Let's ponder the national scene for a moment and you can draw your own conclusions as to where Hoboken price expectations need to drop in RE.ality.
Single family homes are the bedrock of high-end sales in Hoboken (no, not the cookie cutter trash being sold to you at the W or Maxwell Place). They have a good history of comparables and the structures are mostly original, except for some rehab adjustments.
Nationally, September 2009 single family home sales broke down like this:
21% = less than $100k
49% = $100K to $250k
22% = $250 to $500K
5.6% = $500k to $750K
1.3% = $750k to $1mio
1.3% = $1mio and up
These are national numbers. Is it any wonder that a city such as Hoboken, with a heavy dependence on the NYC growth has stopped dead in its tracks? Ah yes, there's month to month improvement for the last several months. Granted. But when you're looking down a big black hole, is this bounce even something to cheer about?
Only 8.2% of all such sales nationwide were for $500K or more. Less than 10%!
Or another way, 70% of all such sales were for under $250K! How much single family inventory in Hoboken is priced at that level? I'm going to guess... none!
So where will those buyers eventually come from?
Well, year to year doesn't help the rose-colored view either.
<$100k +22.5%
$100K-$250K +6%
$250K-$500K -5.2%
$500k-$750K +4.0%
$750K-$1mio -2.6%
$1mio up -1.2%
While there's plenty to cheer about from the beginning of the year, it would seem that the disaster is just underway for the prospects of this mighty NYC wanna be; at least as far as RE.ality is concerned.
The next time your broker tells you that affordability has never been better, I suggest you think about where affordability needs to be.
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The Conference Board's Consumer Confidence number for the month of October hit 47.7, a major decline from the September number of 53.4 and over a 5 point differential from the expected reading of 53.1. The data series has trended flat since hitting a high of 54.80 in May and has recently accelerated its pick up. As a reminder a reading above 90 means the economy is on solid footing. Above 100 signals strong growth. We are nowhere close and in fact getting worse by the month with unemployment, commodity inflation and wage deflation taking their toll on US consumers.
How about realtors? They are hoping for an extension of the federal credit but are they warning prospective buyers that they are likely to see lower prices next year?
I don't think that its's much of a factor in Hoboken but those who stand to benefit from the first-time home buyer credit may still decide to jump in even though this would be a good argument for waiting. And what about the non-profits that promote "asset building" through homeownership? Are they warning that the house they buy today is likely to sell for considerably less in a year or two? If there are no changes in behavior among these actors now, then it is a safe bet that the market is as bubble-prone as ever and the major actors (including the regulators) have learned nothing.
The recent data from the Mortgage Bankers Association mortgage applications index suggests that we may not have to wait too long before the housing market begins to weaken again. The purchase applications index dropped 5.2 percent last week, its third consecutive decline. This index now stands 15.4 percent below its year-ago level.
This is a predictable result of the ending of the tax credit. It is now too late for someone to be able to contract for a home and be able to close in time to take advantage of the tax credit.
The extension of the credit may help, but with so many purchases already pulled forward, its impact will be limited.
The property buyer seems to have their eye on the stock market (just as the White House has understood the psychology) and that too will turn out to be a mistake, probably by next year as attention turns to fiscal reform. The states and municipalities will only exacerbate this trend.
After plummeting in early 2008, the share of borrowers with FICO credit scores lower than 660 has returned to just higher than 20%, the same share as when subprime securitization peaked in 2006!
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