Monday, March 23, 2009

Which Bottom Will We Hit First?

There are two bottoms to the housing crisis - the bottom for prices and the bottom for sales (in number of sales). Each month we hope that we have reached bottom, and the next months number roll in showing us an even lower bottom. In some areas of the country the only reason the number of sales has bounced back up from bottom is due to the record number of foreclosures at bargain basement prices. But hey, they increase on set of numbers. In an article from The Record titled Where's the bottom? shows how much things have fallen. First lets take a look at the chart they put together of current median prices in municipalities that had at least 30 sales in the 4th quarter of 2008 -

Highest-ever median Quarter 4th quarter 2008 median Percent change
Englewood $425,000 3rd, 2006 $364,000 -14

Fort Lee

$599,500 4th, 2005 $453,000 -24
Hackensack $345,000 2nd, 2006 $307,500 -11
Mahwah $494,000 4th, 2006 $379,000 -23
Paramus $635,000 2nd, 2007 $606,000 -5
Ridgewood $791,000 3rd, 2006 $631,000 -20
Clifton $400,000 2nd, 2006 $320,000 -20
Wanaque $371,500 3rd, 2005 $325,900 -12
West Milford $331,000 4th, 2005 $300,000 -9

Pretty mixed results - big hits in Fort Lee, Clifton, Mahwah and Ridgewood, but just moderate declines in Paramus and West Milford.

Now lets take a look at the accompanying article -

Mounting economic woes worsened conditions in North Jersey's stumbling housing market at the end of 2008, sending prices down another 8 percent and the number of sales down to levels not seen in nearly 20 years.

Amid a deepening recession and a banking crisis that squeezed the flow of mortgage money, the median price for a single-family home in Bergen and Passaic counties slipped to $390,000 in the fourth quarter, from $425,000 in the same period of 2007.


An analysis by The Record of data obtained from county and state agencies found that:

* The median price for single-family homes in Bergen County sank from $455,000 in the fourth quarter of 2007 to $425,000 in the fourth quarter of 2008. In Passaic County, the decline was steeper, from a median of $370,000 to $335,000.

* Since the all-time peaks of $495,000 in Bergen County and $390,000 in Passaic County, medians in the two counties both are down 14 percent. While substantial, those drops are nowhere near the dips of 30 percent or more felt in other parts of the country.

* An estimated 1,600 to 1,700 homes sold in Bergen and Passaic counties from October through December. That is down nearly two-thirds since the all-time fourth-quarter high of 4,713 in 2004 and the first time since 1990 that fewer than 2,000 homes sold in any fourth-quarter period. The Record used past years' trends to reach this estimate; the available data did not include all sales through the end of 2008 because of a lag in deed recordings.

* The downturn not only cut into potential profits for people who bought before the real estate boom of the 2000s, but it forced losses onto sellers who bought when prices were at their highest. Among the 185 homes that sold during the peak of the real estate boom and sold again in 2008, two-thirds lost value.


"Is it turning around tomorrow? No. But will it turn around? Absolutely," said Karen Lampiasi, manager of Coldwell Banker Residential Brokerage in Mahwah. "When it will happen is hard for anybody to predict."

The Coldwell Banker may be right that is will someday turn around, but where the numbers end is as important question for many of us as well as the when. How low can the number of sales go down before things turn around? How much below peak prices before the prices bottom out? In some parts of the country areas have are less than 50% of peak price. We have seen a local foreclosure sell for 80% off peak price. Those foreclosures are helping drive down prices in other areas of the country, but they are helping the number of sales increase. Perhaps that is not the model we should look to follow.


Anonymous said...

real estate price declines in Bergen? Yeah right, thats a conspiracy theory.

real estate always goes up, buy now or be priced out forever, or Wall St. bonus money will always keep prices moving upwards.

ok, I gotta run and get some Doritos before American Idol comes back on.

PS. just bought a new SUV that gives about 8 miles to the gallon.


NJHH said...

Who knew Bergen prices could tumble...