NJ's New Governor Comes Clean On Discretionary Ownership

If Hoboken property owners are that different in their situation from others in the state, then they should separate! But the reality dictates that prices will adjust - sooner rather than later, if we want to join any eventual upcycle in prices. My unfortunate prediction is that we will stagnate because the majority of property owners in this town are professionals in the business of real estate. Their (lost) fortunes are tied to it!

So, if you can't heed the advice of the Governor himself, then consider how you are going to protect your family's future:
“They should be talking about treating people like adults and telling them the truth: we’re in huge trouble,” he said. “And it’s going to mean cutting back on a lot of things that folks either have become used to or in a perfect world would like to have.”

All you adults know what's at the top of that "like to have" list.

DEFLATION was always the trend

With the latest economic data in mind, RE.ality is beginning to take hold - yes, it took a while due to government intervention with people's minds and home prices; both of which should continue breaking down for the rest of this year.

Our general price opinion on Hoboken properties points to another decline of 20% or so, similar to the first phase of declines over the past couple years. Rentals are not holding up either as supply from the sale side continues to compete with existing lease renewals.

Household formation (in Hoboken) has always been falling in the face of rising optimism, so a mini bubble was brewing before this next leg down.

The cry from the realtor business?
"It's never been more affordable and it's a great time to buy!"
Somehow they have forgotten to justify why it won't continue to be that way - even more "affordable" - for the foreseeable future.

Today's Case-Shiller numbers were good nationally, but down for NYC. That's because the high prices of homes here benefited the least from any interest in the government stimulus.

The NAR lobbyists are screaming for the country's staple diet right about now. Any common sense on this issue would allow the inventory to flush out sooner rather than later. But that's a longer story.

New Source of Home Sellers

The growing angst in Trenton is about to create an unforeseen group of property sellers, joining the ranks of financial services employees. Figure 1 attached.

Another Slap For Political Intervention In Markets

The Commerce Department said sales dropped a record 32.7 percent to a 300,000 unit annual rate, the lowest level since record keeping started in 1963, The fall unwound two months of gains inspired by a government tax credit. Enough said!

If this is east of Manhattan, what about...

Another picture says a thousand words. Queens is on the eastern front to the big city. Income and savings demographics are very similar to those of Hoboken where the population is tiny and more sensitive to economic changes in comparison.
The western frontage onto Manhattan has more dire municipal and state consequences, so there is no good ending in store for Hoboken.

The Back End of the Bubble

The FBI is preparing to arrest hundreds of people across the country as early as next week for offenses including:
- encouraging borrowers to falsify income on mortgage applications
- misleading home owners about foreclosure rescue programs
- inflating home appraisals.

The FBI is scheduled to release its 2009 mortgage report on June 17.

Let's see if any of Hoboken's finest transactions have brought any notoriety to the party.

FICO Survey: Credit Supply Unlikely to Meet Consumer Demand

FICO Survey Indicates Credit Supply Unlikely to Meet Consumer Demand

The survey, conducted in March 2010 found that while bankers generally expected consumers to pursue more new credit as well as spend more against their existing credit lines, most lenders are likely to keep a close eye on risk management.

Of the 127 bank risk professionals surveyed, 92 percent said they don’t expect to see an easing of lending standards in this quarter, 95 percent expected interest rates for consumer credit to stay at current levels or move higher, and 83 percent expected the average credit limit for new credit cards to be lower than in the past.

Why is this especially important in a property market like Hoboken and the new "core" category?
Because there is a total mismatch between local annual incomes (typically around $100,000) and property prices (current median around $750,000).

Single family homes which are typically $1 million+ are completely out of this realm.

Cash buyers are the only qualifiers in such a mispriced situation, but that makes them the next hit from depreciation regardless.

Hoboken's adjustments in price are not yet reflecting the mispricings of the past despite adjustments already underway in Manhattan. The bottom line: prices are simply declining at a slower pace over what will be a longer and more protracted time --> another 20% over the next four years.