2012 May 9th

The Weekly Wednesday Wrap-Up – Hoboken Condo Sales and Activity for the Week of May 9th, 2012

What’s up with Inventory?

Week after week, we have seen the inventory of Hoboken Condos for sale inching up and down, but never leaving the lowest levels that many long-time observers can remember.  Week after week, I draw your attention to the fact that–following the rules of classic Free Market theory–this low inventory (supply) must inevitably drive up prices (demand) and, in turn, eventually lead to an increase in supply.  If you’ve been studying the numbers in the weekly, monthly and quarterly reports that we produce, you have seen the discount rate falling, the days on market falling and–recently–an increase in the frequency of properties going for more than their asking price–the visible symptom of multiple offers leading to bidding wars.  So, you may ask, why do we see no meaningful improvement in supply?
Certainly, there are seasonal factors at work.  If sellers with children have the opportunity to choose, they will not move during the school year, so a bump up in inventory may come in June.  But I see a less obvious factor at work in the market  on a daily basis:  the amazingly high percentage of sellers who are listing properties at prices that are lower than the price they paid.  Before people are going to be tempted to sell their homes in response to an ‘improving’ market, that market must promise them–at least–the likelihood that they will recoup their costs.  Until then, the only people selling will be long-time owners whose basis pre-dates the ‘bubble’, or people who are forced to sell by external forces–job re-location, divorce, etc.
The low cost of money–historically low interest rates–is great for home buyers, but does little to compensate sellers who are under-water.  You may consider this a “sellers market”, but I don’t think you will see a significant increase in inventory until prices rise further.  The Free Market at work.

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This Week’s Condo Sales & Activity versus last week’s:

246 active Hoboken condo units – vs. 246 last week

1 Bedroom & Studio Condos

14 New listings

7 Price Changes

92 Active

5 DABOs

7 Sold

2 Bedroom Condos

12 New listings

17 Price changes

128 Active

7 DABOs

6 Sold

3 Bedroom & Bigger Condos

2 New listings

2 Price changes

26 Active

2 DABO
  • 501 9th St., 202 listed April 20 for $649K;
  • 1018 Hudson St., 5 listed April 27 for $759K;
2 sold
  • 620 Monroe St., 3 listed June 17 for $649K; reduced Sept 21 to $631K; reduced Oct 28 to $618K; sold for $600K;
  • 150 14th St., 401 Listed Jan 11 for $784K; sold for $766K;
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  1. Ron

    You mention inventory shortage. Is there any new construction underway? I believe there are some uptown/west, but they may be rentals?

  2. JC

    right…and when that significant increase in inventory does hit the market prices will be pushed downward again. Interest rates will rise (one of these years) but of course still be at historically low levels….I think there is a lot downard pressure for price increases that we need to get through. Deleveraging and clearing of inventory takes time especially with real estate….and prices will not increase significantly for some time. i hope im wrong.

  3. Lori

    Both large, new construction buildings on Willow & 14th St. are rentals. The new buildings by the Shoprite are also rentals. The only large condo development is by Toll – 1450 Washington, the building planned next to it on the east side of Washington, and the 3rd Maxwell building which is underway.

    If the people currently sitting tight all decide to sell at the same time, yes, that will affect prices downwardly. But what if they decide to rent? Rents in NYC are at all time highs. Hoboken is close behind. Those people (like many of my clients) can refinance and be cash flow positive from the start. Newer condo buildings are much less restrained by Hoboken rent control. Those units may dribble onto the market as sales slowly enough so to be soaked up by natural demand. We shall see.

  4. Mike D

    Corzine sold his place

  5. Craig

    While the market is making a comeback, it’s nowhere near making up the entire 20-25% fall from the height of the bubble. Most who bought then are still underwater. Even when the time does come where it’s doable for those who are underwater to sell, I don’t see a mass dumping of properties all at once. I think Lori is correct that you’ll see a trickle that is slow enough to meet natural demand. Why? Because there will be some who are happy with just breaking even and getting out ASAP, while others will hold out even longer until they can turn a profit.

    As an aside, one unit in my building just went on the market and another is about to. If either of them get anywhere close to what they’re asking, I’m going to be a happy camper for correctly guessing the bottom was in 2010 when I bought that year.

  6. bz

    Many individual landlords (by force or not) have already realized that Hoboken is a great place for renting, to professionals and to families. Unless you absolutely hate being a landlord or your financial situation is too bad, most landlords would hold on to their properties until the selling price make sense to them (making profit + lowered mortgaged by the rent + possible positive cash flow). It will take some time. Also , personally, I don’t feel A LOT of owners are under water (no data to back it up, just my own observation). I consider myself as an average buyer in Hoboken and I bought my home in 2005. Now my property is valued at same or a little higher than what I bought for (from a realtor). Am I the luck one? I think not. My neighbors are very similar to me except that they moved to the suburb and on purposely hold their Hoboken homes as an investment property. They are actually planning to buy another one in Hoboken to boost their rental cash flow and the overall investment portfolio. They said that in 15 years when their kids are ready for college, their tuitions will be ready too.

  7. Lori

    The big issue investment buyers (and all buyers) need to be aware of is that Hoboken apartments, yes, even condos, are subject to rent control. You can’t, as a landlord, just charge whatever you want or whatever the market will bear. Though the law is less onerous than previously, landlords still face treble damages if found guilty of overcharging. Most of the landlords I have worked with recently have been able to legally charge market rate but it depends on the circumstances. Lately, I have had seller’s agents flat-out refuse to file to obtain the legal rent calculation from City Hall. Only the seller and tenant can do that. Obviously, he had something to hide and we moved on. But buyer beware on this one!

  8. Lori

    The big issue investment buyers (and all buyers) need to be aware of is that Hoboken apartments, yes, even condos, are subject to rent control. You can’t, as a landlord, just charge whatever you want or whatever the market will bear. Though the law is less onerous than previously, landlords still face treble damages if found guilty of overcharging. Most of the landlords I have worked with recently have been able to legally charge market rate but it depends on the circumstances. Lately, I have had seller’s agents flat-out refuse to file to obtain the legal rent calculation from City Hall. Only the seller and tenant can do that. Obviously, he had something to hide and we moved on. But caveat emptor (buyer beware) on this one!

  9. Craig

    Not all of Hoboken’s housing stock is subject to rent control. In fact, the majority of it is not. There are about 27,000 housing units in Hoboken, of which approximately 8,000 are subject to rent control. That’s only 30% of the housing stock. It excludes dwellings built after 1987. It also excludes older industrial buildings converted to residential conversion after 1992. If rent control is a concern for an investment buyer, the workaround is easy: buy one of the thousands of units not covered by it.

  10. Lori

    Wow – I’d love to know the source of your info because in my 10 years experience as a realtor, my findings have been quite different. Building converted are not exempt unless the developer filed for decontrol – which almost none of them bothered to do. You are spreading very false information.

  11. Craig

    I am more than happy to share the source of my info. My info on the total numner of housing units in Hoboken comes from the 2010 Census. My info on the numer of rent controlled units come from various recent news articles on the topic. I fail to see where those statistics are wrong. If you have different findings, please do share them with us. Lastly, the fact that some developers didn’t bother to apply for the conversion decontrol control they had the right to doesn’t render false my statement that the law permits it.

  12. Lori Turoff

    Here is what is missing – there have been no accurate counts of housing units in Hoboken based on how many rental units are subsidized (Church Square, Marine View, etc.) how many market rate (Shipyard, 333 River) and how many subject to rent control. To be accurate, the number of individual condo units which are rented out by the owners would have to be included. That, in fact, is where the biggest risk likes for an investor. I don’t know what “news articles” you refer to but, having followed the topic closely, I’ve yet to see anything authoritative address the issue in depth. Just lots of vitriol and speculation. Should those facts become available I’d be anxious to see them. But just because a local blog or newspaper says Tim Tebow is living in Hoboken doesn’t make it true.

    It is irrelevant that developers could have filed for decontrol but didn’t. What matters is that buyers purchase properties assuming they were decontrolled when converted and they weren’t, thereby opening themselves up to liability. That things could have been done differently does not protect those buyers.

  13. Craig

    If I’m not mistaken, every property tax form filed in the tax assessors office requires disclosure of whether the property is subject to rent control. I would think that’s one way of getting an accounting of how many are covered – though I concede that even the city’s records may not be 100% accurate. Here are some of the articles referencing the 8,000 number from The Hudson Rporter and Wall Street Journal:

    http://www.hudsonreporter.com/view/full_stories_home/15219332/article—Judge-orders-Hoboken-rent-control-petitions-to-be-approved-for-referendum–

    http://online.wsj.com/article/SB10001424052970204358004577032473909862662.html

    In any event, anyone buying property here should have their attorney exercise due diligence. I say if the property was built before 1987, assume it’s subject to rent control unless proven otherwise.

  14. Cheryl

    Craig: Lori is correct, I suspect the oft sighted 8,000 number is, most likely, the number of units in town that are filing a rent registration form. Most would probably be the multi-family properties that have not been converted to condos. Many condos in Hoboken are owner occupied and, therefore, they are not registering a yearly rent registration form. Some contact the rent control office by telephone to advise that they are not renting their unit or they send the form back listing “owner occupied” on the form. Those units are probably above the 8,000 and not included in that number. However, any of the pre-1987 units (condo or otherwise) are covered under rent control, should they ever be placed back on the rental market. Additionally, all buildings built after 1987 would need to have filed for a exemption prior to obtaining a CO in order to be exempt for up to 30 years – I suspect, because a good bit of the post-1987 housing stock were initially built as condos, no exemption was filed. However, the first time that they were to rent, the owner could rent them for whatever they wanted as there would be no pre-existing rent. Thereafter the rent would be controlled meaning that increases would be limited according to the yearly CPI and other provisions in Hoboken’s rent control ordinance as long as a tenant is in residence.

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