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Re: worth buying in downtown JC?
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Quite a regular
 
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Knowing what I know now, it's worth renting in downtown JC. Find another way of building your net worth. Prior to buying our place in the JC area we were contemplating the idea of buying an investment property in upstate NY. Should have gone with the investment property and continued to rent in JC. Live and learn!!
Posted on: 2010/1/29 16:28
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Re: worth buying in downtown JC?
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Quite a regular
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No, you can get a far nicer rental for less and no stress about JC going bankrupt or taxes going up. Remember, at one time renting was at a premium to owning. Now the premium is at owning, and with 22% tax increases in JC this year the situation is getting worse. Also wait for JC to be reassessed for taxes. Then you'll know what you're signing up for and won't get a nasty surprise in a few years. Until the bubble deflates and jobs come back to NYC I wouldn't buy in JC or Manhattan. The only place I'd buy is in a place that has already recovered, like Boston, or San Francisco. Don't be a knife catcher. You don't know how far down it will fall. Also, most economists are expecting a double dip in house prices once the federal stimulus goes away in March. What do you have to lose by waiting a year?
Posted on: 2010/1/29 16:09
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worth buying in downtown JC?
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Newbie
 
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thoughts, comments?
Posted on: 2010/1/29 15:10
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Re: JC realtor hypes short sales - too good to be true?
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Home away from home
 
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Realtor + hype == too good to be true.
In all seriousness, short sales can sometimes work out, but they are total pain in the neck. If the bank has pre-approved the listing amount and the sale price is near it, it might not be so bad. But if the bank hasn't pre-approved the sale price it can take a long time to process depending on the loan/servicer. I had a friend who was trying to buy a short sale house and it took her months to get the sale done. (Luckily she was renting month-to-month so it wasn't a big deal at the time.)
Posted on: 2009/12/8 22:51
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Re: Real estate prices in Jersey City
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Home away from home
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Actually, I think if banks had kept traditional underwriting guidelines (20% down, or at an absolute minimum 10% down) much of the bubble could have been avoided. (And at 20% down you're getting a 5x magnification of returns.) It was when you had 1% down, no-money-down, and even 105% loans that people really got into trouble. Even a 20% down payment is a LOT of money to most people, and they aren't going to put that down on a house until they really think about it. But when you're putting nothing down and need no documentation, any schmo can take out multiple mortgages and try to flip a bunch of houses.
Posted on: 2009/12/8 22:47
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JC realtor hypes short sales - too good to be true?
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Newbie
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i'm prepared to accept that i'm a sucker but he talks up short sales in a way that it almost makes sense. if bloomberg hadnt published the story i wouldn't have thought twice about it.
tell me how wrong i am. http://www.bloomberg.com/avp/avp.htm? ... om/cache/vOA5j8kELzzY.asf
Posted on: 2009/12/8 21:41
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Re: Real estate prices in Jersey City
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Home away from home
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if you think about it, there are no other product in the world that gives the average john doe retail player the kind of leverage real estate provides. Where else can you get a 5 to 1 leverage except some shady high risk fx shops.
that's why this bubble was so bad, when the average american has a 5:1 or higher leverage on their investment and this particular investment comes crashing down...
Posted on: 2009/12/8 21:31
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Re: Real estate prices in Jersey City
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Home away from home
Joined:
2007/11/28 3:26 Last Login : 2014/10/27 13:13 From The fog.
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The most important assumption here is the one that home prices will increase at least modestly. No one would buy a home if they believed prices would go down every year. And, as dieselpowerd said, leveraging can multiply your gains (and losses).
A $400k condo which appreciates just 2% in a year adds $666 a month in equity to the equation, which is why people might spend a little more than equivalent rent or rent the place out each month for less than their monthly nut. This type of move was a no-brainer back in the heady days of the real estate market. Today it takes a little more faith and gumption to assume even a 2% increase.
Posted on: 2009/12/8 18:01
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Re: Real estate prices in Jersey City
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Quite a regular
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The 100k down payment is a leveraged equity investment -- basically the same as buying stocks on margin - and will appreciate or depreciate at a multiple of whatever the rate of appreciation of the home is. Roughly speaking, if you put down 100K on a 400K home that appreciates at 3% per year, your 100K will appreciate at 12% per year. Conversely, if your home loses value you will lose 4x the amount too. Just like any leveraged investment. Over time you are deleveraging as you build up equity, which reduces the multiplier effect (up or down). So there is actually a very important time component to how you think about your down payment as an investment. Again, there are many factors to consider but your down payment isn't dead money -- you just need to think about how you would otherwise invest it and compare possible returns. And as wibbit said, the tax benefit should always be included in calculations, as it is a huge contributor to both affordability and house prices. Also, you aren't really $2666 "out the window". You need to compare that to the next best alternative (the cost of rent) and of course include the tax benefit to find your true opportunity cost.[/quote] Good points Scottacus. I will factor in the tax deduction. Assuming 28% tax rate. Mortgage interest (out the window) = $1318 (based on 400k mortgage) Property Taxes (out the window) = $ 250 (based on 500 pretax) Condo Fees (out the window) = $500 Total out the window per month factoring in tax savings= $2068 Principal (equity!) = $480
Posted on: 2009/12/8 11:17
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Re: Real estate prices in Jersey City
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Home away from home
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federal yes, state probably not. This was discussed many times in the past i believe, search under real estate.
Posted on: 2009/12/8 0:29
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Re: Real estate prices in Jersey City
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Home away from home
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In our current r/e climate, what would be the purpose of using a seller's agent to sell a condo?
Posted on: 2009/12/8 0:28
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Re: Real estate prices in Jersey City
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Home away from home
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I am surprised no one has mentioned the NY Times Rent vs. Buy calculator. I have consistently found it to be the best online tool to quickly run through various scenarios to make a numbers-based decision on buying vs. renting.
You can find it here: New York Times Rent vs. Buy Calculator. If you decide to use it, dont forget to go into the advanced settings panel to enter all the pertinent information that plays into the various scenarios.
Posted on: 2009/12/8 0:12
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Re: Real estate prices in Jersey City
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Home away from home
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I didnt read through all of the comments so if it was already addressed, my bad.
This is a smaller consideration but does anyone know if you can write off a tax abatement like you can property taxes? I am not sure with a PILOT (Payment In Lieu Of Taxes). I know you are not eligable for the homestead rebate in NJ with a pilot.
Posted on: 2009/12/7 23:19
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Re: Real estate prices in Jersey City
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Home away from home
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A well articulated interpretation of the conventional wisdom, Margel. Since you understand this, you must also understand that since our government is printing money like there's no tommorrow, it is somewhat likely that the dollar will continue to weaken and that US Treasuries may become increasingly less desirable for investors thereby necessitating an increase in interest rates (both Treasury and mortage interest rates). In other words, there is a good possibility of a scenario where the US economy continues to slog along while interest rates drift upwards. The doomsday scenario for real estate may not have happened yet, but may happen soon. And it may not be something that unwinds in 3-5 years. Just take a look at what happened in Japan when real estate valuations didn't match fundamentals in the early 90's...
Posted on: 2009/12/7 22:14
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Re: Real estate prices in Jersey City
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Home away from home
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A lot of accurate and thoughtful comments on this thread. Thanks everyone! For the past 2 or 3 years, a down payment on a residence in downtown JC would have been better put use if it was literally stuffed under a mattress. If it was in a savings account, then that was just genius! No one knows what will happen, but I'm still in nervous nellie mode. I don't want to sink $100K into a residence, decide I have to move in three or four years and have to eat a loss of $40K or so...
Posted on: 2009/12/7 22:03
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Re: Real estate prices in Jersey City
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Home away from home
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Thanks to everyone for the thoughtful replies. A real estate thread on JClist that didn't turn into a flame war? Amazing.
 We should clarify something in the original calculation, the 100k down payment is NOT included in the 2800 buying per month scenario. In the renting scenario, you still have the 100k, in the buying scenario you don't. That has to be considered and really makes the cost more than 2800 a month. More like 3200 a month if you consider you just lost 100k of investable money. Also, you really aren't socking away any significant principal the first 5 years. Here's how my numbers break down. Lets consider 400k condo, 500 month maintenance. 500 a month taxes. All pretty lowball for what most people pay around here. Mortgage interest (out the window) = $1666 Property Taxes (out the window) = $ 500 Condo Fees (out the window) = $500 Total out the window per month = $2666 Principal (equity!) = $480 I'm all for equity, but is a $2666 out the window worth $480 equity creation per month? Its all religion/philosophy/politics so just do whatever you want, I'm sure you'll love your new condo. Also, if you really found a condo that sold for 300k and would rent on the market for $2300 kudos to you. Sounds impossible to me.... maybe you found the perfect short sale.[/quote] The 100k down payment is a leveraged equity investment -- basically the same as buying stocks on margin - and will appreciate or depreciate at a multiple of whatever the rate of appreciation of the home is. Roughly speaking, if you put down 100K on a 400K home that appreciates at 3% per year, your 100K will appreciate at 12% per year. Conversely, if your home loses value you will lose 4x the amount too. Just like any leveraged investment. Over time you are deleveraging as you build up equity, which reduces the multiplier effect (up or down). So there is actually a very important time component to how you think about your down payment as an investment. Again, there are many factors to consider but your down payment isn't dead money -- you just need to think about how you would otherwise invest it and compare possible returns. And as wibbit said, the tax benefit should always be included in calculations, as it is a huge contributor to both affordability and house prices. Also, you aren't really $2666 "out the window". You need to compare that to the next best alternative (the cost of rent) and of course include the tax benefit to find your true opportunity cost.
Posted on: 2009/12/7 21:29
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Re: Real estate prices in Jersey City
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Home away from home
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One other variable I haven't seen mentioned in this thread (forgive me if it has) but buying/selling real estate is not a frictionless transaction --- everyone needs to get get their cut: Broker Fees, Attorney Fees, Appraisal Fees, Title Search, home inspectors, and all the other ancillary costs add up to a significant amount of money. Buying a house costs a lot of money (i.e. money other than the purchase price / down payment) and selling a house costs even more.
Spending a few % on the front end and 5-6%+ on the back-end are major expenses. If nothing else, these expenses cut into the "free money" the government is handing out.
Posted on: 2009/12/7 19:49
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Re: Real estate prices in Jersey City
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Home away from home
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you still didnt add the tax deduction to your numbers ;)
but yes the down payment is another factor, it takes away your liquidity for other investments (assuming you think you can get a better return).
Posted on: 2009/12/7 19:11
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Re: Real estate prices in Jersey City
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Quite a regular
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Quote:
Thanks to everyone for the thoughtful replies. A real estate thread on JClist that didn't turn into a flame war? Amazing. We should clarify something in the original calculation, the 100k down payment is NOT included in the 2800 buying per month scenario. In the renting scenario, you still have the 100k, in the buying scenario you don't. That has to be considered and really makes the cost more than 2800 a month. More like 3200 a month if you consider you just lost 100k of investable money. Also, you really aren't socking away any significant principal the first 5 years. Here's how my numbers break down. Lets consider 400k condo, 500 month maintenance. 500 a month taxes. All pretty lowball for what most people pay around here. Mortgage interest (out the window) = $1666 Property Taxes (out the window) = $ 500 Condo Fees (out the window) = $500 Total out the window per month = $2666 Principal (equity!) = $480 I'm all for equity, but is a $2666 out the window worth $480 equity creation per month? Its all religion/philosophy/politics so just do whatever you want, I'm sure you'll love your new condo. Also, if you really found a condo that sold for 300k and would rent on the market for $2300 kudos to you. Sounds impossible to me.... maybe you found the perfect short sale.
Posted on: 2009/12/7 17:50
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Re: Real estate prices in Jersey City
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Home away from home
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All good points. If you are in the 25% tax bracket you would end up paying roughly $2225 after tax benefits on the scenario above (very rough estimate including only Federal benefit). You would also be paying principal every month, which is very roughly analogous to putting money in a savings account if you believe real estate prices will hold steady or slowly increase. This would be another few hundred dollars per month to think about. If you think prices are going to continue to decline it wouldn't make any sense to buy right now. But if you think they're stable or on track to slowly increase then it comes down to individual situations. In the end buying a house is a combination of two things - a rational investment (where you are essentially paying yourself rent and using the funds to make a leveraged investment) and an emotional one (since people ascribe a lot of meaning to owning a home). So whether homebuying makes sense depends on how much value you place on both aspects.
Posted on: 2009/12/7 15:21
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Re: Real estate prices in Jersey City
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Home away from home
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it's per individual basis. how much of that 2800 can you 1) get back from tax deductions? 2) as principal towards the mortgage 3) will you qualify for the 8500 free cash add all up and make a determination, there are no blanket statements. But one thing is for sure though, if you believe the price will continue to drop another 10-20%, there is NO REASON to buy whatsoever. I bought because i feel downtown jc real estate prices has reached a flatline and the potential for another 10-20% drop is a low probability. Also my numbers made more sense - 3000 buying vs 2300 renting, plus a nicer dig not to mention the current low rates. So it wasnt a hard decision after finding a good bargain....
Posted on: 2009/12/7 7:07
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Re: Real estate prices in Jersey City
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Quite a regular
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I would definitely buy a condo if it were the same price as renting. But buying is nearly twice as expensive for the same space. I pay 1650 to rent a 750 sq foot loft with 12' x 8' windows in both rooms a block from Grove street PATH station. Buying the same place would probably run me 2800 a month. If you find a similar place as mine with "the same responsibilites" for 1650 please let me know!
Posted on: 2009/12/7 5:24
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Re: Real estate prices in Jersey City
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Home away from home
Joined:
2007/6/27 22:27 Last Login : 2012/4/20 14:33 From Hamilton Park
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If you use the mortgage underwriting standard that says the occupancy costs should not be more than 1/3 of pre-tax income, $2,800/mo would imply pre-tax income of $100,800, or $50,400 each for a couple where both work. I don't think it's hard to imagine there are people out there making that kind of money.
Posted on: 2009/12/6 23:13
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Re: Real estate prices in Jersey City
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Home away from home
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A smart move, if you are living alone, and paying rent then yes buy buy buy. Especially a condo where you will have the same responsibilities as paying rent. Save your money, savor the future.
Posted on: 2009/12/6 22:24
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Re: Real estate prices in Jersey City
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Just can't stay away
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Don't forget that property taxes and interest payments are tax-deductible, that substantially reduces your $2800 in real terms. And a lot of buildings around here have tax abatements. In my case, my total monthly condo payments aren't much more than I would be paying in rent if I were renting a similar apartment. As for interest rates, they generally track with the health of the overall economy. When rates are higher, incomes and unemployment will also be better, and more people will have more money to put into homebuying. That's how it's supposed to work, at least...
Posted on: 2009/12/6 17:26
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Re: Real estate prices in Jersey City
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Home away from home
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So to complete my thoughts...
In my estimation, it is extremely risky to pay $500K for a condo around here. Of course there can be upside, but there seems to be a higher probability that values will continue to decline because the fundamentals (schools, income levels, employment rates) are shaky at best.
Posted on: 2009/12/5 21:32
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Re: Real estate prices in Jersey City
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Home away from home
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Another approach to evaluate real estate values (some would argue it's the only true way to evaluate RE values) is to consider the income of people buying and living in the area. i.e., what can the people afford to pay for housing?
Assuming a $400K condo: 100K down payment. 300K mortgage at 6%, 30 year fixed $6000 annual property tax $500/month maintenance That would be a $2800 monthly payment. (not including PMI or other expenses) So think to yourself: How many people who want to live in downtown Jersey City for an extended period of time have that kind of money? Also, consider the fact that I'm using very conservative numbers here... There are many $500K, $600K condos with 8-10K annual taxes and $700/month maintenance. So how many people have that kind of money to pay $3K-$4K/ month? Quote:
It's not rocket science. longtimeJC posed the rhetorical question and the answer is: RE values go down, for those of you that haven't considered this (very likely) scenario.
Posted on: 2009/12/5 21:26
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Re: Real estate prices in Jersey City
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Home away from home
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longtime,
That is the best NJ real estate sales price site I have seen. Thank You.
Posted on: 2009/12/5 16:22
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Re: Real estate prices in Jersey City
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Home away from home
Joined:
2005/12/18 2:57 Last Login : 2017/9/14 20:15 From Crystal Point
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Registered Users
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Daisy, you should seriously use a site like propertyshark.com where you can pull up comps, sales histories and other good information.
Then you could use a site like trulia to pull up the asking history.
Posted on: 2009/12/4 14:14
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Re: Real estate prices in Jersey City
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Home away from home
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Great link I use it all the time. Try typing in some condo addresses in the area you are looking in. You will be surprised at the jump in prices over a recent 2-year increment as opposed to the same increment 8 years ago. To me it has to do with what is important to you as far as environment is concerned. I like the Heights section because my food needs are at an easy reach; having a car means I have quicker access to the major highways, also quicker proximity to other sections of Jersey City and the surrounding towns. I also get more square footage, and most of all I know most of the neighborhoods and people there. The market knows the attractions of Downtown J.C such as PATH, coffee shops, and the same cut of (resident) cloths or like culture IE: (gentrification) to generate and justify these selling prices. Some may like living in Downtown J.C. or living by the water and PATH trains in Newport. These patterns are used in Brooklyn and other hot real estate markets. Kind of like certain colors of cars it makes it more attractive. Someday the market will realize our pluses or personal preferences for in living in the Heights and it will raise the property value as well. The old timers can't believe what the newbies are paying, and the newbies can't believe why the old timers didn't capitalize on this area years ago. Remember it's what you like, what's important to you.
Posted on: 2009/12/4 14:10
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