2010 Apr 9th

The Hoboken Open House Google Map for Sat. 4/10 and Sun. 4/11

Every Open House in Hoboken this weekend as compiled from the Midweek and Hoboken Reporter, the MLS, every Realtor website and email and Craigslist courtesy of the Turoff Realty Team

There was good news and bad news in the real estate market this week.  How you perceive the news was sort of dependent upon which side of the buyer/seller fence you’re on.  There were tons of new listings this week.  Great news for buyers as the added supply will continue to put downward pressure on prices while increasing your selection of units.  For sellers, not so much.  There also was the news that interest rates are rising.  That’s good news for no one – but it does support what I’ve been telling people for months.  Buyers often ask me if I think the market has “hit bottom” or if prices will continue to fall.  My response is that I don’t know, but I am reasonably confident that this period of both low prices AND low interest rates won’t last.  If buyers wait to buy because they think prices will fall even further they may or may not be right, but any benefit they gain by a lower price can easily be erased by an eighth of a point rise in interest rates.  Hmmm.  Sounds like a future blog post topic.

When you look at the map, place markers are color coded:

New listings are marked with a “New Listing” icon.

Click on the location marker for:

Want to know which open houses are on Saturday and which only Sunday? Click on “tools” at the top of the list and enter the word “sat” or “sun” (without the quotes) into the search box.

Did you know that the agent hosting an open house is the Seller’s agent?Whether it is the actual listing agent or any other agent from the same company, that person legally represents the sellers.  Not only that, the hosting agent – by law – has a fiduciary duty to the seller to get that seller the highest possible price for that property.  Do you think it might be a conflict of interest for that same person to then represent you?  Many people think so.  In fact, in many states (other than NJ) it is illegal for the same agent to represent the seller and also work with the buyer.

Did you know that when you go to an open house you can see the property at the open house on your own and, if you like it, go back to it with your own agent?You can!  So if you see something you like at an open house you might want to consider finding your own agent who does not work for the seller.Just because you walk into an open house does not mean that the hosting (seller’s) agent gets to “claim” you as his or her customer – even if you “sign in”.  You are the consumer.  You are spending your hard earned money on what is probably the biggest investment you will make in your life.  Don’t you think you should be able to work with whom you choose?

Questions? Text us at 201 993 9500.

  1. Craig

    I’ve been pretty much been preaching this for weeks on this blog to all those waiting for “the bottom” before buying. We are already at the bottom for all intensive purposes. Low prices + low interest rates + a free $6500-$8000 check from Uncle Sam is “the bottom” because the overall deal only gets worse from there.

    Does anyone here honestly believe Hoboken has another 20% down to go? More like 5% at best. Because of the relative affluence and demand here, it isn’t type of market where you’ll see tons of foreclosures or tons of bank-owned properties being withheld from the market that will soon flood the inventory. Nor is it a place which had a 100% increase in pricing during the boom. In other words, this isn’t Las Vegas, Miami, or southern California. You may get another 5% here, and waiting for an extra 5% off your purchase price isn’t going to make up for the extra point in interest you will pay by year end and the thousands of dollars of free money from the gov’t you left on the table.

  2. carl

    from 2000 to 2007 prices up 105 % in Hoboken. Yes I think they can fall 20%. We are not at a bottom. Inventory is not moving. People are hoarding cash. So prices are only down about 15 % from thetop in Hoboken. I guess you think Hoboken is protected by some magic bubble. Having said that I think there are deals out there because some sellers do get it and to move a house you have to price it to sell

  3. stan

    “Low prices + low interest rates + a free $6500-$8000 check from Uncle Sam is “the bottom” because the overall deal only gets worse from there.”

    can’t say i see why prices would stop declining due to these factors

  4. Craig

    I never said prices have stopped declining due to those factors. What I said was they are not going to decline further enough to overcome the bottom line of higher interest rates that are inevitable and the lack of the tax credit. Do the math: if interest rates rise to 6% by year end, you need close to a 10% drop in price to make up for it. That means a condo listing at $500k today would have to drop $50k in the next few months. I don’t see such a further drastic decline happening based on recent trends. Properly priced units in the sub $600k sweet spot are moving relatively quickly and thus are unlikely to decline that drastically.

    When evaluating a deal, you can’t just look at purchase price. That is far from the only factor contributing to the bottom line cost of the deal. You have to look at the cash value of the cost of borrowing money and any incentives. For example, my bottom line purchase price was further reduced $8k thanks to the tax credit and my 5% interest rate saved tens of thousands over the term of the loan vs. a 6% rate. Overpaying 5% for property by hurts a lot less than paying a whole point extra for interest the next 30 years. You’ll make back the 5% sooner of later, but interest rates aren’t likely coming back down to these historical lows in the next few decades. Any further reduction in prices is speculation, but an increase in interest rates is an inevitable certainty. Which is the safer bet?

  5. stan

    My understanding is that the majority of buyers here put 10-20% down. The increase in borrowing costs will certainly affect prices and these buyers. If you are a buyer with a significant downpayment, I would imagine your holding out for higher rates.

    I thought the 8K credit wasn’t a factor in Hoboken. (That wasn’t directed at you, but many on this board have claimed that it had no effect here).
    There is an argument that the starter market is inflated by 8K and once the funny money is removed prices will drop by the same amount. Get 8k now or pay it back @ 5% over 30 yrs.

    I don’t know which way prices are headed, but if the market couldn’t hold with low rates and tax incentives, how would it perform with both crutches removed. We’ll see this summer/fall. I don’t see 30% declines, but another 10% isn’t inconceivable.

  6. homeboken

    Craig – you offer a good assessment of the seller’s perspective, but what you are assuming is that all buyers feel the same way and are willing to monetize these benefits at closing and pay them to the seller.

    I think the same thing when I hear people running buy v rent analysis. In all these scenarios, the potential buyer calculates the value of the mortgage interest deduction and deducts that to come up with the net monthly payment. While it makes sense on the cash flow perspective of the potential buyer, I submit that any future interest deduction should remain out of the equation.

    Example being, A buyer might say “I will buy this $500,000 condo because after the mortgage interest deduction it is cheaper to own than buy.” What they have just done is monetized 30 years of that deduction discounted at the current mortgage rate and paid it to the Seller at closing. In effect, the buyer is not gaining the benefit, they paid it all up front and get the benefit back over the mortgage term.

    If a buyer has the ability to deduct mortgage interest then that benefit should accrue to the buyer and not the seller. Alas, the market does not work this way, and realtors continue to show buyers that “Hey look, you can afford this house b/c your net payment is less than rent.” While true, many do not understand that the realtor just suggested the buyer pay the seller for the buyers future benefit.

    Caveat – The above is just an exercise in finance, I know that in the real world, if a buyer reduced a bid by the amount of the mortgage deduction they would likely not ever get to closing. But it is an interesting discussion point on how buyers have been trained to think they are getting a deal when really all the benefits accrue to the seller, much like the $8k tax credit.

  7. Vivian

    Of note, my husband and I lost out on a property because the listing agent chose his own client over use so he could get the double commission.

  8. whynot

    homeboken – you’re analysis really does not make any sense. rent versus purchase calculations are typically done based on the estimated monthly payments. not “monetized 30 years of that deduction”

  9. homeboken

    whynot – when a buyer runs the rent vs buy calculation they always figure out their monthly payment AFTER netting off the mortgage interest deduction. That is the issue, when you net that off a buyer says “Oh look, now I can afford $500,000” In reality, they can really afford $500,000 less the NPV of the future interest deductions, if they pay more than that, then they are letting their future benefit accrue to the seller.

    Discounted cash flow analysis is complicated, get my email from Lori if you want some more information, I’d be happy to answer any questions you have.

  10. Craig

    Rent vs. buying calculations should be based as follows: the purchase price of the property divided by the annual cost to rent a similar property. The result is the rent/buy ratio. Ideally this number should be 15 or less, meaning the cost to buy the property should be about 15 times the annual cost to rent it. Any ratio over 17 means the area is still overpriced and it’s better to rent.

    Hoboken is not reported as its own metropolitan statistical area, so it’s hard to attain this number for Hoboken. But for some perspective, according to Moody’s in Q1 2008 NYC was at 22.2 and was at 26.8 at the peak, a change of -17.2%. My own personal transaction works out to a rent/buy ratio of no worse than 14.9 based at the going market rent for a 2br/2ba newer construction unit of similar size in the southwest part of town. That is indeed calculated after factoring in my mortgage interest deduction (which is a current ongoing benefit, not a future one as homeboken seems to assert. I get my deduction up front in cash each paycheck after amending my W4 to lower my withholding). If my deal is typical, it would appear Hoboken is currently within the sweet spot of the rent/buy ratio.

  11. whynot

    In my opinion, a place that costs around $600,000 (2 bed/bath with parking and good location) would cost around $3,300 or so to rent, which ratio is then around 15.15.

    I never heard of such a calculation?!?

  12. homeboken

    Craig – I think your deal is not typical, you definetely got a good deal.

    Using Lori’s numbers from last week:

    Studio/1 BR – Avg ask = $378,000. Divide by 15 (your rent buy sweetspot) = $25,200/yr $2,100/month. Seems high for studio/1Br rents.

    2BR – Avg Ask $575,000, Divide by 15 = $38,333/yr $3,194 per month. Again, unless HTB or Maxwell, this is high rent.

    3BR + – Avg Ask $904,000 – $60,266/year $5,022 per month.

    If 15 is the inflection point in the buy/rent ration (and I agree that historically it has been) then the current asking prices are still way too high.

    And you got a great deal, congrats.

  13. lori

    Today you can have your choice of 2br 2baths with indoor parking, elevator, cac, w/d, gym in bld., common outdoor space, 1000 sq. ft or more etc. in a “good” location for $500k. I say “good” location because most 2/2s with parking are not on Hudson or Bloomfield but more likely on 9th and Jeff or thereabouts. That same unit would rent for about $2800. The ratio works out to about 14.88.

  14. homeboken

    Lori that is surprising to me that people are paying $2,800 to rent on Jefferson. I think a better deal can be had. Espicially if “they can have their choice of 2BR/2BA in the area”

    Either way, posters here attack all the time for not using facts, I merely took your numbers and applied Craig’s method.

  15. lori

    I ask tenants all the time (when they live in a condo that I’m showing)how much they pay in rent. Sure, you can find a place for less maybe on 6th and Monroe or in a walk-up but the nice condo units with parking included (worth $200 a month alone) still get good rents.

  16. UPennAlaskan

    Excellent points Craig. If one purchases a piece of property that has a low ratio….it is highly likely a winner. High ratio…well, then that could be a situation of taking on extra risk without being compensated for it. Similarly, buying a high PE ratio stock is a good deal if the company has very good growth opportunities. Back to the Price/Annual Rent Ratio, the only adjustment I would make is to calculate the ratio in gross figures only. I often find simplicity is better than complex models. Otherwise there is other factors to consider such as monthly condo fees, special assessments, tax rates, etc. The gross figure also is easier to compare apples to apples from a historically context.

  17. Craig

    I agree with Lori. Any newer unit with 2br/2ba, all the desired amenities like granite/stainless kitchen, elevator, washer/dryer, central air and 1000 sq. ft. or more easily starts at $2800. That number goes higher the closer you get to the PATH. Anything you’re seeing cheaper has some compromises like it’s a walk-up or not modern.

    Homeboken thinks $3000 is high rent except for Hudson Tea and Maxwell? That barely gets you into many of the nicest, newest, and largest 2br/2ba units in Applied’s buildings – complete with their cheap kitchens, parquet floors and wall a/c units. Want to park? That’s another $250/mo. Got a dog? Another $50/mo. And just wait until you get the first lease renewal since they are not rent controlled.

  18. whynot

    All I know is that we’ve lived all over NYC and Hoboken rents and prices are a steal compared to NYC and the Boroughs. We understand that Hoboken should be cheaper than Manhatten, but more than 50% off?

    In regard to rent versus buy, all of the calculations that we’ve used say “buy” or it’s very close either way.

    Every month Hoboken gets nicer and more upscale, we just don’t want to miss out. Once we saw the W Hotel come in, we thought is was a real anker for the city.

  19. homeboken

    Craig – I am sorry but a quick scan of craigslist or realtor.com shows that you can live in just about any 2br in Hoboken (save the W, or Maxwell) for way less than $3000.

    I know that my contrarian view is not popular on this board, but the reason we post is to get different views of the market. If all anyone wants is constant cheer-leading of the market with no real discussion, then go to that waste of website kannekt.

  20. Craig

    Homeboken – that’s just the thing, you can’t compare just any 2br. The apartments you are looking at on Craigslist are mostly not condo quality with all the trimmings like granite/stainless kitchens, elevators, central air, etc. Most of the rental stock in Hoboken is nowhere near as nice as the condos for sale. To properly calculate the rent/buy ratio, you have to compare the cost of renting vs. buying units of similar size, age, and amenities. Thus you cannot compare the typical walk-up in a 50 year old rowhouse on Craigslist to a 5 year old condo with modern finishes in an elevator building.

  21. Tiger

    Very true, Craig. A friend of mine was renting a 2BR on 6th and Hudson for $1900, it was just horrible. The floors were scratched, kitchen was ancient, and one of the bedrooms did not have a window. So yea, you can have a 2BR for less than $1900 in Hoboken, but good luck.

  22. whynot

    Craigslist apartments in Hoboken are typically horrible. We rent. We looked around. A nice 2 bed/bath with parking is over $3,000. With rates and prices where they are, our calculations and figures say “buy”.

    The only arguement against buying is if the market is going to tank by 20% or so. But, with prices holding steady for a year and the stock market and ecomony improving, we don’t think that will happen.

    We think that a lot of people that get sticker shock from Hoboken are from west Jersey or PA. They’re just not use to seeing prices like this. Coming from NYC and Brooklyn, these prices are nothing.

  23. Tiger

    whynot, I agree with you. That same friend eventually decided to upgade to a proper apartment. With OKAY (not great) finishes and better aminities, elevator and doorman.

    Guess what? He ended up getting priced out of Hoboken. He actually moved to JC, he pays $2K for a 520 sq ft 1 BR, no parking, SS appliances (entry level, Whirlpool). A similar 1 BR in Hoboken would have cost him $2,300 or so.

  24. whynot

    homeboken – your contrarian view is not unpopular, it’s just unsupported by the facts.

  25. carl

    What happens if homebuyer demand continues to stay soft and interest rates do not rise significantly for two years. What do home prices do then? Do you think people are reevaluating the mantra that “everyone needs to buy a home” especially after the last couple of year debacle?

  26. Confused

    whynot – homeboken’s view may not be supported by facts but neither are yours.

    I’ve yet to encounter someone on here who can support their opinions with facts.

  27. whynot

    Confused –

    We are talking about facts not opinion. Re-read Lori’s post “The ratio works out to about 14.88.” We looked at over 25 rental units. I’m sure Lori’s seen even more. We know the prices. Homeboken’s post was incorrect.

    Further, Carl’s opinion is predicting the future, which can go either way. I think we all can agree on that, which is the real debate? All I know is that prices have been steady for a year, the economy is improving, Hoboken as a city is improving every day, the suburbs have the same tax issues as Hoboken, prices are down and interest rates are great, and we are damn close to NYC, which is the best city in the world. 🙂 Versus, a lot a lot of schlock inventory out there and interest rates creeping up soon. By the way, the government said it would stop buying mortgages, but would steap back in under certain circumstances. I do not beleive that the tax breaks helped Hoboken too much. 🙁

  28. Lori

    The Weekly Wednesday Wrap Up will be posted shortly. I know – it’s Thursday. New computer with Windows 7 – took some time to work out the glitches and get the MLS program to run. Thanks for your patience!

  29. whynot

    Thanks Lori – We are looking forward to it. 🙂 🙂 🙂

  30. boken

    Thanks Lori! I thought you got stuck getting your taxes ready :)~

  31. Lori Turoff

    Howie is the CPA, I’m the attorney. Not only did I have to debug Windows 7 but my touch pad isn’t working (already) so I was on hold w/ Dell for an hour to get a replacement after it LOST ALL MY WORK!!! Almost done redoing it all. Sorry for the delay.

  32. boken

    Yikes! Oh the fun!

  33. Tiger

    Lori, why didn’t you techie friend Tiger? I have a Dell and did face the touchpad issue when I upgraded to Windows 7, sorry you lost all your work :-(!

    FYI, it took me over 9 different attempts to move from 32 bit Vista to 64 bit Windows 7, so much for a clean slate ‘fresh’ install, MicroSUCK!

  34. Lori

    I asked once again when we might get the MAC compatible version of the MLS. I was told by the software vendor that it is available but it’s up to each individual board as to when they shall make it available to us. In our case, that would mean NEVER. I don’t think they even know what a MAC is 🙁 never mind why it’s better!

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