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Re: NJ house hunting experience
Old 08-28-2006, 01:21 PM   #21
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Re: NJ house hunting experience

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Originally Posted by semtex
The "afford" issue always puzzles me. How could people afford the price? My wife and I both work and are savvy savers. Be honest, we could not afford it.

So where are the income for the buyers? Inheritance? Good stock picker? Good tax practice?
Nope. By and large, none of the above. You are thinking like a responsible individual who would put 20+% down, avoid mortgaging yourself to the hilt, and taking a traditional 15 or 30 year amortizing mortgage.

The buyers who drove prices up did so using "new" mortgages. Some use interest only mortgages which do not require the borrower to repay any principal for a few years. Many/most used a first mortgage for the first 80% of the purchase price, and a secong loan/LOC for the next 20%. Less common in the East, but wildly popular elsewhere, is the "option ARM", which allows the borrower to pay 1% of the balance per year and tack any interest this doesn't cover (these loans are around 7% rates now) onto the mortgage balance. Many of these loans are alos "stated income", meaning that you can lie about inflate your income and the lender won't check. *wink, wink, say no more*

All of this stupid siht will eventually come back to bite lenders, borrowers and the rest of us in the ass. And when it does, RE prices will be dropping rapidly in may areas.
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Re: NJ house hunting experience
Old 08-28-2006, 01:27 PM   #22
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Re: NJ house hunting experience

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my wife and I decide to pay more money on rent instead of owing a house.
Offered 2 tenants the house they rent from me ... each was VERY interested until they learned that thier monthly costs would INCREASE 50-60% (w/o maintenance costs). Needless to say, each declined my offer.

Sooo, I raised rents 5% ... not a peep from the tenants.
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Re: NJ house hunting experience
Old 08-28-2006, 01:36 PM   #23
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Re: NJ house hunting experience

There is something I never understand. One of them is how people sleep well with a big mortgage.
Still remember the car salesman's response when I said I will pay it right now.
Savers are such a rare breed, far fewer than drug dealers.
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Re: NJ house hunting experience
Old 08-28-2006, 01:38 PM   #24
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Re: NJ house hunting experience

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Originally Posted by semtex
There is something I never understand. One of them is how people sleep well with a big mortgage.
Still remember the car salesman's response when I said I will pay it right now.* *
Savers are such a rare breed, far fewer than drug dealers.
Did you buy a red Farari and pay in cash ?

Actually some people love big mortgages. They look at home equity as "dead" money that is not working at all for them. These people borrow to the hilt and leverage everything for maximum gain.

I'm like you though, I don't like to be in debt to anyone.
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Re: NJ house hunting experience
Old 08-28-2006, 01:39 PM   #25
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Re: NJ house hunting experience

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Originally Posted by semtex
There is something I never understand. One of them is how people sleep well with a big mortgage.
Hey, if they can make the payment, they think everything is OK.
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Re: NJ house hunting experience
Old 08-28-2006, 01:44 PM   #26
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Re: NJ house hunting experience

MasterBlaster wanted to see housing prices overlaid with a graph of interest rates.* *Shiller has one that goes back to 1890:

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Re: NJ house hunting experience
Old 08-28-2006, 01:45 PM   #27
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Re: NJ house hunting experience

Wab:

what I really wanted to see was the red curve divided by the gray curve.

Actually though the gray curve isn't quite the right data being only the 10-year data.
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Re: NJ house hunting experience
Old 08-28-2006, 03:57 PM   #28
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Re: NJ house hunting experience

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Originally Posted by MasterBlaster
what I really wanted to see was the red curve divided by the gray curve.

Actually though the gray curve isn't quite the right data being only the 10-year data.
I know what you're saying, but mortgage rates are based on the 10-year treasury (something to do with the way banks hedge -- brewer can probably fill us in). And you might want to take a look at affordability indices around the country. Affordability is at a historic low, and those indices factor in current mortgage rates.
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Re: NJ house hunting experience
Old 08-28-2006, 04:01 PM   #29
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Re: NJ house hunting experience

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Originally Posted by wab
I know what you're saying, but mortgage rates are based on the 10-year treasury (something to do with the way banks hedge -- brewer can probably fill us in).* *
Hmm, well traditional 15 and 30 year fixed loan rates are related to the 10 year treasury, but not all the ARMs that have become so popular. Some of those are based on LIBOR, some on a Fed Funds or 1 years treasury, and some are based on the cost-of-funds or -deposits indexes for banks. So it really depends which type of loan you are talking about.
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Re: NJ house hunting experience
Old 08-28-2006, 04:11 PM   #30
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Re: NJ house hunting experience

So the biggest bubble is credit bubble. See how many credit cards I have and how easy to get 10K+ credit line.
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Re: NJ house hunting experience
Old 08-28-2006, 04:16 PM   #31
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Re: NJ house hunting experience

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Originally Posted by semtex
So the biggest bubble is credit bubble. See how many credit cards I have and how easy to get 10K+ credit line.
Yup. Scary, isn't it? What I can't figure out is why the bank regulators let the banks get so loose with mortgage money. Didn't they have at least some seior people with painful memories of the Resolution Trust Co. and the disastrous mess that was the S&L bailout?

BTW, there is a whole school of economic thought that says that creation and destruction of credit availability is pretty much the driving force behind economic expansion and contraction. IIRC, it is most often associated with Schumpeter. I'm not sure I swing quite that way, but it sure looks like credit has been driving the housing market bubble.
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Re: NJ house hunting experience
Old 08-28-2006, 05:08 PM   #32
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Re: NJ house hunting experience

How could you ever feel comfortable in a house with 15k/year in property taxes. If you stick that money in the market and earn 6% over inflation you'll have almost 400k in today's dollars in just 15 years... I don't think I could write a 1250/month check to New Jersey month after month forever.
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Re: NJ house hunting experience
Old 08-28-2006, 06:21 PM   #33
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Re: NJ house hunting experience

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Originally Posted by brewer12345
Yup.* Scary, isn't it?* What I can't figure out is why the bank regulators let the banks get so loose with mortgage money.* Didn't they have at least some seior people with painful memories of the Resolution Trust Co. and the disastrous mess that was the S&L bailout?

BTW, there is a whole school of economic thought that says that creation and destruction of credit availability is pretty much the driving force behind economic expansion and contraction. IIRC, it is most often associated with Schumpeter.* I'm not sure I swing quite that way, but it sure looks like credit has been driving the housing market bubble.
it's not the bank's money. if you have a bond fund in your 401k, look at the investments. chances are part of it going into mortgages. they set up legal entities, get investors, pay out the PITI to the entities and skim off anything extra beyond what they have to pay. Forgot the exact name for it. goal is to spread the risk. credit cards are the same. it's investors' money and not the bank's money.
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Re: NJ house hunting experience
Old 08-28-2006, 09:00 PM   #34
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Re: NJ house hunting experience

A big reason we left NJ. Yep we sold our plastic toll brothers centerhall colonial 10 years old for 513 in may of this year. Out in warren county. I work in Newark those 15K taxes go down the toilet in essex county!!!

I only have 4 months left there.

Good luck in NJ. I have had enough.

By the way not another house in our old neighborhood has sold in the past 3 months and prices are being cut now we have seen 579,000 houses now pricd at 510,000 and 519,000 houses now priced at 479,000, wait a 10 to 20% reduction may be near.
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Re: NJ house hunting experience
Old 08-29-2006, 07:03 AM   #35
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Re: NJ house hunting experience

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it's not the bank's money. if you have a bond fund in your 401k, look at the investments. chances are part of it going into mortgages. they set up legal entities, get investors, pay out the PITI to the entities and skim off anything extra beyond what they have to pay. Forgot the exact name for it. goal is to spread the risk. credit cards are the same. it's investors' money and not the bank's money.
Ah, no. That is not quite how it works. In most cases, banks retain some or lots of exposure to mortagges they make, ecev if they sell them. Usually this is even more the case with riskier loans.
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Re: NJ house hunting experience
Old 08-29-2006, 08:16 PM   #36
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Re: NJ house hunting experience

Semtex - Everyone is different and has different desires for their lifestyle both while working and their (hoped for) retirement. I live in Montclair and love the town. Sure it has high taxes and it is not pleasant paying that much. But most taxes result from the excellent schools. If you have children, you will get your money's worth. I grew up in the Midwest and wanted to move to the east coast. It costs money to live here but that is my preference. I mentioned to my wife last weekend how much I love living here.

The taxes have gone up as more and more families move into town and schools are expanding. It is self-perpetuating..Seniors are moving out. But for us, we have kids up and down the block and my children have a great quality of life. For me, that is the big reason why I work. One has to live for today too and not sacrifice everything for the future - especially when the alternative is spending 3 hours or more of your day away from your family commuting.

As for a real estate bubble - perhaps, but I don't believe so. I think prices will come down a little but not much. My theory is that you will always see many young individuals leave other parts of the USA to head to the coasts (NYC, San Francisco, Boston, LA, etc)..These singles grow older and marry and move to the suburbs....Many will retire elsewhere eventually but (while working) they will create a demand for housing in the suburbs within commuting distance and good schools. My two cents. Good luck.
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Re: NJ house hunting experience
Old 08-29-2006, 08:50 PM   #37
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Re: NJ house hunting experience


I can't imagine paying that much for a home !

How many sq ft is it ?

1800-2200 sq ft 4 bedroom custom made ranch style homes
[no basement] built in the 1960s in my DFW neighborhood
are selling for around $165,000.




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Re: NJ house hunting experience
Old 08-29-2006, 10:23 PM   #38
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Re: NJ house hunting experience

Compared to prices in the bay area of Northern California even New Jersy looks like a steal. I really don't understand how folks do it. We live 40miles east of San Fransico and a 10 year old, 2200 sqft house sells for $880K in our neighborhood. They are still selling but the price has come down a bit ... and we live in the suburbs! Glad the we bought 10 years ago- even then the prices seemed outrageous, but nothing like today !

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Re: NJ house hunting experience
Old 08-30-2006, 09:46 AM   #39
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Re: NJ house hunting experience

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Originally Posted by New Thinking
Semtex - Everyone is different and has different desires for their lifestyle both while working and their (hoped for) retirement.* I live in Montclair and love the town. Sure it has high taxes and it is not pleasant paying that much. But most taxes result from the excellent schools. If you have children, you will get your money's worth. I grew up in the Midwest and wanted to move to the east coast.* *It costs money to live here but that is my preference. I mentioned to my wife last weekend how much I love living here.

The taxes have gone up as more and more families move into town and schools are expanding. It is self-perpetuating..Seniors are moving out. But for us, we have kids up and down the block and my children have a great quality of life. For me, that is the big reason why I work. One has to live for today too and not sacrifice everything for the future - especially when the alternative is spending 3 hours or more of your day away from your family commuting.

As for a real estate bubble - perhaps, but I don't believe so. I think prices will come down a little but not much. My theory is that you will always see many young individuals leave other parts of the USA to head to the coasts (NYC, San Francisco, Boston, LA, etc)..These singles grow older and marry and move to the suburbs....Many will retire elsewhere eventually but (while working) they will create a demand for housing in the suburbs within commuting distance and good schools. My two cents.* Good luck.
the taxes don't go to the schools, but to pay for retirement benefits and then for schools

NJ has also been losing population for years because you can find good schools anywhere in the USA and no one wants to pay the property taxes.

before you buy the house, you should budget double digit increases every year
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Re: NJ house hunting experience
Old 09-02-2006, 07:58 PM   #40
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Re: NJ house hunting experience

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Originally Posted by semtex
One thing shocked me is that property tax is nearly 15000.
Yeah, my associates in NJ finally got me to shut up re: the tax rates here in MD, but I bought my 1st home in the Great Midwest so I can identify with the ones that say "how can anyone afford it?" I think you get used to it and it really is quality of life and if you can avoid the bubble, no other investment is as secure....just look at the leverage and tax advantages. Not only that all you mid-westerners are subsidizing us that reside in BIG PROPERTY TAX STATES since we can deduct our outrageous taxes. If you get a reasonable mortgage terms, that huge payment will stay flat (actually decrease vs. inflation) and look pretty good ten years from now, while rents are steadily rising.

Skip the PUT treat the bubble burst as a potential buying oppourtunity.
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