Wednesday, August 31, 2005

Don't Fight the Fed and Investor Psychology


"People need to realize that it is unwise to fight the Fed – enough is enough. Buying a house you can’t afford on the never, never may have worked over the last four or five or so years, but it’s certainly not going to work over the next four or five. Buyer Beware."

Full article...

2864 Listings in the Eastern Monmouth MLS

Last week the count was 2846 and the week before it was 2837 and the week before that it was 2868. I can't tell if a trend is developing yet but will continue to post the count every Wednesday.

Tuesday, August 30, 2005

Realtor Writes to Local Paper

Go halfway down the page to see the full letter to the editor.

"Always a market

for shore property

I read the Aug. 19 story, "A.C., O.C. real estate overpriced, study says." I agree with some of the evaluations, however, not all. I have been involved in the Ocean City market since 1958 when my uncle purchased his first property, and I have owned in Ocean City for 20 years myself.

We have a very high demand for investment and second-home properties and a very limited supply. We have many investors who are buying more than one home.

My accountant told me that baby boomers' parents, who were savers, will leave $5 trillion of inheritance money to their children, who are investors. Do you think that a good percentage of that money will be going into real estate at the shore?"


House Builder Execs Head for Exits


"Only one thing was missing from his cheery forecast: his wallet. For a guy who sees nothing but roses in the future, Mr. Toll has a strange way of showing it -- in late July, he dumped about $57-million (U.S.) in shares.

Not that this makes him unusual, in his company or his industry. Insiders at several U.S. home-building companies, including Toll, have been selling stock at a pace not seen in two decades, according to Merrill Lynch strategist Richard Bernstein. Dwight Schar, chairman of home-builder NVR, might be the champion. He has sold more than $250-million worth of stock in the past two years (even as the firm has spent millions to buy back its own shares). Sure, he's 63 and on his way out. But as Alan Abelson, the famed Barron's columnist, would say: There are many reasons to sell a stock, and believing it's about to go up usually is not one of them."

Full article...

Monday, August 29, 2005

Yield Curve Close to Inverting

The yield curve is almost flat. Soon, banks will not be able to borrow short and lend long and have a chance of making any money. This is why mortgage rates do not have to go to 8% to prick the housing bubble. If there is no profit margin in lending than banks should have no reason to lend, thereby cutting off liquidity to housing.


"Treasury price gains were seen along the yield curve

The 30-year bond improved 3/16 to 115 7/16, yielding 4.36 pct versus 4.38 pct. The 2-year government note was unchanged at 99 7/8, yielding 4.07 pct versus 4.08 pct Friday

The difference in yield between the 2-year and 10-year notes remained at its tightest, only 10 basis points, or 0.1 percentage point, since early 2001"


Fleckenstein Says Housing Peaked Already

Judging by the poll results we have here, it seems that a majority of the people believe prices at the Shore have peaked as well.


"Given all the multiple-property buying that's occurred, the accounts in the media (I'll share two of them below) and what readers of this column have observed with their own eyes, this news is somewhat surprising. However, it was inevitable that inventory would start piling up at some point. The time, as it turns out, is now.

That excess inventory, together with the further supply now in various stages of coming on stream, makes me feel more strongly than ever that this summer will be seen, with benefit of hindsight, to have been the top. In essence, Time Magazine's cover early last June -- "Home $weet Home: Why We're Going Gaga Over Real Estate" -- will more or less have marked the peak."


What Happened in Texas?


"What that tells me, even if it escapes him, is that his habits of investing haven't changed, but the venue has. To me, California, Florida and much of New England look like a replay of Texas in the '80s. Back then we had savings and loans financing "see-through" buildings, condos and houses being sold with buy-down mortgages, and a long oil-bust recession.

Littered with repos

By the time it was over, the spine of Texas, Interstate 35, was littered with manufactured home repos from Dallas to San Antonio. Virtually every financial institution in the state was busted. Dallas, Houston and Austin condo prices plummeted: There is no market when you ask people to pay cash because there are no lenders."

Full article...

Sunday, August 28, 2005

(Non-real estate) What a Touching Image

What a Load of Crap

That's quite a media circus you've got there Cindy.

Real Estate Q&A

Here is an interview with an experienced real estate agent in the Contra Costa Times.


Q What would you tell somebody considering (investing in real estate and borrowing money to do it)?

A I think ... we're at the end of that cycle right now. (For) a couple of years ... people have been buying new construction and selling it the moment it was done.

More Q&A

Bad Haircut Guy has Good Advice

Stocks are looking pretty boring these days with real estate so exciting. That means it is probably a good time to cash out of real estate and invest in stocks. This guy from St. Louis who looks like he cuts his own hair thinks so to.


"If you stop putting money into stocks and bonds, you risk having too much of your wealth tied up in your home.

Forget about a bursting housing bubble. Even a few years of slow to no-growth in the housing market could crimp your financial future."

Full Article...

Saturday, August 27, 2005

Greenspan Warns

Greenspan gave a pretty serious warning about the housing bubble yesterday. I believe that he would rather try to talk down house prices than keep raising interest rates. Raising interest rates will certainly pop the bubble eventually, but it will also hurt other parts of the economy that do not need to be slowed. Corporations have been able to borrow pretty cheaply now for at least two years and it would not be good for the economy if higher interest rates caused companies to spend less on hiring and more on financing their debt.

"JACKSON, Wyo. - Federal Reserve Chairman Alan Greenspan on Friday cautioned Americans against thinking the value of their homes and other investments will only go higher, saying "history has not dealt kindly" with such optimism.

Greenspan also said that bloated trade and budget deficits threaten the long-term health of the U.S. economy.

His warnings, made at an economic policy conference, came as the Fed chief and prominent economists pondered his 18 years at the central bank and the legacy he will leave. He is expected to step down in five months."


"Pricking the Bubble"


"These two factors—low mortgage rates, and the fact that the country has filled up so much that our cars no longer marginalize location costs—go a long way toward explaining the surge in housing prices over the past decade or so. But they don’t go all the way.

On top of these two powerful fundamental factors sits a bubble. The bubble is filled by people with money who are buying extra houses because they think home prices will continue to rise, and by people without money who are buying $400,000 houses in less-fashionable neighborhoods with zero percent down and floating interest rates."


Friday, August 26, 2005

All Signs Point to Bust

From the Chicago Tribune

"Although sales of new homes leaped to a new record in July, analysts said Wednesday they see signs that the nation's long housing boom may be approaching a peak.

"The whole energy behind housing we've enjoyed for so long is beginning to moderate," said Chicago economist Carl Tannenbaum of LaSalle Bank.

The question of whether or when the torrid real estate market will cool has been a continual source of debate, but there are now concerns over one statistic: the median price of a new home is less than last year at this time."


Thursday, August 25, 2005

Return on Investment Analysis in Hoboken

This message board is a about some new condos that are going up in Hoboken. The return on investment analysis done by a poster there is pretty interesting. In short, you need to get some pretty aggresive appreciation in condo prices in order to make a worthwhile return.


"An interesting discussion developed on the locked thread that seems worthwhile discussing further. It's surprising that some people forget to really break down the cost of carrying a property when figuring ROI.

Someone posted the example scenario of buying a no view 2br for 800K, with 20% down, and selling for 900K in 4 years. They quoted a 15%/yr return.

Let's take this scenario and make some further reasonable assumptions. A 30yr fixed mortgage at 6% (I think that's low considering the size of the loan, but let's assume excellent credit and aggressive mortgage shopping.)

All values estimates and rounded."

For the rest of the analysis....

Closing Fort Monmouth

"Losing Fort Monmouth won't be easy on the local real estate market, commercial and residential real estate agents say, but it may not be a crushing blow.

"If there is a negative impact, it is very likely to be short-term and gradual over the five years or so the base will take to close," said Jim Bollerman, owner of Bollerman Real Estate Services, a commercial real estate agency in Red Bank."


Wednesday, August 24, 2005

2846 Eastern Monmouth MLS Listings this Week

The count was 2837 last week.

Staying on the Market Longer at the Shore

But what if interest rates don't stay where they are?


"Realtors in the Shore area said on Tuesday that homes are staying on the market a little longer than they have in recent years but not long enough to create much concern.

"As long as these interest rates remain where they are — and they haven't started to climb precipitously — it's going to stay the same," said Bill Thomas, owner of Prudential Zack Realtors in Stafford."


Peak Real Estate

From The NY Times


["We could very much be close to the peak at this time," said Lynn Reaser, chief economist at Bank of America's capital markets group.

"There are signs that investors are becoming a little more cautious about the housing market," she added. "Sellers of the higher-price homes are not getting their asking prices, and there is a buildup of inventories."]


Tuesday, August 23, 2005

Existing Home Sales Down

Existing home sales fell 2.6% last month, which was more than predicted. In addition, the inventory of unsold home increased from 4.4 months in June to 4.6 months in July. The treasury market rallied on this news because Greenspan is less likely to keep raising interest rates if the housing bubble starts to show signs of deflation.

“NEW YORK, August 23 ( – The sales of existing homes in the US declined 2.6% in July, according to the National Association of Realtors.”


St. Joseph the Realtor

When you are having a difficult time selling your house, you are supposed to bury a statue of St. Joseph on the front lawn. As indicated in this article, people must be having a hard time selling their houses because demand for St. Joseph statues is through the roof.

"At the Saint Jude Shop in Somerville, N.J., the shelves are stocked with Catholic supplies such as rosaries, Communion dresses, Bibles, gifts and crucifixes.

But one of the hottest-selling items -- particularly these days with so many "For Sale" signs planted on suburban lawns -- is a 4-inch statue of St. Joseph. That is because St. Joseph, in addition to being venerated as the chaste husband of the Virgin Mary and earthly father of Jesus, is revered in many circles for his uncanny ability to sell real estate in a pinch."


Scraping the Bottom of the Barrel

Some have argued, and it makes sense to me, that when banks began offering negative amortization loans and 40 year mortgages, that means they essentially ran out of financially solvent customers and had to attract less than solvent customers. To put it more simply, anyone who could afford a house already owned at least one, forcing banks to try to sell mortgages to people that can't afford a house.

"NEW YORK, Aug 22 (Reuters) - Sky-high prices are not preventing cash-strapped consumers from getting the house of their dreams now that lenders are letting them drag out the term of their mortgages to 40 years.

By moving from a fixed-rate 30-year to a 40-year loan, borrowers can stretch out loan payments and qualify for larger mortgages with lower payments.

While that seems to be good news for consumers, financial experts say the benefits are far outweighed by higher interest rates, 10 years of extra mortgage payments and a reduction in home equity."


Monday, August 22, 2005

"Slaughter of the housing speculators"


"These days, “Get Rich Quick” has been the mantra for too many people trying to cash in while buying real estate speculatively. With so much “free” money still flowing from the Federal Reserve, it has become a real estate speculator’s dream world. These so called speculators have purchased over 3 million residences, practically with their eyes closed, with the sole intention of flipping them like pancakes to the next guy, marked up 25 percent or more. However, signs are beginning to appear that indicate this game of getting rich quick may soon be over.

Less than 20 percent of Californians can now afford a home with a fixed rate mortgage. The Federal Reserve is still raising variable interest rates. In 2004, when the housing bubble was really gathering steam, the National Association of Realtors calculated that 23 percent of homes purchased were for investment, and 13 percent were for second homes. With housing prices in some markets rising 20 to 40 percent in the past year – and 50 to 100 percent or more since 2000 – buying a house on spec looked like a sure thing to make a quick profit. But this housing deck of cards, in an already over-heated market, could have a domino affect. Why?"


The Futures Market and Real Estate

Today’s NY Times had a story about the futures market and its predictive value as related to housing. According to the article, given the prices of house futures for various regions in the US, it is likely that prices will continue to go up.

Although I don’t doubt that the predictive value of the futures market is compelling, I wonder if its value is as applicable to housing as it is to predicting who the next Pope or President will be.

The future’s markets in the article describe two different kinds of markets in my opinion, one of which is speculative (a bet on the next Pope) and one that is used as a hedge (betting on the direction of house prices.) In short, there is no underlying “Pope” security that will move in the opposite direction of the “Pope” future. On the other hand, the “Home” future could be bought to move in the opposite direction of the price of the actual house that is actually owned, thereby creating a hedge. Therefore the buyer of the home future is more likely a hedge investor whereas the buyer of the pope security is more likely a speculative investor and the motivations are going to be different.

That still does not explain why house future prices point to higher house prices, in light of all indications that actual house prices seem to be reaching a zenith. But maybe it does.

Over the past year, we have all witnessed irrational behavior on the part of real estate investors in the bidding up of houses beyond their fair value. As a result, we should not be surprised if these irrational investors do not take advantage of hedging opportunities in the futures market, even though they exist. In other words, these irrational investors were to dumb to over pay for a house and they are still to dumb to buy a security that will go up when the price of their house is going down.

Meanwhile, the futures market allows people who have smartly cashed out of there real estate investments to still hedge themselves in the event they bet wrong. A person who sold and took the cash and is now renting would probably want to hedge against a further increase in home prices by going long house prices in the futures market.


“Now one of these markets has turned its gaze to a consumer activity that is a favorite discussion topic these days: real estate. And the bettors see no signs of a bursting bubble anytime soon.

San Diego? Prices will rise another 5 percent in the third quarter, according to the bettors at HedgeStreet, another Web site. New York? They will inch up 2 percent. In Los Angeles, they will jump 7 percent. In each of the cities, as in San Francisco, prices will be more than 10 percent higher than they had been a year earlier.

The Internet has allowed these betting markets to flourish, and their predictive power stems from what the writer James Surowiecki calls "The Wisdom of Crowds," in his recent book of that name. When people take the time to study something and then put their money where their mind is, their cumulative intelligence can be cunning. As long as there are enough prognosticators, they gather their evidence independently and their backgrounds are diverse, they often do better than individual experts who have spent years studying the subject.”


Don’t Worry, There is no Bubble in NYC


“When asked what prices will look like next year, the panel said, “It is doubtful that [real estate] prices will see a severe decline, there may be a short correction, but prices will continue to climb in the next few years, as the demand for housing increases from wealth and investment from around the world.” The declining dollar has also contributed to the rising costs of NYC housing. The stock market has also seen some of its best performance in the last two years.

Though it is doubtful that current owners are selling purely based on the speculation of a housing bubble in NYC, they can be rest assured that the price of real estate will not see a dramatic decline in the coming months. The media will likely continue following this story, thereby contributing more to the speculation, and making buyers more anxious. Buyers should always follow the advice of holding property for a minimum of 5 years to reduce market risks.”

Full article

This is from the Dow Jones newswire

Edited by John Shipman

MARKET TALK can be found using N/DJMT

3:43 (Dow Jones) Merrill economist David Rosenberg cites a simple reason for why he's convinced that the housing market is due for a price correction. "The answer comes down to one metric: housing affordability and its impact on demand," he says. Affordability for first-time buyers has deteriorated to levels last seen in 1989, when mortgage rates were at 10%, he notes. Back then, in the 3Q of '89, bids ultimately dried up and "new home sales plunged 20% in the ensuing year as demand responded to the affordability erosion," Rosenberg says. Consumer cyclicals and financials "were the worst two performing sectors in the year after the 1989 housing bubble burst (which, by the way, also featured a surge in energy prices and a Fed tightening cycle)," he adds. (JHS)

Sunday, August 21, 2005

"Be Warned: Mr. Bubble's Worried Again"

Today's NY Times has a big article about Robert Shiller called "Be Warned: Mr. Bubble's Worried Again".

Here is an excerpt.

["Shiller is predicting the mountain goes into the sea," Robert I. Toll, the chief executive of Toll Brothers, a home builder, said in a recent interview, without having been asked about the economist. "He's selling himself."

To Mr. Shiller, though, it is a question of history, not salesmanship. Most people have never looked at decades and decades of home prices, because such data have been almost impossible to find. Stock-market charts often go back almost a century. Housing charts typically start sometime in the distant decade of the 1970's.]


Condo Myths From CNN

Condos are more like stock compared to single family houses in that condos in the same development are easily comparable to each other. If a seller of a two bedroom condo in a specific building decides to sell for say $550 per square foot, then that per square foot sales price becomes the going market rate, since all 2 bedroom condos in the same building are substantially the same.


"Remember the lust for Internet IPOs? Ordinary investors bid up the stocks of hot little companies that hadn't even registered their first sale yet. Today's version is a preconstruction condo, where investors jockey to get into a project not yet built, certain the units will jump in value when completed."


Saturday, August 20, 2005

Atlantic City is Immune

It seems like almost every real estate bubble article has a quote by a realtor explaining why the area they live in is immune to falling prices. In Atlantic City it's casinos, in Phoenix its the weather, in Miami its foreign buyers, in Alabama, its the sunny gulf coast.

"A recent survey says the land in and around two southern New Jersey towns is some of the most overpriced real estate in the nation, and is among the most at risk of price declines.

The national study by Cleveland-based bank National City Corp. concludes that both the Ocean City and Atlantic City regions are among areas that are "extremely overvalued and confront a high risk of future price correction," according to National City's 96-page report "Housing Prices in America," written by bank Chief Economist Richard J. DeKaser.

The two areas are also the most overvalued places in the state, the survey said, outstripping the population centers of northern New Jersey. The survey found the entire state overvalued."


Top Real Estate Bull Resigns

Barbara Corcoran has been one of the biggest housing bulls out there.

[The Corcoran Group announced today that founder Barbara Corcoran will step down as chairman of the company in November to start her own TV production firm.

Corcoran, who started the firm in 1978 and grew it into Manhattan's biggest residential brokerage, is leaving to start Barbara Corcoran Productions, which will produce TV content for network television.

Pamela Liebman, president and CEO of Corcoran since 2000, will continue to lead the brokerage.

"As someone who knows timing is almost everything, I know this is the time to devote myself fully to my next chapter," said Corcoran. "Together we've worked hard at The Corcoran Group to create the most successful residential real estate company in America. I'm bursting with pride over our success."]

Full Article

Friday, August 19, 2005

Sell the Single Family House

On the Ben Jones Blog, someone pointed out that a popular real estate trade in the NYC area is to sell (or not buy to begin with) the single family home in the suburbs and buy a smaller townhouse or condo in the country (or down the Shore); and also buy or rent an apartment in, or very near, the city. From my own observations, this does seem like it is becoming a more popular trade compared to buying a big house in the burbs and commuting at least an hour and a half to the city every morning. Hoboken has become much more family friendly over the past 3 to 5 years, (as opposed to frat-boy friendly) and it seems as if many of these families disappear on the weekends, presumably to the Shore or the Hamptons etc. In addition, the increase in the number of private schools in Jersey City, Weehawken and Hoboken area has probably compelled fewer families to run screaming to less incompetent school systems in the suburbs when their kids turn kindergarten age.

I am actually thinking about doing this trade myself. The appeal to me is to have a place at the Shore for the weekends, but also have a place close to where I work so that I am not spending four hours a day on NJ Transit. In my case though, and especially because I think housing prices are going to collapse, I would rent both in the city and at the Shore instead of buying. Given the relative “cheapness of rental properties at the Shore in the off season, I think it would actually be cheaper to rent in Hoboken and say Long Branch then to actually own a three bedroom in a quiet town like Little Silver or Shrewsbury and still face a minimum of an hour and a half commute every morning.

Stocks Outperform Real Estate

In today’s NY Times there is an article that demonstrates why stocks are a better investment than real estate over the long term. I always thought that this was obvious, but I guess not. Of course, real estate often has value as shelter that stocks do not have as the article points out.

“The housing boom of the last five years has made many homeowners feel like very, very smart investors.

As the value of real estate has skyrocketed, owners have become enamored of the wealth their homes are creating, with many concluding that real estate is now a safer and better investment than stocks. It turns out, though, that the last five years - when homes in some hot markets like Manhattan and Las Vegas have outperformed stocks - has been a highly unusual period.

In fact, by a wide margin over time, stock prices have risen more quickly than home values, even on the East and West Coasts, where home values have appreciated most.

When Marti and Ray Jacobs sold the five-bedroom colonial house in Harrington Park, N.J., where they had lived since 1970, they made what looked like a typically impressive profit. They had paid $110,000 to have the house built and sold it in July for $900,000.”


Thursday, August 18, 2005

Monmouth Beach Bans McMansions

"MONMOUTH BEACH — In a unanimous vote, the borough’s Board of Commissioners approved an ordinance that will bring an end to the building of what some residents believed were homes too big for the lots they were constructed on.

In recent years, the borough, as have municipalities nearby and across the country, has had many of its older houses torn down and replaced by what some call McMansions, that occupy far more of the lot than the homes they replace."


Condo Crazy

The Wall Street Journal has another article about the housing bubble today, after an extensive look at the bubble yesterday. The article was mostly about the huge amount of condo construction going on nationally and what is possibly fueling the demand. Some people try to make the case that condo demand is high because more people now want to live closer to where they work, and so are happy to buy apartments that are close to city centers. However, the article also points out that condo’s are attractive properties for flippers and suggests that once the speculators stop speculating, there is going to be lots of supply on the market.

At the Jersey Shore, it does seem like condos are sprouting up on a regular basis. Long Branch certainly has lots of condo construction, as does Asbury. Also, the bay shore is building town-homes and condos.


“Developers started construction on about 802,000 condo units in the past five years, according to the Census Bureau. More are on the way. About 270,000 condos will be started in 2005 and a further 255,000 in 2006, estimates Michael Carliner, an economist with the National Association of Home Builders, a Washington-based trade association. That doesn't include the sizable but hard-to-quantify number of new buildings that start life as rentals and switch before completion, or the existing offices, hotels and rental properties being converted into condo developments.

"In the past, the highest and best uses of land were commercial, but now with condo prices and single-family homes getting such high prices, the demand for land that would have been used for commercial is being shifted to residential," says Anthony Downs, a senior fellow at the Brookings Institution and a real-estate specialist. Median prices for condos may be skewed because many of the newer properties tend to be located in pricey coastal cities or in parts of town where land prices are higher.”

More Eminent Domain Abuse in Long Branch

I think I would feel pretty guilty if I bought one of those condos in Long Branch that was built through the seizure of private property.

“LONG BRANCH — When Lori Vendetti invested more than $2,000 to paint her Ocean Terrace home, it wasn't just an exercise in beautification. It was an act of defiance.

The city plans to invoke eminent domain to level Vendetti's home, along with dozens of others in her quiet seaside neighborhood, to make way for luxury condominiums as part of its oceanfront redevelopment.

So when Vendetti recently changed the color of her house from blue to seafoam green, some neighbors questioned why she would invest that money in something the city plans to tear down. She had a simple answer.”


Slowdown in San Diego

SAN DIEGO -- San Diego County is seeing one of California's lowest appreciation rates in home prices.

DataQuick Information Systems says sales of California homes and condos slowed in July, even as homebuyers helped push prices to new records.

The statewide median price paid for a home last month was $451,000, up 17.4 percent from July 2004. In San Diego County, the median price of homes rose over the last 12 months to $496,000, an increase of 5.1 percent. That is much lower than in recent years, when home prices were rising at 20 percent or more per year.


Ask Merril Lynch About the Housing Bubble

“What's ahead for the housing sector? We think that there could be a slowdown in the pace of housing activity even if long-term interest rates do not move higher. One reason is that interest rates alone do not determine the affordability of housing — home prices and personal income are part of the mix. Increases in home prices lately have been outpacing increases in income, pushing affordability down to a 15-year low. Another reason why housing activity could slow even if long-term rates stay put is that adjustable-rate contracts now account for about 30% of all new mortgages; that suggests that borrowers will be pinched by increases in short-to-medium-term interest rates. In that context, it might be a good idea to remember that trends in the housing sector typically lead trends in the economy as a whole by about three quarters.”

Full Article

Wednesday, August 17, 2005

Protecting Profits, I Mean Farmland

"Aug. 15 (Bloomberg) -- New Jersey, the most densely populated U.S. state, is investing more than $140 million to preserve farms from real-estate development.

The state is losing about 18,000 acres a year to developers and builders, according to the New Jersey Public Interest Research Group, a Trenton-based consumer-advocacy organization. New Jersey has lost more than half of its farmland since 1950, according to U.S. Census Bureau data. The state has about 9,600 farms."


MLS is at 2837 this Week

Every Wednesday we check the MLS for Eatern Monmouth. This week the count is 2837. Last week the count was 2868.

Tuesday, August 16, 2005

Fat Beach People

When I was on the beach in Pt. Pleasant over the 4th of July weekend, I saw a family of about 9 bring hot buffet style chafing plates onto the beach, with burning sterno. They were eating sausages, rice and beans and other assorted hot foods right there on the beach like some kind of public barbeque. It looked disgusting, and reminded me why beach clubs have so much appeal.


[There, on the Avalon beach, we saw a portly young father feeding chips to his toddler. With what looked like fascination (or pride), he watched her eat until, with her mouth full, the once-little girl finally said, "No more." There were inflated bellies hanging over men's swim trunks, and women ranging from overweight young mothers to way-large matriarchs, invariably wearing floral swimsuits. None of it "fit fat."]

Full article

I/O Loans in SC

That's a lot of interest only loans. Interestingly, one guy in the article believes that most of the speculation is occurring on the coast. The same, I believe is probably true in NJ as well.

[Nearly a third of all mortgages made in South Carolina last year were interest-only loans — a low-cost, at least initially, but risky form of borrowing.

David Bryant, president of Columbia-based Metropolitan Development, was one of those borrowers.

Interest-only mortgages suit Bryant’s needs because he does not like leaving equity, or much else, in a house for too long. “I turn a house every 36 months.”]


Extensive Article About NJ Real Estate Bubble

The Star Ledger has an extensive article about the housing market in New Jersey today. I personally believe I have been seeing a lot more “for sale” signs in Monmouth County than usual. One house that I am interested in that is located in Middletown has been sitting on the market unsold since about March. After a price reduction from about $800k to $750k between March and May, the price has come down in $5k increments each successive month. In general, I would guess that homes in the $300k to $550k range move pretty quickly still. However, as you get over the $650k level, I’m guessing that houses might be slower to move.

“Yes, it is mid-August -- vacation time -- hardly what real estate agents would describe as the ideal home shopping season.

But in a housing market known for multiple offers, bidding wars and frenzied buyers waiving their rights to property inspections to snatch up homes, all those stale "For Sale" signs are getting a bit hard to ignore.

And yesterday the latest statistics from the National Association of Realtors suggested that despite New Jersey's sizzling temperatures, home sales in the Garden State appear to be cooling down a bit. In its quarterly survey, NAR found existing home sales in New Jersey, which included single-family homes and condos, were little changed from April through June, dipping 0.6 percent compared with the same period a year earlier.”


Little Silver Rentals

A couple of weeks ago I said that I saw three “for rent” signs on single family houses in Fair Haven. At the time, I commented that this was unusual since you never really see for rent signs in Fair Haven. This week, I noticed two more for rent signs on single family houses on Branch Avenue in Little Silver and Red Bank. In my opinion, these for rent signs in otherwise non-rent type neighborhoods suggest that some speculation might be occurring with these kinds of properties. I would not be surprised if the owners of these places are betting that the prices will be higher in a year or two and are attempting to bring in renters to offset the carrying cost of the property taxes and the mortgages.

Monday, August 15, 2005

Mississippi is a Bargain

“For the time being, it's unlikely you'll find yourself with property that's about to take a nosedive. In fact, 35 percent of respondents in a Parade magazine survey said Mississippi along with a handful of other states still are bargains.

According to the National Association of Realtors, the median price of existing homes nationwide is $219,000 - 14.7 percent higher than last year. Fueling the boom: low interest rates and the variety of mortgage options.

Of 1,000 households surveyed by Parade, close to 61 percent believe the price upswing will continue over the next year, and 47 percent say investing in housing now is smart.

Data compiled by the Office of Federal Housing Enterprise Oversight shows the average home appreciated by 12.5 percent over a one-year period. Hot markets: Nevada homes up 31.2 percent, California up 25.4, Hawaii, 24.4 percent, Washington, D.C., up 22.2 percent and Florida up 21.4 percent.”


Summer Rental Subsidy

A couple of weeks ago I posted an article here about the surprising amount of summer rentals available at the Jersey Shore this past summer. I’m thinking that once the season ends, and the rental income goes away, a greater amount of shore landlords than normal will throw in the towel and maybe decide to put their house on the market this fall.

In other words, if you are a relatively new landlord (say you just bought a house in LBI last January) and you kept that house rented though-out this summer, then that rental income allowed you to delay selling the place until the upcoming fall or winter. In short, shore house sales should normally be slow in the summer, due to the fact a tenant is paying for the mortgage. On the other hand, maybe it doesn’t work that way.

Philadelphia Posers

The NY Times had an article yesterday about how Brooklyn hipsters are moving to Philadelphia because it is cheaper to live there than NYC. This article kind of makes an interesting point about real estate that it probably did not intend to, which is that price trumps all. Basically, if the price of real estate gets so out of whack with what most people can afford, as it has in NYC, then people will move to somewhere cheaper, like Philadelphia. Given constrained supply and excessive demand in a closed economy with no other options, prices should continue to rise indefinitely. Luckily, NYC, no matter how cool or trendy, is not closed. Prices can’t go up indefinitely because eventually demand decreases as buyers exit the system – to Philadelphia.

[WEARING a Paul Green School of Rock T-shirt, his bangs plastered to his forehead in the summer heat, Laris Kreslins pulled in front of a handsome brownstone on Rittenhouse Square, the priciest neighborhood in the city, and hopped out of his car.

"We're going to show you what a real Philly apartment looks like," he said, unlocking the door to reveal a spacious one-bedroom flat sparsely decorated with CD's and copies of music magazines. "As you can see, it has hardwood floors, lots of light and very high ceilings," he said. Then Mr. Kreslins paused and delivered what he knew would be the kicker: "Rent is $800 a month. Heat and electricity included."]


Sunday, August 14, 2005

Mail Order Pork Roll

This post is not exactly real estate related, but it does pertain to the Shore. I do like pork roll, but maybe not enough to order it through the mail.

[TRENTON, N.J. - Donna Beers and Pattie Weaver kept hearing the same complaint when their grown sons left their native New Jersey almost a decade ago: ``There's no pork roll here!''

Weaver's son, Mark, had moved to North Carolina when he joined the Army, and Jimmy Beers then moved to Colorado for a job. It turned out that pork roll, a spicy pork-and-seasonings delicacy created in Trenton in 1856, generally wasn't sold or even known outside New Jersey and eastern Pennsylvania.]


The Chinese Will Help Bust the Bubble

From the San Franciso Chronicle

"In the new global economy, almost everything's connected to everything else. Case in point: China will let its currency rise against the dollar and America's housing bubble will burst.

Let me explain. The housing bubble has been pumped up by low mortgage rates which have made it easy for lots of people to buy a house. Or two. Other major investments require more capital up front. But with mortgage rates this low, housing has become the major investment for average Americans who haven't saved much of anything."


This Week's Carnival of NJ Bloggers is Up.

If you get a chance, try to visit the Carnival of NJ Bloggers today.


Saturday, August 13, 2005

This Was in Today's NY Post

August 13, 2005
Inside Report: Greenspan's Concerns
By Robert Novak

WASHINGTON -- Federal Reserve Chairman Alan Greenspan, worried about excesses in real estate investment, has privately called on other federal regulators to take a closer look at imprudent speculation.

According to Fed sources, Greenspan has told the regulators that there is a limit to what the central bank's monetary policy can do in tamping down inflationary pressures. He has been in contact with the Comptroller of the Currency and the Office of Thrift Supervision, among other agencies.

A footnote: High officials in the Japanese Ministry of Finance recently commented privately that the vibrant U.S. home mortgage market is supporting an otherwise shaky global economy.

Leveraged to the Hilt

[Multitalented Joaquin L. Thompson of Mableton, Ga., is a baker, a nurse for an insurance company, and now, a successful real estate investor. On Aug. 3, he made $14,500 by flipping a house he owned for only 53 days. A small Atlanta bank financed his entire purchase price. All Thompson put up was $1,200 in earnest money that went into escrow. Not bad: In less than two months, Thomson walked away with a 1,100% gain on the money he started with.

More and more homebuyers are discovering that in a bull market, acquiring assets with other people's money is the path to riches. They're borrowing a rising percentage of their purchase prices, contributing to the housing boom. The danger is that if prices begin to fall, people who have stretched to buy houses with 100% financing will be under water on their mortgages and at risk of default if they have to sell. "I always tell people, look at the worst scenario," says James R. Gillespie, chief executive of Coldwell Banker Real Estate Corp. (CD ). But many buyers ignore the warning.]


Friday, August 12, 2005

Today's WSJ

The Wall Street Journal featured the housing bubble prominently on its front page today with a story about growing home inventories.

“In San Diego County, for instance, where the median home price has more than doubled in the last five years, the number of homes listed for sale totaled 12,149 on July 8, more than twice the 5,995 available a year earlier, according to the San Diego Association of Realtors.

In northern Virginia, an area dominated by the fast-growing suburbs of Washington, inventories are up 26% from a year earlier. "Sales have slowed down for sure," says Tip Powers, president of Realty Direct Inc., Sterling, Va. He says home prices have flattened out and speculators are starting to shy away from the market because they no longer can count on quickly unloading properties at a profit.”

Another article in today’s journal highlighted the growth in the number of McMansions in the nations suburbs. Here is a snippet from the article.

“The McMansion has been supersized.

Even as economists debate whether discounts on some high-end homes signal a broader softening in the housing market, one indicator continues to rise: The biggest homes in suburbia are getting even bigger. The nation's largest builders of luxury homes say their top-selling designs lately have expanded to include more bathrooms, giant master-suite closets and extra rooms designated as teen dens, hobby rooms or even "bonus" rooms. Toll Brothers, of Horsham, Pa., says its best-selling plan this year has a base size of 4,800 square feet -- 1,600 bigger than its top seller of five years ago. WCI Communities, of Bonita Springs, Fla., says the most popular plan in its Mid-Atlantic region measures 5,425 square feet, up 250 square feet from its 2000 bestseller.”


Different parts of the Shore seem to attract people from different parts of the state. I always figured Chatamites for LBI types since they’re both family friendly kinds of places. Belmar and Manasquan are frat boy towns, Sea Side seems to attract the Bayonne crowd while Sea Bright, unless the Hook is closed is for local yocals.


[“I keep hearing Asbury’s going to come back,” said Mrs. Nauta, recreation director for Chatham Borough. “My family would go down and stay in Ocean Grove before things started closing up. We just liked sitting on the boardwalk and watching the ocean and the people. We used to eat at the Homestead Restaurant in Ocean Grove and go to concerts at Convention Hall.”

Whether any of that will come back and stick is still unknown.

Past Bradley Beach is Avon-by-the-Sea, and this is Richard Kern’s beach. A Chatham Township resident, Kern is the area coordinator for the Morris County Office of Emergency Management.]


Thursday, August 11, 2005

New Jersey and Taxes, Perfect Together

Property taxes take a pretty big chunk of cash out of New Jersey residents pockets every month. I wonder if the rush out of Jersey to more tax friendly states will accelerate over the next two decades as baby boomers begin to retire en masse. If that is the case, then maybe there will be a glut of houses in New Jersey 10 or 20 years from now. As I see it, today’s 40 and 50 year olds, which already bought their first houses in the 80s an 90s are now financially secure enough to buy their vacation houses at the shore, thereby driving up prices (as we have seen) and increasing the supply.

Eventually though, many of the 40 and 50 year old people are going to turn 60 and 70, and they are only going to need one house, so they sell off their original residence in Flemington and keep the beach house in Bay Head. Or, instead of staying in NJ, they sell both houses and move to North Carolina, where their social security checks will go a lot further.


[Brown and other residents of both the borough and township have many of the same concerns faced by residents throughout much of New Jersey.

"What do people call me about, stop me in the store (about)?" Freehold Township Administrator Thomas Antus said. "It's traffic, quality of life, taxes."

"Between the county buildings and churches, we have a quarter of our property nontaxable," Freehold Mayor Michael Wilson said. The borough is the county seat, and Borough Historian Kevin Coyne estimated it's got 30 houses of worship.]


I’ll Take the Risk Free Return of 4%

...instead of risking my cash for a possible real estate return of maybe 9% at best at this point.


[Fed fund futures are pricing in the possibility of three more increases this year. Fed fund futures are now pricing in the possibility of fed funds reaching 4.25% by the end of the year. Traders are now forecasting another 25 basis points in the next two meetings, pausing in December, than raising rate to 4.25% in February 2006. This week, Goldman Sachs raised its target for mid-2006 fed funds to 5% from 4.5%.]


Wednesday, August 10, 2005

Traffic Keeps Growing

Since I started this blog in late April, traffic to this site has grown pretty steadily. In May I was averaging about 25 unique visits a day and now I'm averaging well over 200, with somedays hitting 500 visits. Although I certainly don't get the kind of traffic Ben Jones' excellent blog gets, I'm pretty encouraged by the amount of interest in the Jersey Shore and the real estate bubble in general.

Suggestions have been made that simple awareness of over valued real estate price will lead to an eventual correction. Reading some press accounts and the other blog suggests to me that this is true. Many prospective buyers, at this point, have got to be asking themslves if it isn't better to wait before diving in and making a major purchase that may go bust in only a few months. In addition, many home owners sitting on tons of paper profits are probably wondering if now might be the best point to head for the exits. Whether people are potential buyers or sellers, it doesn't hurt for them to be informed about the current discussion, or even frenzy, surrounding the state of the real estate market at the Shore, in NYC, or Fresno California. Therefore, if you know some people that haven't exactly been paying attention, e-mail them with a link to the and mention the interesting outlook Ben Jones and some of the commentators there have. Also, if they have a particluar interest on what is happening in Rumson, or Manalapan or Brick, send them this link too;

More Homes For Marlboro Says Judge

As someone from east of the Parkway, Marlboro always to me seemed as far away as Iowa and about as densely populated. Now, when I drive out in that section of Monmouth County, I'm always frustrated by the amount of traffic on highway 9, especially on the weekends. I don't think that the local raods out in that part of NJ were designed to support the amount of cars that now use the roads regularly. Moreover, the Freehold Mall is another destination that ads to the congestion.

"MARLBORO — Superior Court Judge Robert A. Coogan Tuesday ordered the township to allow developer Dan Werbler to immediately commence building a 225-home retirement community called Chelsea Square on Route 79 near Beacon Hill Road."


San Diego - Ground Zero

San Diego seems to be ground zero for the housing bubble. Other hot areas that could burst early (or they are already burstin) seem to be Miami, Vegas and Boston. I was reading today on the Ben Jones site that some feel that New York City properties might have some sort of built in immunity from sharp price decreases. The rationale behind this line of thinking is that co-op boards are stringent about making sure the buyer can actually pay for the apartment, and often require more than 20% down payments. This would make sense, however, co-ops have always existed before, and its not like NYC housing prices have never collapsed. Basically, despite tough co-op board rules, property values were still haircut substantially when the apartment market fell apart in NYC in the late '80s.


"Home prices have accelerated at a rate far faster than household income and this has increased concerns there may be a bubble out there," said Greg McBride, Senior Financial Analyst at "The fact that homes may take longer to sell and the fact that mortgage rates may go up could throw cold water on what's currently a very hot housing market."

Entire article...

This Week 2868 Listings on Eastern Monmouth MLS

Every Wednesday we check the MLS system for Eastern Monmouth County. This week the count is 2868, which is essentially flat with last week's count of 2874.

Tuesday, August 09, 2005

"10th Avenue Freeze, You're Arrested"

"Drop the ping pong paddle and step away from the table." (Belmar Police Officer)

The Asbury Park Press has good editorial today about the efforts of Belmar’s elected officials to outlaw fun. Although I agree with the editorial, and like Belmar as a summer party town, maybe there are investment opportunities available given the town’s new priorities and direction. The housing stock in Belmar is pretty attractive in my opinion and some of the larger houses that are now filled with summer renters would probably make nice single-family year- round residences – more like what Avon has. In other words, if fun is eventually to be outlawed altogether in Belmar, maybe a nice house can be bought there for 80% of the cost of what a similar house would cost you one mile north (Avon) or one mile south (Spring Lake.)

“In its ongoing campaign to subdue rowdy renters and visitors, the Belmar Borough Council has adopted an ordinance to prohibit any outdoor alcohol-related games or contests, such as "beer pong."

We understand Belmar's attempts to improve the quality of life for its residents by enforcing noise ordinances and ticketing overcrowded rentals. But to tell people they can't play a game in their own yard — regardless of whether they are creating a disturbance? That's going too far.”


No Where is Affordable

There is nothing wrong with renting. In this over heated housing market, where amateurs are getting into the landlord game, it seems that like there are plenty of rental bargains to be had. Even in some of the nicer towns, such as Fair Haven, I have noticed a few single family houses up for rent.

“WASHINGTON - Housing prices are far outstripping salary increases for low- and moderate-income jobs, putting the American dream of owning a home beyond the reach of teachers, firefighters and other community workers in many cities, said a study being released today.

The report, by a coalition advocating affordable housing, found that even cities once considered affordable, such as Tulsa, Okla., are rapidly becoming too pricey for lower-income workers such as janitors and retail sales employees.”


What a Flat Yield Curve Does

Today’s Wall Street Journal has an article about what could happen if the yield curve goes flat. In short, banks lose the incentive to lend, which means that it will be harder, or more expensive to get a mortgage.


“A flattening yield curve removes banks' age-old profit model: Borrow money at low short-term rates and lend it out to people and companies at higher long-term rates. Already, as rates converge, banks are cutting costs to address their shrinking profit margins. "Banks are scrambling, because they have this huge amount of income that is disappearing that they need to replace," says William S. Demchak, chief financial officer of PNC Financial Services Group Inc.

Should the curve end up "inverting" -- with short rates climbing above long -- banks could lose their incentive to lend. That is one reason previous flat yield-curve inversions have signaled recessions, though some economists think this time will be different. Now, they say, falling long-term rates have offset the braking effect of the Fed's short-term rate increases, in what traders call a "bull flattening": People and companies are able to bypass banks and secure low, long-term rates from other lenders or even through the bond market, meaning they still are able to make big-ticket purchases, including that new home or factory.”

If You Have A Good Idea…

…then so does everybody else.

Doesn’t this remind you when people you knew quit their day jobs to become day traders. It was easy to make money as a day trader in 1998 and 1999, because the market went up 3 out of 4 days. Every tick was an up-tick it seemed. The preponderance of new real estate agents reminds me of those day trading days. What is even more idiotic about this crop of people thinking hat they will get rich selling real estate is that the day trading days only ended 5 years ago. The memories of “get rich quick” schemes should still be pretty lucid stll.


“Everyone, it seems, wants to get into the real-estate business. According to the Department of State, as of June, there are 27,081 licensed agents and brokers in Manhattan, up 1,491 from 2004 and 4,268 from ’03. “We’re graduating well over 100 students a week,” says NYREI’s president, Richard Levine. “You could hire a new person almost every second,” confirms Halstead president Diane Ramirez. And brokers and customers are starting to say the system is flooded with neophytes.”


Wise Words from a T-Shirt Salesmen

"America is financing and refinancing their homes with all kinds of funky new mortgage products while real estate prices go through the roof," said John Baynham, founding partner and the artist behind all the site's designs. "If and when this bubble pops, a lot of people are going to take a bath and they're going to need an affordable shirt to put on afterwards."

Monday, August 08, 2005

The Bubble Talk is Ending

This site shows a nice chart that shows the number of media stories that mention the "real estate bubble." As far as I can tell, the subject of the bubble is increasingly the main discussion topic at social gatherings.

"The hysteria about the real estate bubble is an almost ideal case study to illustrate why good publicists always have a chance to succeed –– no matter how badly out of favor their clients are at the moment. All they have to do is wait out the story cycle."


30th Anniversary of Born to Run this Month

The third best Springsteen album.

Treasury Short Squeeze in June

Earlier this summer, the 10 year note yield fell to below 4%, which caused a “conundrum” in the face of Fed efforts to boost interest rates. According to this article in the NY Times, the lower yields might have been caused a short squeeze. From a real estate and mortgage perspective, the short squeeze theory of low yields is interesting because it suggests that the low yield at the time was both artificial and temporary.

“A STORM swept through the United States Treasury market in June, creating big losses at banks and brokerage firms and bringing back memories of the infamous short squeeze by Salomon Brothers in 1991 that ultimately brought the firm to its knees.
Skip to next paragraph

The recent turmoil is a troubling sign that the pools of capital at hedge funds and investment firms have grown so enormous that they can easily swamp the government securities market, one of the world's deepest, most liquid and heavily used financial markets. The upheaval also involved a short squeeze - financial-speak for what happens to short-sellers when they are forced to stanch their losses in a buying spree that sends prices higher and higher.”

Continue to NY Times (Registration Required.)

Advice for The Fed from the FT


“Fed policy replaced the internet bubble with a housing bubble. The problem is that equity and property are very different. When stock prices rise, it signals improved future profitability. Faster growth means higher incomes and more resources to devote to current (and future) consumption.

Housing is different. We all have to live somewhere. When housing prices rise it does not signal any increase in the quantity of economy-wide output. While someone with a bigger house could move into a smaller one, for each person trading down and taking wealth out of their home, someone is trading up and putting wealth in. A rise in property prices means people are consuming more housing, not that they are wealthier.”


This Sunday, Howell

Last week we commented that we had a chance to drive through Sea Bright and remarked about all the “for sale” signs that we saw. This weekend we had a chance to drive through the southern end of Monmouth County and saw parts of Howell, Wall, and the Spring Lake Heights to Brielle area. Just from observation alone, and with no empirical evidence whatsoever, I would say that there seem to be a lot of houses for sale in the Howell and Wall area. In particular, I noticed in Wall, at one of the lights on rte. 195, there were about five different “open house” signs on the grassy corner pointing in various directions. On the other hand, the areas that are closer to the beach did not seem to have that many “house for sale” signs.

The western part of Monmouth County seems to have had the most new construction over the past few years (because eastern Monmouth was built up years ago), as a results, it probably shouldn’t be that surprising that more houses are for sale there compared to the eastern portion.

National Foreclosure’s Are Up

“BOCA RATON, Fla., Aug. 8 /PRNewswire/ -- According to data released today by online foreclosure listing service,, a total of 90,590 foreclosed residential properties were available for sale in the U.S. during July. A baseline comparison of foreclosure inventory in July compared to June shows a 4.6 percent increase in the total number of foreclosed residential properties for sale in July, and an 8 percent increase in new foreclosure listings during the month.”


Saturday, August 06, 2005

Pittsburgh Paper Covers Cape May

The Pennsylvania newspapers do a good job of covering the Jersey Shore. This article, I thought, was worth a read, although it only mentions the subject of real estate briefly. Meanwhile, the Asbury Park Press, after carrying a front page headline last Sunday telling us that President Truman dropped an A-Bomb on Hiroshima, should probably have a front page headline this Sunday announcing that a man has landed on the moon.


"Precious little penetrates the haze of vacation consciousness, notably word that the real estate market is nearing a crash. A vacant lot nowhere near the beach is currently on offer for $3.5 million.

Irrational optimism permeates shore thinking. At the beach, adjacent to a body of water locals call "the Atlantic Ocean," lifeguards spend their days blowing whistles and commanding bathers to come closer to shore."


The Carnival of NJ Bloggers Will Be Up Tomorrow

If you get a chance, try to visit the Carnival of NJ Bloggers when it is updated tomorrow (Sunday, August 7.)


Another Article From Fidelity

I'm surprised Fidelity and other money managers and Wall Street broker/dealers are not pushing the idea of a real estate bubble more forcefully. After all, Wall Street profits are dependent on people investing their cash in stocks and bonds and mutual funds but not real estate. Not too many Wall Street firms benefit when 401k accounts are cashed in to buy a duplex in Myrtle Beach.

[Enter the market at your own risk

Mark Nash, a real estate agent in Chicago and author of several books on real estate, including "1001 Tips for Buying and Selling a Home," has his ear to the ground and his eyes on the bigger picture as well. He says signs of a bubble definitely exist in certain isolated markets, such as South Florida, but not nationally. "There's a lot of speculation out there," Nash cautions. "If you're thinking of getting into an overheated market today, tread carefully. In some markets, I think it's past time to get in."]

Full Article

The Chinese Started It

Letting the Yaun float a little seems to have had more effect on the long bond than Greenspan's efforts.


"The Above Trends Have Been Fueled Synergistically in Recent Months by over-the-Top Aggressiveness by the Lenders and Homebuilders. The Share of Homes Bought with No Down Payment -- Zero Money Down -- Has Surged from Below 20 Percent Two Years Ago to About 40 Percent in Recent Months. Many of These Loans Were Combined with Teaser Interest Rates of 4-5 Percent."


Question for Readers

If you use Internet Explorer (not Mozilla Firefox, which I use) do you see the side bar immdeiately to the right of the postings, or is it all the way at the bottom. (The side bar contains, google ads, the poll, and other links.)

Friday, August 05, 2005

Price Lowered on Rumson House Again

This house in Rumson is now listed on the MLS for $835,000. It was recently priced at $875,000 and before that $899,000, which was down from $940,000 back on May 5th. MLS ID#: 10038427 Posted by Picasa

What Leads to Higher Rates?

This Q & A session is from Fidelity.

"Q: The Federal Reserve has raised short-term interest rates—which lenders use as the basis for calculating their mortgage rates—nine times since the middle of 2004. Shouldn't that lead to higher mortgage rates and a slower housing market?

Camilli: Yes, it should, if short-term and long-term interest rates (as represented by the yields on Treasury securities) were at higher levels than they are now. But short- and long-term rates are still low by historical standards."

The yield on the 10 year bond is finally starting to creep higher, especially with today�s stronger than expected payroll numbers helping. As about 11:30 AM today, the yield on the 10 year bond was at 4.38%. Here is a 3 month chart from that shows the yield on the 10 year bond moving up since late June.
 Posted by Picasa

A Baby Boomer is Building My Vacation Home

In a few years, after the dust has settled from the housing bust, I think I might by a second home somewhere out west or maybe up in New England. I’m pretty confident that a significant number of vacation type houses (with granite counter tops) will be up for sale given the building boom going on now that is being financed by boomers cashing out of there 401k accounts.

["It’s a Baby Boomer’s playground," said Reid as he walked a visitor through the first house in the development, currently under construction. Black Rock Falls will be the first upscale vacation development in this town where modest vacation homes now sell for $160,000 to $250,000, a four hour-plus drive from Charlotte, N.C.]


Thursday, August 04, 2005

"We’ll keep pushin’ till it’s understood...

....and these badlands start treating us good"

Lots of bubble experts and amateurs keep calling different speculative excesses a market top for real estate. I have read numerous articles about people behaving stupidly in this over-hyped market, but I’ve got to say, the people in this article seem to have hit a new level of idiocy.

[Bad Lands Now Hot Property

# Undeveloped -- even bleak -- parcels in a Texas county lure out-of-state buyers looking to jump into the real estate market.

By David Streitfeld, Times Staff Writer

VALENTINE, Texas— For 19 miles, most of it bumpy enough to shake your bones, State Route 2017 runs down to the Rio Grande and the Mexican border.

Drug smugglers and illegal immigrants pass through here. So do the Border Patrol agents that pursue them, and cowboys heading to a nearby ranch. No one else bothers. The land is sandy and bleak, full of gullies and rattlesnakes.

Yet this parched ground is increasing in value faster than any Manhattan duplex or Malibu villa.]


Today's Housing Bubble News in the WSJ

The Wall Street Journal has a story today about how some luxury home owners are having trouble moving there $2+ million homes. Buyers of high-end homes are apparently being much more cautious this year compared to last year. The WSJ gave a few examples in the article of homes that are not moving. Although none of the homes mentioned in the article were in New Jersey, or at the Shore for that matter, one of the mansions mentioned as slow to move was in Westport Connecticut. Westport luxury homes sellers probably rely on the same type if buyer that high-end eastern Monmouth County luxury rely on, namely Wall Street types.

From the article (subscription may be required.)


["Over the past few years this market has been seeing a 10% to 15% annual appreciation, and this year we quite didn't hit that," says Ms. McGovern. Sellers who put homes up for sale earlier this year have been overly optimistic about getting their asking price. "They've had to rethink their expectations," she says.]

Emigrant Savings Bank is Paying 3.50%

In case no one has noticed, Emigrant Savings in NYC recently raised the interest rate that they pay on deposits from 3.25% to 3.50%. Although Emigrant is small relative to the other NYC banks, it is interesting to see them price rates so aggressively in order to attract deposits. Over time, Emigrant’s move will force other area banks to raise their deposit rates, which means that they will also have to raise lending rates if they hope to still make money. In short, Bank of America, Chase, Citi and others big banks are going to lose depositor’s money to Emigrant (and a few others) if they do not increase their own rates. Once they increase their deposit rates from say 2.00% to 2.50%, they will have to also increase the amount they charge for a mortgage from 6.00% to 6.50% if they hope to maintain the same 400 basis point margin (which is called the net interest margin.)

Wednesday, August 03, 2005

Go Back to Bayonne Seaside Tony

Here is an amusing story about bennies. A few years ago a song came out about "Seaside Tony." In the song, Tony was from Bayonne, and "wore a quart of cologne." I wish I could find that song, it was pretty funny.


["A Benny is someone who's not a local from New York, with a New York/northern New Jersey attitude," said Brian Phillips, a radio jock on the popular Jersey Shore alternative rock station, G106.3. "It elicits quite the response. Every time that subject is brought up, the phone lines light up."

(Phillips himself commutes an hour from northern Jersey to the Jersey Shore each day for work, but in a debate with his listeners, it was determined he is not a Benny because he contributes to traffic congestion year round.)]


As a side note, G106.3 is not half as good as WHTG 106.3 was before it was bought. I still see the old black and red WHTG bumper stickers occasionally and get nostalgic for the radio stations glory days of roughly '85 to 2000.

2874 MLS Listings For Eastern Monmouth

This week there are 2874 listings for Eastern Monmouth County. Last week the count was 2871.

Listings Here.

Build Faster Dammit!

I can’t help but think that the developers in Asbury Park are at least cognizant of the current housing bubble nationally, and at the Shore. They must be getting nervous about the progress of their construction projects, hoping that the bubble doesn’t burst before all the condos, apartments and townhouses are sold. Although I would not want to own a condo anywhere at all going into a prolonged period of declining house prices, imagine how much money you would lose in a town like Asbury. In other Shore towns, the attraction or investment appeal is generally not limited to redevelopment efforts. However, the only thing Asbury has going for it is the redevelopment of the waterfront and the redevelopment could come to a screeching halt if the bubble bursts.

Imagine being an earlier buyer in the first phase of construction of the town homes along Wesley Lake. If all the other projects in town are completed, then you are going to look like a genius because you got in early on the towns rebirth. However, it would be a nightmare if you were an early buyer, and then funding dried up so that the remaining two-thirds of the project sit there half built. Meanwhile, in other parts of town, developments take years to build or don’t get built at all because real estate is not such a hot investment anymore, and the town remains a dump.


[Gershwin said the registration probably will be finalized in late August. The first 91 units now under construction will be sold for between $400,000 and $900,000. The sales center is 85 percent complete, he said.

"We're definitely moving full-steam ahead as best we can," Gershwin said. "We have a mason contractor working on the site of the first 91 units."]


Question about Buying A Condo

There seem to be a lot of condos going up at the Jersey Shore. I would assume that most of the buyers are people from North Jersey and New York that want a place at the shore. Also, I’m sure a lot of empty nesters in Monmouth and Ocean Counties are selling their single family homes that are located a little further in-land and moving closer to the beach.

“Question | I am contemplating purchasing a $200,000 condo on the [Jersey] Shore with my life partner. We both expect to retire in three years. I am very unhappy with the $383-per-month association fee, and I remember that condos used to be considered bad investments. What do you think?

Answer | You're right. Condos once were thought to be bad investments. But that has changed.”

Signs of a Manhattan Market Top from Curbed



So, after all the brilliant philosophizing about the BUBBLE, there appears to be absolutely no tangible indication (so far) of any bubble-popping market behavior. In fact, quite the contrary…..all of a sudden we are seeing more and more properties with asking prices hovering around the $ 2,000/sf mark”

Tuesday, August 02, 2005

Old Robert Shiller Article

This is an article from the esteemed real estate bear Robert Shiller. I believe it was written back in April, so some of you might have seen it before.

“The upward momentum of home prices in cities such as Los Angeles, Las Vegas, New York or Boston has seemed so incredibly strong that it has been hard to imagine what could stop it. But we have to exercise our imaginations a little more. The reality is that double-digit price increases cannot go on indefinitely because they would eventually put home prices out of reach of ordinary mortals.”


The Stock Market is Looking Attractive

One of the more persistent themes in all of the real estate articles I have read over the past few months is how attractive real estate investing is supposed to be compared to stock market investing. Typically, recent real estate bubble articles, almost invariably, quote someone who is heavily invested in real estate saying that they do not trust the stock market, or that investing in houses in safer than stocks.

Given the tendency for “dumb money” to chase returns, I wonder if a sustained upward move in stocks over the course of a few months or quarters would attract capital that otherwise would have gone into real estate. Basically, I can imagine a situation in which today’s smart money (money not invested in real estate) starts to push stock prices higher eventually making stocks look like a good investment again. This would, in turn, prompt more real estate investors to bail out of their investments and divert any cash they have left over into the stock market, where the returns appear better.

Everyone’s a Buyer at the Jersey Shore

I keep hearing, and one article pointed out a few weeks ago, that there are plenty of rentals available this summer in LBI. I remember in the early 90s, and probably before that, that you had to get your summer shares in the winter or spring. In my opinion, the build up along the shore of summer houses has been massive over the past 10 years.

[Vacation dynamics are shifting at the Jersey Shore. More people are buying property, as an alternative to the yearly week-long stay at a rental apartment or motel.

"We have 49,000 second-home owners in the county," Diane Wieland, Cape May County tourism director Diane Wieland said.]


Monday, August 01, 2005

Driving Through Sea Bright

This weekend, we had a chance to drive the length of Sea Bright on the way to points south. Although it is always hard to draw any conclusion from anecdotal evidence, it certainly seemed to me that there were a lot of “for sale” and “for rent” signs along Ocean Avenue. (For all I know though, there are always lots of signs in the summer, and I’m just noticing this year because I care.) Nevertheless, even though anecdotal evidence doesn’t count for much, it’s often good for initiating discussions.

National Pending Home Sales Index Up Again

This new index, published monthly by the NAR, rose 0.6% nationally for the month of June. However, you will also see that pending home sales in the North East were actually down 3.2% in June.

“WASHINGTON, Aug. 1 /U.S. Newswire/ -- Pending home sales, a leading indicator for the housing market, have risen to the third highest level on record, according to the National Association of Realtors(r) (NAR).

The Pending Home Sales Index (see Note 1 below), based on data collected for June, rose 0.6 percent to a reading of 126.3, and is 3.6 percent higher than June 2004.

The index is based on pending sales of existing homes, including single-family and condos; a sale is pending when the contract has been signed but the transaction has not closed. Pending home sales typically close within one or two months of signing.”


More Perspective from the UK


“Unlike battle-hardened Brits, who lived through a housing market downturn in the early 1990s when hundreds of thousands of homes were repossessed, Americans have never seen a nationwide boom-bust cycle in their property market. Instead, there has been a series of regional booms.

Analysts say this time looks different. 'The interesting thing about the latest cycle in the US is that even those regions that have previously not been affected by price changes are involved,' says Alan Castle of Lehman Brothers, who argues that overstretched housing markets cover about a third of the country.”