2008 Nov 15th

What’s Going On in Today’s Real Estate Market? It’s a Question of Balance.

Hoboken Condo Buyers – Consider This:  Think it through!

Same property  a year from now, or a month from now, or a week from now

The Hoboken Condo Buyer’s Bottom Line

Even though the property value in our hypothetical example declined 15%, the monthly payment only declined 7%.  The savings a buyer might recognize through even a significant price reduction can quickly be eroded by an increase in interest rates.  I’m not predicting what’s going to happen to Hoboken condo prices or mortgage interest rates in the future.  Nobody knows that.  But the facts are as follows; property values are low right now, as are interest rates.  While property values may or may not fall a bit lower before they rebound, interest rates are far more likely to increase.  Taking advantage of low interest rates NOW may outweigh the benefit of future price declines (which may never occur.)  Do the math.  Just some food for thought.

Posted by Lori Turoff | Currently 16 Comments »

2008 Nov 7th

Historically Low Mortgage Rates + Price Cuts = A Buying Opportunity in Hoboken Condos

Mortgage Rates Have Been Below 6% Only 2 Times in Recent History

Yes, we are in difficult financial times and the economy is a mess.  Be it due to a job transfer or job promotion, financial downsizing, a growing family with another baby, a marriage or divorce, or many other reasons, there will always be people who need to buy a condo in Hoboken.  Here is an interesting chart that makes it very clear how low mortgage rates are today in relation to the past:

National Average Mortgage Rates - 1964 to present

National Average Contract Mortgage Rates - 1963 to present

Price Reductions on Hoboken Condos Have Been Happening Like Crazy

If you follow Hoboken Condo price changes on the Weekly Wednesday Wrap Up you have seen that there have been reductions and more reductions.  Many Hoboken sellers find themselves in a squeeze, either already in contract to buy elsewhere and forced to sell their current property, or unable to keep their current home because they’ve outgrown it.  One glance down Washington Street on a sunny day and the ever increasing number of small childred in our community is obvious.  Although the average price per square foot for a Hoboken condo has for the entire year been above above $500 per square foot, there are many Hoboken properties on the market today priced in the $400s.  Many of these properties have NOTHING wrong with them (I’ve seen them) but have anxious sellers who are highly negotiable thanks to current market conditions.  For those today’s Hoboken condo buyers, and they will always exist, the combination of historically low rates and reduced prices can make for an extremely attractive buy.

Posted by Lori Turoff | Currently 7 Comments »

2008 Feb 26th

Where NOT to Learn About the Real Estate Market

There is no Wall Street In HobokenHoboken Map

There was a recent article in the NY Daily News by Peter Siris, the “Guerilla Investor” to which I take exception. In the interest of full disclosure I will tell you that I know Peter because many years ago, I worked for his wife. I am sure he doesn’t remember me. Peter wrote about the difference between investing in stocks and real estate e. He starts out by saying that “there are big differences between investing in stocks and buying and selling in real estate” and then completely ignores his own statement. Peter’s argument, as I understand it, is that real estate is riskier than stocks because margin requirements force an investor to maintain a greater equity stake in stock purchases. Housing prices may continue to drop and a large number of homes may be worth less than their equity. (I take it he means that the mortgage obligation on these properties will be greater than the market value of the property). According to Peter, that may precipitate a crisis.

You Can’t Live In Your Stock PortfolioNot a Hoboken Home

There is a primary, fundamental difference that Peter ignores. Stocks are an investment. Real estate, for the most part, is where people live – it is their home. Investors may buy stocks hoping they will appreciate or pay income in the form of dividends. People buy real estate to have a roof over their heads. If stocks go down and the investor takes a loss it’s still purely an investment. Real estate is different. All those homeowners whose value dropped can’t just sell their homes and not have another one. They still need a place to live. If they do sell, even at a loss, chances are other properties in their community have been similarly impacted and the new property they buy can be bought at a commensurately lower price. Some may refinance and get a mortgage more suitable for their financial situation.

Investors can Rent and Profit Rather Than Sell

What about people who purchase real estate as an investment? They, too, do not necessarily need to sell and when housing prices fall rents tend to rise. Real estate investors typically earn greater rental income even when their properties value has declined. That has certainly been the case here in Hoboken.

Sellers Can Be Greedy

I recognize that there are buyers who over-reached and now can’t make their mortgage payments and may even face forclosure. It’s true that there were innocent (typically lower income) buyers who were misled by unscrupulous mortgage lenders and have had balloon payments become due or interest rates reset. How many homeowners, however, have put their homes on the market not because they must but because they are curious to see how much they can get above what they paid? When they learn that they can’t get what they had hoped for, they decide not to sell. They wait until the market improves or don’t sell at all and just keep living in their home. Not every homeowner with a drop in value is going to sell their home.Apples

Apples are Not Oranges

There is difference between the margin requirements for buying stock and the mortgage requirements to get a home. An investor can walk away from a stock purchase and write it off as a loss. Even if homeowners have no equity in their homes, if they don’t have to sell, they haven’t lost anything. They still need a place to live. Stocks and real estate are like apples and oranges. The comparisons Peter tries to make just don’t hold.Oranges

Posted by Lori Turoff | Currently 1 Comment »

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