Headline inflation fell in yesterday's CPI report. The economic softness is hitting demand in everything from crude oil to property rentals. Normally, this would have concerned the Fed (and they would have eased rates), if it were not for so much evidence of economic weakness. Rates are already low and maintaining mortgage rates. That won't help housing until other factors - years away - are resolved.
The core inflation rate in August brought the annual rate over the last quarter to 3.4 percent. This rate is being held down by over-supply in the housing market, which is depressing rents. The annual rate of inflation in the owners' equivalent rent (OER) component of the CPI has risen at just a 2.1 percent annual rate over the last quarter. If OER were pulled out of the core CPI, it would have risen at a 4.1 percent annual rate over the last quarter.
When I discuss properties, I always present the cost per square foot equation in the context of carrying costs.
In a previous post, I benchmarked the Hoboken market to around March 2005 levels - that was a few months ago. Property owners (residents, landlords) are probably feeling this economic pinch if they bought at anytime in 2005 forward.
We are not far from testing the resolve of those in previous years. The employment dilemma for NYC and Wall Street is accelerating and it's taking everything from bankruptcies to government bailouts to find any bottom.
We are far from that... but expect WaMu and possibly Wachovia to join the parade sooner rather than later.
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3 comments:
Hi there -
Wanted to get your opinion on how current option holders in Maxwell Place can protect themselves.
TB is obviously very inflexible with option cancellations... (and they boast lowest cancellation history during their earnings release).
Your advice and thoughts are much appreciated. I am really concerned about the prospect of MP and the overall Hoboken market.
Ko,
Your question is a case-by-case legal question. Although I can't provide legal opinion on your matter, I will share some cases I have heard.
The obvious walkaways were those who - by contract - did not receive delivery by the prospective term trigger. In Toll's case, I believe (don't quote me) that was six months. Many of those who had the choice still chose to renew. That was the emotion side of the brain rather than the rational side.
Those who engaged in nullifying the contract - with the help of lawyers - while still within their obligation term, presented issues such as:
- having the property reassessed by their financing institution, thereby making the case that the bank shouldn't lend them the stipulated amount against that particular property. It makes sense if an objective reassessment is made but most assessors fell in line with what the builder and the bank were exchanging. No objective source would assess those properties at their current sale price.
- I am not aware of the outcome, but some residents pressed the lack of proper exhausting of the units' ventilation fans in the kitchens and bathrooms. I am not sure if these issues being up to code, were necessarily omissions from contract details or misrepresentations in the eyes of the buyers of "high-end" units.
- a final step I had heard of was the total lack of the bulk of common facilities (health club, pool, etc.) while they were to occupy their unit and pay for common fees to the condo.
From what I understand, none of these were straight forward print items of the contract, but rather reasonable interpretation.
I stress that any of this should be initiated by a qualified (specialist) lawyer in real estate transactions.
I am not aware of the outcomes but the cost is well worth the cause. In my opinion, the down payment equity takes an instant haircut. So why are the bank's still not learning their lesson? Never use a "preferred lender" - it's a partnership scheme and nothing else. If you were in such a case, that might be another angle to refute the intended contract.
Pre-construction has its obvious merits in an up market but unfortunately Toll's lock-up of lottery recipients (damn good marketing giving the impression of demand) was brilliant.
If anyone else has experience that they want to share anonymously, please post here.
Good luck.
Hi, Porter:
Thanks so much for your insight. I have much to say but will hold off my thoughts for now...
Do you know any good Hoboken lawyers that I can contact?
Many thanks again.
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