Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I don't know guys, I get plenty of first time home buyers for Springfield, Summit, Chatham, Madison, Morristown, Florham Park, East Hanover ... making less money than $135,000 and they don't seem to have trouble with affordability. On top of that probably 30% of the people in these areas commute into the city every day.
I haven't done a whole lot of looking in those neighborhoods (mostly West Essex) but how much are they paying ? A quick glance at listings show that single family homes start at about 400 in Summit and Chatham, with median sales prices at 767k (Chatham) and 665k (Summit). Morristown, it's about 525. Morristown seems to have places that are affordable for someone making 135k, it's true that there are still some places where one can squeeze into at the entry level if making double the median household income for that area, I suppose.
Median prices in these towns have more or less doubled since 2000.
I don't think the correction will be complete until payments for a loan for 80% of the cost of a "starter home" are affordable to someone who earns the median income for that area.
I haven't done a whole lot of looking in those neighborhoods (mostly West Essex) but how much are they paying ? A quick glance at listings show that single family homes start at about 400 in Summit and Chatham, with median sales prices at 767k (Chatham) and 665k (Summit). Morristown, it's about 525. Morristown seems to have places that are affordable for someone making 135k, it's true that there are still some places where one can squeeze into at the entry level if making double the median household income for that area, I suppose.
Median prices in these towns have more or less doubled since 2000.
I don't think the correction will be complete until payments for a loan for 80% of the cost of a "starter home" are affordable to someone who earns the median income for that area.
Lets see, sold a 3 bedroom 2 bath home in Morristown for $315,000 it needed some work but a great house, and in fully livable condition.
sold a 5 bedroom 3.5 bath home fully updated wonderful home in Morris Twp. for $509,500 I loved the house, hated the .9 acre yard but still it was a great deal.
A absolutly stunning 3 bedroom 1 bath home in Morristown, Over improved by far for $459,000
Are just 3 examples.
There is currently a nice 3 bedroom 2 bath home on the market in Summit for $375,000 Moderator cut: as previously warned, do not link to your site
A number of nice 3 and 4 bedroom homes in Madison Chatham and Florham Park in the 4's and low 5's as well as nice condos on the market for upper 2's to low 4's
Don't let anyone tell you there are not great deals out there, because there are lots of them.
As far as the median income argument, it gets very hard for the median income to move up much when 40% of the people who live in many of these towns are retired
You all can go on believing what you want. Things are what they are. if you want to call NJ a bubble well you can if you want, but then you likely need to call most every state a bubble, and I really don't think that is accurate.
Please provide a graph of median housing prices versus median income.
If that ratio hasn't changed much, no bubble. If it has, ....
Please provide a graph of median housing prices versus median income.
If that ratio hasn't changed much, no bubble. If it has, ....
The pages for the different towns provide the median incomes for today and for 2000. The by the numbers link posted previously: New Jersey by the Numbers - NJ.com gives historical median price data.
Median prices have roughly doubled, median incomes are up by about 20%.
Lets see, sold a 3 bedroom 2 bath home in Morristown for $315,000 it needed some work but a great house, and in fully livable condition.
sold a 5 bedroom 3.5 bath home fully updated wonderful home in Morris Twp. for $509,500 I loved the house, hated the .9 acre yard but still it was a great deal.
A absolutly stunning 3 bedroom 1 bath home in Morristown, Over improved by far for $459,000
Are just 3 examples.
There is currently a nice 3 bedroom 2 bath home on the market in Summit for $375,000 Summit City Property Listing: MLS# 2626220 (http://www.jboyerhomes.com/idx/for-sale/2626220/details.html - broken link)
A number of nice 3 and 4 bedroom homes in Madison Chatham and Florham Park in the 4's and low 5's as well as nice condos on the market for upper 2's to low 4's
Don't let anyone tell you there are not great deals out there, because there are lots of them.
As far as the median income argument, it gets very hard for the median income to move up much when 40% of the people who live in many of these towns are retired
These are only "deals" when you compare them to today's prices. Try comparing them to 2000 prices (adjust these by about 20% for income increase):
Morristown: 200k (this is the median price, not a "starter home" price)
Madison: 396k (this is not really a bubble market -- it only went up 50% since 2000)
Chatham: 308k
Morris Twp:330k
Summit: 470k
Florham Park: 275k
So out of what you listed, the only one that genuinely seems like a "deal" in terms of historical prices is the place in Summit. Also, Madison doesn't look like a bubble market. 'low 4s and upper 5s' is neither a bargain for most neighborhoods, nor is it terribly affordable. Based on 80k down payment, income of 100k, and 28% of income on the home purchase calculator, I get 380k as the "affordability" limit according to an online home purchase calculator: Home Purchase Calculator
These are only "deals" when you compare them to today's prices. Try comparing them to 2000 prices (adjust these by about 20% for income increase):
Morristown: 200k (this is the median price, not a "starter home" price)
Madison: 396k (this is not really a bubble market -- it only went up 50% since 2000)
Chatham: 308k
Morris Twp:330k
Summit: 470k
Florham Park: 275k
So out of what you listed, the only one that genuinely seems like a "deal" in terms of historical prices is the place in Summit. Also, Madison doesn't look like a bubble market. 'low 4s and upper 5s' is neither a bargain for most neighborhoods, nor is it terribly affordable. Based on 80k down payment, income of 100k, and 28% of income on the home purchase calculator, I get 380k as the "affordability" limit according to an online home purchase calculator: Home Purchase Calculator
I have a strong feeling that, if you guys want to wait for prices to come down to the level you are talking about, you will be waiting for a long time. Probably till that place we talk about freezing over, actually does.
None of the markets listed above are acting like bubble markets at all. you have to have a pop to go along with bubble to actually have a bubble. Not to even start to talk about rampant spec building, hordes of people speculating on real estate, flipping, on top of that, a large percentage of the buyers getting sub-prime loans of some sort.
None of that happened. In fact, we had lots of homes purchased with 20% to 50% down, very little new construction, in fact Morristown is the town that has had the most new construction, and most of that has taken place in 2006 to the present day. The largest of the projects is currently under construction and 50+% spoken for by buyers.
I am not looking to reignite the argument, just pointing out the other factors that nobody in the New Jersey forum will address. They are the factors that I believe are just as important as median income to appreciation. Other factors that are hard to consider unless you have all the data sitting right in front of you, are what types and sizes of homes were being sold during the time periods being looked at. Currently in most towns, the vast majority of the homes being sold are in the starter home size and price range. In 2005 and 2006 there was a fairly even mix, with many 4 to 6 bedroom Mcmansions selling for 900K too 2.5M. Those kinds of things can skew numbers big time.
If you want to look at bubble markets and median income verses appreciation look at Florida's Dade or Merin Counties. I have not looked at them for this particular comparison, but there you had appreciation of 200% to 400% during the time period where we went up 50% to 80% depending on how you look at it.
Good luck with this approach: judging the market from your single personal experience and ignoring statistics and other peoples experience here and everywhere (tv, newspapers, etc). Instead of counting your blessings you project them to other peoples lives.
Other people lost their jobs, savings, equity etc but you see the market robust. Not only re agents but also sellers live in denial. Good grief!
Wow, sounds like you're the one projecting something here, not me! And in truth, I was more surprised by this than anyone, that's why I shared it here. Believe me, my husband and I are taking a hammering on our two houses up here in Mass. It's more than sad.
And don't get me started about job security, savings, stock etc. We've had the rug pulled out from under us. So this sale was a really happy bit of news for us.
Last edited by clevedark; 02-02-2009 at 09:56 AM..
None of the markets listed above are acting like bubble markets at all. you have to have a pop to go along with bubble to actually have a bubble. Not to even start to talk about rampant spec building, hordes of people speculating on real estate, flipping, on top of that, a large percentage of the buyers getting sub-prime loans of some sort.
None of that happened. In fact, we had lots of homes purchased with 20% to 50% down, very little new construction, in fact Morristown is the town that has had the most new construction, and most of that has taken place in 2006 to the present day. The largest of the projects is currently under construction and 50+% spoken for by buyers.
This was already addressed elsewhere. I don't think there's much disagreement on *how* these large down-payments were made -- buyers were cashing in on equity appreciation (I think that would be especially the case in some of the markets you mention, since some these areas are historically quite expensive), but that only works when prices are going up. Pull the bottom card out of the house, and the whole thing crashes down.
For example, the buyer that could have bought an 800k place in Summit by using the equity on their 500k home has to settle for a 700k home because their "500k home" will only sell for 400k now. Or worse, they won't even enter the market, because they are unwilling to sell their "500k home" for 400k.
Quote:
I am not looking to reignite the argument, just pointing out the other factors that nobody in the New Jersey forum will address. They are the factors that I believe are just as important as median income to appreciation. Other factors that are hard to consider unless you have all the data sitting right in front of you, are what types and sizes of homes were being sold during the time periods being looked at. Currently in most towns, the vast majority of the homes being sold are in the starter home size and price range.
If that's the case, that supports my argument that today's prices are still inflated -- I wasn't arguing about the extent of the year on year decline; I was arguing that today's prices are still above long term valuation indicators. I would be inclined to at least wait for an uptick (e.g. in Case-Shiller) before buying in today's market.
It also supports the case that the top of the market is in a deflationary spiral -- no-one wants to sell, and most of the people buying these places are not first time buyers, so there are no buyers either. This is a market that will be driven by forced sales for quite a while. The correction will be slow because everyone is trying to hold on.
Having stated that, note that Case-Shiller uses same-property comparisons.
"For example, the buyer that could have bought an 800k place in Summit by using the equity on their 500k home has to settle for a 700k home because their "500k home" will only sell for 400k now. Or worse, they won't even enter the market, because they are unwilling to sell their "500k home" for 400k."
Yes but you're forgetting that the 800K home is now the 700K home (or 650K). When the whole market goes down how are you losing money if you're still trading up?
(Not that I'm suggesting we try this at home, children.)
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
"4s and low 5s" isn't "affordable".
