2010 Jul 20th

The 2nd Quarter 2010 Hoboken Condo Sales Results

Sometimes I think a picture tells a better story than words.  Here are some charts of the Hoboken condo market performance.  If you would like to receive a copy of the underlying really large chart with the raw data please request it here and I will share it with you.
Median Sales Price

Median price / sq. ft.

Average Sales Price

Average Price per Square Foot

Number of Units Sold

  1. JC

    Lori..I know this is off topic but can you plz tell me what the definition of “adequate reserves” is? I live in a brownstone that went condo (4 units in building) in the last 2 years. Since we are a new condo association we may not have the “adequate reserves” you mention just because we are young. thanks

  2. whynot

    JC – Don’t worry. I think Lori is wrong about the $$$. Lenders are not looking at or requesting condo association’s financials as part as underwriting….

  3. Lori

    I will post specifics later today.

  4. TS

    Craig,

    I wasn’t claiming that on average any building is down 40%, but that you could probably find units here and there down that %. My best first guess was SkyClub – maybe there is, maybe there isn’t one in that building. I looked for a little and only found down 25%.

    But looking just quickly at Hudson Tea, I found this:
    1500 Hudson St, #6G $1185140 04/20/08
    1500 Hudson St, #1G $689995 05/07/10

    Yes, the floor difference is going to make an impact on pricing here, but still – 42% difference.

    Here’s something a little more comparable in the same building – a desirable building, keep in mind:
    #4F $1404888 03/01/06
    #3F $999000 07/15/08

    And I can pull up many more in the F line with unfavorable outcomes, to say the least.

    Or try the same building again:
    #10J $1558245 09/22/08
    #8J $1107515 12/21/06

    These last two examples were only about 30% down – but in a very desirable building, possibly among the 2 or 3 most desirable. So while I agree this isn’t Las Vegas, at the same time don’t think there haven’t been some isolated Las Vegas-like losses in Hoboken.

  5. whynot

    Lori – I just called my attorney friend who handles around 300 residential closings in NJ a year. That’s all she does.

    Yes, lenders are asking about condo associations in regarding to ownership of units (rental v. ownership).

    No, lenders are not asking about or requesting condo association’s financials.

    🙁

  6. Craig

    TS – You are comparing apples to oranges. You proceed on the incorrect assumption that every unit of similar size in a building is identical in features and finish. This is not always the case. In your example of 1500 Hudson, unit 6G had an assessed value of $11k more than 1G in 2007 – a substantial difference in real world dollar value if you understand the difference between city assessments and real world values. Currently 6G has an assessed value of $25k more than 1G. 6G would be priced substanially higher than 1G if it were on the market today. It was worth more than 1G in 2007, and it would be worth more today. So comparing 2 different units with different values does not establish a 30% market loss.

    Whynot – my lender (Wells Fargo) requested my condo’s financials and refused to fund my loan until the condo’s reserve was sufficiently funded. Upon realizing that no one in the building could sell as things were, the HOA issued a special assessment to all units to immediately fund the reserves up to adequate levels. Based on my actual experience, I’d say your attorney friend doesn’t do many condo closings. Lori has it right.

    This brings us to JC’s question. Each lender may vary, but in my case adequate reserves was defined as 10% of the condo’s annual operating budget.

  7. stan

    To piggyback on TS’s comment,

    2 constituaion is now selling in the mid 500’s, crappy finishes and all. It was selling over 900k for the same 1100 square foot units.

    That’s a lot of cherrywood and rich mahogany.

  8. whynot

    Craig – I highly doubt your story and highly doubt that it would happen that fast. In any event, that is not the norm.

  9. WantingToBuy

    The point of my comments are to advise people to price appropriately based on comps and other indicators and not waste buyers’ time.

  10. Craig

    Stan – A couple of fools did spend $900k for 1100 Sq. Ft. units at Constitution in ’05, but most topped out in the high $700 – $800k range at the height of the market. Right now there are 3 units that size for sale in the low 700s and one for $650k. These aren’t the same units you’ve seen for mid $500s. The question you have to ask yourself is how did the ones you saw for mid 500s compare to the ones currently listed for $100 – 200k more?

  11. Bill

    Wanting to Buy:

    Why should a seller care if they are wasting a buyers time?

    You should be able to get a decent idea if its priced in line with your comps just by the listing, no one is forcing you to go see it in person.

  12. TS

    Craig,

    Your mistake was to not look past the first example, which I admitted wasn’t so straightforward.
    #4F and #3F have the same assessed value, but look at the price difference.

  13. TS

    Actually, they did in 2007 but not now. #3F got taxes lowered in 2010, while #4F got raised in 2008, after the sale.

    So the point holds.

    Maybe it’s time to stop denying the obvious. Some very prime property in Hoboken has been hit very, very hard. But, of course, on average this is far from the case.

  14. TS

    2 Constitution:
    #611 $725000 05/01/07
    #711 $520000 07/13/09

    Note that they had virtually the same assessed value (#711 was a little higher) before #611 got a likely tax appeal to lower their taxes in 2010.

  15. TS

    2 Constitution:
    #601 $875000 09/29/05

    Currently, #601 is on the market for 650k. This will likely see a 30% drop, if it sells any time soon.

  16. morally_right

    It seems more and more like people not getting credit is the ‘norm’ and what we experienced over the last 15 years or so was not the norm. If that’s the case then I would think we’re certainly going lower. Take away credit that most people could get and the pricing dynamics change drastically.

  17. laki

    40% down number was a random number i used to construct an example with round numbers to rebuff an argument and to prove that in certain cases it does matter whether one is about to realize a loss when selling a property. I didn’t mean to imply this was the case for Hoboken. But even if prices are down 20-25% the argument still holds in Hoboken for everyone who put down 10% when buying a house. And plenty of people did that during the boom years…

  18. laki

    morally_right, I do a lot of work on this and i certainly agree with you. I would advise everyone to try to get their hands on the following charts (nation wide) for the past 50-60 years (however long the data series goes). They’re out there look for them. Half can be found on the bloomberg terminal and the other can be found on various US government statistics websites or research articles published by sell/buy side analysts over the years.

    1. Number of houses/apts/units in US
    2. Number of people in US
    3. Number of houses with a mortgage
    4. Number of delinquent mortgages
    5. Number of newly constructed houses/apts/units
    6. Number of vacant houses/apts/units
    7. Existing home sales rate
    8. New home sales rate
    9. Median price to median income ratio
    10.Median price to inflation ratio
    11.Median price to rent ratio
    12.Median household debt to wealth ratio
    13.Median household debt to disposable income ratio

    Only when one looks at the longer data series and puts things in perspective and looks at the big picture as illustrated by these charts it becomes apparently clear that last 15 years have been anything but normal. All the indicators are COMPLETELY out of whack and show a multi decade bubble that has especially accelerated since the late 1990s. The imbalances are obvious. We’re looking at a record number of vacant homes (vacation homes, empty rentals, unsold homes on a market, etc.) a record number of mortgage delinquencies and a relatively low demand for new purchases. For many decades the rate of new construction has outpaced the rate of population growth amid the pricing bubble. So now we’re at the inflection point stuck with too many houses at a time when households are the most stretched they’ve ever been (debt/income and debt/wealth ratios) while the houses are still overvalued based on all fundamental indicators (price to income/inflation/rent ratios).

    In all likelihood we’re entering a new paradigm where all the trends of the past several decades are likely to reverse themselves until we reach a new equilibrium. This can last for years if not decades.

    So everyone who thinks in terms of things getting back to “normal”, and defines “normal” as late 1990s or early 2000s is failing to see the big picture.

  19. whynot

    laki – turn the computer off, put your pants on, put down the cheetos, and get into the real world. if your charts were so accurate, you would be very rich at this point. But, you’re not. you can’t predict the future, but you can actually try and purchase or sell a home and see what’s really happening out there.

    disclaimer: “past results do not guarantee future performance”

  20. FN

    whynot, “You can’t predict the future, but you can actually try and purchase or sell a home and see what’s really happening out there. ”

    In 2005/6 the volume was 2x today, inventory was 1/2 today’s inventory bidding war were everywhere. So by your argument one should have bought 2005/6 and lost 250% of downpayment (assuming 10%)

  21. Craig

    TS – There’s no doubt that Constitution has been hit hard and it deserves to be because it was vastly overpriced to begin with. My position is simply that you can’t compare models with similar floorplans on paper. One would need to get inside to see what changes have been made that may have changed the value from one unit compared to another. For example, the upgrades I have made to my bathrooms make my unit more valuable than the other identical units in my building – but that won’t be reflected in the tax records. Thus if my neighbor sells for less than me a few months apart, it’s because his unit is worth less and is not necessarily an indicator of market direction.

    It’s good to see 2 BR units in Constitution coming into the $500s. With those parquet floors, so-so kitchens, and wall a/c units, that’s what they’re worth – waterfront location or not. Applied’s condos are no different in quality from its rentals.

  22. whynot

    FN – no, i’m saying charts are the past – not the future.

  23. Lori

    If you do renovations in Hoboken you need a building permit and if you pull permits your taxes will be reassessed so changes ARE reflected in the tax records (unless you do it illegally or if the changes are merely cosmetic – i.e., no new sink or fixtures, no plumbing, no electric).

  24. Craig

    The city isn’t really clear on what you need permits for. A look at the city website reveals no info whatsoever. I can see structural, electrical, or plumbing changes requiring permits. I may be wrong, but I can’t imagine replacing a vanity and faucet requires a building permit unless you’re changing its original location and re-plumbing. That’s cosmetic, not structural – it’s like replacing furniture. Installing a new hot water heater is more involved and you don’t need permits for those.

  25. Laki

    Whynot,

    “if your charts were so accurate, you would be very rich at this point. But, you’re not”

    Again you keep making claims about things that you don’t know much about. At least you’re consistent in that regard. You couldn’t possibly know how rich or not rich I am.

  26. TS

    Craig,

    Quite frankly, that’s hardly a response – more like a way out.

    The tax records indicate similar assessed values, so that is the best information we have to go on.
    Additionally, one of the apartments I listed in the Constitution **is the exact same unit for resale.**

    Also, I didn’t just show the Constitution but also the Hudson Tea had some big declines.

    Maybe it’s just time to admit that you were wrong, rather than stretch this out.

  27. patk14

    Whynot sounds very much like those stock brokers from the late 90’s telling everyone to ignore historical P/E ratios, that a new paradigm for valuing equities makes historical comparisons irrelevant, so buy/buy/buy growth stocks. There were widespread expectations of achieving 20% returns indefinitely in the markets by the end of the 90’s. What happened, no gains for the next decade plus with some significant and painful volatility.

    You need long-term income to pay your mortgage. The lower the amount that you can afford to put down, the higher your monthly nut. Ignore historical mortgage/income ratios at your own risk. By the way, incomes in Hoboken have risen substantially over the last decade supporting SOME of the rise in prices.

  28. morally_right

    Realtor friends of mine in Manhattan are telling me things are not looking good there. I don’t think prices are collapsing but inventory apparently is going to become a big issue in the next couple of years. If, and it’s a BIG IF, Manhattan prices come down significantly, that is of course going to drive pricing in surrounding areas.

  29. Lori

    Craig – I just called City Hall – the construction office (201 420 2066) and asked:
    1. Do you need a building permit to change a hot water heater? Answer: YES.
    2. Do you need a permit to change a faucet in a sink vanity if you don’t need to move it? Answer: Ask Joe Bahun, the plumbing inspector, who is in the office from 9 to 11am.

    Sure you may think you don’t need it because it’s not so complicated but, if you are wrong and if you advise people incorrectly beware. The city fined my neighbor $5,000 for doing work without a permit. All you need is an inspector to see the old faucet in the trash, or a nosy neighbor to snitch on you and you have all sorts of problems with City Hall. Hoboken is VERY strict about requiring building permits.

  30. Craig

    TS – I never argued that those buildings haven’t suffered steep declines in value. You are quite correct in that assessment. My position is that you can’t always compare units in terms of pricing sight-unseen. I’m not sure how that viewpoint is wrong.

    Lori – It would be nice if the city made it clear exactly for what types of work permits are needed. If you need a permit to replace a hot water heater, I’d venture to guess most property owners that have changed one are in violation. I’ve personally had 2 replaced by landlords when I was a tenant in my 14 years as a Hoboken resident without a permit in sight. With the months I hear it can take to get a permit, can I get a show of hands of who will go without hot water that long while they wait? I’m curious as to what work your neighbor did without a permit that got them a $5000 fine. If it was for something like replacing a leaky faucet without a building permit, I’d challenge that in a state level court. Sounds arbitrary and capricious to me.

  31. Lori Turoff

    Now we all know Hoboken City Hall never acts in an arbitrary and capricious manner! It would be nice if it was clear but good luck trying to get a hold of anything in writing that clarifies the requirements. Before I would do any work at all – no matter how minor, I would go to the construction office, tell them exactly what I’m planning to do and get them to sign off on it at least verbally, and know with whom you spoke!

  32. carl

    Some people have a lot of time on their hands to go to a construction office when changing a faucet and then paying Hoboken more money that the City Council will just waste. How are the taxes in Hoboken compared to surrounding areas?

  33. TS

    Craig,

    Who would disagree that you can’t always compare units in terms of pricing sight-unseen?? This wasn’t even the issue. The original issue was whether some properties in Hoboken have seen some very, very steep declines – you claimed that one of the worst performing buildings, the SkyClub, has still only seen a 25% drop at worst. I picked out two more desirable buildings (at least Hudson Tea is) to show otherwise, by pulling up equally sharp drops – without much effort, I might add.

    And yes, you can’t always compare units sight-unseen but sometimes you can – and sometimes, as a matter of practicality, you have to in order to arrive at a market view.

    The best thing to go by is the tax records/assessed values, as you actually pointed out. If someone did enough work to their condo to make those numbers inaccurate, then you better believe that they had to get permits. Changing a few vanities isn’t going to account for a 250k or whatever price drop.

  34. Craig

    TS – I’m sure you can find some outlying examples of properties that have suffered more than 25% losses (if taken at face value the later examples you cite are down 29%). But they are the exceptions that prove the rule: on average Hoboken is down about 20-25%. Certainly nowhere near the 40% number that was bandied about.

    Properties like 1500 Hudson and 2 Constitution will never rebound to their full former glory. When they first came online in 1999-2000 they were the cream of the crop. But their parquet flooring, cheap kitchens, and wall a/c units are now inadequate compared to newer high-end units that trump their amenities/finishes yet can be had at the same price. Speaking of 1500 Hudson, Peyton Manning gut renovated his 3000 sq. ft. unit (he bought two units and combined them), and brought his place up to snuff with central a/c and high end everything. His place is now what the whole building should have been. Click on the link below and click the slide show to see his place:

    http://www.electronichouse.com/article/inside_eli_mannings_automated_condo

  35. TS

    Craig,

    If you re-read my comments, I didn’t say it was the norm, just the opposite. I totally agree with you. I was merely reacting to your claim that no property is down 40%: “Even the crappiest gut jobs in town haven’t lost 40% in value.”

    105-111 GRAND ST #206 $1475000 on 02/09/07
    105-111 GRAND ST #206 $950000 on 02/24/10

    ~36% decline in value, and a great location.

  36. Craig

    TS – Fair enough. I think we’re pretty much on the same page and are just debating minutiae. However, I still stand behind my statement that nothing in Hoboken has endured a 40% loss. You could argue 36% percent is close enough in your latest example, but the $65k difference in that 4% gap is not insignificant.

    Some units had a greater rise than others (like #206), and are now suffering a greater fall. The whole market is at about 2004 prices (some inventory had to be reduced more than others to get there), which would put unit 206’s 2010 sale price of $950k in line with 2004 pricing given that it sold for $850k in 2002.

  37. TS

    Craig,

    I’m not sure what the ultimate point was of your last comment, but I don’t agree with your claim. In 2004 unit #205 in the same building sold for over 1MM, and its assessed value is considerably less than #206’s. Furthermore, Unit #206 sold for 1.225MM in January of 2005, so I don’t think its value 1-12 months prior was 275k less.

    It would seem to me that on this particular unit, the price reverted to pre-2004. I don’t think it’s correct to assume that because in general the market is at 2004 prices that every property will be there. Going back to my original point, there are cases in Hoboken where you see Las Vegas-like losses and price reversions.

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