2009 Jan 10th

So Just How Bad Is The Hoboken Economy?

By Lori Turoff 


Is A Market Turn Around in Sight For Hoboken?

I attended a week-long real estate conference last week put on by Inman News.   Thursday a panel of preeminent journalists, economists and bankers discussed the state of today’s real estate market and various proposed solutions to the credit crisis and the economy in general.  They did not paint a pretty picture.  Nor could they agree on much other than the fact that things are probably going to get worse before they get better but they will eventually get better.  

When Does Trickle Up Begin?

An interesting comment was made about how to know when the real estate market has hit bottom and will begin to recover.  That happens, it was suggested, when in a given local market a typical first-time home buyer earning an entry level salary can afford to buy a home.  That creates a push in demand at the low end of the market which will initiate the change.  The demand will then trickle up to the higher priced properties.

Who Can Afford A Hoboken Condo?

That got me thinking about Hoboken.  The basic Hoboken starter condo in Hoboken sells for about $300,000.  You know the unit – about 600 square feet, 10 unit walk-up building with two long, narrow units on each floor.  Most of the units at this price-point have been renovated but would not be considered luxurious.   The building probably has a common yard, washer/dryer and storage in the basement.  You probably can’t live on Hudson Street for $300K but Willow, Park, Adams, Grand, Madison and Monroe are lined with these types of properties. 

A first time home buyer purchasing a primary residence can get a 30 year fixed-rate mortgage today for as low as 5% and that may soon drop down closer to 4%.  To qualify for the low rate, the buyer has to have a credit score of over 760, verifiable documented income to service the debt, and has to put 20% down, but we’ll get back to that part later.

So lets say our young Hoboken buyer works in Manhattan in an entry level job in finance, fashion or media.  He or she probably earns $60,000 to $65,000 annually.  In a 25-33% tax bracket, that means about $3,300 a month take home or more. 

Hoboken Condo Math

 Let’s crunch the numbers (just estimates) for the buyer thinking about buying that $300K condo:

Total monthly outlay = $1,750

Rent or Buy?

In my experience, that is about the going rate for a rental of one of the type units described above.  So on a cash flow basis, the choice to buy is equal to what it would cost to rent.  The buyer would also get a tax savings of about another $400 to $500 per month bringing the net cost of owning a starter condo to about $1,250 a month.  Not bad at all.  There are many other benefits to owning over renting but that’s the subject of another post.

Brother Can I Borrow a Dime?

Where is the rub?  Well, we’re talking about a generation of post-boomers brought up in a world of easy credit and no savings.  How does the first-time buyer come up with the $60,000 downpayment?  Sure, wealthy parents willing to help out may be a solution but not all buyers are that lucky.  In all the years I’ve been selling real estate in Hoboken, I would estimate that 99% of my buyers bought a condo with a downpayment no more than 5 to 10%.  To avoid paying “PMI” they took out a  “home equity loan” or “piggyback mortgage” on the home they did not yet own for the balance and wrapped it into the mortgage. A year ago, getting 95% financing with no documented income and even so-so credit would not have been a problem.  

Show Me The Money

Even if Hoboken condo prices were to fall another 10% or 20%, (which I don’t believe is highly likely) the problem of the lack of savings among first time buyers remains.  Many of these 30-somethings are still paying off school loans, have car loans, and max out their credit cards to buy designer clothes, hi def TVs and the like.  In fact, we are now a country with a negative savings rate.  So how does this problem get resolved?  New legislation provides a federal housing tax credit of $7,500 for first time home buyers through July 2009 but I believe it will take more than that to get the ball rolling.

Help Me Out Here

Let me know what you did or plan to do if you’re a first-time home buyer.

What do you think? Do you have an idea for a solution to the mess we’re in?

Posted by Lori Turoff | Currently 48 Comments »

2008 Dec 2nd

Where Is The Hoboken Housing Market Going?

By Lori Turoff – 201 993 9500 or info@hobokensbest.com

Hoboken Condo Sales & Market Analysis Part 2

Yesterday I posted the sales figures for the month of November. They don’t look too bad. In fact, Hoboken condo sale prices were up in November. Here is the comparison to the past two years:

But that’s only part of the story. Analyzing what sold is certainly useful information but it doesn’t address the properties that have not sold. The number of Hoboken condos still on the market for sale presents a different picture.

The Number Of Hoboken Condos For Sale Continues To Climb

Here two informative charts. The first tracks how many condo units were active, i.e., for sale, at the start of each month:

It is quite apparent that the number of condo units for sale has been soaring. Today, there are 513 active condo units in Hoboken. That’s looking just at the MLS, (which does include MetroStop and some of the other new buildings back on Jackson but does not include Maxwell Place.) If price is determined by supply and demand, the supply of Hoboken condos is growing. It seems that the build up results more from dwindling sales numbers than from an abundance of new units being placed on the market.

An important indicator of the Hoboken real estate market is the number of units sold and the number of units that go under contract during a month. Here are those results:

The trend in listings is downward which helps supress the growth in supply a little bit, but the number of units going under contract and being sold are also decreasing. The question is which is happening faster, the build-up of unsold units bloating inventory or the decrease in new listings which limit inventory? The answer seems to be apparent in the first chart – overall, there are too many properties on the market and not enough demand for them. The result? Markets find equilibrium and prices fall.

So Why Were November Prices Up?

It seems contradictory at first glance for prices to rise when demand is decreasing and supply increasing.
The answer may lie in the properties themselves. If you look at the Hoboken condos that did sell in the month of Novemer, they have a few characteristics that stand out:

The remaining 3 units, from what I can tell, had nothing in particular that stands out as especially attractive, (not price, location, or construction).

Take a look at these 5 “fire sale” units included in the above:

If a Hoboken condo is not drop-dead gorgeous, in a great location, or really and truly priced to sell (and still in a good location and good condition) it just isn’t likely to sell. Buyers are going for the cream of the crop and the bargains – sometimes both.

Posted by Lori Turoff | Currently No Comments »

2008 Dec 1st

Hoboken Condo Sales – The November Numbers Are In And They Are Surprising!

By Lori Turoff  – info@hobokensbest.com

Hoboken Condo Sales Are Up – Transactions Are Down

Lehman went under, B of A bought Merrill and AIG collapsed mid-September.  Since then, things have continued to deteriorate.  Here we are, about 2 months later, with some still predicting the demise of the Hoboken real estate market. Yet that’s not what the numbers show – at least so far.  The most apparent change was that Hoboken condo sales practically came to a stand-still in November.  There were only 36 condo sale closings for the month compared to the average of over 70 a month for the rest of this year.  About half the usual deals simply did not take place.  Yet the average sales price of a Hoboken condo increased to over $532,000 in November.  That’s more than the average for the year of $530,000; more than last November’s $479K and more than November of ’06’s $493K.  Here are the numbers (note – I flipped the months to make the chart easier to read):

Not only are sales prices up, days on market are down, price per square foot is up from last month although not as high as it was in September, and average list price is up from last month.

Did Hoboken Condo Sellers Have to Slash Prices to Get Buyers to Act?

There have been predictions that the price of Hoboken condos will plummet up to 30%. It’s interesting to see if sellers are getting their asking prices.  The discount off the asking price shows up as almost 4% for November.  I went back and looked at the original list price of each property rather than the most recent price (upon which the above chart is based).  The result is indeed a bit different.  Using the original asking price to calculate the discount off list causes it to rise to about 8%.  So yes, some price reductions were required to get buyers to bite. Tomorrow I’ll post this months stats vs. prior years, so come back again for another look.

Posted by Lori Turoff | Currently 6 Comments »

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