum downpayment for condos only. That much down is not required on a conventional mortgage for a single-family residence.

    I am hardly rich and was not bragging. I was merely illustrating my financial situation in response to those claiming I cannot afford my home. Now why didn’t I have 20% down you ask? Well, without having sold another property first, how many of you honestly have 6 figures in cash saved by yourselves without help from mommy & daddy? Most people I know got help from their parents in buying their first home. I don’t get to enjoy that benefit. I’ve put myself out there and shared my story. So now why don’t some of you clowns who sit in judgment tell us how you saved up 20% of your first home purchase without any help.

  99. patk14

    Don’t mean to be hard on you, but from a purely economic view, Wells Fargo is not taking your credit risk. They are taking the risk of the US Govt (through the FHA). If for whatever reason you end up defaulting on the mortgage, the insurance coverage protects Wells. They can package and sell the loan to investors solely because of that insurance. That insurance is being offered well below the cost generally available in the private sector to attempt to stabilize home prices. It’s simply not a good idea to be offering people who have demonstrated that they cannot save more than 3.5% (you are in much better financial shape than most utilizing FHA) of the purchase price a long-term highly leveraged loan (I’ll spare you my lecture on the direct correlation between low down payment and your level of leverage). Rational people are walking away from mortgages all over this country because they are underwater. In your case, if you end up walking, Wells collects on the FHA insurance and the US taxpayers take the loss. If Hoboken prices move upward, you keep all of the gain. Wells has made a nice amount of fee income and taken absolutely zero credit risk. Great business while it lasts.

  100. homeboken

    Craig – I am sorry, but you are wrong, you are receiving a subsidy.

    Let me ask this a different way. Let’s say that FHA did not exist. Would Wells still have qualified you for the loan, without 20% down?

  101. Craig

    Homeboken – I don’t deny I am receiving a subsidy. I admittedly get the same one every homeowner gets – the mortgage interest deduction. If FHA did not exist Wells Fargo would have qualified me for a loan on a single family house with less than 20% down, but not a condo. They wanted 10% minimum for a house (which I had), but 20% minimum for a condo. So I likely would have bought a house in the ‘burbs instead.

    Your hypothetical still doesn’t prove your point. To prove I received an up front subsidy to assist with the purchase, you have to demonstrate that I received money from the government. No matter how you spin it, that’s the definition of a subsidy. All I got was discounted mortgage insurance – not a dime of which is paid for by taxpayer money.

    From the HUD website: “FHA is the only government agency that operates entirely from its self-generated income and costs the taxpayers nothing. The proceeds from the mortgage insurance paid by the homeowners are captured in an account that is used to operate the program entirely.”

    http://www.hud.gov/offices/hsg/fhahistory.cfm

  102. Lori

    I have to agree with patk14 and homeboken on this one. Craig, you offered me kudos on having mortgage free property. My husband and I are probably quite a bit older than many of you. When we were first in the market over 30 years ago 20% down was the norm. Whenever we had extra cash it went to paying off our principal – not a BMW or a trip to Hawaii. Maybe we were raised with different values having had non-wealthy parents who lived through the Depression but we were both taught to live within our means and without credit, except to buy a home. So 30 years later, the mortgage on my first condo, which we still own, is paid off. Neither of us has ever had a car loan or carried a credit card balance. I understand that today that is not the norm. What interests me is how so many younger people I know who are earning a decent living – I’m talking 70K to 125k, yet can’t or won’t or don’t know how to save a dime. At the same time, I can’t help but pick up on a feeling of entitlement to all the finer things in life without regard to the price tag. If I can’t afford it – charge it. When things head south – walk away from your debt. Now, Craig, again this is not directed at you but I know many people who live this lifestyle and feel that they are almost entitled to own a $500,000 condo whether they have the down payment or not. Just as they used no money down and alt-arms and all the other trickster mortgages a few years ago, today they use FHA. It truly worries me. Maybe these people should be renting and living a lifestyle that lets them save their money toward a down payment on a property they can really afford. If I were a lender (assuming I had to also hold the loan on my books, but that’s a whole other issue) I wouldn’t want to lend to a borrower with little or no savings history. There is simply too much risk. But as the others have pointed out, the bank doesn’t incur that risk. Instead, we do. Eventually, someone has to pay the piper and recent events have shown us that the taxpayer seems to keep getting hit with the bill. The hopes of a financial regulatory overhaul are mired in resistance from the industry lobby. When the house of cards tumbles next time I don’t want to clean up the mess, again.

  103. thoughts

    How can anybody kill someone living in the northeast for getting any help from the government at all??? Everything is perspective people!

    The cost to live here is double or triple most of the country – yet, we killed with taxes compared to the rest of the country. For example, 100K salary is minimal in our area – yet, with that salary, a person would not even qualify to be able to deduct interest on their student loans!!! (#’s could be off)

    Shorts – Where did you go – did you admit your wrong yet?

  104. vreporter

    Oh don’t worry, we’ve got plenty of these cycles left before this mess rationalizes. A crash does not have to be short in time frame, and this one’s a beaut! Just reading all the denial here is enough of a warning about where we are in the residential recovery! Looks like the feds are achieving their goal after all. Just not sure who the beneficiary is (sarcasm).

  105. onBloom

    Just have to correct one point way up in this thread:

    “4. buying in hoboken right now is cheaper than renting a nice place (i.e. shipyard is over 3K a month plus parking).”

    Sorry, Thoughts — no way. In general there are many great deals on rentals around. It definitely is a renter’s market — even in Manhattan. Why risk 20% and closing costs in a market that surely is facing a long slow slide back to pre-bubble levels? I’ll rent for the foreseeable future.

  106. Craig

    Lori – I realize your opinions aren’t directed at me. I value your input and you are certainly entitled to agree with patk14 and homeboken – but you will continue to be wrong with them on this particular issue. Frankly, I’m shocked that as a realtor, you are apparently unaware what FHA is or how it’s funded. I’ve already establshed that FHA is a mortgage insurance program, not a subsidized loan program. I have also proven via the above link to the HUD website that FHA is not funded by a single penny of taxpayer money. It’s funded solely by its participants who pay premiums into it. So whatever bill you all think you’re getting hit with using your tax dollars has nothing to do with FHA.

    So why couldn’t I save the full 20%? Not because I was living an entitled, fancy lifestyle. Both my girlfriend and I paid for our entire educations ourselves – that’s 2 bachelor and 3 grad degrees between us. No bank of mommy and daddy for us. How many here bought their first home without their parent’s help, or paid for their own education…can I get a show of hands? Our student loan payments are $1150/mo. between us. If we could have saved that money over the years, we’d have easily had the full 20% saved in short order. Frankly, it’s a testament to our saving ability that we put away as much as we did with our overhead. I assure you we have no sense of entitlement. We did it the hard way – and we did it by ourselves. Financing via FHA doesn’t change that.

  107. laki

    Craig – I trade mortgages for a living. I live and breathe the mortgage stats and numbers. So take my word for this: FHA is beyond bankrupt. If they were a private company they already would be bankrupt 100 times over. This is a HIGHLY leveraged agency with insane amount of losses in the pipeline. If you truly knew the financial situation of this “insurer” you would be shocked. So the government (i.e. us the people) is already on the hook here even though nobody talks about it. But everyone (and i really mean everyone I’m not exaggerating) in the mortgage game knows that they’re bankrupt.

    Regardless of what it says on some website you pulled up, FHA is not a typical insurer. Its motives are different than that of a typical privately ran insurer. FHA is used by the government to push a social agenda of extending home ownership to low income families. FHA takes on HUGE risk by insuring mortgages given to usually not so credit worthy borrowers under extremely lax terms. In exchange for extending this insurance it collects only a tiny insurance premium. No private company can compete with FHA on these terms. FHA underprices the risk because of this social agenda the government has. If it wasn’t underpricing the risk the insurance premium would be so high that the low income family would not be able to afford the mortgage payment! So, an average FHA borrower’s low premium is where the subsidy comes in. Without FHA, the insurance premium a typical FHA borrower would pay with identical terms to a private insurer would be several times higher at least!!

    These are hard cold facts. So yes, you are being subsidized.

  108. homeboken

    Craig – You just identified what I beleive is the next bubble that will pop…Higher Educuation.

    Again, we are anonymous here so no disrespect. I contend that a couple should not have to attain 2 bachelor’s degrees and 3 graduate/post grad degrees to only make $160,000 combine (and get stuck with >$1k per month student loan payments)

    This is totally off topic I understand, but from an economic stand-point, your degrees are not providing any return on your investment.

    Don’t get me wrong, I am a big fan of higher ed, but I think students that are in the college phase really need to look at the cost/benefit of their schooling. In some cases, one may be better off foregoing the extra degrees.

  109. JC

    Craig was nice enough to divulge his financial info and now we are knocking his choice to pay for his own college/post grad? C’mon now.

    Homeboken…I know your beef is with the ROI of higher education but telling Craig his degrees are not providing any return is a bit much. Plus, how do you know that in 3 years Craig and his girl wont be making $750k combined? Now, it is a good ROI.

  110. patk14

    Homeboken, generally agree with what you post but I have to defend Craig on this point. It sounds like he is relatively young (say late 20’s). He is in the early stages of his career and will likely enjoy significant increases over the years. You can’t expect to jump from grad school right to a comp package that provides instant cost/benefit advantage over those who didn’t get the advanced degree. I think 10 years later, Craig will look back and be very glad he got the degrees. No guarantee, especially in this economy, but likely.

  111. homeboken

    All good points, likely that those degrees will pay off in spades in the future, I honestly hope they do.

    Perhaps I should be more general in the future.

  112. Craig

    Laki – I cited a link backing my position. Your theories and hypotheticals are not backed by any evidence. Cite me proof that FHA is bankrupt and drawing money from taxpayer funds as you allege. You can’t, because it’s not true. FHA undercuts private insurer pricing because unlike them, it is non-profit. That’s the sole reason. FHA is in fact not bankrupt, but their reserves are dwindling. They have responded by raising premiums effective Spring 2010. It remains funded without a dime of taxpayer money as always.

    Homeboken – My lady and I earn much more than $160k combined. Not sure where you’re getting your figures from. The ROI on our degrees is that we are both highly educated. You can’t put a price tag on being smart.

    JC – Thanks for the assist. I’m pretty much done with this topic, so this is my final post on it. Let’s check back in a few years to see if I defaulted on the mortgage for the condo I supposedly can’t afford.

  113. Lori

    My college and 2 grad degrees were the best investment I ever made. You can never lose your education.

  114. Andy

    I have guy w/ a masters in math from a top Ivy who has over 100k in debt and makes less than I did only 4 yrs out of undergrad. MBAs and Masters in Finance unless you are a Front Office person are overrated. We don’t automatically hire at 100K + if you have an MBA. Sorry kind of off topic

  115. Tiger

    HOLLY CANOLI! I leave for a couple of days and I see 100+ comments on this thread; ranging from buy vs rent to FHA mortgages to lifestlye choices to college degrees :-).

    I have to say I am with Lori on this one. Nothing is like education. I am in my (late) 20s, and the best thing I ever did was go to Stevens; not only did it introduce me to a nice little town called Hoboken, but it truly opened a wealth of opportunities I would have never had, especially as a [former] foreigner. But of course, it required a lot of hard work.

    I lived long enough in this country to see two economic recessions. I have to say, regardless of its issues, and even in its WORST times, the US is STILL the land of opportunities and dreams, the sky is the limit.

  116. whynot

    Great comments.

    By the way, I ran the rent (3,000) versus buy (550,000) numbers – it’s very VERY close because of the tax deduction and low LOW interest rates. I understand there are a couple of other variables.

    I agree with Tiger in regard to the US. I wish I bet big on the dollar versus euro a few months ago – is it too late? any financial people out there?

  117. JC

    not too late

  118. shortsequalmarket

    The FHA has fallen below the capital levels it is required to have. It has fallen below those levels because the insurance premium they charge is not sufficient to cover the losses they are incurring. Since the FHA has an explicit government guarantee the fact that their insurance premium does not cover their expenses does not imperil Wells Fargo. This is a government subsidy. They are charging you less for the insurance than it would cost in the free market.

    Thoughts:

    Closing cost do not need to be open ended. They can be capped at a dollar amount or percent of the sale. The FHA explicitly states the amount of closing costs the seller can refund. Wonder if Craig took advantage of that?

  119. shortsequalmarket

    Thoughts

    Interesting that you would say buying is less expensive than rent and simultaneously say there is nothing worthwhile less than $600K in Hoboken. I am fairly certain I can rent a 2br on 2nd and Bloom for less than $3,000 which is less than mortgage, maintenance, and taxes on over $600K.

    In addition many rental building are comping one to two months of rent making the stated rate meaningless.

  120. thoughts

    For the last time – here’s a tutorial for Shorty:

    Buy (give or take):

    P&I for 450K loan at 5% = @2,400
    HOA = 275
    Taxes =625

    Total = 3,300 minus the tax deduction plus the principal payments!

    Rent = 3K plus parking of $200 plus no savings plus living in a box owned by 3rd party.

    Wow – seems pretty close or better EVEN if you increase the above purchase numbers!

    In regard to tying up the down payment – there’s a million and one different ways to look at it – forced savings, the stock market is a risk, real estate is a risk, etc. etc.

    Right now – with a down market and low rates – good time to get in to the 6th borough or any borough if you want to stay????

    Come on Shorty – get some!

  121. laki

    Craig:

    I told you i look at these numbers for a living. Still you don’t trust me. You think that my agenda is to come here on this blog and prove you wrong by lying about what i do and make up numbers to prove my point? Is that what you really think? I have better stuff to do with my time than strategically lie to a handful of people on this blog. But if you want proof here you go.. This is from a presentation made by T2 capital partners in mid 2009 (Credit hedge fund.. the numbers themselves come from the agency itself).

    http://blogs.reuters.com/felix-salmon/files/2009/10/fha-delinq-mother-of-all-head-fakes.pdf

    This chart says that 32.4% of all loans FHA insured in 2007 were delinquent by mid 2009!! In total the delinquencies were at 18% of their entire pool. So almost one in 5 people who insured their mortgage with FHA stopped paying! And these numbers are still on the rise. Also, the numbers would look way worse had it not been for modifications (another subsidy) and even more importantly if you stripped out the bias introduced by the explicit government backing of FHA making it an ongoing concern as an entity. What do I mean by the latter? Well, had FHA been a private company NO WAY would it be able to grow in 2009 and 2010 and insure INSANE amounts of new loans. Who would lend them money? Which bank would insure mortgages with them? Private insurers with this kind of performance go bankrupt and banks know that so they would never take on a risk of insurance policy becoming invalidated due to the bankruptcy. So had they been private, they would not be able to insure new loans in late 2008 all of 2009 and early 2010. These new loans haven’t had chance to default yet so FHA’s overall delinquency stats look better to an uneducated observer cause the pool has been diluted with new loans that are still current! If i’m an insurer and i unerwite 100 policies over time all of which go bust but then i quickly underwrite a 1000 more in a day, i too could turn around the next day and say only 10% of my pool is delinquent! Clearly misleading.

    So, had there not been for the government backing FHA you would be looking at their overall delinquency rate in the high 20s /low 30s and they would NOT be insuring new loans over the past couple of years. Every 3rd borrower they insured prior to 2008 had stopped paying their mortgage by mid 2009! (these numbers look much worse today than they appear on this chart by the way.. today this number is around 40-45%, but i’ll stick with whats on the chart)

    Now FHA charged in the neighborhood of 1.5% up front and 0.5% per year to insure these loans… 1.5% + 4* 0.5% = 3.5% of premium collected in recent years.

    When FHA delinquent homes are liquidated they fetch 30 to 45 cents on the dollar in recovery so 30% delinquency will eventually result in 20ish percent of actual losses. Hmmmm… 20% > 3.5% several times over.

    Just as i was saying.

  122. Higher Education

    homeboken

    The bubble has already popped for MBAs.
    The demand for lawyers has softened considerably.
    Graduating doctors are not becoming general practitioners because the money isn’t there.
    On top of this, the cost of all education has rapidly outstripped inflation over the 10+ years.
    My opinion seems to be inline with yours.

  123. Craig

    Thoughts – your rent vs. own calculations are right on the money. I have appealed my real estate taxes and the firm handling it says they will be reduced by at least $2200 annually. With that reduction and with all the income tax deductions factored in, my condo will cost exactly $22 a month more than my prior rental (which was a nice 900 sq. ft. 1 br + den duplex that rents for less than my 1300 sq. ft. 2 br/ 2 bath condo would cost to rent).

    One way to know whether it makes economic sense to own in a particular market is to look at the housing price/rent ratio. Look at an equivalent unit that is for rent and for sale. If the annual rent of the rental multiplied by 15 equates to the sale price of an equivalent unit, then buying makes sense. But once you go much over that ideal 15 multiplier (say 17 max), then that market is overpriced and it makes more sense to rent.

  124. Lori Turoff

    I’m closing comments on this post – please move it over to today’s WWWU. I’ve asked my tech guys to make “pages” so you don’t have to scroll so much. Thanks for your cooperation.

    Lori

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